<PAGE>
PROSPECTUS SUPPLEMENT DATED AUGUST 13, 1998 [LOGO]
(TO PROSPECTUS DATED AUGUST 3, 1998)
$974,416,000 (Approximate)
MORGAN STANLEY CAPITAL I INC.
as Depositor
CONTITRADE SERVICES L.L.C.,
MORGAN STANLEY MORTGAGE CAPITAL INC.
AND
RED MOUNTAIN FUNDING, L.L.C.
as Sellers
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-CF1
The Series 1998-CF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will consist of 21 classes (each, a "Class"): (i) the Class
A-1, Class A-2, Class A-MF1 and Class A-MF2 Certificates (collectively, the
"Class A Certificates"), (ii) the Class X Certificates (the "Class X
Certificates" or the "Interest Only Certificates" and, together with the Class
A Certificates, the "Senior Certificates"), (iii) the Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M and
Class N Certificates (collectively, the "Subordinate Certificates" and,
collectively with the "Senior Certificates", the "REMIC Regular Certificates"),
(iv) the Class Q Certificates and (v) the Class R-I, Class R-II and Class R-III
Certificates (collectively, the "Residual Certificates"). Only the Class A-1,
Class A-2, Class A-MF1, Class A-MF2, Class B, Class C, Class D and Class E
Certificates (collectively, the "Offered Certificates") are offered hereby. It
is a condition to their issuance that the respective Classes of Offered
Certificates be assigned ratings by Moody's Investors Service, Inc. ("Moody's")
and by Standard & Poor's Ratings Service, a division of the McGraw Hill
Companies Inc. ("S&P" and, together with Moody's, the "Rating Agencies") as set
forth in the table below. Each Class of Offered Certificates will be issued
with the aggregate principal balance (the aggregate "Certificate Balance"), and
will accrue interest at the per annum rate (the "Pass-Through Rate"), set forth
in the table below.
The Certificates will evidence, in the aggregate, all of the
beneficial ownership interests in a trust (the "Trust Fund") to be established
by Morgan Stanley Capital I Inc. (the "Depositor") pursuant to a Pooling and
Servicing Agreement, to be dated as of August 1, 1998 (the "Pooling and
Servicing Agreement"), among the Depositor, AMRESCO Services, L.P., as master
servicer (the "Master Servicer"), Lennar Partners, Inc., as Special Servicer
(the "Special Servicer"), LaSalle National Bank, as trustee (the "Trustee") and
ABN AMRO Bank N.V., as fiscal agent (the "Fiscal Agent"). Distributions on the
Certificates will be payable solely from the assets transferred to the Trust
Fund for the benefit of the holders of the Certificates (the
"Certificateholders"). The Certificates do not constitute obligations of the
Depositor, the Master Servicer, the Special Servicer, the Trustee, the Fiscal
Agent, or any of their respective affiliates. Neither the Certificates nor the
Mortgage Loans (as defined below) will be insured or guaranteed by any
governmental agency or instrumentality or by the Depositor, the Sellers (as
defined herein), the Master Servicer, the Special Servicer, the Trustee, the
Fiscal Agent, any of their respective affiliates or any other person.
SEE "RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS" BEGINNING ON PAGE
S-37 HEREIN AND "RISK FACTORS" BEGINNING ON PAGE 12 IN THE PROSPECTUS FOR
CERTAIN FACTORS TO BE CONSIDERED IN PURCHASING THE OFFERED CERTIFICATES.
---------------
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 TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
(cover continued on page S-3)
<TABLE>
<CAPTION>
Initial Aggregate Pass-Through Final Scheduled Ratings
Class Certificate Balance (1) Rate (2) Distribution Date (3) (Moody's/S&P) (4)
- - ------------- ----------------------- ------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Class A-1 ................. $231,000,000 6.33% 10/15/07 Aaa/AAA
Class A-2 ................. $365,026,000 6.60% 06/15/08 Aaa/AAA
Class A-MF1 ............... $ 98,712,000 6.52% 06/15/08 Aaa/AAA
Class A-MF2 ............... $ 83,134,000 6.53% 06/15/08 Aaa/AAA
Class B ................... $ 55,364,000 6.88% 06/15/08 Aa2/AA
Class C ................... $ 60,901,000 7.13% 07/15/08 A2/A
Class D ................... $ 60,901,000 7.35% 01/15/12 Baa2/BBB
Class E ................... $ 19,378,000 7.35% 12/15/12 Baa3/BBB-
</TABLE>
(Footnotes to table on page S-3)
The Offered Certificates will be purchased from the Depositor by
Morgan Stanley & Co. Incorporated and Deutsche Bank Securities Inc.
(collectively, the "Underwriters" with both Underwriters as co-bookrunners and
co-lead managers) and will be offered by the Underwriters to the public 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 issuance expenses payable by the
Depositor, will be approximately $_____________ plus accrued interest. For
further information with respect to the plan of distribution and any discounts,
commissions and profits on resale that may be deemed underwriting discounts or
commissions, see "Plan of Distribution" herein.
The Offered Certificates are offered by the Underwriters when, as and
if issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC") in the United
States and may be made in book-entry form through Cedel Bank, S.A. ("CEDEL")
and the Euroclear System ("Euroclear"), as participants of DTC, in Europe,
against payment therefor on or about August 27, 1998 (the "Closing Date").
MORGAN STANLEY DEAN WITTER DEUTSCHE BANK SECURITIES
and solely as members of the selling group
CONTIFINANCIAL SERVICES CORPORATION SOUTHTRUST SECURITIES, INC.
The date of this Prospectus Supplement is August 13, 1998
<PAGE>
[GRAPHIC OF LEMBI MULTIFAMILY AND RETAIL PORTFOLIO, VARIOUS LOCATIONS]
[GRAPHIC OF BROADVIEW VILLAGE SQUARE, BROADVIEW, ILLINOIS]
[GRAPHIC OF WISCO HOTEL PORTFOLIO, VARIOUS LOCATIONS]
[GRAPHIC OF THE CABLE BUILDING, NEW YORK, NEW YORK]
[GRAPHIC OF HEALTH CARE CAPITAL PORTFOLIO, VARIOUS LOCATIONS]
[GRAPHIC OF COURVILLE HEALTHCARE PORTFOLIO, VARIOUS LOCATIONS]
[GRAPHIC OF ELLIOTT BAY OFFICE BUILDING, SEATTLE, WASHINGTON]
<PAGE>
The footnotes to the table on the cover page are as follows:
(1) The initial aggregate Certificate Balance of each Class of Offered
Certificates is subject to a permitted variance of plus or minus 5%,
depending on the aggregate principal amount of the Mortgage Loans
actually transferred to the Trust Fund.
(2) The Pass-Through Rates for the Offered Certificates for each
Distribution Date (as defined herein) will be equal to the fixed rates
per annum set forth in the table; provided, in each case, that such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage
Rate (as defined herein) for such Distribution Date. See "Description
of the Certificates--Pass-Through Rates" herein.
(3) The Final Scheduled Distribution Date for each Class of Offered
Certificates is the Distribution Date on which such Class is expected
to be paid in full, assuming that timely payments (and no prepayments)
will be made on the Mortgage Loans in accordance with their terms and
otherwise based on the Maturity Assumptions (as defined herein). The
actual performance and experiences of the Mortgage Loans will likely
differ from such assumptions. As described herein under "Ratings," the
Final Rated Distribution Date for those Classes of Offered
Certificates entitled to distributions of principal will be the
Distribution Date in July 2032.
(4) See "Ratings."
(continued from cover page)
Initially, the assets of the Trust Fund will consist primarily of
three segregated pools (collectively, the "Mortgage Pool") of generally
fixed-rate commercial and multifamily mortgage loans (the "Mortgage Loans").
The Cut-Off Date is August 1, 1998 and, as of such date, the Mortgage Loans had
an aggregate principal balance (the "Initial Pool Balance") of $1,107,291,368
after application of all payments of principal due on or before such date,
whether or not received, and subject to a variance of plus or minus 5%. The
Mortgage Loans comprise three separate groups, Loan Group 1, Loan Group 2 and
Loan Group 3 (each, a "Loan Group"). Loan Group 3 will consist of 29 Mortgage
Loans, representing approximately 8.6% of the Initial Pool Balance, each of
which is a Multifamily Loan (as defined herein) and as of the Cut-Off Date has
a remaining term to scheduled maturity (or, in the case of an ARD Loan (as
defined herein), to the Anticipated Repayment Date (as defined herein)) of 118
months or less. Loan Group 2 will consist of 35 Mortgage Loans, representing
approximately 10.3% of the Initial Pool Balance, each of which is a Multifamily
Loan and as of the Cut-Off Date has a remaining term to scheduled maturity (or,
in the case of an ARD Loan, to the Anticipated Repayment Date (as defined
herein)) of 118 months or less. Loan Group 1 will consist of the remaining 316
Mortgage Loans representing approximately 81.1% of the Initial Pool Balance.
Balloon Payments and unscheduled payments of principal on the Mortgage Loans in
Loan Group 2 (the "A-MF1 Principal Distribution Amount") will be paid first to
the Class A-MF1 Certificates. Balloon Payments and unscheduled payments of
principal on the Mortgage Loans in Loan Group 3 (the "A-MF2 Principal
Distribution Amount") will be paid first to the Class A-MF2 Certificates. All
remaining payments in respect of principal (including Balloon Payments and
unscheduled payments of principal on the Mortgage Loans in Loan Group 1 and
scheduled payments (other than Balloon Payments) of principal on all Mortgage
Loans) will be paid sequentially to each Class of Certificates as described
herein. See "Description of the Offered Certificates--Distributions." The
Mortgage Loans are further described under "Description of the Mortgage Pool"
herein and on Appendix I, Appendix II and Appendix III hereto.
The Depositor will acquire the Mortgage Loans from the following
sellers (each, a "Seller") on the Closing Date: ContiTrade Services L.L.C.
("ContiTrade") 259 Mortgage Loans, representing 54.7% of the Initial Pool
Balance; Morgan Stanley Mortgage Capital Inc. ("MSMC") 83 Mortgage Loans,
representing 29.4% of the Initial Pool Balance and Red Mountain Funding, L.L.C.
("RMF") 38 Mortgage Loans representing 15.9% of the Initial Pool Balance.
Distributions on the Certificates 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, then on the next business day, beginning in September, 1998
(each, a "Distribution Date"). As described herein, distributions of interest
on each Class of Offered Certificates
S-3
<PAGE>
will be made on each Distribution Date based on the Pass-Through Rate then
applicable to such Class and the aggregate Certificate Balance of such Class
outstanding immediately prior to such Distribution Date. Distributions
allocable to principal of the respective Classes of Certificates with
Certificate Balances (the "Principal Balance Certificates") will be made in the
amounts and in accordance with the priorities described herein until the
Certificate Balance of each such Class is reduced to zero. As described herein,
any prepayment premiums, penalties or fees actually collected on the Mortgage
Loans will be distributed among certain of the Classes of Certificates in the
amounts and in accordance with the priorities described herein. See
"Description of the Certificates--Distributions" herein.
As and to the extent described herein, the Subordinate Certificates
will be subordinate to the Senior Certificates; and each Class of Subordinate
Certificates will further be subordinate to each other Class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation. The
Residual Certificates will be subordinate to the REMIC Regular Certificates.
See "Description of the Certificates--Distributions" and
"--Distributions--Subordination; Allocation of Losses and Certain Expenses"
herein.
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 or in respect of the Mortgage Loans that result in
a reduction of the aggregate Certificate Balance of such Class. The yield to
investors in the Class A-MF1 and Class A-MF2 Certificates will depend on, among
other things, the rate and timing of receipt of the A-MF1 Principal
Distribution Amount and the A-MF2 Principal Distribution Amount, respectively.
No representation is made as to the rate of prepayments on, or rate or amount
of liquidations of, the Mortgage Loans or as to the anticipated yield to
maturity of any Offered Certificates. See "Yield, Prepayment and Maturity
Considerations" herein and "Yield Considerations," "Risk Factors--Average Life
of Certificates; Prepayments; Yields" in the Prospectus.
As described herein, three separate real estate mortgage investment
conduit ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby being herein referred to
as "REMIC I", "REMIC II" and "REMIC III", respectively). The Offered
Certificates will constitute "regular interests" in REMIC III. The Class Q
Certificates will represent the right to receive Excess Interest, which portion
of the Trust Fund will be treated as a grantor trust for federal income tax
purposes. See "Certain Federal Income Tax Consequences" herein and in the
Prospectus.
See "Index of Principal Definitions" in the Prospectus for the
location of meanings of capitalized terms used but not defined herein. See
"Index of Principal Definitions" herein for location of meanings of other
capitalized terms used herein.
There is currently no secondary market for the Offered Certificates.
The Underwriters currently intend to make a secondary market in the Offered
Certificates, but are not obligated to do so. There can be no assurance that a
secondary market for the Offered Certificates will develop or, if it does
develop, that it will continue. The Offered Certificates will not be listed on
any securities exchange.
THIS PROSPECTUS SUPPLEMENT IS NOT INTENDED TO FURNISH LEGAL,
REGULATORY, TAX OR ACCOUNTING ADVICE TO ANY PROSPECTIVE PURCHASER OF THE
OFFERED CERTIFICATES. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHOULD BE
REVIEWED BY EACH PROSPECTIVE PURCHASER AND ITS LEGAL, REGULATORY, TAX AND
ACCOUNTING ADVISORS. EACH PROSPECTIVE PURCHASER MUST RELY ON ITS OWN
EXAMINATION OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
INVESTORS WHOSE INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS
SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT
THE OFFERED CERTIFICATES CONSTITUTE LEGAL INVESTMENTS FOR THEM.
S-4
<PAGE>
THE UNDERWRITERS MAY SELL OFFERED CERTIFICATES TO THEIR AFFILIATES OR
ENTITIES OVER WHICH THEIR AFFILIATES HAVE DISCRETIONARY AUTHORITY IN ACCORDANCE
WITH APPLICABLE LAW.
THE OFFERED 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 AUGUST 3, 1998, OF WHICH
THIS PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING WHICH 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.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN
OR OTHERWISE AFFECT THE PRICE OF THE OFFERED CERTIFICATES, INCLUDING MAKING A
SECONDARY MARKET IN THE OFFERED CERTIFICATES. SEE "PLAN OF DISTRIBUTION"
HEREIN. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ALL DEPOSITORY INSTITUTIONS CONSIDERING AN INVESTMENT IN THE OFFERED
CERTIFICATES SHOULD REVIEW THE "SUPERVISORY POLICY STATEMENT ON INVESTMENT
SECURITIES AND END-USER DERIVATIVES ACTIVITIES" (THE "1998 POLICY STATEMENT")
OF THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL (THE "FFIEC"), WHICH
HAS BEEN ADOPTED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE OFFICE OF THE COMPTROLLER OF THE
CURRENCY AND THE OFFICE OF THRIFT SUPERVISION, EFFECTIVE MAY 26, 1998, AND BY
THE NATIONAL CREDIT UNION ASSOCIATION (THE "NCUA"), EFFECTIVE OCTOBER 1, 1998.
THE 1998 POLICY STATEMENT SETS FORTH GENERAL GUIDELINES WHICH DEPOSITORY
INSTITUTIONS MUST FOLLOW IN MANAGING RISKS (INCLUDING MARKET, CREDIT,
LIQUIDITY, OPERATIONAL (TRANSACTION), AND LEGAL RISKS) APPLICABLE TO ALL
SECURITIES (INCLUDING MORTGAGE PASS-THROUGH SECURITIES AND MORTGAGE-DERIVATIVE
PRODUCTS) USED FOR INVESTMENT PURPOSES. UNTIL OCTOBER 1, 1998, FEDERAL CREDIT
UNIONS WILL STILL BE SUBJECT TO THE FFIEC'S NOW-SUPERSEDED "SUPERVISORY POLICY
STATEMENT ON SECURITIES ACTIVITIES" DATED JANUARY 28, 1992, AS ADOPTED BY THE
NCUA WITH CERTAIN MODIFICATIONS, WHICH PROHIBITED DEPOSITORY INSTITUTIONS FROM
INVESTING IN CERTAIN "HIGH-RISK MORTGAGE SECURITIES," EXCEPT UNDER LIMITED
CIRCUMSTANCES, AND SET FORTH CERTAIN INVESTMENT PRACTICES DEEMED TO BE
UNSUITABLE FOR REGULATED INSTITUTIONS.
FORWARD-LOOKING STATEMENTS
IF AND WHEN INCLUDED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS OR IN DOCUMENTS INCORPORATED HEREIN OR THEREIN BY
REFERENCE, THE WORDS "EXPECTS," "INTENDS," "ANTICIPATES," "ESTIMATES" AND
ANALOGOUS EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY
SUCH STATEMENTS, WHICH MAY INCLUDE STATEMENTS CONTAINED IN "RISK FACTORS AND
OTHER SPECIAL CONSIDERATIONS," INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED.
S-5
<PAGE>
SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND
BUSINESS CONDITIONS, COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND
ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL
REGULATIONS, CUSTOMER PREFERENCES AND VARIOUS AND OTHER MATTERS, MANY OF WHICH
ARE BEYOND THE DEPOSITOR'S CONTROL. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY
AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT. THE DEPOSITOR EXPRESSLY DISCLAIMS
ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO
ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE
DEPOSITOR'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS,
CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement under the Securities Act of 1933,
as amended, with respect to the Offered Certificates. This Prospectus
Supplement and the related Prospectus, which form a part of the Registration
Statement, omit certain information contained in such Registration Statement
pursuant to the Rules and Regulations of the Commission. Such Registration
Statement and exhibits thereto can be inspected and copied at prescribed rates
at the Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's regional offices at Seven World
Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Depositor, that file electronically with the Commission.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail monthly reports concerning the Certificates to
all Certificateholders of record.
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Depositor or any Underwriter. This Prospectus Supplement and the Prospectus do
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus Supplement or the Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that the information herein or
therein is correct as of any time subsequent to the date hereof or that there
has been no change in the affairs of the Depositor since such date.
S-6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
FORWARD-LOOKING STATEMENTS......................................................................................S-5
AVAILABLE INFORMATION...........................................................................................S-6
REPORTS TO CERTIFICATEHOLDERS...................................................................................S-6
TRANSACTION OVERVIEW...........................................................................................S-11
SUMMARY........................................................................................................S-12
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS..................................................................S-39
The Certificates......................................................................................S-39
Limited Liquidity............................................................................S-39
Certain Yield Considerations.................................................................S-39
Limited Obligations..........................................................................S-39
Subordination of Class B, Class C, Class D and Class E Certificates..........................S-40
Potential Conflict of Interest in Connection with Specially Serviced Mortgage Loans..........S-40
Tax Considerations Related to Foreclosure....................................................S-40
The Mortgage Loans....................................................................................S-41
Risks of Lending on Income-Producing Properties Generally....................................S-41
Property Management..........................................................................S-41
Risks Particular to Retail, Office, Industrial and Mixed Use Properties......................S-41
Risks Particular to Multifamily Properties...................................................S-42
Risks Particular to Hospitality Properties...................................................S-43
Risks Particular to Healthcare Properties ...................................................S-44
Risks Particular to Self-Storage Properties..................................................S-45
Risks Particular to Mobile Home Park Properties..............................................S-45
Lessee Credit Risk...........................................................................S-45
Mortgage Loans Not Insured...................................................................S-46
Borrower Default; Non-Recourse Mortgage Loans................................................S-46
Environmental Considerations.................................................................S-46
Balloon Payments.............................................................................S-47
Geographic Concentration.....................................................................S-47
Cross-Collateralization; Related Parties.....................................................S-48
Limitations of Appraisals....................................................................S-49
Leasehold Considerations.....................................................................S-49
Owner Occupied and Single Tenant Properties..................................................S-49
Risks of Other Financing.....................................................................S-49
Risk of Changes in Concentrations............................................................S-50
Risk Associated With Lack of Special Purpose Borrowers.......................................S-50
One Action Considerations....................................................................S-50
Conflicts of Interest........................................................................S-50
Zoning Compliance............................................................................S-50
Costs of Compliance with Americans with Disabilities Act ....................................S-51
Litigation ..................................................................................S-51
Risk of Year 2000............................................................................S-51
DESCRIPTION OF THE CERTIFICATES................................................................................S-51
General...............................................................................................S-51
Certificate Balances and Notional Amounts.............................................................S-53
Pass-Through Rates....................................................................................S-54
S-7
<PAGE>
Distributions.........................................................................................S-55
General......................................................................................S-55
The Available Distribution Amount............................................................S-55
Application of the Available Distribution Amount.............................................S-56
Distributable Certificate Interest...........................................................S-58
Principal Distribution Amount................................................................S-59
Distributions of Prepayment Premiums.........................................................S-60
Treatment of REO Properties..................................................................S-61
Interest Reserve Account.....................................................................S-61
Appraisal Reductions.........................................................................S-61
Subordination; Allocation of Losses and Certain Expenses.....................................S-62
Prepayment Interest Shortfalls and Prepayment Interest Excesses..............................S-63
Optional Termination..................................................................................S-64
Advances..............................................................................................S-65
P&I Advances.................................................................................S-65
Servicing Advances...........................................................................S-65
Nonrecoverable Advances......................................................................S-66
Reports to Certificateholders; Available Information..................................................S-66
Trustee Reports..............................................................................S-66
Special Servicer Reports.....................................................................S-68
Other Information............................................................................S-68
Book-Entry Certificates......................................................................S-68
Example of Distributions..............................................................................S-68
The Trustee...........................................................................................S-69
The Fiscal Agent......................................................................................S-70
Final Scheduled Distribution Date; Final Rated Distribution Date......................................S-70
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS..................................................................S-70
General...............................................................................................S-70
Rate and Timing of Principal Payments.................................................................S-71
Losses and Shortfalls.................................................................................S-72
Certain Relevant Factors..............................................................................S-72
Weighted Average Life.................................................................................S-73
DESCRIPTION OF THE MORTGAGE POOL...............................................................................S-82
General...............................................................................................S-82
Security for the Mortgage Loans.......................................................................S-83
Certain Terms and Conditions of the Mortgage Loans....................................................S-83
Mortgage Rates; Calculation of Interest......................................................S-83
Excess Interest..............................................................................S-84
Amortization of Principal....................................................................S-84
Due Dates....................................................................................S-84
Prepayment Provisions........................................................................S-84
Subordinate Financing........................................................................S-85
Defeasance...................................................................................S-86
Property Releases............................................................................S-86
Escrows......................................................................................S-86
Non-recourse Obligations.....................................................................S-87
"Due-on-Sale" and "Due-on-Encumbrance" Provisions............................................S-87
Low Income Housing Tax Credits...............................................................S-88
HUD Section 8 Loans..........................................................................S-88
S-8
<PAGE>
Cross-Collateralization and Cross-Default of Certain Mortgage Loans and Multiple
Property Mortgage Loans......................................................................S-88
Assessments of Property Value and Condition...........................................................S-88
Environmental Assessments....................................................................S-88
Property Condition Assessments...............................................................S-89
Appraisals...................................................................................S-89
Hazard, Liability and Other Insurance........................................................S-89
ContiTrade Small Loan Program................................................................S-90
Additional Mortgage Loan Information..................................................................S-90
General......................................................................................S-90
Definitions..................................................................................S-91
The Sellers...........................................................................................S-93
ContiTrade Services L.L.C....................................................................S-93
Morgan Stanley Mortgage Capital Inc..........................................................S-93
Red Mountain Funding, L.L.C..................................................................S-93
Assignment of the Mortgage Loans......................................................................S-94
Representations and Warranties........................................................................S-94
Repurchases and Other Remedies........................................................................S-97
Changes in Mortgage Pool Characteristics..............................................................S-98
SERVICING OF THE MORTGAGE LOANS................................................................................S-98
General...............................................................................................S-98
The Master Servicer..................................................................................S-100
Master Servicer Compensation................................................................S-100
The Special Servicer.................................................................................S-101
Special Servicer Compensation...............................................................S-101
Termination of Special Servicer......................................................................S-102
The Operating Adviser................................................................................S-103
The Healthcare Adviser...............................................................................S-103
Election of the Healthcare Adviser..........................................................S-103
Duties of the Healthcare Adviser............................................................S-104
Limitation on Liability of Healthcare Adviser...............................................S-104
Mortgage Loan Modifications..........................................................................S-104
Sale of Defaulted Mortgage Loans and REO Properties..................................................S-105
Foreclosures.........................................................................................S-106
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................................................S-107
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA AND FLORIDA.....................................S-108
CERTAIN ERISA CONSIDERATIONS..................................................................................S-108
Plan Assets..........................................................................................S-109
Special Exemption Applicable to Senior Certificates..................................................S-109
Insurance Company General Accounts...................................................................S-110
General Investment Considerations....................................................................S-111
LEGAL INVESTMENT..............................................................................................S-111
USE OF PROCEEDS...............................................................................................S-112
PLAN OF DISTRIBUTION..........................................................................................S-112
LEGAL MATTERS.................................................................................................S-113
S-9
<PAGE>
RATINGS.......................................................................................................S-113
INDEX OF PRINCIPAL DEFINITIONS................................................................................S-114
APPENDIX I - MORTGAGE POOL INFORMATION (TABLES).................................................................I-1
APPENDIX II - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS....................................................II-1
APPENDIX III - SIGNIFICANT LOAN SUMMARIES.....................................................................III-1
APPENDIX IV - TERM SHEET........................................................................................T-1
APPENDIX V - SAMPLE REMITTANCE REPORT...........................................................................R-1
</TABLE>
S-10
<PAGE>
TRANSACTION OVERVIEW
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the Prospectus relating to the Offered Certificates in making
their investment decision. The following transaction overview (the "Transaction
Overview") does not include all relevant information relating to the securities
and underlying assets described herein, particularly with respect to the risks
and special considerations involved with an investment in such securities and
is qualified in its entirety by reference to the detailed information appearing
elsewhere in this Prospectus Supplement and in the Prospectus. Prior to making
an investment decision, a prospective investor should carefully review this
Prospectus Supplement and the Prospectus in their entirety.
<TABLE>
<CAPTION>
==========================================================================================================================
INITIAL AGGREGATE
CERTIFICATE RATINGS DESCRIPTION INITIAL
BALANCE OR (Moody's/S&P) WEIGHTED PRINCIPAL OF PASS-THROUGH PASS-THROUGH
CLASS NOTIONAL AMOUNT(1) (2) AVG. LIFE (3) WINDOW (3) RATE RATE (4)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $231,000,000 Aaa/AAA 5.43 1-110 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
A-2 $365,026,000 Aaa/AAA 9.63 110-118 Fixed Rate 6.60%
- - --------------------------------------------------------------------------------------------------------------------------
A-MF1 $98,712,000 Aaa/AAA 9.55 110-118 Fixed Rate 6.52%
- - --------------------------------------------------------------------------------------------------------------------------
A-MF2 $83,134,000 Aaa/AAA 8.92 78-118 Fixed Rate 6.53%
- - --------------------------------------------------------------------------------------------------------------------------
X(b) $1,107,291,368(a) Aaa/AAAr N/A N/A Variable Rate I/O 1.06%
- - --------------------------------------------------------------------------------------------------------------------------
B $55,364,000 Aa2/AA 9.80 118-118 Fixed Rate 6.88%
- - --------------------------------------------------------------------------------------------------------------------------
C $60,901,000 A2/A 9.85 118-119 Fixed Rate 7.13%
- - --------------------------------------------------------------------------------------------------------------------------
D $60,901,000 Baa2/BBB 11.00 119-161 Fixed Rate 7.35%
- - --------------------------------------------------------------------------------------------------------------------------
E $19,378,000 Baa3/BBB- 14.00 161-172 Fixed Rate 7.35%
- - --------------------------------------------------------------------------------------------------------------------------
F(b) $22,146,000 Ba1/BB+ 14.31 172-174 Fixed Rate 7.35%
- - --------------------------------------------------------------------------------------------------------------------------
G(b) $33,218,000 Ba2/BB 14.57 174-176 Fixed Rate 7.35%
- - --------------------------------------------------------------------------------------------------------------------------
H(b) $11,073,000 Ba3/BB- 14.67 176-177 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
J(b) $11,073,000 B1/B+ 14.74 177-179 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
K(b) $19,378,000 B2/NR 16.47 179-216 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
L(b) $11,073,000 B3/NR 18.68 216-233 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
M(b) $5,536,000 Caa2/NR 19.53 233-235 Fixed Rate 6.33%
- - --------------------------------------------------------------------------------------------------------------------------
N(b) $19,378,368 NR/NR 20.84 235-299 Fixed Rate 6.33%
==========================================================================================================================
</TABLE>
The Class Q, Class R-I, Class R-II and Class R-III Certificates are not
represented in this table.
- - ------------------------
(1) In each case, subject to a variance of plus or minus 5%.
(2) See "Ratings" herein. "NR" means not rated.
(3) The weighted average life (expressed in years) and the period
(expressed in months following the Closing Date and commencing with
the month of the first Distribution Date) during which distributions
of principal would be received (the "Principal Window") set forth in
the foregoing table is based on the Maturity Assumptions (as defined
herein) and a pricing speed of 0% CPR (as defined in the Prospectus)
applied to each Mortgage Loan during any period that it permits
voluntary prepayments of principal without imposing a Prepayment
Premium (as defined herein) in connection therewith. See "Yield,
Prepayment and Maturity Considerations" herein.
(4) The Pass-Through Rates for the Class A-1, Class A-2, Class A-MF1,
Class A-MF2, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M and Class N Certificates
for each Distribution Date will be equal to the fixed rates per annum
set forth in the table; provided, in each case, that such Pass-Through
Rate will not exceed the Weighted Average Net Mortgage Rate (as
defined herein) for such Distribution Date. The initial Pass-Through
Rate for the Interest Only Certificates set forth in the table is the
approximate initial Pass-Through Rate. The Pass-Through Rate for the
Interest Only Certificates is variable and, subsequent to the initial
Distribution Date, will be determined as described in "Description of
the Certificates--Pass-Through Rates" herein.
(a) Aggregate Notional Amount.
(b) Not offered hereby.
S-11
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary are
defined elsewhere in this Prospectus Supplement or in the Prospectus. An "Index
of Principal Definitions" is included at the end of each of this Prospectus
Supplement and the Prospectus.
DEPOSITOR...................... Morgan Stanley Capital I Inc., a Delaware
corporation (the "Depositor"). The Depositor's
principal offices are located at 1585
Broadway, New York, New York 10036, telephone
(212) 761-4700.
THE CERTIFICATES............... The Series 1998-CF1 Commercial Mortgage
Pass-Through Certificates (the "Certificates")
will be issued in 21 classes (each, a "Class")
designated as: (i) the Class A-1, Class A-2,
Class A-MF1 and Class A-MF2 Certificates
(collectively, the "Class A Certificates");
(ii) the Class X Certificates (the "Interest
Only Certificates" or the "Class X
Certificates" and, collectively with the Class
A Certificates, the "Senior Certificates");
(iii) the Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K,
Class L, Class M and Class N (collectively,
the "Subordinate Certificates" and,
collectively with the Senior Certificates, the
"REMIC Regular Certificates"); (iv) the Class
Q Certificates; and (v) the Class R-I, Class
R-II and Class R-III Certificates
(collectively, the "Residual Certificates").
The Certificates will evidence beneficial
ownership interests in a trust fund (the
"Trust Fund") to be formed by the Depositor
pursuant to a Pooling and Servicing Agreement,
to be dated as of the Cut-Off Date (the
"Pooling and Servicing Agreement"), among the
Depositor, the Master Servicer, the Special
Servicer, the Trustee and the Fiscal Agent.
Initially, the assets of the Trust Fund will
consist primarily of 379 fixed-rate mortgage
loans and 1 variable-rate mortgage loan (each,
a "Mortgage Loan"). As of the Cut-Off Date,
the Mortgage Loans had an aggregate principal
balance (the "Initial Pool Balance") of
$1,107,291,368, after application of all
payments due on or before such date, whether
or not received. The Trust Fund will also hold
(i) any Mortgaged Property acquired by
foreclosure or deed in lieu of foreclosure in
respect of a Mortgage Loan that becomes
defaulted (any such property upon acquisition,
an "REO Property") and (ii) certain other
related property, as described herein. The
Certificates collectively represent the entire
interest in the Trust Fund.
Only the Class A-1, Class A-2, Class A-MF1,
Class A-MF2, Class B, Class C, Class D and
Class E Certificates (collectively, the
"Offered Certificates") are offered hereby.
The Class X, Class F, Class G, Class H, Class
J, Class K, Class L, Class M, Class N, Class
Q, Class R-I, Class R-II and Class R-III
Certificates (collectively, the "Private
S-12
<PAGE>
Certificates") have not been registered under
the Securities Act of 1933, as amended, 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
solely because of its potential relevance to a
prospective purchaser of an Offered
Certificate.
SELLERS........................ ContiTrade Services L.L.C. ("ContiTrade"),
Morgan Stanley Mortgage Capital Inc. ("MSMC")
and Red Mountain Funding, L.L.C. ("RMF"). Two
hundred fifty-nine of the Mortgage Loans, or
54.7% of the Initial Pool Balance (the
"ContiTrade Loans"), were originated by one of
the participants in ContiTrade's commercial
and multifamily mortgage loan conduit program.
ContiTrade is a Delaware limited liability
company and an affiliate of ContiFinancial
Services Corporation, which is a member of the
selling group. Eighty-three Mortgage Loans, or
29.4% of the Initial Pool Balance (the "Morgan
Stanley Loans"), were originated by one of the
participants in MSMC's commercial and
multifamily mortgage loan conduit program,
were originated directly by MSMC or were
purchased in the secondary market. MSMC is a
New York corporation and an affiliate of
Morgan Stanley & Co. Incorporated, which is
acting as an Underwriter. Thirty-eight
Mortgage Loans, or 15.9% of the Initial Pool
Balance (the "RMF Loans"), were originated or
acquired by RMF. ContiTrade and Survey LLC,
the initial healthcare adviser (the
"Healthcare Adviser"), hold ownership
interests in RMF. Each Seller will sell its
Mortgage Loans on the Closing Date pursuant to
an agreement with the Depositor (each, a
"Mortgage Loan Purchase Agreement"), which
will be assigned in relevant part to the
Trustee. See "Description of the Mortgage
Pool--The Sellers" herein.
MASTER SERVICER................ AMRESCO Services, L.P. The Master Servicer will
be required to make Advances (as defined
herein) with respect to the Mortgage Loans as
described herein. See "Servicing of the
Mortgage Loans--The Master Servicer" and
"Description of the Certificates--Advances"
herein.
SPECIAL SERVICER............... Lennar Partners, Inc. The Special Servicer will
be responsible for performing certain
servicing functions with respect to Mortgage
Loans that, in general, are in default or as
to which default is imminent, and for the
management of REO Properties. The Special
Servicer will be required to provide notice to
the Operating Adviser before taking certain
actions. See "Servicing of the Mortgage
Loans--The Special Servicer" and "--The
Operating Adviser" herein.
TRUSTEE........................ LaSalle National Bank, a national banking
association. See "Description of the
Certificates--The Trustee" herein. The Trustee
will be obligated to make Advances with
respect to the Mortgage Loans in certain
circumstances where the
S-13
<PAGE>
Master Servicer was required, but failed, to
do so, as described under "Description of the
Certificates--Advances" herein.
FISCAL AGENT................... ABN AMRO Bank N.V., a Netherlands banking
corporation (the "Fiscal Agent"), and the
indirect corporate parent of the Trustee. See
"Description of the Certificates--The Fiscal
Agent" herein.
OPERATING ADVISER.............. Holders of the majority interest in the most
subordinate Class of Principal Balance
Certificates (as defined herein) outstanding
at any time of determination or, if the
Certificate Balance of such Class of
Certificates is less than 50% (or 20% in the
case of the Class N Certificates) of the
initial Certificate Balance of such Class, the
next most subordinate Class of Certificates
(the "Controlling Class"), may appoint an
"Operating Adviser" as described under
"Servicing of the Mortgage Loans--The
Operating Adviser" herein. The Operating
Adviser will have the right to appoint a
replacement Special Servicer subject to
certain conditions. The Special Servicer will
be required to provide notice to the Operating
Adviser before taking certain actions as
described herein.
HEALTHCARE ADVISER............. The Controlling Class will be entitled to elect
a consultant with respect to the Healthcare
Loans and the Healthcare Properties (the
"Healthcare Adviser") as described under
"Servicing of the Mortgage Loans--The
Healthcare Adviser" herein.
CUT-OFF DATE................... The close of business on August 1, 1998.
CLOSING DATE................... On or about August 27, 1998.
RECORD DATE.................... The record date for each Class of Certificates
for each Distribution Date will be the close
of business on the last day of the month
immediately preceding the month in which such
Distribution Date occurs or, if such day is
not a business day, the business day
immediately preceding such day.
DISTRIBUTION DATE.............. The 15th day of each month or, if such day is
not a business day, the next succeeding
business day, commencing September 15, 1998.
DETERMINATION DATE............. The 10th day of the month in which such
Distribution Date occurs or, if such day is
not a business day, the immediately preceding
business day.
COLLECTION PERIOD.............. The "Collection Period" related to each
Distribution Date, (a) with respect to
Scheduled Payments, will begin on the day
after the Determination Date in the month
preceding the month of such Distribution Date
(or in the case of the first Distribution
Date, the Cut-Off Date) and will end on the
Determination Date in the month in which the
Distribution Date occurs, and (b) with respect
to all other collections on the Mortgage Loans
and REO Properties, will begin on the
S-14
<PAGE>
day following the last day of the immediately
preceding Collection Period for such
collections (or, in the case of the first
Distribution Date, the Cut-Off Date) and will
end on the earlier of the Determination Date
in the month in which the Distribution Date
occurs and the fourth business day prior to
such Distribution Date.
REGISTRATION AND DENOMINATIONS. The Class A Certificates will initially be
issued in book-entry form in denominations of
$5,000 initial Certificate Balance and in any
whole dollar denomination in excess thereof.
The Class B, Class C, Class D and Class E
Certificates will initially be issued in
book-entry form in denominations of $50,000
initial Certificate Balance, and in any whole
dollar denomination in excess thereof. Each
Class of Offered Certificates will be
represented by one or more Certificates
registered in the name of Cede & Co., as
nominee of The Depository Trust Company
("DTC"). No person acquiring an interest in an
Offered Certificate (any such person, a
"Certificate Owner") will be entitled to
receive a fully registered physical
certificate (a "Definitive Certificate")
representing such interest, except under the
limited circumstances described herein and in
the Prospectus. See "Description of the
Certificates--General" herein and "Description
of the Certificates--Book-Entry Registration
and Definitive Certificates" in the
Prospectus.
CLEARANCE AND SETTLEMENT....... Certificateholders must hold their Offered
Certificates in book-entry form, delivery of
which will be made through the facilities of
DTC (in the United States) and may be made
through the facilities of Cedel Bank, societe
anonyme ("CEDEL") or the Euroclear System
("Euroclear") (in Europe). Transfers within
DTC, CEDEL or Euroclear, as the case may be,
will be in accordance with the usual rules and
operating procedures of the relevant system.
Crossmarket transfers between persons holding
directly or indirectly through DTC, on the one
hand, and counterparties holding directly or
indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through
Citibank, N.A. or The Chase Manhattan Bank,
the relevant depositaries of CEDEL and
Euroclear, respectively.
SUBORDINATION.................. Credit enhancement for each Class of Offered
Certificates will be provided by those Classes
of Certificates that are subordinate to such
Certificates with respect to (a) rights to
receive distributions of interest and
principal, to the extent described herein, and
(b) the allocation of Realized Losses (as
defined herein) incurred on the Mortgage
Loans, and certain Expense Losses (also as
defined herein), to the extent described
herein. As described herein, the Residual
Certificates are subordinate to the REMIC
Regular Certificates; each Class of
Subordinate Certificates is subordinate to the
Senior Certificates and to each other Class of
Subordinate Certificates with an earlier
alphabetical Class designation (for example,
the Class N Certificates are
S-15
<PAGE>
subordinate to the Class M Certificates); and
the respective Classes of Senior Certificates
rank pari passu in entitlement to
distributions of interest. The level of credit
enhancement available to any Class of Offered
Certificates will change over time as a result
of (i) the allocation, as described herein, of
principal payments, and proceeds from
liquidations of Mortgage Loans or associated
REO Properties or the sale of defaulted
Mortgage Loans and (ii) the allocation of any
Realized Losses and Expense Losses to one or
more Classes of Subordinate Certificates in
the order of priority described herein. After
the aggregate Certificate Balance of the
Subordinate Certificates has been reduced to
zero, Realized Losses and Expenses Losses will
be allocated pro rata among the Class A-1,
Class A-2, Class A-MF1 and Class A-MF2
Certificates and, with respect to losses
allocable to interest, the Class X
Certificates.
DESCRIPTION OF THE CERTIFICATES
A. CERTIFICATE BALANCES AND
NOTIONAL AMOUNTS.......... Upon initial issuance, the Class A-1, Class
A-2, Class A-MF1, Class A-MF2, Class B, Class
C, Class D, Class E, Class F, Class G, Class
H, Class J, Class K, Class L, Class M and
Class N Certificates (collectively, the
"Principal Balance Certificates") will have
the following aggregate Certificate Balances
(in each case, subject to a variance of plus
or minus 5%):
<TABLE>
<CAPTION>
Approximate Approximate
Initial Aggregate Percentage
Certificate of Initial Pool
Class Balance Balance
----- ------- -------
<S> <C> <C>
Class A-1 $231,000,000 20.86%
Class A-2 $365,026,000 32.97
Class A-MF1 $98,712,000 8.91
Class A-MF2 $83,134,000 7.51
Class B $55,364,000 5.00
Class C $60,901,000 5.50
Class D $60,901,000 5.50
Class E $19,378,000 1.75
Class F $22,146,000 2.00
Class G $33,218,000 3.00
Class H $11,073,000 1.00
Class J $11,073,000 1.00
Class K $19,378,000 1.75
Class L $11,073,000 1.00
Class M $5,536,000 0.50
Class N $19,378,368 1.75
</TABLE>
The "Certificate Balance" of any Principal
Balance Certificate outstanding at any time
will equal the then maximum amount that the
holder will be entitled to receive in respect
of principal out of future cash flow on the
Mortgage Loans and other assets included in
the Trust Fund. The
S-16
<PAGE>
initial Certificate Balance of each Principal
Balance Certificate will be set forth on the
face thereof. On each Distribution Date, the
Certificate Balance of each Principal Balance
Certificate will be reduced by any
distributions of principal actually made on
such Certificate on such Distribution Date,
and will be further reduced by any Realized
Losses or Expense Losses allocated to such
Certificate on such Distribution Date. See
"Description of the
Certificates--Distributions" and
"--Distributions--Subordination; Allocation of
Losses and Certain Expenses" herein.
The Class X Certificates will not have a
Certificate Balance; such Class of
Certificates will instead represent the right
to receive distributions of interest accrued
as described herein on a notional principal
amount (a "Notional Amount"). The Notional
Amount of the Class X Certificates will be
equal to the aggregate of the Certificate
Balances of the respective Classes of
Principal Balance Certificates outstanding
from time to time. Accordingly, the Notional
Amount of the Class X Certificates will be
reduced on each Distribution Date by any
distributions of principal actually made on,
and any Realized Losses and Expense Losses
actually allocated to any Class of Principal
Balance Certificates.
The Notional Amount of each Interest Only
Certificate is used solely for the purpose of
determining the amount of interest to be
distributed on such Certificate and does not
represent the right to receive any
distributions of principal.
The Class Q Certificates and the Residual
Certificates will not have Certificate
Balances or Notional Amounts.
B. PASS-THROUGH RATES.......... The Pass-Through Rates applicable to the
Class A-1, Class A-2, Class A-MF1, Class
A-MF2, Class B, Class C, Class D and Class E
Certificates for each Distribution Date will
be equal to 6.33%, 6.60%, 6.52%, 6.53%, 6.88%,
7.13%, 7.35%, and 7.35% per annum,
respectively; provided, however, that each
such Pass-Through Rate will not exceed the
Weighted Average Net Mortgage Rate for such
Distribution Date.
The Pass-Through Rate applicable to the Class
X Certificates for the initial Distribution
Date will equal approximately 1.06% per annum.
The Pass-Through Rate applicable to the Class
X Certificates for each Distribution Date
subsequent to the initial Distribution Date
will, in general, equal the excess, if any, of
(i) the Weighted Average Net Mortgage Rate for
such Distribution Date, over (ii) the weighted
average of the Pass-Through Rates applicable
to the respective Classes of Principal Balance
Certificates for such Distribution Date, the
relevant weighting to be on the basis of the
respective aggregate Certificate Balances of
such Classes of Certificates immediately prior
to such Distribution Date.
S-17
<PAGE>
The Pass-Through Rates applicable to the Class
F, Class G, Class H, Class J, Class K, Class
L, Class M and Class N Certificates will, at
all times, be equal to 7.35%, 7.35%, 6.33%,
6.33%, 6.33%, 6.33%, 6.33%, and 6.33% per
annum, respectively; provided, however, that
each such Pass-Through Rate will not exceed
the Weighted Average Net Mortgage Rate for
such Distribution Date. The Class Q, Class
R-I, Class R-II and Class R-III Certificates
will not have Pass-Through Rates.
The "Weighted Average Net Mortgage Rate" for
any Distribution Date is the weighted average
of the Net Mortgage Rates for the Mortgage
Loans (in the case of each Mortgage Loan that
is a Non-30/360 Mortgage Loan, adjusted as
described below), weighted on the basis of
their respective Scheduled Principal Balances
as of the close of business on the preceding
Distribution Date.
The "Net Mortgage Rate" with respect to any
Mortgage Loan will, in general, be a per annum
rate equal to the related Mortgage Rate minus
the related Administrative Cost Rate, adjusted
as described below for Actual/360 Mortgage
Loans; provided that, for purposes of
calculating the Pass-Through Rate for each
Class of REMIC Regular Certificates from time
to time, the Net Mortgage Rate for any
Mortgage Loan will be calculated without
regard to any modification, waiver or
amendment of the terms of such Mortgage Loan
subsequent to the Closing Date.
The "Net Mortgage Rate" with respect to the
Mortgage Loans that provide for interest based
on a 360-day year and the actual number of
days elapsed ("Actual/360 Mortgage Loans") for
(a) any Interest Accrual Period commencing in
any January, February, April, June, September
and November, and any December occurring in a
year immediately preceding any year which is
not a leap year, is the Net Mortgage Rate
thereof, and (b) any Interest Accrual Period
commencing in March, May, July, August and
October and any December occurring in a year
immediately preceding any year which is a leap
year, is equal to the Net Mortgage Rate
thereof multiplied by a fraction the numerator
of which is the actual number of days in such
Interest Accrual Period and the denominator of
which is 30; provided, however, that with
respect to each Interest Reserve Loan (as
defined herein), (i) the Net Mortgage Rate for
the Collection Period preceding the Due Dates
in (a) January and February in each year that
is not a leap year or (b) in February only in
each year that is a leap year will be
determined net of the Withheld Amounts and
(ii) the Net Mortgage Rate for the Collection
Period preceding the Due Dates in March will
be determined after taking into account the
addition of the Withheld Amounts with respect
to each such Mortgage Loan.
C. DISTRIBUTIONS OF INTEREST
AND PRINCIPAL............ As more particularly described herein, the
total of all payments and other collections
(or advances in lieu thereof)
S-18
<PAGE>
in respect of the Mortgage Loans that are
available for distributions of interest on and
principal of the Certificates on any
Distribution Date is herein referred to as the
"Available Distribution Amount" for such date.
The Available Distribution Amount for either
Loan Group for any Distribution Date generally
is the total of all payments or other
collections (or available P&I Advances) (other
than Prepayment Premiums and Excess Interest,
which are distributed separately as described
herein) on or in respect of the Mortgage Loans
in such Loan Group that are available for
distribution on the Certificates on such date.
The "A-MF1 Principal Distribution Amount" will
be, with respect to Loan Group 2, and any
Distribution Date, the portion of the
Principal Distribution Amount for Loan Group 2
for such Distribution Date that represents
Balloon Payments, Principal Prepayments,
Liquidation Proceeds, Insurance Proceeds, and
REO Income. The "A-MF2 Principal Distribution
Amount " will be, with respect to Loan Group
3, and any Distribution Date, the portion of
the Principal Distribution Amount for Loan
Group 3 for such Distribution Date that
represents Balloon Payments, Principal
Prepayments, Liquidation Proceeds, Insurance
Proceeds, and REO Income. See "Description of
the Certificates--Distributions--The Available
Distribution Amount" and
"--Distributions--Distributions of Prepayment
Premiums" herein.
On each Distribution Date, for so long as any
Class of Offered Certificates remains
outstanding, and except as otherwise described
under "Description of the
Certificates--Optional Termination" herein,
the Available Distribution Amount for such
date will be distributed to the holders of the
respective Classes of Certificates for the
following purposes and in the following order
of priority:
(1) concurrently, (A) from the Available
Distribution Amount for Loan Group 1, to the
Class A-1 and Class A-2 Certificates, pro
rata, the Distributable Certificate Interest
in respect of each such Class for such
Distribution Date, (B) from the Available
Distribution Amount for Loan Group 2, to the
Class A-MF1 Certificates, the Distributable
Certificate Interest for such Class for such
Distribution Date, (C) from the Available
Distribution Amount for Loan Group 3, to the
Class A-MF2 Certificates, the Distributable
Certificate Interest for such Class for such
Distribution Date, and (D) from the Available
Distribution Amount, the Distributable
Certificate Interest to the Class X
Certificates; provided, however, that if the
Available Distribution Amount for any Loan
Group is insufficient to pay in full the
Distributable Certificate Interest to be
distributed to any such Classes as described
above, the Available Distribution Amount will
be allocated among such Classes pro rata in
proportion to such Distributable Certificate
Interest without regard to Loan Group;
S-19
<PAGE>
(2) to the Class A-MF1 Certificates, in
reduction of the Certificate Balance thereof
until the Certificate Balance thereof has been
reduced to zero, an amount up to the A-MF1
Principal Distribution Amount (as defined
herein) for such Distribution Date from
amounts received with respect to Loan Group 2;
and to the Class A-MF2 Certificates, in
reduction of the Certificate Balance thereof
until the Certificate Balance thereof has been
reduced to zero, an amount up to the A-MF2
Principal Distribution Amount (as defined
herein) for such Distribution Date from
amounts received with respect to Loan Group 3;
(3) to the Class A-1, Class A-2, Class A-MF1
and Class A-MF2 Certificates, in reduction of
the Certificate Balances thereof, an amount up
to the Principal Distribution Amount for such
Distribution Date remaining after the
distribution described in clause (2), in the
following order of priority:
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero;
second, to the Class A-2 Certificates, until
the Certificate Balance thereof has been
reduced to zero; and
third, to Class A-MF1 and Class A-MF2
Certificates, pro rata, until the Certificate
Balances thereof have been reduced to zero;
(4) to the holders of the Class A and Class X
Certificates, pro rata in proportion to their
respective entitlements to reimbursement
described in this clause (4), to reimburse
them for any Realized Losses or Expense Losses
previously allocated to such Classes of
Certificates plus interest on such amounts,
compounded monthly, at one-twelfth the
applicable Pass-Through Rate;
(5) to the holders of the Class B
Certificates, all Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(6) upon payment in full of the aggregate
Certificate Balance of the Class A
Certificates, to the holders of the Class B
Certificates, the Principal Distribution
Amount for such Distribution Date (reduced by
any portion thereof distributed to the holders
of the Class A Certificates), until the
aggregate Certificate Balance of the Class B
Certificates has been reduced to zero;
(7) to the holders of the Class B
Certificates, to reimburse any Realized Losses
or Expense Losses previously allocated to such
Class of Certificates, plus interest on such
amounts, compounded monthly, at one-twelfth
the applicable Pass-Through Rate;
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<PAGE>
(8) to the holders of the Class C
Certificates, all Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(9) upon payment in full of the aggregate
Certificate Balance of the Class B
Certificates, to the holders of the Class C
Certificates, the Principal Distribution
Amount for such Distribution Date (reduced by
any portion thereof distributed to the holders
of the Class A and Class B Certificates),
until the aggregate Certificate Balance of the
Class C Certificates has been reduced to zero;
(10) to the holders of the Class C
Certificates, to reimburse them for any
Realized Losses or Expense Losses previously
allocated to such Class of Certificates, plus
interest on such amounts, compounded monthly,
at one-twelfth the applicable Pass-Through
Rate;
(11) to the holders of the Class D
Certificates, all Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(12) upon payment in full of the aggregate
Certificate Balance of the Class C
Certificates, to the holders of the Class D
Certificates, the Principal Distribution
Amount for such Distribution Date (reduced by
any portion thereof distributed to the holders
of the Class A, Class B and Class C
Certificates), until the aggregate Certificate
Balance of the Class D Certificates has been
reduced to zero;
(13) to the holders of the Class D
Certificates, to reimburse them for any
Realized Losses or Expense Losses previously
allocated to such Class of Certificates, plus
interest on such amounts, compounded monthly,
at one-twelfth the applicable Pass-Through
Rate;
(14) to the holders of the Class E
Certificates, all Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(15) upon payment in full of the aggregate
Certificate Balance of the Class D
Certificates, to the holders of the Class E
Certificates, the Principal Distribution
Amount for such Distribution Date (reduced by
any portion thereof distributed to the holders
of the Class A, Class B, Class C and Class D
Certificates), until the aggregate Certificate
Balance of the Class E Certificates has been
reduced to zero;
(16) to the holders of the Class E
Certificates, to reimburse them for any
Realized Losses or Expense Losses previously
allocated to such Class of Certificates, plus
interest on such amounts, compounded monthly,
at one-twelfth the applicable Pass-Through
Rate; and
(17) to make payments to the holders of the
Private Certificates as contemplated below.
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<PAGE>
Notwithstanding the foregoing, on each
Distribution Date occurring on or after the
date, if any, upon which the aggregate
Certificate Balance of all Classes of
Subordinate Certificates has been reduced to
zero or the aggregate Appraisal Reduction in
effect is greater than or equal to the
aggregate Certificate Balance of all Classes
of Subordinate Certificates, the Principal
Distribution Amount will be distributed,
first, to the Class A-1, Class A-2, Class
A-MF1 and Class A-MF2 Certificates, pro rata,
based on their respective Certificate
Balances, in reduction of their respective
Certificate Balances, until the Certificate
Balance of each such Class is reduced to zero;
and, second, to the Class A-1, Class A-2,
Class A-MF1 and Class A-MF2 Certificates, pro
rata, based on the respective percentages
allocated pursuant to the preceding clause
first, for the unreimbursed amount of Realized
Losses and Expense Losses previously allocated
to such Classes.
On each Distribution Date, following the
above-described distributions on the Publicly
Offered Certificates, the Trustee will apply
the remaining portion, if any, of the
Available Distribution Amount for such date to
make payments to the holders of each of the
respective Classes of Private Certificates
(other than the Residual Certificates and the
Class Q Certificates), in alphabetical order
of Class designation, in each case for the
following purposes and in the following order
of priority (i.e., payments under clauses (1),
(2) and (3) below, in that order, to the
holders of the Class F Certificates, then
payments under clauses (1), (2) and (3) below,
in that order, to the holders of the Class G,
Class H, Class J, Class K, Class L, Class M
and Class N Certificates):
(1) to pay interest to the holders of the
particular Class of Certificates, up to an
amount equal to all Distributable Certificate
Interest in respect of such Class of
Certificates for such Distribution Date;
(2) if the aggregate Certificate Balance of
each other Class of Subordinate Certificates,
if any, with an earlier alphabetical Class
designation has been reduced to zero, to pay
principal to the holders of the particular
Class of Certificates, up to an amount equal
to the lesser of (a) the then outstanding
aggregate Certificate Balance of such Class of
Certificates and (b) the aggregate of the
remaining Principal Distribution Amount for
such Distribution Date; and
(3) to reimburse the holders of the particular
Class of Certificates, up to an amount equal
to (a) all Realized Losses and Expense Losses,
if any, previously allocated to such Class of
Certificates and for which no reimbursement
has previously been paid, plus (b) all unpaid
interest on such amounts
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<PAGE>
(compounded monthly) at one-twelfth the
respective Pass-Through Rates of such Classes.
Any portion of the Available Distribution
Amount for any Distribution Date that is not
otherwise payable to the holders of REMIC
Regular Certificates as contemplated above,
will be paid to the holders of the Class R-I
Certificates.
The "Distributable Certificate Interest" in
respect of any Class of REMIC Regular
Certificates for any Distribution Date will
equal the sum of (a) Accrued Certificate
Interest in respect of such Class of
Certificates for such Distribution Date,
reduced (to not less than zero) by (i) any Net
Aggregate Prepayment Interest Shortfalls (as
defined herein), and (ii) Realized Losses and
Expense Losses, in each case specifically
allocated with respect to such Distribution
Date to reduce Distributable Certificate
Interest payable in respect of such Class in
accordance with the terms of the Pooling and
Servicing Agreement and, (b) the portion of
Distributable Certificate Interest for such
Class remaining unpaid as of the close of
business on the preceding Distribution Date,
plus one month's interest thereon at the
applicable Pass-Through Rate (such amount,
"Unpaid Interest").
The "Accrued Certificate Interest" in respect
of each Class of REMIC Regular Certificates
for each Distribution Date will equal the
amount of interest for the applicable Interest
Accrual Period accrued at the applicable
Pass-Through Rate on the aggregate Certificate
Balance or Notional Amount, as the case may
be, of such Class of Certificates outstanding
immediately prior to such Distribution Date.
Accrued Certificate Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months.
The "Interest Accrual Period" for each Class
of REMIC Regular Certificates and each
Distribution Date will be the calendar month
immediately preceding the month in which such
Distribution Date occurs. See "Description of
the Certificates--Distributions--Distributable
Certificate Interest" and "--Prepayment
Interest Shortfalls and Prepayment Interest
Excesses" herein.
The "Principal Distribution Amount" for any
Distribution Date will, in general, equal the
aggregate of the following:
(a) the principal portions of all Scheduled
Payments (other than the principal portion of
Balloon Payments (as defined herein)) and any
Assumed Scheduled Payments due or deemed due,
as the case may be, in respect of the Mortgage
Loans for their respective Due Dates (as
defined herein) occurring during the related
Collection Period; and
(b) all payments (including Principal
Prepayments and the principal portion of
Balloon Payments) and other collections
(including Liquidation Proceeds, Condemnation
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<PAGE>
Proceeds, Insurance Proceeds and REO Income
(each as defined herein) and proceeds of
Mortgage Loan repurchases) that were received
on or in respect of the Mortgage Loans during
the related Collection Period and that were
identified and applied by the Master Servicer
as recoveries of principal thereof, in each
case net of any portion of such payment or
other collection that represents a recovery of
the principal portion of any Scheduled Payment
(other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled
Payment deemed due, in respect of the related
Mortgage Loan on a Due Date during or prior to
the related Collection Period and not
previously recovered.
The "Scheduled Payment" for any Mortgage Loan
on any Due Date will, in general, be the
amount of the scheduled payment of principal
and interest due thereon on such date (taking
into account any waiver, modification or
amendment of the terms of such Mortgage Loan
subsequent to the Closing Date, whether agreed
to by the Special Servicer or occurring in
connection with a bankruptcy proceeding
involving the related borrower).
An "Assumed Scheduled 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 original
stated maturity date or (ii) any Mortgage Loan
as to which the related Mortgaged Property has
become an REO Property. The Assumed Scheduled
Payment deemed due on any such Balloon
Mortgage Loan on its original stated maturity
date and on each successive Due Date that it
remains or is deemed to remain outstanding
will equal the Scheduled Payment that would
have been due thereon on such date if the
related Balloon Payment had not come due, but
rather such Mortgage Loan had continued to
amortize in accordance with its amortization
schedule in effect immediately prior to
maturity. The Assumed Scheduled Payment for
any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property,
deemed due on each Due Date for so long as the
REO Property remains part of the Trust Fund,
equals the Scheduled Payment (or Assumed
Scheduled Payment) due on the last Due Date
prior to the acquisition of such REO Property.
DISTRIBUTIONS OF
PREPAYMENT PREMIUMS......... Any Prepayment Premium (as defined herein)
collected with respect to a Mortgage Loan in
Loan Group 1 during any particular Collection
Period will be distributed on the following
Distribution Date as follows: The holders of
the Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates then entitled
to distributions of principal on such
Distribution Date will be entitled to an
amount equal to the product of (a) a fraction
whose numerator is the amount distributed as
principal to such Class on such Distribution
Date and whose denominator is the total amount
distributed as
S-24
<PAGE>
principal to the Principal Balance
Certificates (other than the Class A-MF1 or
Class A-MF2 Certificates), (b) a fraction (not
greater than 1 or less than zero), the
numerator of which is equal to the excess, if
any, of the Pass-Through Rate applicable to
the most senior of such Classes of Principal
Balance Certificates then outstanding (or, in
the case of the three Classes of Class A
Certificates, the one with the earlier payment
priority), over the relevant Discount Rate (as
defined herein), and the denominator of which
is equal to the excess, if any, of the
Mortgage Rate of the Mortgage Loan that
prepaid, over the relevant Discount Rate, and
(c) the amount of such Prepayment Premium
collected on such principal prepayment during
the related Collection Period.
Any Prepayment Premium collected with respect
to a Mortgage Loan in Loan Group 2 during any
particular Collection Period will be
distributed on the following Distribution Date
as follows: The holders of the Class A-MF1
Certificates will be entitled to an amount
equal to the product of (a) a fraction, not
greater than 1, whose numerator is the amount
distributed as principal to such Class on such
Distribution Date, and whose denominator is
the total amount distributed as principal
prepayments on such Distribution Date from the
Mortgage Loans in Loan Group 2, (b) a fraction
(not greater than 1 or less than zero), the
numerator of which is equal to the excess, if
any, of the Pass-Through Rate applicable to
the Class A-MF1 Certificates over the relevant
Discount Rate, and the denominator of which is
equal to the excess, if any, of the Mortgage
Rate of the Mortgage Loan that prepaid, over
the relevant Discount Rate, and (c) the amount
of Prepayment Premium collected on such
principal prepayment during the related
Collection Period.
Any Prepayment Premium collected with respect
to a Mortgage Loan in Loan Group 3 during any
particular Collection Period will be
distributed on the following Distribution Date
as follows: The holders of the Class A-MF2
Certificates will be entitled to an amount
equal to the product of (a) a fraction, not
greater than 1, whose numerator is the amount
distributed as principal to such Class on such
Distribution Date, and whose denominator is
the total amount distributed as principal
prepayments on such Distribution Date from the
Mortgage Loans in Loan Group 3, (b) a fraction
(not greater than 1 or less than zero), the
numerator of which is equal to the excess, if
any, of the Pass-Through Rate applicable to
the Class A-MF2 Certificates over the relevant
Discount Rate, and the denominator of which is
equal to the excess, if any, of the Mortgage
Rate of the Mortgage Loan that prepaid, over
the relevant Discount Rate, and (c) the amount
of Prepayment Premium collected on such
principal prepayment during the related
Collection Period.
The portion of the Prepayment Premium
remaining after any such payment to the
holders of such Principal Balance
S-25
<PAGE>
Certificates, Class A-MF1 Certificates or
Class A-MF2 Certificates, as applicable, will
be distributed to the holders of the Class X
Certificates. See "Description of the
Certificates--Distributions--Distributions of
Prepayment Premiums" herein.
APPRAISAL REDUCTIONS........... Not later than the earliest of (i) the date 120
days after the occurrence of any delinquency
in payment with respect to a Mortgage Loan if
such delinquency remains uncured, (ii) the
date 90 days after the related borrower files
a bankruptcy petition or a receiver is
appointed in respect of the related Mortgaged
Property, provided such petition or
appointment is still in effect, (iii) the
effective date of any modification to the
maturity date, Mortgage Rate, principal
balance, amortization term or payment
frequency (each, a "Money Term") of a Mortgage
Loan, other than the extension of the date
that a Balloon Payment is due for a period of
less than six months (provided that the total
of all such extensions does not exceed six (6)
months), (iv) the date of the commencement of
an involuntary bankruptcy action against a
borrower and the failure by the borrower to
effect the dismissal of such action within 60
days and (v) the date 30 days following the
date a Mortgaged Property becomes an REO
Property (each of (i), (ii), (iii), (iv) and
(v), an "Appraisal Event"), the Special
Servicer is required to have obtained an MAI
appraisal (if the Scheduled Principal Balance
of the Mortgage Loan is greater than
$1,000,000) or an internal valuation (if the
Scheduled Principal Balance of the Mortgage
Loan is equal to or less than $1,000,000) of
the related Mortgaged Property or REO
Property, as the case may be, unless such an
appraisal or valuation had previously been
obtained within the prior twelve months,
provided, that if the Special Servicer is
required to obtain an MAI appraisal of a
Mortgaged Property after receipt of notice of
the events described in (ii) or (iv) above,
such appraisal will be obtained no later than
60 days after receipt of such notice (but in
no case later than 120 days after the filing
referred to in (ii) above) and an internal
valuation will be obtained no later than 30
days after receipt of such notice. As a result
of such appraisal or internal valuation, an
"Appraisal Reduction" may be created.
The Appraisal Reduction for any Mortgage Loan,
including a Mortgage Loan as to which the
related Mortgaged Property has become an REO
Property, will be an amount, calculated as of
the first Determination Date that is at least
fifteen days after the date on which the
appraisal or valuation is obtained or
performed, equal to the excess, if any, of (a)
the sum of (i) the Scheduled Principal Balance
of such Mortgage Loan, (ii) to the extent not
previously advanced by the Master Servicer,
all unpaid interest on the Mortgage Loan,
(iii) all related unreimbursed Advances and
interest on Advances at the Advance Rate (as
defined herein) and (iv) all currently due and
unpaid real estate taxes and assessments (net
of any amounts escrowed for such items),
insurance premiums, and,
S-26
<PAGE>
if applicable, ground rents in respect of the
related Mortgaged Property or REO Property, as
the case may be, over (b) 90% of the value of
such Mortgaged Property or REO Property as
determined by such appraisal or valuation. An
Appraisal Reduction will be reduced to zero as
of the date the related Mortgage Loan is
brought current under the then current terms
of the Mortgage Loan for at least three
consecutive months, paid in full, liquidated,
repurchased or otherwise disposed of.
The existence of an Appraisal Reduction will
proportionately reduce the Master Servicer's
obligation to make P&I Advances (as defined
herein) in respect of the related Mortgage
Loan, which will generally result in a
reduction in current distributions of interest
in respect of the then most subordinate Class
of Principal Balance Certificates. See
"Description of the
Certificates--Advances--P&I Advances" herein.
ALLOCATION OF REALIZED LOSSES,
EXPENSE LOSSES AND
INTEREST SHORTFALLS........ As and to the extent described herein, Realized
Losses of principal and interest on the
Mortgage Loans and certain Expense Losses will
generally be allocated with respect to each
Distribution Date to the Class N, Class M,
Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to the
Class A-1, Class A-2, Class A-MF1, Class A-MF2
and, solely with respect to Realized Losses
and Expense Losses of interest, to the Class X
Certificates, pro rata, in each case reducing
amounts payable thereto.
Any shortfall in the amount of Distributable
Certificate Interest paid to the
Certificateholders of any Class of
Certificates on any Distribution Date will
result in unpaid interest for such Class
which, together with interest thereon
compounded monthly at one-twelfth the
applicable Pass-Through Rate, will be included
in Distributable Certificate Interest in
subsequent periods.
PREPAYMENT INTEREST SHORTFALLS
AND PREPAYMENT INTEREST
EXCESSES.................. "Prepayment Interest Shortfall" is a shortfall
in the collection of a full month's interest
on any Mortgage Loan by reason of a full or
partial Principal Prepayment (including early
payment of a Balloon Payment) made during any
Collection Period prior to the date when the
Scheduled Payment is payable on such Mortgage
Loan (the "Due Date") in such Collection
Period, which is the first day of each month.
If a full or partial Principal Prepayment is
made during any Collection Period but after
the Due Date for such Mortgage Loan occurring
in such Collection Period, then a "Prepayment
Interest Excess" will result. The amount of
Prepayment Interest Excess in any such case
will equal the interest that accrues on the
Mortgage Loan from such Due Date to the date
such payment was made. To the extent of
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<PAGE>
that portion of its aggregate Master Servicing
Fee for the related Collection Period that is,
in the case of each and every Mortgage Loan,
calculated at 0.015% per annum, the Master
Servicer is required, with respect to each
Distribution Date, to cover the aggregate of
any Prepayment Interest Shortfalls incurred
with respect to the Mortgage Pool during such
Collection Period that are not offset by
Prepayment Interest Excesses collected on the
Mortgage Loans during such Collection Period.
See "Servicing of the Mortgage Loans--The
Master Servicer--Master Servicer Compensation"
herein.
Any payment so made by the Master Servicer to
cover such shortfalls will constitute a
"Compensating Interest Payment." The aggregate
of all Prepayment Interest Shortfalls incurred
in respect of the Mortgage Loans during any
Collection Period that are neither offset by
Prepayment Interest Excesses collected on the
Mortgage Loans during such Collection Period
nor covered by a Compensating Interest Payment
made by the Master Servicer, will constitute
the "Net Aggregate Prepayment Interest
Shortfall" for the related Distribution Date.
Any Net Aggregate Prepayment Interest
Shortfall for a Distribution Date will be
allocated among the respective Classes of
REMIC Regular Certificates, on a pro rata
basis, in the ratio that the Accrued
Certificate Interest with respect to any such
Class of Certificates for such Distribution
Date, bears to the total of the Accrued
Certificate Interest with respect to all
Classes of REMIC Regular Certificates for such
Distribution Date. The Distributable
Certificate Interest in respect of any Class
of REMIC Regular Certificates will be reduced
to the extent that any Net Aggregate
Prepayment Interest Shortfalls are allocated
thereto. See "Description of the
Certificates--Distributions--Distributable
Certificate Interest" herein.
OPTIONAL TERMINATION........... The Depositor, the Master Servicer, the Special
Servicer and the holder of the majority
interest in the Class R-I Certificates, each
in turn, will have the option to purchase, in
whole but not in part, the Mortgage Loans and
any other property remaining in the Trust Fund
on any Distribution Date on or after the
Distribution Date on which the aggregate
Certificate Balance of all Classes of
Principal Balance Certificates then
outstanding is less than or equal to 1% of the
Initial Pool Balance. The purchase price for
any such purchase will be the greater of (i)
100% of the aggregate Principal Balance of the
Mortgage Loans (other than any Mortgage Loans
as to which the Master Servicer has determined
that all payments or recoveries with respect
thereto have been made), plus accrued and
unpaid interest at the Mortgage Rate (or the
Mortgage Rate less the Master Servicing Fee
Rate if the Master Servicer is the purchaser)
to the Due Date for each Mortgage Loan ending
in the
S-28
<PAGE>
Collection Period with respect to which such
purchase occurs, plus unreimbursed Servicing
Advances, with interest on any Advances at the
Advance Rate, and (ii) the aggregate fair
market value of the Mortgage Loans and any
other property remaining in the Trust Fund.
See "Description of the Certificates--Optional
Termination" herein.
ADMINISTRATIVE COST RATE....... The administrative costs on each Mortgage Loan
in any month will equal the sum of the related
Master Servicing Fee, the primary servicing
fee (such fee, the "Primary Servicing Fee"),
any RMF Retained Fee, any Healthcare Adviser
Fee and the Trustee Fee for such month
(collectively, expressed as a per annum rate,
the "Administrative Cost Rate"), which is set
forth in Appendix II. The Administrative Cost
Rate will be payable on the Scheduled
Principal Balance of each Mortgage Loan
outstanding from time to time. The portion of
the Administrative Cost Rate applicable to a
Mortgage Loan in any month will be determined
using the same interest accrual methodology
that is applied with respect to the Mortgage
Rate on such Mortgage Loan. The RMF Retained
Fee is non-terminable.
ADVANCES....................... As and to the extent described herein, the
Master Servicer will be obligated to make
advances ("Advances") in respect of delinquent
payments of principal (other than the
principal portion of Balloon Payments) and/or
interest on the Mortgage Loans ("P&I
Advances") and to cover certain servicing
expenses ("Servicing Advances") in accordance
with the provisions set forth in the Pooling
and Servicing Agreement. See "Description of
the Certificates--Advances" herein. If the
Master Servicer fails to make any Advance that
it is obligated to make pursuant to the
Pooling and Servicing Agreement, the Trustee
will be required to make such Advance, and if
the Trustee fails to make a required Advance,
the Fiscal Agent will be required to make such
Advance.
Each of the Master Servicer, the Trustee and
the Fiscal Agent, as applicable, will be
obligated to make Advances only to the extent
that it determines, in its sole discretion,
exercised in good faith, that such Advances
are ultimately recoverable from future
payments and other collections on the related
Mortgage Loan or REO Property. Any such
determination will be conclusive and binding
on the Certificateholders.
The Master Servicer, the Trustee and the
Fiscal Agent will each be entitled, with
respect to any Advance made thereby, to
receive interest accrued on the amount of such
Advance for so long as it is outstanding at a
rate per annum (the "Advance Rate") equal to
the "Prime Rate" as 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 result
in a reduction in amounts payable on the
S-29
<PAGE>
Certificates. See "Description of the
Certificates--Advances" herein.
CERTAIN YIELD, MATURITY AND
PREPAYMENT CONSIDERATION.. The yield on the Offered Certificates of each
Class will depend on, among other things, the
Pass-Through Rate for such Certificates.
The yield on any Principal Balance Certificate
that is purchased at a discount or premium
will also be affected by the rate and timing
of distributions in respect of principal on
such Certificate, which in turn will be
affected by (i) the rate and timing of
principal payments (including principal
prepayments) on the Mortgage Loans and (ii)
the extent to which such principal payments
are applied on any Distribution Date in
reduction of the Certificate Balance of such
Certificate. The yield to investors in the
Class A-MF1 Certificates will be sensitive to
the rate and timing of receipt of the A-MF1
Principal Distribution Amount, and the yield
to investors in the Class A-MF2 Certificates
will be sensitive to the rate and timing of
receipt of the A-MF2 Principal Distribution
Amount. No representation is made as to the
rate of prepayments on, or rate or amount of
liquidations of, the Mortgage Loans or as to
the anticipated yield to maturity of any
Offered Certificates. An investor that
purchases any Principal Balance Certificate at
a discount should consider the risk that a
slower than anticipated rate of principal
payments on such Certificate will result in an
actual yield that is lower than such
investor's expected yield. An investor that
purchases any Principal Balance Certificate at
a premium should consider the risk that a
faster than anticipated rate of principal
payments on such Certificate will result in an
actual yield that is lower than such
investor's expected yield. Insofar as an
investor's initial investment in any Offered
Certificate is returned in the form of
payments of principal thereon, there can be no
assurance that such amounts can be reinvested
in a comparable alternative investment with a
comparable yield. See "Description of the
Certificates--Distributions--Application of
the Available Distribution Amount" and
"--Distributions--Principal Distribution
Amount" herein.
The actual rate of prepayment of principal on
the Mortgage Loans cannot be predicted. The
investment performance of the Offered
Certificates may vary materially and adversely
from the investment expectations of investors
due to prepayments on the Mortgage Loans being
higher or lower than anticipated by investors.
The actual yield to the holder of an Offered
Certificate may not be equal to the yield
anticipated at the time of purchase of the
Certificate or, notwithstanding that the
actual yield is equal to the yield anticipated
at that time, the total return on investment
expected by the investor or the expected
weighted average life of the Certificate may
not be realized. For a discussion of certain
factors affecting prepayment of the Mortgage
Loans,
S-30
<PAGE>
including the effect of Prepayment Premiums,
see "Yield, Maturity and Prepayment
Considerations" herein. In deciding whether to
purchase any Offered Certificates, an investor
should make an independent decision as to the
appropriate prepayment assumptions to be used.
CERTIFICATE RATINGS............ It is a condition of the issuance of the
Offered Certificates that they receive the
following credit ratings from Moody's
Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Service ("S&P", and
together with Moody's, the "Rating Agencies"):
CLASS MOODY'S S&P
------------ ------- ---
Class A-1....... Aaa AAA
Class A-2....... Aaa AAA
Class A-MF1..... Aaa AAA
Class A-MF2..... Aaa AAA
Class B......... Aa2 AA
Class C......... A2 A
Class D......... Baa2 BBB
Class E......... Baa3 BBB-
In addition, it is a condition to the issuance
of the Private Certificates that the Class X,
Class F, Class G, Class H, Class J, Class K,
Class L and Class M Certificates be rated
"Aaa"/AAAr", "Ba1/BB+," "Ba2/BB," "Ba3/BB-,"
"B1/B+," "B2/NR," "B3/NR" and "Caa2/NR"
respectively, by Moody's and S&P. The Class N
Certificates, Class Q Certificates and the
REMIC Residual Certificates will be unrated.
A securities rating addresses the likelihood
of the receipt by Certificateholders of timely
payment of interest and ultimate payment of
principal due on their Certificates. The
rating takes into consideration the
characteristics of the Mortgage Loans and the
structural and legal aspects associated with
the Certificates, including, if applicable,
ultimate distribution of all principal by the
Distribution Date in July 2032 (the "Final
Rated Distribution Date"). Each security
rating assigned to the Certificates should be
evaluated independently of any other security
rating.
The ratings on the Offered Certificates do not
represent any assessment of (i) the likelihood
or frequency of principal prepayments on the
Mortgage Loans or the corresponding effect on
yield to investors, (ii) the degree to which
such prepayments might differ from those
originally anticipated, (iii) whether and to
what extent Prepayment Premiums will be
received or (iv) the allocation of Net
Aggregate Prepayment Interest Shortfall. A
security rating does not represent any
assessment of the yield to maturity that
investors may experience. In general, the
ratings address credit risk and not prepayment
risk.
S-31
<PAGE>
A credit 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 "Ratings"
and "Risk Factors and Other Special
Considerations" herein.
THE MORTGAGE POOL.............. The Mortgage Pool will consist of 380 Mortgage
Loans, with an Initial Pool Balance of
$1,107,291,368 subject to a variance of plus
or minus 5%. The Mortgage Loans comprise three
separate groups, Loan Group 1, Loan Group 2
and Loan Group 3 (each, a "Loan Group"). Loan
Group 3 will consist of 29 Mortgage Loans,
representing approximately 8.6% of the Initial
Pool Balance, each of which is a Multifamily
Loan (as defined herein) and as of the Cut-Off
Date has a remaining term to scheduled
maturity (or, in the case of an ARD Loan (as
defined herein), to the Anticipated Repayment
Date (as defined herein)) of 118 months or
less. Loan Group 2 will consist of 35 Mortgage
Loans, representing approximately 10.3% of the
Initial Pool Balance, each of which is a
Multifamily Loan and as of the Cut-Off Date
has a remaining term to scheduled maturity
(or, in the case of an ARD Loan, to the
Anticipated Repayment Date) of 118 months or
less. Loan Group 1 will consist of the
remaining 316 Mortgage Loans representing
approximately 81.1% of the Initial Pool
Balance. Balloon Payments and unscheduled
payments of principal on the Mortgage Loans in
Loan Group 2 (the "A-MF1 Principal
Distribution Amount") will be paid first to
the Class A-MF1 Certificates. Balloon Payments
and unscheduled payments of principal on the
Mortgage Loans in Loan Group 3 (the "A-MF2
Principal Distribution Amount") will be paid
first to the Class A-MF2 Certificates. All
numerical information provided herein with
respect to the Mortgage Loans is provided on
an approximate basis. For purposes of the
presentation of certain Mortgage Pool
Information herein, each Mortgage Loan is
deemed to be secured by a mortgage on one
Mortgaged Property. For Mortgage Loans where
one note is secured by multiple mortgaged
properties, the loan amount has been allocated
to each Mortgaged Property and such loans are
treated as if they were multiple loans that
are cross-collateralized and cross-defaulted.
S-32
<PAGE>
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
MORTGAGE POOL LOAN GROUP 1 LOAN GROUP 2 LOAN GROUP 3
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Initial Balance (1)................... $1,107,291,368 $897,909,789 $113,757,381 $95,624,197
Number of Mortgage Loans.............. 380 316 35 29
Average Mortgage Loan Balance......... $2,913,925 $2,841,487 $3,250,211 $3,297,386
Maximum Mortgage Loan Principal
Balance............................ $26,481,230 $26,481,230 $10,965,690 $9,979,120
Minimum Mortgage Loan Principal
Balance............................ $129,582 $129,582 $134,312 $199,335
Weighted Average Mortgage Rate........ 7.602 7.664% 7.215% 7.473%
Range of Mortgage Rates............... 6.900-11.050% 6.900-11.050% 6.970-9.410% 6.930-9.250%
Weighted Average Remaining Term
to the Earlier of Maturity or
Anticipated Repayment Date......... 134 139 115 108
Range of Remaining Term to the
Earlier of Maturity or
Anticipated Repayment Date......... 31-299 31-299 110-118 78-118
Weighted Average Amortization
Terms (2).......................... 316 308 356 349
Range of Amortization Terms (2)....... 156-376 156-376 300-360 300-360
Weighted Average DSCR (2)............. 1.39x 1.40x 1.32x 1.40x
Range of DSCR (2)..................... 1.06-2.75x 1.06-2.75x 1.14-1.92x 1.17-2.17x
Weighted Average LTV (2).............. 71.2% 70.7% 74.5% 71.4%
Range of LTVs (2)..................... 28.6-86.8% 28.6-86.8% 56.3-79.6% 47.8-79.8%
Weighted Average Balloon LTV
(including fully amortizing
loans)............................. 52.7% 50.2% 64.7% 62.1%
Percentage of Initial Pool Balance
made up of:
Fully Amortizing Loans............. 9.0% 9.0% 0% 0%
Balloon Loans (including ARD
Loans)............................. 51.7% 45.7% 1.0% 5.0%
</TABLE>
- - ------------------
(1) Subject to a permitted variance of plus or minus 5%.
(2) As defined and described in "Certain Characteristics of the Mortgage
Loans--Additional Mortgage Loan Information."
S-33
<PAGE>
Security for the Mortgage Loans
Each Mortgage Loan is secured by one or more
first priority mortgages, deeds of trust, or
other similar security instruments on the
borrower's interest in certain land used for
commercial or multifamily residential
purposes, all buildings and improvements
thereon and certain personal property located
thereon (each a "Mortgaged Property").
Mortgage Loans representing 98.4% of the
Initial Pool Balance were secured by liens
encumbering a fee simple interest of the
related borrowers and Mortgage Loans
representing 1.6% of the Initial Pool Balance
were secured by liens encumbering a leasehold
or partial leasehold interest of the related
borrower.
Payment Terms
Each Mortgage Loan (except for the variable
rate Mortgage Loan known as Silver Creek
Manor, which accrues interest as described in
Appendix II) accrues interest at the per annum
rate set forth for such Mortgage Loan on
Appendix II (the "Mortgage Rate") that is
fixed for the entire term of such Mortgage
Loan, except that most of the ARD Loans accrue
interest at a higher rate after the related
Anticipated Repayment Date. An "ARD Loan" is a
Mortgage Loan which provides that, commencing
on a specified date prior to maturity (the
"Anticipated Repayment Date"), all Excess Cash
Flow is diverted to repay principal. See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Excess Interest" herein.
As used herein, the term "Mortgage Rate" does
not include the portion of the interest rate
attributable to any such rate increase; with
respect to each ARD Loan, the excess, if any,
of interest at such higher rate over interest
at the Mortgage Rate (together with interest
thereon) is referred to herein as "Excess
Interest". Any such Excess Interest shall be
distributed to holders of the Class Q
Certificates. As described below, all of the
ARD Loans permit the related borrower to
prepay such ARD Loan without payment of a
Prepayment Premium for a period beginning on
or, in the case of certain of these Mortgage
Loans, generally one to six months prior to,
the Anticipated Repayment Date and ending on
the related maturity date. The Anticipated
Repayment Date for each ARD Loan is set forth
on Appendix II. If the related borrower elects
to prepay an ARD Loan in full on the related
Anticipated Repayment Date, a substantial
amount of principal will be due. With respect
to any ARD Loan, payment of Excess Interest,
if any, will be deferred until the principal
of such Mortgage Loan has been paid in full.
All of the ARD Loans for which a lock box is
not already established provide that a lock
box be established generally on, or prior to,
the applicable Anticipated Repayment
S-34
<PAGE>
Date. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans--Excess Interest" herein.
Certain of the Mortgage Loans provide for
Monthly Payments based on amortization
schedules longer than the remaining stated
terms of such Mortgage Loans (such Mortgage
Loans, the "Balloon Loans"), such that
substantial amounts of principal are due and
payable on the respective maturity dates (each
such amount, after application of all constant
Monthly Payments due on or prior to the
respective maturity date, a "Balloon
Payment"), unless prepaid prior thereto.
Call Protection Characteristics of the
Mortgage Loans
All of the Mortgage Loans impose some
restriction on voluntary Principal Prepayments
during certain periods of time, whether in the
form of an absolute prohibition or a
requirement that any voluntary principal
prepayment be accompanied by a prepayment
premium. The prepayment terms of each of the
Mortgage Loans are described herein. See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" and "--Property
Releases" herein and on Appendix II hereto.
The following table sets forth certain
information regarding prepayment restrictions
contained in the Mortgage Loans as of the
Cut-Off Date:
OVERVIEW OF PREPAYMENT RESTRICTIONS
% OF
INITIAL
POOL
PREPAYMENT RESTRICTION BALANCE
---------------------- -------
Lock-Out Period with defeasance 43.6
Lock-Out Period with yield maintenance 36.9
Lock-Out Period with prepayment premium 5.1
Yield maintenance only 4.3
Yield maintenance with prepayment premium 3.4
Lock-Out Period only 1.1
Lock-Out Period with yield maintenance
and prepayment premium 1.0
Other (1) 4.6
---
Total 100.0
----------------------
(1) Includes Mortgage Loans with other
types and combinations of prepayment
restrictions, such as open periods
equal to or greater than twenty-four
months prior to maturity.
S-35
<PAGE>
USE OF PROCEEDS................ The Depositor will use substantially all of
the net proceeds from the sale of the Offered
Certificates to purchase the Mortgage Loans
and to pay certain expenses in connection with
the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............. Three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with
respect to the Trust Fund for federal income
tax purposes. The assets of "REMIC I" will
consist primarily of the Mortgage Loans and
any properties acquired on behalf of the
Certificateholders. The assets of "REMIC II"
will consist of the separate uncertificated
REMIC I regular interests. The assets of
"REMIC III" will consist of the separate
uncertificated REMIC II regular interests. For
federal income tax purposes, (i) the REMIC
Regular Certificates will be the "regular
interests" in, and generally will be treated
as debt obligations of, REMIC III, and (ii)
the Class R-I Certificates will be the sole
class of residual interests in REMIC I, the
Class R-II Certificates will be the sole class
of residual interests in REMIC II and the
Class R-III Certificates will be the sole
class of residual interests in REMIC III. For
ease of presentation herein, payments on the
Mortgage Loans will generally be described as
distributable on the REMIC Regular
Certificates. The Class Q Certificates will
represent the right to receive Excess
Interest, which portions of the Trust Fund
will be treated as a grantor trust for federal
income tax purposes.
The Offered Certificates will be treated as
"real estate assets" under Section
856(c)(4)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), generally in
the same proportion that the assets in the
Trust Fund would be so treated. In addition,
interest on the Offered Certificates will be
treated as "interest on obligations secured by
mortgages on real property" under Section
856(c)(3)(B) of the Code generally to the
extent that such Offered Certificates are
treated as "real estate assets" under Section
856(c)(4)(A) of the Code. The Offered
Certificates also will be treated as
"qualified mortgages" under Section 860G(a)(3)
of the Code. However, the Certificates will
generally be considered to be assets described
in Section 7701(a)(19)(C) of the Code only to
the extent that the Mortgage Loans are secured
by multifamily properties.
It is anticipated that the Class A-1, Class
A-2, Class A-MF1, Class A-MF2, Class B and
Class C Certificates will be issued at a
premium, that the Class D Certificates will be
issued with de minimis original issue discount
and that the Class E Certificates will be
issued with original issue discount for
S-36
<PAGE>
federal income tax purposes. The prepayment
assumption that will be used in determining
the rate of accrual of original issue discount
and market discount and amortization of
premium, if any, for federal income tax
purposes will be 0% CPR (the "Prepayment
Assumption") and that all ARD Loans will
prepay on their Anticipated Repayment Dates.
However, the Depositor makes no representation
that the Mortgage Loans will prepay at any
particular rate. See "Certain Federal Income
Tax Consequences" herein and in the
Prospectus.
CERTAIN ERISA CONSIDERATIONS... A fiduciary of a retirement plan or other
employee benefit plan or arrangement subject
to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or Section 4975
of the Code, or an investor that is a life
insurance company, should review carefully
with its legal advisors whether the purchase,
holding or sale of the Offered Certificates
could constitute or result in a transaction
that is prohibited or is not otherwise
permissible under ERISA or Section 4975 of the
Code and, if prohibited, whether any statutory
or administrative exemption is applicable to
any such purchase, holding or sale.
The United States Department of Labor has
issued individual prohibited transaction
exemptions to the Underwriters (Deutsche Bank
Securities Inc. as Department exemption
application number E-0003 (the "Deutsche
Exemption") and Morgan Stanley & Co.
Incorporated as Prohibited Transaction
Exemption ("PTE") 90-24, as amended by PTE
92-34 (the "MCSI Exemption" and collectively
with the Deutsche Exemption, the
"Exemptions")) that generally exempt from the
application of certain of the prohibited
transaction provisions of ERISA and Section
4975 of the Code transactions relating to the
purchase, holding and sale of certain
pass-through certificates underwritten by the
Underwriters, such as the Senior Certificates,
and the servicing and operation of asset
pools, such as the Mortgage Pool, provided
that certain conditions are satisfied. These
Exemptions are not applicable to the
Subordinate Certificates; however, a
prohibited transaction class exemption granted
with respect to transactions involving life
insurance company general accounts may be
applicable to the purchase and holding by
insurance companies of such Classes, provided
that the conditions of such exemption are
satisfied. See "Certain ERISA Considerations"
herein.
LEGAL INVESTMENT............... The Offered Certificates will not constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act
of 1984, as amended ("SMMEA"). The appropriate
characterization of the Offered Certificates
under various legal investment restrictions,
and thus the ability of
S-37
<PAGE>
investors subject to these restrictions to
purchase Offered Certificates, may be subject
to significant interpretive uncertainties. All
investors whose investment authority is
subject to legal restrictions should consult
their own legal advisors to determine whether,
and to what extent, the Offered Certificates
will constitute legal investments for them.
S-38
<PAGE>
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS
Investors should consider, among other things, the following risks and
other important factors (as well as the risk factors set forth under "Risk
Factors" in the Prospectus) in connection with a purchase of Offered
Certificates:
THE CERTIFICATES
Limited Liquidity
There is currently no secondary market for the Offered Certificates.
The Depositor has been advised by the Underwriters that they presently intend
to make a secondary market in the Offered Certificates; however, they have no
obligation to do so and any market making activity may be discontinued at any
time. Accordingly, there can be no assurance that a secondary market for the
Offered Certificates will develop or, if it 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.
See "Risk Factors--Limited Liquidity" in the Prospectus.
Certain Yield Considerations
The yield on any Offered Certificate will depend on (x) the price at
which such Certificate is purchased by an investor and (y) 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, (a) the Pass-Through Rate for such Certificate, (b) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on or in respect of the Mortgage Loans and the extent to which such
amounts are to be applied or otherwise result in a reduction of the Certificate
Balance of such Certificate, (c) the rate, timing and severity of Realized
Losses on or in respect of the Mortgage Loans and of Expense Losses and the
extent to which such losses and expenses result in a reduction of the
Certificate Balance of such Certificate, (d) the timing and severity of any Net
Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls are allocated in reduction of the interest payable on such
Certificate, (e) the timing and severity of any Appraisal Reductions and the
extent to which such Appraisal Reductions result in a reduction or deferral of
amounts otherwise payable on such Certificate and (f) the extent to which
Prepayment Premiums are collected and, in turn, distributed on such
Certificate. The yield to maturity of the Class A-MF1 Certificates will be
particularly sensitive to the rate, timing and receipt of the A-MF1 Principal
Distribution Amount. The yield to maturity of the Class A-MF2 Certificates will
be particularly sensitive to the rate, timing and receipt of the A-MF2
Principal Distribution Amount. Except for the Pass-Through Rates on the Class
A-1, Class A-2, Class A-MF1, Class A-MF2, Class B, Class C, Class D and Class E
Certificates (which are, in each case, generally fixed), it is impossible to
predict with certainty any of the factors described in the third preceding
sentence. Accordingly, investors may find it difficult to analyze the effect
that such factors might have on the yield to maturity of any Class of Offered
Certificates. See "Description of the Mortgage Pool", "Description of the
Certificates--Distributions" and "--Distributions--Subordination; Allocation of
Losses and Certain Expenses" and "Yield, Prepayment and Maturity
Considerations" herein. See also "Yield Considerations" and "Risk
Factors--Average Life of Certificates; Prepayments; Yields" in the Prospectus.
Limited Obligations
The Offered Certificates will represent beneficial ownership interests
solely in the assets of the Trust Fund and will not represent an interest in or
obligation of the Depositor, any Seller, the Master Servicer, the Special
Servicer, the Trustee, the Fiscal Agent, or any of their respective affiliates
or any other person. Distributions on any Class of Offered Certificates will
depend solely on the amount and timing of payments and other collections in
respect of the Mortgage Loans. Although amounts, if any, otherwise
distributable to the holders of any Class of Subordinate Certificates on any
Distribution Date will be available, to the extent set forth herein, to make
distributions on the Senior Certificates and the Classes of Subordinate
Certificates senior thereto,
S-39
<PAGE>
if Realized Losses or Expense Losses occur, there can be no assurance that
these amounts, together with other payments and collections in respect of the
Mortgage Loans, will be sufficient to make full and timely distributions on any
Class of Offered Certificates. See "Risk Factors--Limited Assets" in the
Prospectus.
Subordination of Class B, Class C, Class D and Class E Certificates
As described herein, the rights of holders of the Subordinate
Certificates, including the Class B, Class C, Class D and Class E Certificates,
to receive certain payments of principal and interest otherwise payable on
their Certificates will, in the case of each Class of Subordinate Certificates,
be subordinated to such rights of the holders of the Senior Certificates and
the holders of each other Class of Subordinate Certificates, if any, having an
earlier alphabetical Class designation, to the extent set forth herein. See
"Description of the Certificates--Distributions" herein. Realized Losses on the
Mortgage Loans and Expense Losses will be allocated to the Class N, Class M,
Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class D, Class C
and Class B Certificates, in that order, reducing amounts payable to each such
Class.
Potential Conflict of Interest in Connection with Specially Serviced Mortgage
Loans
The Special Servicer is given considerable latitude in determining
whether and in what manner to liquidate or modify defaulted Mortgage Loans.
Prior to taking certain actions, the Special Servicer is required to provide
notice to the Operating Adviser and, in the case of certain of the Healthcare
Loans, the Healthcare Adviser, of such proposed action. Additionally, the
Operating Adviser will have the right to appoint a replacement Special Servicer
subject to certain conditions. As described under "Servicing of the Mortgage
Loans--The Operating Adviser," the Operating Adviser will, in the absence of
significant losses allocated to such Class, be controlled generally by the
holder of the majority interest in the most subordinated Class of Principal
Balance Certificates (that is, the Controlling Class as described herein)
outstanding from time to time, which holders may have interests in conflict
with those of the holders of the Offered Certificates. For instance, the
holders of Certificates of the Controlling Class might desire to mitigate the
potential for loss to that Class from a troubled Mortgage Loan by deferring
enforcement in the hope of maximizing future proceeds and will therefore be
encouraged to replace the Special Servicer, particularly, if the course of
action chosen by the Special Servicer would differ with those actions chosen by
the Controlling Class. However, the interests of the Trust Fund may be better
served by prompt action, since delay followed by a market downturn could result
in less proceeds to the Trust Fund than would have been realized if earlier
action had been taken. In addition, with respect to certain of the Healthcare
Loans, the Controlling Class will have the right to appoint and to remove the
Healthcare Adviser. Survey LLC, the initial Healthcare Adviser, holds an
ownership interest in RMF, one of the Sellers which is conveying Healthcare
Loans to the Depositor. See "The Pooling and Servicing Agreement -Realization
Upon Mortgage Loans" and "--The Healthcare Adviser" herein.
Tax Considerations Related to Foreclosure
If the Trust Fund were to acquire a Mortgaged Property subsequent to a
default on the related Mortgage Loan pursuant to a foreclosure or deed in lieu
of foreclosure, the Special Servicer would be required to retain an independent
contractor to operate and manage the Mortgaged Property. Any net income from
such operation and management, other than qualifying "rents from real
property," or any rental income based on the net profits of a tenant or
sub-tenant or allocable to a service that is non-customary in the area and for
the type of property involved, will subject REMIC I to federal (and possibly
state or local tax) on such income at the highest marginal corporate tax rate
(currently 35%), thereby reducing net proceeds available for distribution to
Certificateholders. It is likely that certain Mortgaged Properties that are
operated by an independent contractor on behalf of the Trust Fund, including
Hospitality Properties and Healthcare Properties would generate taxable "net
income from foreclosure property." The Pooling and Servicing Agreement provides
that the Special Servicer will be permitted to cause REMIC I to earn "net
income from foreclosure property" that is subject to tax if it determines that
the net after-tax benefit to Certificateholders is greater than another method
of operating or net leasing the Mortgaged Property. See "Federal Income Tax
Consequences--REMIC Certificates--Income from Residual Certificates--Prohibited
Transactions; Special Taxes" in the Prospectus.
S-40
<PAGE>
THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties Generally
The Mortgaged Properties consist entirely of income-producing real
estate. Lending on the security of income-producing real estate is generally
viewed as exposing a lender to a greater risk of loss than lending on the
security of single-family residences. Multifamily and commercial real estate
lending typically involves larger loans than single-family lending. In
addition, and unlike the case of loans made on the security of single-family
residences, repayment of loans made on the security of income-producing real
property depends upon the ability of that property (i) to generate rental
income sufficient to pay operating expenses, to make necessary repairs, tenant
improvements and capital improvements and to pay debt service and (ii) in the
case of loans that do not fully amortize over their terms, to retain sufficient
value to permit the borrower to pay off the loan at maturity by sale or
refinancing. A number of factors, many beyond the control of the property
owner, can affect the ability of an income-producing real estate project to
generate sufficient net operating income to pay debt service and/or to maintain
its value. Among these factors are economic conditions generally and in the
area of the project, the age, quality and design of the project and the degree
to which it competes with other projects in the area, changes or continued
weaknesses in specific industry segments, increases in operating costs, the
willingness and ability of the owner to provide capable property management and
maintenance and the degree to which the project's revenue is dependent upon a
single tenant or user, a small group of tenants, or tenants concentrated in a
particular business or industry. If leases are not renewed or replaced, if
tenants default, if rental rates fall and/or if operating expenses increase,
the borrower's ability to repay the loan may be impaired and the resale value
of the property, which is substantially dependent upon the property's ability
to generate income, may decline. In addition, there are other factors,
including changes in zoning or tax laws, the availability of credit for
financing, and changes in interest rate levels that may adversely affect the
value of a project (and thus the borrower's ability to sell or refinance)
without necessarily affecting the ability to generate current income. Moreover,
some of the Mortgaged Properties may not readily be converted to alternative
uses if such Mortgaged Properties were to become unprofitable due to
competition, age of the improvements, decreased demand or other factors. The
conversion of healthcare facilities or hotels to alternative uses would
generally require substantial capital expenditures. Thus, if the operation of
any such Mortgaged Properties becomes unprofitable such that the borrower
becomes unable to meet its obligations on the related loan, the liquidation
value of any such property may be substantially less, relative to the amount
owing on the related loan, than would be the case if such property were readily
adaptable to other uses. In addition, particular types of income properties are
exposed to particular risks, some of which are summarized below.
Property Management
The successful operation of a real estate project is also dependent on
the performance and viability of the property manager of such project.
Different property types vary in the extent to which the property manager is
involved in property marketing, leasing and operations on a daily basis.
Properties deriving revenues primarily from short-term sources (such as hotels)
are generally more management intensive than properties leased to creditworthy
tenants under long-term leases. The property manager is responsible for
responding to changes in the local market, planning and implementing the rental
structure, including establishing levels of rent payments, operating the
properties and providing building services, managing operating expenses and
advising the borrowers so that maintenance and capital improvements can be
carried out in a timely fashion. There can be no assurance that the property
managers will at all times be in a financial condition to continue to fulfill
their management responsibilities under the related management agreements
throughout the terms thereof. The property managers are operating companies and
unlike limited purpose entities, may not be restricted from incurring debt and
other liabilities in the ordinary course of business or otherwise.
Risks Particular to Retail, Office, Industrial and Mixed Use Properties
Ninety-four (94) Mortgage Loans (the "Retail Loans"), representing
22.5% of the Initial Pool Balance, are secured by Mortgages on Retail
Properties (the "Retail Properties"); forty (40) Mortgage Loans (the "Office
Loans"), representing 11.0% of the Initial Pool Balance, are secured by
Mortgages on Office Properties (the "Office Properties"); thirty-two (32)
Mortgage Loans (the "Industrial Loans"), representing 7.9% of the Initial
S-41
<PAGE>
Pool Balance, are secured by Mortgages on Industrial Properties (the
"Industrial Properties"); and twenty-one (21) Mortgage Loans (the "Mixed Use
Loans"), representing 7.3% of the Initial Pool Balance, are secured by
Mortgages on Mixed Use Properties (the "Mixed Use Properties") used for a
combination of commercial purposes. See "Description of the Mortgage Pool --
General", "Appendix II - Certain Characteristics of the Mortgage Loans", hereto
for additional information. In addition to risks generally associated with real
estate, such properties can also be adversely affected by other factors. For
instance, retail properties can be affected significantly by adverse changes in
consumer spending patterns and competition from alternative forms of retailing
(such as direct mail, video shopping networks, telephone shopping, electronic
commerce and outlet centers) that reduce the need for retail space. In
addition, 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. Thus, a retail property may be adversely affected if an
anchor or other significant tenant ceases operations (which may occur at the
expiration of a lease term or the term of its covenant to operate, the tenant's
bankruptcy, its general cessation of business activities or for other reasons).
In addition, certain tenants at retail properties may be entitled to terminate
their leases if one or more anchor tenants cease operations. Whether a retail
property is "anchored" or "unanchored" is an important distinction. Retail
properties that are anchored have traditionally been perceived to be less
risky. While there is no strict definition of an anchor, it is generally
understood that a retail anchor tenant is proportionately large in size and is
vital in attracting customers to the property. 13.6% of the Mortgage Loans,
based on Initial Pool Balance are "anchored" Retail Loans and 7.5% are
"unanchored" Retail Loans. Furthermore, there is a greater correlation between
the success of tenant businesses and property value when the property is a
single tenant Retail Property.
Office properties generally require their owners to expend significant
amounts of cash to pay for general capital improvements, tenant improvements
and costs of re-leasing space. Office Properties that are not equipped to
accommodate the needs of modern businesses may become functionally obsolete and
thus non-competitive. Office properties can be affected significantly by the
quality of the tenants in the building, the physical attributes of the building
in relation to competing buildings (such as age, condition, size and access to
transportation) and the strength and stability of the market area as a
desirable business location. Office Properties may be adversely affected if
there is an economic decline in the business operated by the tenants. The risk
of such an adverse effect 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. In addition, and like anchored shopping centers, the
success of an Office Property with a single or dominant tenant may depend
significantly on that tenant's continued occupancy.
Industrial properties can be affected significantly by the quality of
tenants, building design and adaptability and the location of the property.
Concerns about the quality of tenants, particularly major tenants, are similar
in both Office Properties and Industrial Properties, although Industrial
Properties are more frequently dependent on a single tenant. 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, truck
turning radius and overall functionality and accessibility. 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. Industrial Properties
may be adversely affected by reduced demand for industrial space occasioned by
a decline in a particular industry segment. Also, an Industrial Property that
suited the particular needs of its original tenant may be difficult to re-let
to another tenant or, like office properties, may become functionally obsolete
relative to newer properties.
Risks Particular to Multifamily Properties
Seventy-eight (78) Mortgage Loans (the "Multifamily Loans"),
representing 23.1% of the Initial Pool Balance, are secured by Mortgages on
multifamily properties (the "Multifamily Properties"). All of the Mortgage
Loans in Loan Group 2, representing 10.3% of the Initial Pool Balance and all
of the Mortgage Loans in Loan Group 3, representing 8.6% of the Initial Pool
Balance, are Multifamily Loans. See "Description of the Mortgage Pool
- - -General", "Appendix II - Certain Characteristics of the Mortgage Loans",
hereto for additional information. Multifamily Properties are part of a market
that, in general, is characterized by low barriers to entry. Thus, a particular
apartment market with historically low vacancies could experience substantial
new construction, and a resultant oversupply of units, in a relatively short
period of time. Since multifamily apartment
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units are typically leased on a short-term basis, the tenants who reside in a
particular project within such a market may easily move to newer projects with
better amenities. In addition, occupancy and rent levels may be adversely
affected by unfavorable economic conditions generally, a local military base or
factory closings and national and local politics, including current or future
rent stabilization and rent control laws and agreements. Further, reduced
mortgage interest rates may encourage renters to purchase single-family
housing. Certain of the Mortgaged Properties, including certain of the
Mortgaged Properties securing the Mortgage Loan identified as Loan Numbers 1-13
(Lembi Portfolio Loan), as described in Appendix III "Loan Nos. 1-13 Lembi
Portfolio Loan and Properties," are located in states and/or municipalities
where laws or ordinances impose limitations on increases in rent on the rental
units for such Mortgaged Properties. Certain of the Multifamily Mortgaged
Properties have material concentrations of students or military personnel as
tenants. Such properties may experience greater vacancy rates as a result of
the relatively transient nature of the tenant population.
One of the Mortgage Loans, representing 0.3% of the Initial Pool
Balance is subject to Section 42 of the Code. In addition, the rent limitations
imposed on Section 42 Properties may adversely affect the ability of the
applicable borrowers to increase rents. In both such instances, by restricting
the amount of rental income on such Mortgaged Properties, such limitations may
impair the related borrower's ability to maintain such Multifamily Properties
in proper condition during periods of rapid inflation or declining market value
of such Multifamily Properties. In addition, the income restrictions on tenants
imposed by Section 42 of the Code may reduce the number of eligible tenants in
such Multifamily Properties and result in a reduction in occupancy rates
applicable thereto.
In addition, five (5) of the Mortgage Loans, representing 1.1% of the
Initial Pool Balance, secured by Multifamily Properties, are eligible under the
Section 8 program administered by HUD. This low income rent subsidy program
authorizes the payment by the federal government of rental subsidies to owners
of qualified housing. There may be differing default and prepayment rate
experiences between loans receiving Section 8 rent subsidies and mortgage loans
secured by multifamily properties but not receiving Section 8 rent subsidies.
In addition, upon expiration of coverage under the Section 8 program, the
related Mortgaged Properties are subject to market influences that may bear
upon the ability of such Mortgaged Properties to produce sufficient income to
service the Mortgage Loan and maintain the property. See "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage Loans -- HUD
Section 8 Loans" herein.
Risks Particular to Hospitality Properties
Forty-one (41) Mortgage Loans (the "Hospitality Loans"), representing
12.2% of the Initial Pool Balance, are secured by Mortgages solely on hotel or
motel properties (the "Hospitality Properties"). See "Description of the
Mortgage Pool -- General", "Appendix II - Certain Characteristics of the
Mortgage Loans", hereto for additional information. Various factors, including
location, quality and franchise affiliation, if any, affect the economic
viability 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 or motels can have similar effects. 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 that 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 or motel's quality of service and economic viability.
Certain of the Mortgaged Properties securing the Hospitality Loans are
franchisees of national hotel or motel chains. The viability of any hotel or
motel property which is affiliated with a franchise 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 agreements. The transferability of franchise license agreements may
be restricted, and, in the event of a foreclosure on any Mortgaged Property,
the purchaser of such Mortgaged Property would not have the right to use the
franchise license without the franchisor's consent. Further, in the event of a
foreclosure on a Mortgaged Property, it is unlikely that the Trustee, the
Special Servicer or the purchaser of such Mortgaged Property would be entitled
to the rights under any liquor license. Conversely, a lender may be unable to
remove a franchisor that it desires to replace following a foreclosure.
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Certain of the Mortgaged Properties securing the Hospitality Loans are
not franchisees of national hotel or motel chains and therefore do not have the
benefits typically associated with being part of such a chain (including, for
example, reservation systems and marketing).
Risks Particular to Healthcare Properties
Thirty-seven (37) Mortgage Loans (the "Healthcare Loans") representing
11.3% of the Initial Pool Balance which in the case of Mortgage Loans secured
by multiple properties is based on Allocated Loan Amount, are secured by
healthcare related properties (the "Healthcare Properties"). See "Description
of the Mortgage Pool -General", "Appendix II - Certain Characteristics of the
Mortgage Loans", hereto for additional information. Significant factors
determining the value of Healthcare Properties include federal and state laws,
competition with similar properties on a local and regional basis and the
continued availability of revenue from government reimbursement programs,
primarily Medicaid and Medicare.
The successful operation of a Healthcare Property will generally
depend upon the number and quality of competing facilities in the local market,
as well as upon other factors such as its age, appearance, reputation and
management, the types of services it provides and the quality of care and the
cost of that care.
Loan numbers 14-21, the Health Care Capital Portfolio Loans,
representing 3.4% of the Initial Pool Balance, are Healthcare Loans secured by
Mortgaged Properties leased to a single operator. The full and timely repayment
of such Healthcare Loans is heavily dependent on the viability of the operator
and its business.
Providers of long-term nursing care and other medical services are
subject to federal and state laws that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel, operating
policies and additions to facilities and services and, to the extent dependent
on patients whose fees are reimbursed by private insurers, to the reimbursement
policies of such insurers. The failure of any of such borrowers to maintain or
renew any required license or regulatory approval could prevent it from
continuing operations at a Healthcare Property (in which case no revenues would
be received from such property or portion thereof requiring licensing) or, if
applicable, bar it from participation in government reimbursement programs
(such as Medicaid and Medicare). Furthermore, in the event of foreclosure,
there can be no assurance that the Trustee (or Master Servicer or Special
Servicer) or purchaser in a foreclosure sale would be entitled to the rights
under such licenses and such party may have to apply in its own right for such
a license. There can be no assurance that a new license could be obtained.
Healthcare Properties may receive a substantial portion of their
revenues from government reimbursement programs, primarily Medicaid and
Medicare. Medicaid and Medicare are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers, and there are currently
under consideration various proposals for national health care reform that
could further limit those payments. In this regard, the Balanced Budget Act of
1997 (PL 105-23) mandated a number of changes to the federal Medicare program.
Among these is the introduction of a prospective payment system ("PPS") for
nursing facilities that was implemented beginning July 1, 1998. PPS is based on
an overall federal rate that is adjusted by geographical and urban/rural
factors for each nursing facility and further adjusted for each patient
depending upon a number of varying acuity factors. PPS is being phased-in over
three years. It is too soon to know whether PPS will have an adverse impact on
the revenue of nursing facilities. Accordingly, there can be no assurance that
payments under government reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program beneficiaries.
Nursing homes also receive a substantial portion of their revenues from other
third-party payors such as private health insurance plans. There can be no
assurance that third-party reimbursement will continue to be available for
nursing home services. Certain of the Healthcare Loans receive a percentage of
their funding from local municipalities. There can be no assurance that these
municipalities will continue to provide such funding for these Mortgaged
Properties.
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Under applicable federal and state laws and regulations relating to
Medicare and Medicaid, only the provider who actually furnished the related
medical goods and services generally may sue for or enforce its rights to
reimbursement. Accordingly, in the event of foreclosure, none of the Trustee,
the Master Servicer, the Special Servicer or a subsequent lessee or operator of
the property would generally be entitled to obtain from federal or state
governments any outstanding reimbursement payments relating to services
furnished at the respective properties prior to such foreclosure.
Risks Particular to Self-Storage Properties
Sixteen (16) Mortgage Loans (the "Self Storage Loans"), representing
2.3% of the Initial Pool Balance, are secured by Mortgages on self-storage
properties ("Self-Storage Properties"). See "Description of the Mortgage Pool
- - -- General", "Appendix II - Certain Characteristics of the Mortgage Loans",
hereto for additional information. Self-Storage Properties are considered
vulnerable to competition, because both acquisition costs and break-even
occupancy are relatively low. In addition, the conversion of a Self-Storage
Property to an alternative use generally requires substantial capital
expenditures. Thus, if the operations of any of the Self-Storage Property
becomes unprofitable due to decreased demand, increased competition, age of
improvements or other factors such that the borrower becomes unable to meet its
obligations on the related Self-Storage Mortgage Loan, the liquidation value of
that Self-Storage Property may be substantially less, relative to the amount
owing on the Self-Storage Mortgage Loan, than would be the case if the
Self-Storage Property were readily adaptable to other uses.
User privacy, anonymity and ease of access to individual storage space
may heighten environmental risks, although lease agreements generally prohibit
users from storing hazardous substances in the units. The environmental
assessments of the Self-Storage Properties discussed herein did not include an
inspection of the contents of the self-storage units included in the
Self-Storage Properties and there is no assurance that all of the units
included in the Self-Storage Properties are free from hazardous substances or
other pollutants or contaminants or will remain so in the future.
Risks Particular to Mobile Home Park Properties
Thirteen (13) Mortgage Loans (the "Mobile Home Loans"), representing
1.7% of the Initial Pool Balance, are secured by Mortgages on mobile home park
properties ("Mobile Home Properties"). See "Description of the Mortgage Pool --
General", "Appendix II - Certain Characteristics of the Mortgage Loans", hereto
for additional information.
Significant factors determining the value of Mobile Home Properties
are generally similar to the factors affecting the value of multifamily
residential properties. In addition, the Mobile Home Properties are "special
purpose" properties that could not be readily converted to general residential,
retail or office use. In fact, certain states also regulate changes in mobile
home park use and require that the landlord give written notice to its tenants
a substantial period of time prior to the projected change. Consequently, if
the operation of any of the Mobile Home Properties becomes unprofitable due to
competition, age of the improvements or other factors such that the borrower
becomes unable to meet its obligation on the related Mortgage Loan, the
liquidation value of that Mobile Home Property may be substantially less,
relative to the amount owing on the Mortgage Loan, than would be the case if
the Mobile Home Property were readily adaptable to other uses.
Lessee Credit Risk
Income from and the market value of the Retail Properties, the Office
Properties and the Industrial Properties would be adversely affected if space
in such Mortgaged Properties could not be leased, if lessees were unable to
meet their lease obligations, if a significant lessee were to become a debtor
in a bankruptcy case under the United States Bankruptcy Code or if for any
other reason rental payments could not be collected. If lessee sales in the
Mortgaged Properties that contain retail space were to decline, rents based
upon such sales would decline, and lessees may be unable to pay their rent or
other occupancy costs. Upon the occurrence of an event of default by a lessee,
delays and costs in enforcing the lessor's rights could be experienced.
Repayment of the Mortgage
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Loans will be affected by the expiration of space leases and the ability of the
respective borrowers to renew the leases or relet the space on comparable
terms. Even if vacated space is successfully relet, the costs associated with
reletting, including lessee improvements, leasing commissions and free rent,
could be substantial and could reduce cash flow from the Mortgaged Properties.
In the case of Retail Properties, the failure of an anchor lessee to
renew its lease, the termination of an anchor lessee's lease, the bankruptcy or
economic decline of an anchor lessee, or the cessation of the business of an
anchor (notwithstanding its continued payment of rent) could have a
particularly negative effect on the economic performance of a shopping center
property given the importance of anchor lessees in attracting traffic to other
stores. In addition, the failure of any anchor lessee to operate from its
premises may give certain other lessees the right to terminate or reduce rents
under their leases.
Mortgage Loans Not Insured
The Mortgage Loans are not insured or guaranteed by any governmental
entity or any private mortgage insurer. As described herein, in certain limited
circumstances, a Seller may be obligated to repurchase or replace a Mortgage
Loan if its representations and warranties concerning such Mortgage Loan are
breached; however, there can be no assurance that any Seller will be in a
financial position to effect such repurchase or substitution. See "Description
of the Mortgage Pool--The Sellers", "--Representations and Warranties" and
"--Repurchases and Other Remedies" herein.
Borrower Default; Non-Recourse Mortgage Loans
All of the Mortgage Loans, except for certain of the Conti Small Loans
(as defined herein), are generally non-recourse loans as to which recourse, in
the event of a default, will be limited to the related Mortgaged Property,
except in respect to the occurrence of certain events of default, as described
under "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans--Non-recourse Obligations" herein. In those cases where the loan
documents permit recourse to the borrower or a guarantor, the related Seller
has not necessarily evaluated the financial condition of such person.
Consequently, payment on each Mortgage Loan prior to maturity is (or should be
considered by investors to be) dependent primarily on the sufficiency of the
cash flow of the related Mortgaged Property, and at maturity (whether at
scheduled maturity or, in the event of a default, 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.
Environmental Considerations
Contamination of real property may give rise to a lien on that
property to assure payment of the cost of clean-up or, in certain
circumstances, may result in liability to the lender for that cost. Such
contamination may also reduce the value of a property. An environmental site
assessment (or in some cases an update of a previous assessment) was performed
with respect to each Mortgaged Property in connection with the origination or
acquisition thereof, except with respect to certain of the Conti Small Loans
for which a more limited environmental review was performed. Although the
reports of such environmental site assessments or review generally did not
disclose the presence or risk of environmental contamination that is considered
material to the interests of the holders of the Offered Certificates, no
assurance can be given that the environmental assessments or review revealed
all existing or potential environmental risks or that all adverse environmental
conditions have been completely remediated or that sufficient reserves have
been provided for such conditions. Furthermore, certain of such environmental
assessments or reviews are more than a year old. See "Description of the
Mortgage Pool--Assessments of Property Value and Condition--Environmental
Assessments" herein and "Certain Legal Aspects of the Mortgage Loans and the
Leases--Environmental Legislation" in the Prospectus.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto or assuming its operation. Such requirement effectively
precludes enforcement of the security of the related Mortgage Note until a
satisfactory environmental site assessment is obtained (or until any required
remedial action is thereafter taken); but will decrease the
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likelihood that the Trust Fund will become liable for a material adverse
environmental condition at a Mortgaged Property. However, there can be no
assurance that the requirements of the Pooling and Servicing Agreement will
effectively insulate the Trust Fund from potential liability for a materially
adverse environmental condition at any Mortgaged Property. See "Risk
Factors--Environmental Risks" and "Certain Legal Aspects of the Mortgage Loans
and the Leases--Environmental Legislation" in the Prospectus.
Balloon Payments
Certain Mortgage Loans (the "Balloon Loans" ), representing 91.0% of
the Initial Pool Balance provide for monthly payments of principal based on
amortization schedules longer than their original terms, thereby leaving
substantial principal amounts due and payable (each such payment, a "Balloon
Payment" ) on their respective maturity dates, unless previously prepaid.
Balloon Loans, representing 3.6% of the Initial Pool Balance, provide for
payment of interest only for initial periods of 12 months after the origination
date of such Mortgage Loans. With respect to the two hundred eighty-six
Mortgage Loans with Balloon Payments that accrue interest on the basis of the
actual number of days elapsed each month in a 360-day year, representing 81.9%
of the Initial Pool Balance, the amount of the Balloon Payment will be greater
than would be the case if such Mortgage Loans accrued interest on the basis of
a 360-day year consisting of twelve 30-day months as a result of the
application of interest and principal on such Mortgage Loans over time. One
hundred five of the Balloon Loans, representing 39.3% of the Initial Pool
Balance, have Anticipated Repayment Dates, and have substantial scheduled
principal balances as of such date.
Loans with Balloon Payments involve a greater risk to a lender than
fully-amortizing loans because the ability of a borrower to make a Balloon
Payment typically will depend upon its ability either to fully refinance the
loan or to sell the related Mortgaged Property at a price sufficient to permit
the borrower to make the Balloon Payment. Similarly, the ability of a borrower
to repay a loan on the Anticipated Repayment Date will typically depend upon
its ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Property at a price sufficient to permit the borrower to make the ARD
Payment. The ability of a borrower to effect a refinancing or sale will be
affected by a number of factors, including the value of the related Mortgaged
Property, the level of available mortgage rates at the time of sale or
refinancing, the borrower's equity in the Mortgaged Property, the financial
condition and operating history of the borrower and the Mortgaged Property, tax
laws, prevailing economic conditions and the availability of credit for loans
secured by multifamily or commercial, as the case may be, real properties
generally. None of the Sellers, the Master Servicer, the Special Servicer or
their respective affiliates is under any obligation to refinance any Mortgage
Loan. See "Description of the Mortgage Pool--Certain Terms and Characteristics
of the Mortgage Loans" herein and "Risk Factors--Balloon Payments" and
"--Obligor Default" in the Prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the
Special Servicer may modify and/or extend the maturity of Mortgage Loans that
are in material default or as to which a payment default (including the failure
to make a Balloon Payment) is imminent; subject, however, to the limitations
described under "Servicing of the Mortgage Loans--Mortgage Loan Modifications"
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 distributed in
respect of a Class of Principal Balance Certificates, whether such delay is due
to borrower default or to modification of the related Mortgage Loan, will
likely extend the weighted average life of such Class of Certificates. See
"Yield, Prepayment and Maturity Considerations" herein and "Yield
Considerations" in the Prospectus.
Geographic Concentration
The Mortgaged Properties are located in 39 states. Mortgaged
Properties securing Mortgage Loans representing 22.0% of the Initial Pool
Balance are located in California; Mortgaged Properties securing Mortgage Loans
representing 10.7% of the Initial Pool Balance are located in Florida;
Mortgaged Properties securing Mortgage Loans representing 7.9% of the Initial
Pool Balance are located in Texas; Mortgaged Properties securing Mortgage Loans
representing 7.2% of the Initial Pool Balance are located in New York; and
Mortgaged Properties securing Mortgage Loans representing 5.9% of the Initial
Pool Balance are located in New Jersey. Concentrations
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of Mortgaged Properties (in each case representing security for 5.0% or less of
the Initial Pool Balance) also exist in several other states. See the Table
entitled "Mortgage Pool Information--States" on Appendix I hereto for a
description of geographic location of the Mortgaged Properties.
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, conditions in the real estate markets where the Mortgaged
Properties are located, changes in governmental rules and fiscal policies, acts
of nature (which may result in uninsured losses), and other factors which are
beyond the control of the borrowers. For example, improvements on Mortgaged
Properties located in California may be more susceptible to certain types of
special hazards not fully covered by insurance (such as earthquakes) than
properties located in other parts of the country. To the extent that general
economic or other relevant conditions in states or regions in which
concentrations of Mortgaged Properties securing significant portions of the
aggregate principal balance of the Mortgage Loans 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 the Mortgaged Properties and
repayment by borrowers may be adversely affected.
Cross-Collateralization; Related Parties
The Mortgage Pool includes sixteen (16) groups of Mortgage Loans, the
largest of which groups collectively represents 3.9% of the Initial Pool
Balance, under which an aggregate amount of indebtedness is secured by multiple
Mortgaged Properties. For purposes of the presentation of "Mortgage Pool
Information" herein, such Mortgage Loans have been treated as multiple
cross-collateralized and cross-defaulted Mortgage Loans, each secured by one of
the related Mortgaged Properties and each having a principal balance in an
amount equal to an allocated portion of the aggregate indebtedness represented
by such Mortgage Loan.
In addition, there are fourteen (14) groups of Mortgage Loans, the
largest of which groups collectively represents 3.4% of the Initial Pool
Balance, that consist of several Mortgage Loans that are cross-defaulted and
cross-collateralized with the other Mortgage Loan or Loans in such group.
There are also nine (9) groups of Mortgage Loans (other than those
groups that are either cross-defaulted and cross-collateralized or treated as
cross-defaulted and cross-collateralized for purposes of the presentation of
"Mortgage Pool Information" herein), the largest of which group represents 2.3%
of the Initial Pool Balance, where the borrowers are affiliated entities
related through common ownership of partnership or other equity interests and
where, in general, the related Mortgaged Properties are commonly managed.
Adverse circumstances relating to a borrower 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 borrower or
respective affiliate 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 Property 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. In addition, prospective
tenants could be directed by the borrower to the Mortgaged Property
experiencing difficulty at the expense of the other Mortgaged Properties. Also,
a borrower that owns or controls several Mortgaged Properties 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 the Mortgage Loans and the
Leases-Bankruptcy Laws" in the Prospectus. In addition, a number of the
borrowers under the Mortgage Loans 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
borrower 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.
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Limitations of Appraisals
In connection with the origination or acquisition of the Mortgage
Loans, the related Mortgaged Property was appraised by an independent appraiser
who, in most cases, was a member of the Appraisal Institute ("MAI"). However,
those appraisals represent the analysis and opinion of the person performing
the appraisal and are not guarantees of, and may not be indicative of, present
or future values. There can be no assurance that another person would not have
arrived at a different valuation, even if such person used the same general
approach to and same method of valuing the property. Moreover, the values of
the Mortgaged Properties may have fluctuated significantly since the appraisal
was performed. 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.
Leasehold Considerations
Five (5) Mortgage Loans representing 1.6% of the Initial Pool Balance,
are secured solely by a Mortgage on the borrower's leasehold or partial
leasehold interest under a ground lease. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Ground Leases"
herein. 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. However, in each of these cases, the related ground lease requires
the lessor to give the leasehold mortgagee notice 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.
Owner Occupied and Single Tenant Properties
Thirty-two (32) of the Mortgage Loans, representing 4.6% of the
Initial Pool Balance, are secured by Mortgaged Properties entirely or
significantly occupied by the related borrower or an affiliate. For certain of
Mortgage Loans, the borrowers have not executed a lease. For purposes of
calculating Underwritten Cash Flow for Mortgage Loans where leases have been
executed by the tenant-borrower or an affiliate, the rents under some of such
leases have been adjusted to reflect market rents for similar properties.
Mortgage Loans secured by properties of which the borrowers are the sole or
significant tenants may be more likely to default than mortgage loans secured
by properties occupied by third party tenants due to an increased likelihood
that a lease default will coincide with mortgage loan default due to an
economic decline in the business operated by the tenant-borrower.
Mortgage Loans, representing 9.0% of the Initial Pool Balance, are
secured by Mortgaged Properties that are occupied by a single tenant.
The full and timely repayment of any Mortgage Loan secured by a
Mortgaged Property which is owner-occupied or occupied by a single tenant is
heavily dependent on the viability of the occupant and its business.
Risks of Other Financing
The Mortgage Loans generally prohibit incurring any debt that is
secured by the related Mortgaged Properties. In all cases where secured
subordinate debt is permitted, such subordinate loan is not part of the
Mortgage Pool. With respect to eleven (11) Mortgage Loans representing 1.8% of
the Initial Pool Balance, the related Mortgaged Property secures subordinate
debt to a third party, but in most such cases, the holder of such subordinate
debt has agreed in writing not to pursue a foreclosure action with respect to
such subordinate loan while the related Mortgage Loan remains outstanding. With
respect to forty-seven (47) of the Mortgage Loans representing 9.5% of the
Initial Pool Balance, the related borrower may incur secured subordinate debt,
but only if the holder of the Mortgage Loan grants its consent, which consent
may be conditioned on the satisfaction of certain requirements. The existence
of such other indebtedness could adversely affect the financial viability of
the related borrowers or the security interest of the lender in the equipment
or other assets acquired through such financings or could complicate bankruptcy
proceedings and delay foreclosure on the Mortgaged Property. See "Certain Legal
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Aspects of Mortgage Loans--Subordinate Financing" in the Prospectus. See
Appendix II hereto for additional information regarding additional financing
and a Mortgage Loan by Mortgage Loan description of any subordinate financing.
Risk of Changes in Concentrations
As payments in respect of principal (including in the form of
voluntary principal prepayments and liquidation proceeds) are received with
respect to the Mortgage Loans, the Mortgage Pool may exhibit increased
concentration with respect to the type of properties, property characteristics,
number of borrowers and affiliated borrowers and geographic location. Because
principal on the Principal Balance Certificates is payable in sequential order,
the Classes thereof that have a lower priority with respect to the payment of
principal are relatively more likely to be exposed to any risks associated with
changes in concentrations of borrower, loan or property characteristics.
Risk Associated With Lack of Special Purpose Borrowers
A substantial number of the borrowers with respect to the Mortgage
Loans do not have special purpose/bankruptcy remoteness restrictions in their
organizational documents or other special-purpose protections in their
organizational structure. Generally, special purpose restrictions are used to
minimize the likelihood of borrower bankruptcy and to shield assets of a
borrower from the impact of a bankruptcy of any affiliate or owner of such
borrower.
One Action Considerations
Several states (including California) have laws that prohibit more
than one "judicial action" to enforce a mortgage obligation, and some courts
have construed the term "judicial action" broadly. Accordingly, the Pooling and
Servicing Agreement will require the Special Servicer to obtain advice of
counsel prior to enforcing any of the Trust Fund's rights under any of the
Mortgage Loans that include properties where the rule could be applicable. In
addition, in the case of a Pool Loan (as defined herein) secured by Mortgaged
Properties located in multiple states, the Special Servicer may be required to
foreclose first on properties located in states where such "one action" rules
apply (and where non-judicial foreclosure is permitted) before foreclosing on
properties located in states where judicial foreclosure is the only permitted
method of foreclosure. See "Certain Legal Aspects of Mortgage Loans and Leases
- - -- Foreclosure" in the Prospectus.
Conflicts of Interest
A substantial number of the Mortgaged Properties are managed by
property managers affiliated with the respective borrowers. Such relationship
could raise additional difficulties in connection with a Mortgage Loan in
default or undergoing special servicing and a dispute between the partners or
members of a borrower could disrupt the management of the underlying property
which may cause an adverse effect on cash flow. These property managers may
also manage and/or franchise additional properties, including properties that
may compete with the Mortgaged Properties. Moreover, affiliates of the
managers, or the managers themselves, may also own other properties, including
competing properties. Accordingly, the managers of the Mortgaged Properties may
experience conflicts of interest in the management of such properties. However,
many of the Mortgage Loans permit the lender to remove the manager upon the
occurrence of an event of default, a decline in cash flow below specified
levels or other specified triggers. See Appendix II hereto for additional
information on certain conflicts of interest.
Zoning Compliance
Due to 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
and to other reasons, 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. Such
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changes may limit the ability of the borrower to rebuild the premises "as is"
in the event of a substantial casualty loss with respect thereto and may
adversely affect the ability of the borrower to meet its Mortgage Loan
obligations from cash flow. While it is expected that insurance proceeds would
be available for application to the related Mortgage Loan if a substantial
casualty were to occur, no assurance can be given that such proceeds would be
sufficient to pay off such Mortgage Loan in full or that, if the Mortgaged
Property were to be repaired or restored in conformity with current law, what
its value would be relative to the remaining balance on the related Mortgage
Loan, whether the Mortgaged Property would have a value equal to that before
the casualty, or what its revenue-producing potential would be.
Costs of Compliance with Americans with Disabilities Act
Under the Americans with Disabilities Act of 1990 (the "ADA"), all
public accommodations are required to meet certain federal requirements related
to access and use by disabled persons. To the extent the Mortgaged Properties
do not comply with the ADA, the borrowers may have to incur costs associated
with complying with the ADA. In addition, noncompliance could result in the
imposition of fines by the federal government or an award of damages to private
litigants.
Litigation
There may be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the business
of or arising out of the ordinary course of business of the borrowers and their
affiliates. There can be no assurance that such litigation will not have a
material adverse effect on the distributions to Certificateholders.
Risk of Year 2000
The transition from the year 1999 to the year 2000 may disrupt the
ability of computerized systems to process information. If the Master Servicer,
the Special Servicer or the Trustee do not have by the year 2000 computerized
systems which are year 2000 compliant, the ability of the Master Servicer, the
Special Servicer or the Trustee to service the Mortgage Loans (in the case of
the Master Servicer and the Special Servicer) and make distributions to the
Certificateholders (in the case of the Trustee) may be materially and adversely
affected.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Series 1998-CF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will be issued on or about August 27, 1998 (the "Closing Date")
pursuant to a Pooling and Servicing Agreement to be dated as of the Cut-Off
Date (the "Pooling and Servicing Agreement"), among the Depositor, the Master
Servicer, the Special Servicer, the Trustee and the Fiscal Agent. Registered
holders of the Certificates are herein referred to as "Certificateholders". The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund") consisting primarily of: (i) the
Mortgage Loans and all payments under and proceeds of the Mortgage Loans
received after the Cut-Off Date (exclusive of principal prepayments received
prior to the Cut-Off Date and scheduled payments of principal and interest due
on or before the Cut-Off Date); (ii) any Mortgaged Property acquired on behalf
of the Certificateholders in respect of a defaulted Mortgage Loan through
foreclosure, deed in lieu of foreclosure or otherwise (any such Mortgaged
Property, upon acquisition, an "REO Property"); and (iii) certain rights of the
Depositor under, or assigned to the Depositor pursuant to, each of the Mortgage
Loan Purchase Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of the related Seller
regarding its Mortgage Loans.
The Certificates will consist of 21 classes (each, a "Class") thereof,
to be designated as: (i) the Class A-1 Certificates, the Class A-2
Certificates, the Class A-MF1 Certificates and the Class A-MF2 Certificates
(collectively, the "Class A Certificates"); (ii) the Class X Certificates (the
"Interest Only Certificates" or the
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"Class X Certificates" and, collectively with the Class A Certificates, the
"Senior Certificates"); (iii) the Class B Certificates, the Class C
Certificates, the Class D Certificates, the Class E Certificates, the Class F
Certificates, the Class G Certificates, the Class H Certificates, the Class J
Certificates, the Class K Certificates, the Class L Certificates, Class M
Certificates and Class N Certificates (collectively, the "Subordinate
Certificates" and, collectively with the Senior Certificates, the "REMIC
Regular Certificates"); (iv) the Class Q Certificates; and (v) the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates
(collectively, the "Residual Certificates").
Only the Class A-1, Class A-2, Class A-MF1, Class A-MF2, Class B,
Class C, Class D and Class E Certificates (collectively, the "Offered
Certificates") are offered hereby. The Class X, Class F, Class G, Class H,
Class J, Class K, Class L, Class M, Class N Certificates, Class Q Certificates
and the Residual Certificates (collectively, the "Private Certificates") have
not been registered under the Securities Act of 1933, as amended, and are not
offered hereby.
The Class A Certificates will be issued in book-entry form in
denominations of $5,000 initial Certificate Balance and in any whole dollar
denomination in excess thereof. The Class X, Class B, Class C, Class D and
Class E Certificates will be issued in book-entry form in denominations of
$50,000 initial Certificate Balance or Notional Amount, as applicable, and in
any whole dollar denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by
one or more global Certificates registered in the name of the nominee of The
Depository Trust Company ("DTC"). The Depositor has been informed by DTC that
DTC's nominee initially will be Cede & Co. No person acquiring an interest in
an Offered Certificate (any such person, a "Certificate Owner") will be
entitled to receive a fully registered physical certificate (a "Definitive
Certificate") representing such interest, except as set forth in the Prospectus
under "Description of the Certificates--Book-Entry Registration and Definitive
Certificates". Unless and until Definitive Certificates are issued in respect
of any Class of Offered Certificates, all references to actions by holders of
the Offered Certificates will refer to actions taken by DTC upon instructions
received from the related Certificate Owners through DTC's participating
organizations ("Participants"), and all references herein to payments, notices,
reports and statements to holders of the Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Offered Certificates, for distribution to the related
Certificate Owners through DTC's Participants in accordance with DTC
procedures. Until Definitive Certificates are issued in respect of any Class of
Offered Certificates, interests in such Certificates will be transferred on the
book-entry records of DTC (and its Participants). See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
Prospectus.
Certificateholders must hold their Offered Certificates in book-entry
form, and delivery of the Offered Certificates will be made through the
facilities of DTC (in the United States) and may be made through the facilities
of Cedel Bank, societe anonyme ("CEDEL") or Euroclear System ("Euroclear") (in
Europe). Transfers within DTC, CEDEL or Euroclear, as the case may be, will be
in accordance with the usual rules and operating procedures of the relevant
system. Crossmarket transfers between persons holding directly or indirectly
through DTC, on the one hand, and counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be effected in DTC through
Citibank, N.A. or The Chase Manhattan Bank, the relevant depositaries of CEDEL
and Euroclear, respectively.
Because of time-zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a DTC participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel participant on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
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CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Upon initial issuance, the Class A-1, Class A-2, Class A-MF1, Class
A-MF2, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J,
Class K, Class L, Class M and Class N Certificates (collectively, the
"Principal Balance Certificates") will have the following aggregate Certificate
Balances (in each case, subject to a variance of plus or minus 5%):
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
INITIAL AGGREGATE PERCENT OF INITIAL PERCENT OF
CLASS CERTIFICATE BALANCE POOL BALANCE CREDIT SUPPORT
----- ------------------- ------------ --------------
<S> <C> <C> <C>
Class A-1 $231,000,000 20.86% 29.75%
Class A-2 $365,026,000 32.97 29.75
Class A-MF1 $98,712,000 8.91 29.75
Class A-MF2 $83,134,000 7.51 29.75
Class B $55,364,000 5.00 24.75
Class C $60,901,000 5.50 19.25
Class D $60,901,000 5.50 13.75
Class E $19,378,000 1.75 12.00
Class F $22,146,000 2.00 10.00
Class G $33,218,000 3.00 7.00
Class H $11,073,000 1.00 6.00
Class J $11,073,000 1.00 5.00
Class K $19,378,000 1.75 3.25
Class L $11,073,000 1.00 2.25
Class M $5,536,000 0.50 1.75
Class N $19,378,368 1.75 0.00
</TABLE>
The "Certificate Balance" of any Principal Balance Certificate
outstanding at any time will equal the then maximum amount that the holder
thereof will be entitled to receive in respect of principal out of future cash
flow on the Mortgage Loans and other assets included in the Trust Fund. The
initial Certificate Balance of each Principal Balance Certificate will be set
forth on the face thereof. On each Distribution Date, the Certificate Balance
of each Principal Balance Certificate will be reduced by any distributions of
principal actually made on such Certificate on such Distribution Date, and will
be further reduced by any Realized Losses and Expense Losses allocated to such
Certificate on such Distribution Date. See "--Distributions" and
"--Distributions--Subordination; Allocation of Losses and Certain Expenses"
below.
The Class X Certificates will not have Certificate Balances. Each such
Certificate will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount").
The Notional Amount of the Class X Certificates will be equal to the
aggregate of the Certificate Balances of the respective Classes of Principal
Balance Certificates outstanding from time to time. Accordingly, the Notional
Amount of the Class X Certificates will be reduced on each Distribution Date by
any distributions of principal actually made on, and any Realized Losses and
Expense Losses actually allocated to any Class of Principal Balance
Certificates. Accordingly, upon initial issuance, the aggregate Notional Amount
of the Class X Certificates will be $1,107,291,368, subject to a permitted
variance of plus or minus 5%. The Notional Amount of each Interest Only
Certificate is used solely for the purpose of determining the amount of
interest to be distributed on such Certificate and does not represent the right
to receive any distributions of principal.
The Residual Certificates will not have Certificate Balances or
Notional Amounts.
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PASS-THROUGH RATES
The rate per annum at which any Class of Certificates (other than the
Class Q Certificates and the Residual Certificates) accrues interest is
referred to herein as its "Pass-Through Rate."
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class
A-MF1, Class A-MF2, Class B, Class C, Class D and Class E Certificates for each
Distribution Date will, at all times, be equal to 6.33%, 6.60%, 6.52%, 6.53%,
6.88%, 7.13%, 7.35% and 7.35% per annum, respectively; provided, however, that
each such Pass-Through Rate will not exceed the Weighted Average Net Mortgage
Rate for such Distribution Date.
The Pass-Through Rate applicable to the Class X Certificates for the
initial Distribution Date will equal approximately 1.06% per annum. The
Pass-Through Rate applicable to the Class X Certificates for each Distribution
Date subsequent to the initial Distribution Date will, in general, equal to the
excess, if any, of (i) the Weighted Average Net Mortgage Rate for such
Distribution Date, over (ii) the weighted average of the Pass-Through Rates
applicable to the respective Classes of Principal Balance Certificates for such
Distribution Date, the relevant weighting to be on the basis of the respective
aggregate Certificate Balance of such Classes of Certificates immediately prior
to such Distribution Date.
The Pass-Through Rates applicable to the Class F, Class G, Class H,
Class J, Class K, Class L, Class M and Class N Certificates for each
Distribution Date will, at all times, be equal to 7.35%, 7.35%, 6.33%, 6.33%,
6.33%, 6.33%, 6.33% and 6.33%, per annum, respectively; provided, however, that
each such Pass-Through Rate will not exceed the Weighted Average Net Mortgage
Rate for such Distribution Date.
The "Weighted Average Net Mortgage Rate" for any Distribution Date is
the weighted average of the Net Mortgage Rates for the Mortgage Loans (in the
case of each Mortgage Loan that is a Non-30/360 Mortgage Loan, adjusted as
described below), weighted on the basis of their respective Scheduled Principal
Balances as of the close of business on the preceding Distribution Date.
The "Net Mortgage Rate" with respect to any Mortgage Loan will, in
general, be a per annum rate equal to the related Mortgage Rate minus the
related Administrative Cost Rate; provided that, for purposes of calculating
the Pass-Through Rate for each Class of REMIC Regular Certificates from time to
time, the Net Mortgage Rate for any Mortgage Loan will be calculated without
regard to any modification, waiver or amendment of the terms of such Mortgage
Loan subsequent to the Closing Date. In addition, because the Certificates
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, when calculating the Pass-Through Rate for each Class of Certificates
for each Distribution Date, the Net Mortgage Rate of each Mortgage Loan that
accrues interest other than on the basis of a 360-day year consisting of twelve
30-day months (each a "Non-30/360 Loan") will be appropriately adjusted to
reflect such difference.
The "Net Mortgage Rate" with respect to the Mortgage Loans that
provide for interest based on a 360-day year and the actual number of days
elapsed for any Interest Accrual Period commencing in any (a) January,
February, April, June, September and November and any December occurring in a
year immediately preceding any year which is not a leap year, is the Net
Mortgage Rate thereof, or (b) March, May, July, August and October and any
December occurring in a year immediately preceding a year which is a leap year,
is equal to the Net Mortgage Rate thereof multiplied by a fraction the
numerator of which is the actual number of days in such Interest Accrual Period
and the denominator of which is 30; provided, however, that with respect to
each Interest Reserve Loan (as defined herein), (i) the Net Mortgage Rate for
the Collection Period preceding the Due Dates in (a) January and February in
each year that is not a leap year or (b) in February only in each year that is
a leap year will be determined net of the Withheld Amounts and (ii) the Net
Mortgage Rate for the Collection Period preceding the Due Dates in March will
be determined after taking into account the addition of the Withheld Amounts
with respect to each such Mortgage Loan.
The "Scheduled Principal Balance" of any Mortgage Loan will generally
equal the Cut-Off Date balance thereof, reduced (to not less than zero) on each
Distribution Date by (a) any payments or other collections of principal (or
advances in lieu thereof) on such Mortgage Loan that have been collected or
received during any preceding Collection Period, other than any Scheduled
Payments due in any subsequent Collection Period, and (b)
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the principal portion of any Realized Loss incurred in respect of such Mortgage
Loan during any preceding Collection Period.
DISTRIBUTIONS
General
Distributions on or with respect to the Certificates will be made by
the Trustee, to the extent of available funds, and in accordance with the
manner and priority set forth herein, on the 15th day of each month, or if any
such 15th day is not a business day, on the next succeeding business day (each,
a "Distribution Date"), commencing in September 1998. Except as otherwise
described below, all such distributions will be made to the persons in whose
names the Certificates are registered at the close of business on the related
Record Date and, as to each such person, 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 will have provided the Trustee with wiring instructions on or
before the related Record Date, or otherwise by check mailed to such
Certificateholder. The final distribution on any Certificate (determined
without regard to any possible future reimbursement of any Realized Losses or
Expense Losses previously allocated to such Certificate) will be made in a like
manner, but 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 Certificate
in reimbursement of a Realized Loss or Expense Loss 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 on or with respect to a Class of Certificates will be allocated pro rata
among such Certificates based on their respective Percentage Interests in such
Class.
The "Record Date" with respect to each Class of Offered Certificates
for each Distribution Date, will be the last business day of the calendar month
immediately preceding the month in which such Distribution Date occurs. The
"Percentage Interest" evidenced by any REMIC Regular Certificate in the Class
to which it belongs will be a fraction, expressed as a percentage, the
numerator of which is equal to the initial Certificate Balance or Notional
Amount, as the case may be, of such Certificate as set forth on the face
thereof, and the denominator of which is equal to the initial aggregate
Certificate Balance or Notional Amount, as the case may be, of such Class.
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 Distribution Date. The "Available Distribution Amount" for any
Distribution Date will, in general, equal (a) all amounts on deposit in the
certificate account (the "Certificate Account" as described below) 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) Scheduled Payments collected but due on a Due Date
subsequent to the related Collection Period;
(ii) Prepayment Premiums (which are separately distributable
on the Certificates as hereinafter described);
(iii) amounts that are payable or reimbursable to any person
other than the Certificateholders (including, among other things,
amounts attributable to Expense Losses and amounts payable to the
Master Servicer, the Special Servicer and the Trustee as compensation
or in reimbursement of outstanding Advances);
(iv) with respect to the Determination Date in January (other
than in a leap year) and February, the Withheld Amounts;
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(v) Excess Interest; and
(vi) amounts deposited in the Certificate Account in error;
plus
(b) to the extent not already included in clause (a), any P&I Advances
made and any Compensating Interest Payments paid with respect to such
Distribution Date.
The Available Distribution Amount for either Loan Group for any
Distribution Date generally is the total of all payments or other collections
(or available P&I Advances and Compensating Interest Payments) (other than
Prepayment Premiums and Excess Interest, which are distributed separately as
described herein) on or in respect of the Mortgage Loans in such Loan Group
that are available for distribution on the Certificates on such date.
Application of the Available Distribution Amount
On each Distribution Date, except as described under "--Optional
Termination" below, for so long as any Class of Offered Certificates remains
outstanding, the Trustee will apply the Available Distribution Amount for such
date for the following purposes and in the following order of priority:
(i) concurrently, (A) from the Available Distribution Amount for Loan
Group 1, to the Class A-1 and Class A-2 Certificates, pro rata, the
Distributable Certificate Interest for each such Class for such Distribution
Date, (B) from the Available Distribution Amount for Loan Group 2, to the Class
A-MF1 Certificates, the Distributable Certificate Interest Amount for such
Class for such Distribution Date, (C) from the Available Distribution Amount
for Loan Group 3, to the Class A-MF2 Certificates, the Distributable
Certificate Interest for such Class for such Distribution Date, and (D) from
the Available Distribution Amount, the Distributable Certificate Interest
payable to the Class X Certificates; provided, however, that if the Available
Distribution Amount for any Loan Group is insufficient to pay in full the
Distributable Certificate Interest to be distributed to any such Classes as
described above, the Available Distribution Amount will be allocated among all
such Classes pro rata in proportion to such Distributable Certificate Interest,
without regard to Loan Group;
(ii) to the Class A-MF1 Certificates, in reduction of the Certificate
Balance thereof, until the Certificate Balance thereof has been reduced to
zero, an amount up to the A-MF1 Principal Distribution Amount for such
Distribution Date from amounts received with respect to Loan Group 2; and to
the Class A-MF2 Certificates, in reduction of the Certificate Balance thereof
until the Certificate Balance thereof has been reduced to zero, an amount up to
the A-MF2 Principal Distribution Amount (as defined herein) for such
Distribution Date from amounts received with respect to Loan Group 3;
(iii) to the Class A-1, Class A-2, Class A-MF1 and Class A-MF2
Certificates, in reduction of the Certificate Balances thereof, an amount up to
the Principal Distribution Amount for such Distribution Date remaining after
the distribution described in clause (ii), in the following order of priority:
first, to the Class A-1 Certificates, until the Certificate Balance
thereof has been reduced to zero;
second, to the Class A-2 Certificates, until the Certificate Balance
thereof has been reduced to zero; and
third, to the Class A-MF1 and Class A-MF2 Certificates pro rata, until
the Certificate Balances thereof have been reduced to zero;
(iv) to the holders of the Class A and Class X Certificates, pro rata
in proportion to their respective entitlements to reimbursement described in
this clause (iv), to reimburse any Realized Losses or Expense Losses previously
allocated to such Classes of Certificates, plus interest on such amounts,
compounded monthly, at one-twelfth the applicable Pass-Through Rate;
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(v) to the holders of the Class B Certificates, all Distributable
Certificate Interest in respect of such Class of Certificates for such
Distribution Date;
(vi) upon payment in full of the aggregate Certificate Balance of the
Class A Certificates, to the holders of the Class B Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A Certificates), until the aggregate
Certificate Balance of the Class B Certificates has been reduced to zero;
(vii) to the holders of the Class B Certificates, to reimburse them
for any Realized Losses or Expense Losses previously allocated to such Class of
Certificates, plus interest on such amounts, compounded monthly, at one-twelfth
the applicable Pass-Through Rate;
(viii) to the holders of the Class C Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(ix) upon payment in full of the aggregate Certificate Balance of the
Class B Certificates, to the holders of the Class C Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A and Class B Certificates), until the
aggregate Certificate Balance of the Class C Certificates has been reduced to
zero;
(x) to the holders of the Class C Certificates, to reimburse them for
any Realized Losses or Expense Losses previously allocated to such Class of
Certificates, plus interest on such amounts, compounded monthly, at one-twelfth
the applicable Pass-Through Rate;
(xi) to the holders of the Class D Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xii) upon payment in full of the aggregate Certificate Balance of the
Class C Certificates, to the holders of the Class D Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B and Class C Certificates),
until the aggregate Certificate Balance of the Class D Certificates has been
reduced to zero;
(xiii) to the holders of the Class D Certificates, to reimburse them
for any Realized Losses or Expense Losses previously allocated to such Class of
Certificates, plus interest on such amounts, compounded monthly, at one-twelfth
the applicable Pass-Through Rate;
(xiv) to the holders of the Class E Certificates, all Distributable
Certificate Interest in respect to such Class of Certificates for such
Distribution Date;
(xv) upon payment in full of the aggregate Certificate Balance of the
Class D Certificates, to the holders of the Class E Certificates, the Principal
Distribution Amount for such Distribution Date (reduced by any portion thereof
distributed to the holders of the Class A, Class B, Class C and Class D
Certificates), until the aggregate Certificate Balance of the Class E
Certificates has been reduced to zero;
(xvi) to the holders of the Class E Certificates, to reimburse them
for any Realized Losses or Expense Losses previously allocated to such Class of
Certificates, plus interest on such amounts, compounded monthly, at one-twelfth
the applicable Pass-Through Rate; and
(xvii) to make payments to the holders of the Private Certificates as
contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on
or after the date, if any, upon which the aggregate Certificate Balance of all
Classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
Certificate Balance of all Classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed, first, to the Class A-1, Class
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A-2, Class A-MF1 and Class A-MF2 Certificates, pro rata, based on the
respective Certificate Balances in reduction of their respective Certificate
Balances, until the Certificate Balance of each such Class is reduced to zero;
and, second, to the Class A-1, Class A-2, Class A-MF1 and Class A-MF2
Certificates, pro rata, based on the respective percentages allocated pursuant
to the preceding clause first, for the unreimbursed amount of Realized Losses
and Expense Losses previously allocated to such Classes.
On each Distribution Date, following the above-described distributions
on the Offered Certificates, the Trustee will apply the remaining portion, if
any, of the Available Distribution Amount for such date to make payments to the
holders of each of the respective Classes of Private Certificates (other than
the Class Q Certificates and the Residual Certificates), in alphabetical order
of Class designation, in each case for the following purposes and in the
following order of priority (i.e., payments under clauses (1), (2) and (3)
below, in that order, to the holders of the Class F Certificates, then payments
under clauses (1), (2), and (3) below, in that order, to the holders of the
Class G, Class H, Class J, Class K, Class L, Class M and Class N Certificates):
(1) to pay interest to the holders of the particular Class of
Certificates, up to an amount equal to all Distributable
Certificate Interest in respect of such Class of Certificates
for such Distribution Date;
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier
alphabetical Class designation has been reduced to zero, to
pay principal to the holders of the particular Class of
Certificates, up to an amount equal to the lesser of (a) the
then outstanding aggregate Certificate Balance of such Class
of Certificates and (b) the aggregate of the remaining
Principal Distribution Amount for such Distribution Date; and
(3) to reimburse the holders of the particular Class of
Certificates, up to an amount equal to (a) all Realized
Losses and Expense Losses, if any, previously allocated to
such Class of Certificates and for which no reimbursement has
previously been paid, plus (b) all unpaid interest on such
amounts (compounded monthly) at one-twelfth the respective
Pass-Through Rates of such Classes.
Any portion of the Available Distribution Amount for any Distribution
Date that is not otherwise payable to the holders of REMIC Regular Certificates
as contemplated above, will be paid to the holders of the Class R-I
Certificates.
Distributable Certificate Interest
The "Distributable Certificate Interest" in respect of any Class of
REMIC Regular Certificates for any Distribution Date will equal the sum of (a)
Accrued Certificate Interest in respect of such Class of Certificates for such
Distribution Date, reduced (to not less than zero) by (i) any Net Aggregate
Prepayment Interest Shortfalls and (ii) Realized Losses and Expense Losses, in
each case specifically allocated with respect to such Distribution Date to
reduce Distributable Certificate Interest payable in respect of such Class in
accordance with the terms of the Pooling and Servicing Agreement and (b) the
portion of Distributable Certificate Interest for such Class remaining unpaid
as of the close of business on the preceding Distribution Date, plus one
month's interest thereon at the applicable Pass-Through Rate (such amount,
"Unpaid Interest"). The "Accrued Certificate Interest" in respect of each Class
of REMIC Regular Certificates for each Distribution Date will equal the amount
of interest for the applicable Interest Accrual Period accrued at the
applicable Pass-Through Rate on the aggregate Certificate Balance or Notional
Amount, as the case may be, of such Class of Certificates outstanding
immediately prior to such Distribution Date. Accrued Certificate Interest will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
The "Interest Accrual Period" for each class of REMIC Regular
Certificates and each Distribution Date will be the calendar month immediately
preceding the month in which such Distribution Date occurs.
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Principal Distribution Amount
The "Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate of the following:
(a) the principal portions of all Scheduled Payments (other than
the principal portion of Balloon Payments) and any Assumed
Scheduled Payments due or deemed due, as the case may be, in
respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period; and
(b) all payments (including Principal Prepayments and the
principal portion of Balloon Payments) and other collections
(including Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds and REO Income (each as defined herein)
and proceeds of Mortgage Loan repurchases) that were received
on or in respect of the Mortgage Loans during the related
Collection Period and that were identified and applied by the
Master Servicer as recoveries of principal thereof, in each
case net of any portion of such payment or other collection
that represents a recovery of the principal portion of any
Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed
due, in respect of the related Mortgage Loan on a Due Date
during or prior to the related Collection Period and not
previously recovered.
The "A-MF1 Principal Distribution Amount" will be, with respect to
Loan Group 2, and any Distribution Date, the portion of the Principal
Distribution Amount for Loan Group 2 for such Distribution Date that represents
Balloon Payments, Principal Prepayments, Liquidation Proceeds, Insurance
Proceeds, and REO Income.
The "A-MF2 Principal Distribution Amount" will be, with respect to
Loan Group 3, and any Distribution Date, the portion of the Principal
Distribution Amount for Loan Group 3 for such Distribution Date that represents
Balloon Payments, Principal Prepayments, Liquidation Proceeds, Insurance
Proceeds, and REO Income.
Payments and collections with respect to principal of the Mortgage
Loans include all voluntary and involuntary prepayments of principal made prior
to their scheduled Due Dates ("Principal Prepayments"), all amounts paid by an
insurer in connection with a Mortgage Loan, other than any amounts required to
be paid to the related borrower ("Insurance Proceeds"), proceeds from the sale
or liquidation of a Mortgage Loan or related REO Property, net of expenses and
any related Advances and interest thereon ("Liquidation Proceeds"), and income
received in connection with the operation of an REO Property, net of certain
expenses ("REO Income").
The "Scheduled Payment" for any Mortgage Loan on any Due Date will, in
general, be the amount of the scheduled payment of principal and interest due
thereon on such date (taking into account any waiver, modification or amendment
of the terms of such Mortgage Loan subsequent to the Closing Date, whether
agreed to by the Special Servicer or occurring in connection with a bankruptcy
proceeding involving the related borrower).
An "Assumed Scheduled 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 original stated
maturity date or (ii) any Mortgage Loan as to which the related Mortgaged
Property has become an REO Property. The Assumed Scheduled Payment deemed due
on any such Balloon Mortgage Loan on its original stated maturity date and on
each successive Due Date that it remains or is deemed to remain outstanding
will equal the Scheduled Payment that would have been due thereon on such date
if the related Balloon Payment had not come due, but rather such Mortgage Loan
had continued to amortize in accordance with its amortization schedule in
effect immediately prior to maturity. The Assumed Scheduled Payment for any
Mortgage Loan as to which the related Mortgaged Property has become an REO
Property, deemed due on each Due Date for so long as the REO Property remains
part of the Trust Fund, equals the Scheduled Payment (or Assumed Scheduled
Payment) due on the last Due Date prior to the acquisition of such REO
Property.
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Distributions of Prepayment Premiums
Any Prepayment Premium (as defined herein) collected with respect to a
Mortgage Loan in Loan Group 1 during any particular Collection Period will be
distributed on the following Distribution Date as follows: The holders of the
Class A-1, Class A-2, Class B, Class C, Class D and Class E Certificates then
entitled to distributions of principal on such Distribution Date will be
entitled to an amount equal to the product of (a) a fraction whose numerator is
the amount distributed as principal to such Class on such Distribution Date and
whose denominator is the total amount distributed as principal to the Principal
Balance Certificates (other than the Class A-MF1 and Class A-MF2 Certificates),
(b) a fraction (not greater than 1 or less than zero), the numerator of which
is equal to the excess, if any, of the Pass-Through Rate applicable to the most
senior of such Classes of Principal Balance Certificates then outstanding (or,
in the case of the two Classes of Class A Certificates, the one with the
earlier payment priority), over the relevant Discount Rate (as defined herein),
and the denominator of which is equal to the excess, if any, of the Mortgage
Rate of the Mortgage Loan that prepaid, over the relevant Discount Rate, and
(c) the amount of such Prepayment Premium collected on such principal
prepayment during the related Collection Period.
Any Prepayment Premium collected with respect to a Mortgage Loan in
Loan Group 2 during any particular Collection Period will be distributed on the
following Distribution Date as follows: The holders of the Class A-MF1
Certificates will be entitled to an amount equal to the product of (a) a
fraction, not greater than 1, whose numerator is the amount distributed as
principal to such Class on such Distribution Date, and whose denominator is the
total amount distributed as principal prepayments on such Distribution Date
from the Mortgage Loans in Loan Group 2, (b) a fraction, (not greater than 1 or
less than zero) the numerator of which is equal to the excess, if any, of the
Pass-Through Rate applicable to the Class A-MF1 Certificates over the relevant
Discount Rate (as defined herein), and the denominator of which is equal to the
excess, if any, of the Mortgage Rate of the Mortgage Loan that prepaid, over
the relevant Discount Rate, and (c) the amount of such Prepayment Premium
collected on such principal prepayment during the related Collection Period.
Any Prepayment Premium collected with respect to a Mortgage Loan in
Loan Group 3 during any particular Collection Period will be distributed on the
following Distribution Date as follows: The holders of the Class A-MF2
Certificates will be entitled to an amount equal to the product of (a) a
fraction, not greater than 1, whose numerator is the amount distributed as
principal to such Class on such Distribution Date, and whose denominator is the
total amount distributed as principal prepayments on such Distribution Date
from the Mortgage Loans in Loan Group 3, (b) a fraction, (not greater than 1 or
less than zero) the numerator of which is equal to the excess, if any, of the
Pass-Through Rate applicable to the Class A-MF2 Certificates over the relevant
Discount Rate (as defined herein), and the denominator of which is equal to the
excess, if any, of the Mortgage Rate of the Mortgage Loan that prepaid, over
the relevant Discount Rate, and (c) the amount of such Prepayment Premium
collected on such principal prepayment during the related Collection Period.
The portion of the Prepayment Premium remaining after any such payment
to the holders of such Principal Balance Certificates, Class A-MF1 Certificates
or Class A-MF2 Certificates, as applicable, will be distributed to the holders
of the Class X Certificates. See "Description of the
Certificates--Distributions--Distributions of Prepayment Premiums" herein.
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. 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 Mortgage Loan prepaid. If Release H.15 is no longer
published, the Master Servicer will select a comparable publication to
determine the Treasury Rate.
Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
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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 Expense Losses to the Certificates, as well as the Administrative
Cost Rate payable under the Pooling and Servicing 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
Master Servicer as principal, interest and other amounts "due" on such Mortgage
Loan; and, subject to the recoverability determination described under
"--Advances" below and the effect of any Appraisal Reductions described under
"--Appraisal Reductions" below, the Master Servicer will be required to make
P&I Advances in respect of such Mortgage Loan, in all cases as if such Mortgage
Loan had remained outstanding. References to "Mortgage Loan" and "Mortgage
Loans" in the definitions of "Weighted Average Net Mortgage Rate" and
"Principal Distribution Amount" are intended to include any Mortgage Loan or
Mortgage Loans as to which the related Mortgaged Property has become an REO
Property.
Interest Reserve Account
The Trustee will establish and maintain an "Interest Reserve Account"
in the name of the Trustee for the benefit of the holders of the Certificates.
With respect to each Distribution Date occurring in February and each
Distribution Date occurring in January which occurs in a year that is not a
leap year, there shall be deposited, in respect of each Mortgage Loan bearing
interest computed on an actual/360 basis (the "Interest Reserve Loans"), an
amount equal to one day's interest at the related Mortgage Rate (less the
Administrative Cost Rate) on the respective Stated Principal Balance, as of the
Due Date in the month preceding the month in which such Distribution Date
occurs, to the extent a Monthly Payment or P&I Advance is made in respect
thereof (all amounts so deposited in any consecutive January (if applicable)
and February, (the "Withheld Amounts"). With respect to each Distribution Date
occurring in March, the amount equal to the Withheld Amounts from the preceding
January (if applicable) and February, if any, is required to be withdrawn from
the Interest Reserve Account and deposited into the Certificate Account.
Appraisal Reductions
Not later than the earliest of (i) the date 120 days after the
occurrence of any delinquency in payment with respect to a Mortgage Loan if
such delinquency remains uncured, (ii) the date 90 days after the related
borrower files a bankruptcy petition or a receiver is appointed in respect of
the related Mortgaged Property, provided that such petition or appointment
remains in effect, (iii) the effective date of any modification to a Money Term
of a Mortgage Loan, other than an extension of the date that a Balloon Payment
is due for a period of less than six months (provided that the total of all
such extensions does not exceed six (6) months), (iv) the date of the
commencement of an involuntary bankruptcy action against a borrower and failure
by the borrower to effect the dismissal of such action within 60 days and (v)
the date 30 days following the date a Mortgaged Property becomes an REO
Property (each of (i), (ii), (iii), (iv) and (v), an "Appraisal Event"), the
Special Servicer is required to have obtained an MAI appraisal (if the
Scheduled Principal Balance of the Mortgage Loan is greater than $1,000,000) or
an internal valuation (if the Scheduled Principal Balance of the Mortgage Loan
is equal to or less than $1,000,000) of the related Mortgaged Property or REO
Property, as the case may be, unless such an appraisal or valuation had
previously been obtained within the prior twelve months; provided, that if the
Special Servicer is required to obtain an MAI appraisal of a Mortgaged Property
after receipt of notice of the events described in (ii) or (iv) above, such
appraisal will be obtained no later than 60 days after receipt of such notice
(but in no case later than 120 days after the filing referred to in (ii) above)
and an internal valuation will be obtained no later than 30 days after receipt
of such notice. As a result of such appraisal or internal valuation, an
"Appraisal Reduction" may be created.
The Appraisal Reduction for any Mortgage Loan, including a Mortgage
Loan as to which the related Mortgaged Property has become an REO Property,
will be an amount, calculated as of the first Determination Date that is at
least fifteen days after the date on which the appraisal is obtained or the
internal valuation is
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performed, equal to the excess, if any, of (a) the sum of (i) the Scheduled
Principal Balance of such Mortgage Loan, (ii) to the extent not previously
advanced by the Master Servicer, all accrued and unpaid interest on the
Mortgage Loan, (iii) all related unreimbursed Advances and interest on Advances
at the Advance Rate (as defined herein) and (iv) to the extent not previously
advanced by the Master Servicer, 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, as the case may be
(in each case, net of any amounts escrowed for such item), over (b) 90% of the
value of such Mortgaged Property or REO Property as determined by such
appraisal or valuation. An Appraisal Reduction will be reduced to zero as of
the date the related Mortgage Loan is brought current under the then current
terms of the Mortgage Loan for at least three consecutive months (and no
Appraisal Reduction will exist as to any Mortgage Loan after it has been paid
in full, liquidated, repurchased or otherwise disposed of). An appraisal for
any Mortgage Loan that has not been brought current, for at least three
consecutive months, paid in full, liquidated, repurchased or otherwise disposed
of will be updated annually, with a corresponding adjustment to the amount of
the related Appraisal Reduction.
The existence of an Appraisal Reduction will proportionately reduce
the Master Servicer's obligation to make P&I Advances in respect of the related
Mortgage Loan, which will generally result in a reduction in current
distributions of interest in respect of the then most subordinate Class of
Principal Balance Certificates. See "--Advances--P&I Advances" below.
Subordination; Allocation of Losses and Certain Expenses
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Senior Certificates, and to the rights
of the holders of each other Class of Subordinate Certificates with an earlier
alphabetical Class designation. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of all interest payable in respect of the Senior Certificates on
each Distribution Date, and the ultimate receipt by the holders of each Class
of Class A Certificates of principal in an amount equal to the entire
Certificate Balance of the Class A Certificates. Similarly, but to decreasing
degrees (in alphabetical order of Class designation), this subordination is
also intended to enhance the likelihood of timely receipt by the holders of the
Subordinate Certificates (other than the Class N Certificates, which do not
have the benefit of any effective subordination) of the full amount of interest
payable in respect of such Classes of Certificates on each Distribution Date,
and the ultimate receipt by such holders of principal equal to, in each case,
the entire Certificate Balance of such Class of Certificates. 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 above under "--Application of the Available Distribution
Amount" and by the allocation of Realized Losses and Expense Losses as
described below. No other form of credit support will be available for the
benefit of the holders of the Certificates.
Allocation to the Offered Certificates, for so long as they are
outstanding, in order of declining seniority of the entire Principal
Distribution Amount for each Distribution Date will generally have the effect
of reducing the Certificate Balance of that Class at a faster rate than would
be the case if principal payments were allocated pro rata to all Classes of
Certificates with Certificate Balances. Thus, as principal is distributed to
the holders of each Class of Offered Certificates, the percentage interest in
the Trust Fund evidenced by such Class will be decreased (with a corresponding
increase in the percentage interest in the Trust Fund evidenced by the
Subordinate Certificates), thereby increasing, relative to their respective
Certificate Balances, the subordination afforded such Certificates by the
Subordinate Certificates. Following retirement of the Class A Certificates, the
herein described successive allocation to the Subordinate Certificates, in
alphabetical order of Class designation, in each case until such Class is paid
in full, of the entire Principal Distribution Amount for each Distribution Date
will provide a similar benefit to each such Class of Certificates as regards
the relative amount of subordination afforded thereto by the other Classes of
Certificates with later alphabetical Class designations.
Realized Losses of principal and interest on the Mortgage Loans and
Expense Losses for any Distribution Date (to the extent not previously
allocated) will be allocated to the Class N, Class M, Class L, Class K, Class
J, Class H, Class G, Class F, Class E, Class D, Class C and Class B
Certificates, in that order, and then to the Class
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A-1, Class A-2, Class A-MF1 and Class A-MF2 Certificates and, solely with
respect to Realized Losses and Expense Losses, of interest, to the Class X
Certificates, pro rata, in each case reducing principal and interest otherwise
payable thereon.
"Realized Losses" are losses arising from the inability of the Master
Servicer or the Special Servicer to collect all amounts due and owing under any
defaulted Mortgage Loan, including by reason of any modifications to the terms
of a Mortgage Loan, bankruptcy of the related borrower 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, 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
liquidation and other servicing expenses). 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 borrower, the resulting reduction
in interest paid and the principal amount so forgiven, as the case may be, also
will be treated as a Realized Loss.
The "Stated Principal Balance" of each Mortgage Loan will generally
equal the Cut-Off Date Principal Balance thereof, reduced (to not less than
zero) on each Distribution Date by (i) any payments or other collections (or
Advances in lieu thereof) of principal of such Mortgage Loan that have been
distributed on the Certificates on such date and (ii) the principal portion of
any Realized Loss incurred in respect of or allocable to such Mortgage Loan
during the related Collection Period.
"Expense Losses" include, among other things: (i) any interest paid to
the Master Servicer and/or Special Servicer in respect of unreimbursed
Advances; (ii) all Special Servicer Compensation payable to the Special
Servicer from amounts that are part of the Trust Fund; (iii) any of certain
other expenses of the Trust Fund, including, but not limited to, certain
reimbursements and indemnification payments to the Trustee and certain related
persons, certain reimbursements and indemnification payments to the Depositor,
the Master Servicer, the Special Servicer, primary servicers and certain
related persons, certain taxes payable from the assets of the Trust Fund, the
costs and expenses of any tax audits with respect to the Trust Fund and certain
other tax-related expenses and 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 (iv) any other expense of the Trust Fund
not specifically included in the calculation of Realized Loss for which there
is no corresponding collection from the borrower.
Any shortfall in the amount of Distributable Certificate Interest paid
to the Certificateholders of any Class of Certificates on any Distribution Date
will result in Unpaid Interest for such Class which, together with interest
thereon compounded monthly at one-twelfth the applicable Pass-Through Rate,
will be included in Distributable Certificate Interest in subsequent periods.
Prepayment Interest Shortfalls and Prepayment Interest Excesses
For any Distribution Date, a "Prepayment Interest Shortfall" will
arise with respect to any Mortgage Loan if the related borrower makes a full or
partial Principal Prepayment or a Balloon Payment during the related Collection
Period, and the date such payment was made (or, in the case of a Balloon
Payment, the date through which interest thereon accrues) occurred prior to the
Due Date for such Mortgage Loan in such Collection Period. Such a shortfall
arises because the amount of interest (net of the Administrative Cost Rate)
that accrues on the amount of such Principal Prepayment or Balloon Payment will
be less than the corresponding amount of interest accruing on the Certificates.
In such a case, the Prepayment Interest Shortfall will equal the excess of (a)
the aggregate amount of interest which would have accrued on the Scheduled
Principal Balance of such Mortgage Loan for the 30 days ending on such Due Date
if such Principal Prepayment or Balloon Payment had not been made over (b) the
aggregate interest that did so accrue through the date such payment was made.
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In any other case in which a full or partial Principal Prepayment or a
Balloon Payment is made during any Collection Period after the Due Date for
such Mortgage Loan, "Prepayment Interest Excess" will arise since the amount of
interest which accrues on the amount of such Principal Prepayment or Balloon
Payment will exceed the corresponding amount of interest accruing on the
Certificates. The amount of the Prepayment Interest Excess in any such case
will equal the interest that accrues on the Mortgage Loan from such Due Date to
the date such payment was made (net of the Administrative Cost Rate).
To the extent of that portion of its aggregate Master Servicing Fee
for the related Collection Period that is, in the case of each and every
Mortgage Loan, calculated at 0.015% per annum, the Master Servicer is required,
with respect to each Distribution Date, to cover the aggregate of any
Prepayment Interest Shortfalls incurred with respect to the Mortgage Pool
during such Collection Period that are not offset by Prepayment Interest
Excesses collected on the Mortgage Loans during such Collection Period. See
"Servicing Of The Mortgage Loans--The Master Servicer--Master Servicer
Compensation" herein. Any such reduction of the Master Servicing Fee to cover
such shortfalls will constitute a "Compensating Interest Payment" by the Master
Servicer. The aggregate of all Prepayment Interest Shortfalls incurred in
respect of the Mortgage Loans during any Collection Period that are neither
offset by Prepayment Interest Excesses collected on the Mortgage Loans during
such Collection Period nor covered by a Compensating Interest Payment paid by
the Master Servicer, shall constitute the "Net Aggregate Prepayment Interest
Shortfall" for the related Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall for a Distribution
Date will be allocated among the respective Classes of REMIC Regular
Certificates, on a pro rata basis, in each case according to the ratio that the
Accrued Certificate Interest with respect to such Class of Certificates for
such Distribution Date bears to the aggregate Accrued Certificate Interest with
respect to all Classes of REMIC Regular Certificates for such Distribution
Date. The Distributable Certificate Interest in respect of any Class of REMIC
Regular Certificates will be reduced to the extent any Net Aggregate Prepayment
Interest Shortfalls are allocated to such Class of Certificates. See "Servicing
of the Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses" herein.
To the extent that the aggregate Prepayment Interest Excesses for any
Distribution Date exceed the aggregate Prepayment Interest Shortfalls for such
Distribution Date, the excess amount will be payable to the Master Servicer as
additional servicing compensation.
OPTIONAL TERMINATION
The Depositor, the Master Servicer, the Special Servicer and the
holder of the majority interest in the Class R-I Certificates, each in turn,
will have the option to purchase, in whole but not in part, the Mortgage Loans
and any other property remaining in the Trust Fund on any Distribution Date on
or after the Distribution Date on which the aggregate Certificate Balance of
all Classes of Principal Balance Certificates then outstanding is less than or
equal to 1% of the Initial Pool Balance. The purchase price for any such
purchase will be the greater of (i) 100% of the aggregate unpaid principal
balances of the Mortgage Loans (other than any Mortgage Loans as to which the
Master Servicer has determined that all payments or recoveries with respect
thereto have been made), plus accrued and unpaid interest at the Mortgage Rate
(or the Mortgage Rate less the Master Servicing Fee Rate if the Master Servicer
is the purchaser) to the Due Date for each Mortgage Loan ending in the
Collection Period with respect to which such purchase occurs, plus unreimbursed
Advances, with interest thereon at the Advance Rate, and (ii) the fair market
value of the Mortgage Loans and any other property remaining in the Trust Fund.
The optional termination of the Trust Fund must be conducted so as to
constitute a "qualified liquidation" of each REMIC under Section 860F of the
Code. Upon any such termination, the purchase price for the Mortgage Loans and
the other property in the Trust Fund will be applied to pay accrued and unpaid
interest on and reduce the Certificate Balance of all outstanding Classes to
zero in the manner provided under "Description of the
Certificates--Distributions--Application of the Available Distribution Amount"
herein. Notice of any optional termination must be mailed by the Trustee, to
the Certificateholders and the Rating Agencies at least ten days prior to the
date set for optional termination.
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ANY SUCH TERMINATION WILL HAVE AN ADVERSE EFFECT ON THE YIELD OF ANY
OUTSTANDING OFFERED CERTIFICATES PURCHASED AT A PREMIUM. SEE "YIELD, PREPAYMENT
AND MATURITY CONSIDERATIONS" HEREIN.
ADVANCES
P&I Advances
On the business day prior to each Distribution Date, the Master
Servicer will be obligated to make an advance (each, a "P&I Advance") in the
amount of any Scheduled Payments, other than any Balloon Payment, on the
Mortgage Loans that are delinquent as of the close of business on the preceding
Determination Date, but only to the extent that the Master Servicer determines,
in its sole discretion, exercised in good faith, that the amount so advanced,
plus interest expected to accrue thereon, will be recoverable from subsequent
payments or collections (including Insurance Proceeds and Liquidation Proceeds)
in respect of the related Mortgage Loan, and only until the Mortgage Loan has
been liquidated; provided, however, that the amount of any P&I Advance required
to be made by the Master Servicer with respect to a Mortgage Loan as to which
there has been an Appraisal Reduction will be an amount equal to the product of
(i) the amount required to be advanced by the Master Servicer without giving
effect to this proviso and (ii) a fraction, the numerator of which is the
Scheduled Principal Balance of such Mortgage Loan as of the immediately
preceding Determination Date less any Appraisal Reduction in effect with
respect to such Mortgage Loan and the denominator of which is the Scheduled
Principal Balance of the Mortgage Loan as of such Determination Date; and
provided, further, that with respect to Scheduled Payments on any Mortgage Loan
that has been modified for which the Master Servicer is obligated to make a P&I
Advance, the amount of any such P&I Advance shall be adjusted in conformity
with the modification. No Advance shall be made with respect to Excess
Interest, Default Interest or Prepayment Premiums.
With respect to any Mortgage Loan that is delinquent in respect of its
Balloon Payment (including any REO Property as to which the related Mortgage
Loan provided for a Balloon Payment), P&I Advances will include amounts equal
to the Assumed Scheduled Payment.
P&I Advances (including interest accrued thereon at the Advance Rate)
will be reimbursable from recoveries on the related Mortgage Loans and, to the
extent the Master Servicer determines in its sole discretion, exercised in good
faith, that a P&I Advance will not be ultimately recoverable from related
recoveries, from any funds on deposit in the certificate account maintained
pursuant to the Pooling and Servicing Agreement (the "Certificate Account") and
the distribution account maintained pursuant to the Pooling and Servicing
Agreement (the "Distribution Account"). In no event will the Master Servicer be
required to make aggregate P&I Advances with respect to any Mortgage Loan in an
amount greater than the Scheduled Principal Balance (plus all overdue amounts)
thereof, less any Appraisal Reductions with respect thereto. Interest on P&I
Advances made by the Master Servicer will accrue at a rate equal to the "Prime
Rate" as reported in The Wall Street Journal from time to time (the "Advance
Rate"). The Master Servicer's right of reimbursement out of recoveries will be
prior to the right of the Certificateholders to receive any amounts recovered
with respect to any Mortgage Loan. If the Master Servicer fails to make a
required P&I Advance, the Trustee is required to make such P&I Advance, and, if
the Trustee fails to make a required P&I Advance, the Fiscal Agent is required
to make such P&I Advance.
Servicing Advances
In general, customary, reasonable and necessary "out-of-pocket" costs
and expenses required to be incurred by the Master Servicer in connection with
the servicing of a Mortgage Loan after a default (whether or not a payment
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 as described below. The Master Servicer will be
permitted to pay, or to direct the payment of, certain servicing expenses
directly out of the Certificate Account or Distribution Account and under
certain circumstances without regard to the relationship between the expense
and the funds from which it is being paid.
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With respect to Mortgage Loans, the Master Servicer will be obligated
to make Servicing Advances for real estate taxes and insurance premiums not
paid by the related borrower on a timely basis and for collection or
foreclosure costs (including reasonable attorneys fees). With respect to REO
Properties, the Master Servicer will be obligated to make Servicing Advances,
if necessary and to the extent that funds from the operation of the related REO
Property are unavailable to pay any amounts due and payable, for (i) insurance
premiums, (ii) real estate taxes and assessments in respect of such REO
Property that may result in the imposition of a lien, (iii) any ground rents in
respect of such REO Property and (iv) costs and expenses necessary to maintain,
manage or operate such REO Property. Notwithstanding the foregoing, the Master
Servicer will be obligated to make such Servicing Advances only to the extent
that the Master Servicer determines that the amount so advanced will be
recoverable from subsequent payments or collections (including Insurance
Proceeds, Liquidation Proceeds and REO Income) in respect of such Mortgage Loan
or REO Property. Interest on Servicing Advances will accrue at the Advance
Rate, and will be reimbursable from recoveries or collections on the related
Mortgage Loan or REO Property. However, if the Master Servicer determines (as
described below) that any Advance previously made (and accrued interest thereon
at the Advance Rate) will not be ultimately recoverable from such related
recoveries, such advances will be reimbursable from any amounts on deposit in
the Certificate Account or Distribution Account.
Nonrecoverable Advances
The determination by the Master Servicer that any P&I Advance or
Servicing Advance, previously made or proposed to be made, would not be
recoverable will be made in the sole discretion of the Master Servicer,
exercising good faith, and is required to be accompanied by an officer's
certificate delivered to the Trustee and setting forth the reasons for such
determination, with copies of appraisals or internal valuations, if any, or
other information that supports such determination. The Master Servicer's
determination of nonrecoverability will be conclusive and binding upon the
Certificateholders.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports
The Trustee will prepare and forward to each Certificateholder on each
Distribution Date:
(a) A statement setting forth, to the extent applicable: (i)
the amount, if any, of such distributions to the holders of each Class
of Principal Balance Certificates applied to reduce the aggregate
Certificate Balance thereof; (ii) the amount of such distribution to
holders of each Class of REMIC Regular Certificates allocable to (A)
interest and (B) Prepayment Premiums; (iii) the number of outstanding
Mortgage Loans and the aggregate principal balance and Scheduled
Principal Balance of the Mortgage Loans at the close of business on
such Distribution Date; (iv) the number and aggregate principal
balance of Mortgage Loans (a) delinquent one month, (b) delinquent two
months, (c) delinquent three or more months or (d) as to which
foreclosure proceedings have been commenced; (v) with respect to any
REO Property acquired during the preceding calendar month, the
principal balance and Scheduled Principal Balance of the related
Mortgage Loan as of the date of acquisition of the REO Property; (vi)
as of the related Determination Date (a) the book value of any REO
Property, (b) as to any REO Property sold during the related
Collection Period, the date of the related determination by the
Special Servicer or Master Servicer, as the case may be, that it has
recovered all payments which it expects to be finally recoverable and
the amount of the proceeds of such sale deposited into the Certificate
Account, and (c) the aggregate amount of other revenues collected by
the Special Servicer with respect to each REO Property during the
related Collection Period and credited to the Certificate Account, in
each case identifying such REO Property by the loan number of the
related Mortgage Loan; (vii) the aggregate Certificate Balance or
Notional Amount of each Class of REMIC Regular Certificates before and
after giving effect to the distribution made on such Distribution
Date; (viii) the aggregate amount of Principal Prepayments made during
the related Collection Period; (ix) the Pass-Through Rate applicable
to each Class of REMIC Regular Certificates for such Distribution
Date; (x) the aggregate amount of servicing compensation retained by
or paid to the Master Servicer and the Special Servicer; (xi) the
amount of
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Unpaid Interest, Realized Losses or Expense Losses, if any, incurred
with respect to the Mortgage Loans; (xii) the aggregate amount of all
Servicing Advances and P&I Advances outstanding that have been made by
the Master Servicer and/or the Special Servicer separately stated;
(xiii) the amount of any Appraisal Reductions effected during the
related Collection Period on a loan-by-loan basis and the total
Appraisal Reductions in effect as of such Distribution Date; and (xiv)
such other information and in such form as shall be specified in the
Pooling and Servicing Agreement. In the case of information furnished
pursuant to subclauses (i) and (ii) above, the amounts shall be
expressed as a dollar amount per $1,000 of original actual or notional
principal amount of the Certificates for all Certificates of each
applicable Class.
(b) A report containing information regarding the Mortgage
Loans as of the end of the related Collection Period, which report
will contain substantially the categories of information regarding the
Mortgage Loans set forth in Appendix I and will be presented in a
tabular format substantially similar to the format utilized in
Appendix I.
For those who have obtained an account number on the Trustee's ASAP
(Automatic Statements Accessed by Phone) System, the foregoing report may be
obtained from the Trustee via automated facsimile by placing a telephone call
to (312) 904-2200 and following the voice prompts to request "Statement Number
350." Account numbers on the Trustee's ASAP System may be obtained by calling
the same telephone number and following the voice prompts for obtaining account
numbers. In addition, if the Depositor so directs the Trustee and on terms
acceptable to the Trustee, certain information regarding the Mortgage Loans
will be made accessible at the Website maintained by LaSalle National Bank at
www.lnbabs.com or their electronic bulletin board service at (714) 282-3990 or
such other mechanism as the Trustee may have in place from time to time.
In connection with providing access to the Trustee's Website or
electronic bulletin board, the Trustee may require registration and the
acceptance of a disclaimer. The Trustee shall not be liable for the
dissemination of information in accordance with the Pooling and Servicing
Agreement.
Certain information regarding the Mortgage Loans will be available on
the Master Servicer's website at www.amresco.com. Subject to the receipt of
necessary information from any subservicer, such loan-by-loan listing will be
made available electronically in the form of the standard CSSA loan file and
CSSA property file; provided, however, the Trustee will provide
Certificateholders with a written copy of such report upon request. The
information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Master Servicer at least one business
day prior to the Servicer Remittance Date. Absent manifest error, none of the
Master Servicer, the Special Servicer or the Trustee shall be responsible for
the accuracy or completeness of any information supplied to it by a borrower or
third party that is included in any reports, statements, materials or
information prepared or provided by the Master Servicer, the Special Servicer
or the Trustee, as applicable.
On an annual basis, the Master Servicer is required to deliver to the
Trustee, who will deliver such report to the Underwriters, the
Certificateholders, the Depositor and anyone the Depositor or either
Underwriter reasonably designates, the Special Servicer and the Rating
Agencies, a report setting forth the Debt Service Coverage Ratio (and the
calculation thereof) with respect to each Mortgage Loan for which the Master
Servicer obtains operating statements, and such other specified information,
including occupancy, to the extent available, and in such form as shall be
specified in the Pooling and Servicing Agreement.
On a monthly basis, the Trustee is required to deliver to the
Underwriters, the Rating Agencies, the Depositor, the Operating Adviser and
anyone the Depositor or any Underwriter reasonably designates, and upon request
to any Certificateholder, a report substantially in the form of the diskette
attached to the inside back cover of this Prospectus Supplement with the
information contained therein updated to the date of such report.
Special Servicer Reports
On or about each Determination Date, the Special Servicer will
prepare, or provide the Master Servicer with the information to prepare,
reports with respect to Specially Serviced Mortgage Loans as provided in the
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Pooling and Servicing Agreement. Such reports generally will include a report
showing loan-by-loan detail on each Specially Serviced Mortgage Loan that is 60
days delinquent, 90 days delinquent, or in the process of foreclosure, an REO
status report for each REO Property and a modification report showing
loan-by-loan detail for each modification closed during the most recent
reporting period. Such reports will be delivered, no later than the business
day prior to each Distribution Date, to the Underwriters, the Rating Agencies
and the Depositor; provided that certain limitations will be imposed on such
recipients with respect to the use and further dissemination of the information
in such reports to the extent described in the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the
Trustee make available, at its offices or at such other office as it may
reasonably designate, during normal business hours, upon reasonable advance
notice for review by any holder of a Certificate, each Rating Agency or the
Depositor, originals or copies of, among other things, the following items
(except to the extent not permitted by applicable law or under any of the
Mortgage Loan documents): (i) the Pooling and Servicing Agreement and any
amendments thereto, (ii) all reports or statements delivered to holders of the
relevant Class of Certificates since the Closing Date, (iii) all officer's
certificates delivered to the Trustee since the Closing Date, (iv) all
accountants' reports delivered to the Trustee since the Closing Date, (v) the
most recent property inspection report prepared by or on behalf of the Master
Servicer or the Special Servicer in respect of each Mortgaged Property and
delivered to the Trustee, (vi) the most recent Mortgaged Property annual
operating statements and rent rolls, if any, collected by or on behalf of the
Master Servicer or the Special Servicer and delivered to the Trustee, (vii) any
and all modifications, waivers and amendments of the terms of a Mortgage Loan
entered into by the Master Servicer and/or the Special Servicer, and (viii) any
and all officers' certificates and other evidence delivered to the Trustee to
support the Master Servicer's determination that any Advance was or, if made,
would not be recoverable. Copies of any and all of the foregoing items and any
Servicer Reports 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 copies. Recipients of such
information will generally be required to acknowledge that such information may
be used only in connection with an evaluation of the Certificates by such
recipient.
Book-Entry Certificates
Until such time, if any, as Definitive Certificates are issued in
respect of the Offered Certificates, the foregoing information and access will
be available to the related Certificate Owners only to the extent it is
forwarded by, or otherwise available through, DTC and its Participants. The
manner in which notices and other communications are conveyed by DTC to its
Participants, and by such Participants to the 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. The Master Servicer, the
Special Servicer, the Trustee, the Fiscal Agent 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 Trustee; however,
any Certificate Owner that has delivered to the Trustee a written
certification, in the form prescribed by the Pooling and Servicing Agreement
regarding such Certificate Owner's beneficial ownership of Offered Certificates
will be recognized as Certificateholders for purposes of obtaining the
foregoing information and access.
EXAMPLE OF DISTRIBUTIONS
The following chart sets forth an example of distributions on the
Certificates for the first month of the Trust Fund's existence, assuming the
Certificates are issued in August, 1998:
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<TABLE>
<CAPTION>
<S> <C> <C>
THE CLOSE OF BUSINESS ON:
August 1 (A) Cut-Off Date.
August 31 (B) Record Date for all Classes of Certificates.
August 1 - September 10 (C) The Collection Period. The Master Servicer
receives Scheduled Payments due on September 1
and any Principal Prepayments made after the
Cut-Off Date and on or prior to September 10.
September 10 (D) Determination Date.
September 14 (E) Master Servicer Remittance Date.
September 15 (F) Distribution Date.
</TABLE>
Succeeding monthly periods follow the pattern of (B) through (F)
(except as described below).
(A) The outstanding principal balance of the Mortgage Loans will be
the aggregate outstanding principal balance of the Mortgage Loans at the close
of business on August 1, 1998 (after deducting principal payments due on or
before such date, whether or not received). Principal payments due on or before
such date, and the accompanying interest payments, are not part of the Trust
Fund.
(B) Distributions on the next Distribution Date will be made to those
persons that are Certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any Scheduled Payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to September 10, 1998 will be
deposited in the Certificate Account. Each subsequent Collection Period (a)
with respect to Scheduled Payments, will begin on the day after the
Determination Date in the month preceding the month of each Distribution Date
and will end on the Determination Date in the month in which the Distribution
Date occurs and (b) with respect to all other collections on the Mortgage Loans
and REO Properties, will begin on the day following the last day of the
previous Collection Period for such collections (or in the case of the first
Distribution Date, the Cut-Off Date), and will end on the earlier of the
Determination Date in the month in which the Distribution Date occurs and the
fourth business day prior to such Distribution Date.
(D) As of the close of business on the Determination Date, the Master
Servicer will have determined the amounts of principal and interest that will
be remitted with respect to the related Collection Period.
(E) The Master Servicer will remit to the Trustee on the business day
preceding the related Distribution Date all amounts held by the Master
Servicer, and any P&I Advances required to be made by the Master Servicer, that
together constitute the Available Distribution Amount for such Distribution
Date.
(F) The Trustee will make distributions to Certificateholders on the
15th day of each month or, if such day is not a business day, the next
succeeding business day.
THE TRUSTEE
LaSalle National Bank ("LaSalle"), a national banking association with
its principal offices in Chicago, Illinois, will act as Trustee pursuant to the
Pooling and Servicing Agreement. The Trustee's corporate trust office
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is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois
60674-4107, Attention: Asset Backed Securities Trust Services Group--Morgan
Stanley 1998-CF1.
The Trustee is at all times required to be, and will be required to
resign if it fails to be, (i) an institution insured by the FDIC, (ii) a
corporation, national bank or national banking association, organized and doing
business under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of not less than $50,000,000 and subject to
supervision or examination by federal or state authority and (iii) an
institution whose long-term senior unsecured debt is rated not less than "Aa2"
by Moody's and "AA" by S&P (or such lower ratings as the Rating Agencies would
permit without an adverse effect on any of the then-current ratings of the
Certificates). See "Description of the Agreements--The Trustee", "--Duties of
the Trustee", "--Certain Matters Regarding the Trustee" and "--Resignation and
Removal of the Trustee" in the Prospectus.
As compensation for the performance of its duties, the Trustee will be
paid a monthly fee (the "Trustee Fee").
THE FISCAL AGENT
ABN AMRO Bank N.V. ("ABN AMRO"), a Netherlands banking corporation and
the indirect corporate parent of the Trustee, will act as Fiscal Agent for the
Trust Fund and will be obligated to make any Advance required to be made, and
not made, by the Master Servicer and the Trustee under the Pooling and
Servicing Agreement, provided that the Fiscal Agent will not be obligated to
make any Advance that it determines, in its sole discretion, exercised in good
faith, to be a Nonrecoverable Advance. The Fiscal Agent will be entitled to
rely conclusively on any determination by the Master Servicer, the Special
Servicer (solely in the case of Servicing Advances) or the Trustee that an
Advance, if made, would be a Nonrecoverable Advance. The Fiscal Agent will be
entitled to reimbursement for each Advance made by it in the same manner and to
the same extent as, but prior to, the Master Servicer and the Trustee. See
"--Advances" above. The Fiscal Agent will be entitled to various rights,
protections and indemnities similar to those afforded the Trustee. The Trustee
will be responsible for payment of the compensation of the Fiscal Agent. In the
event that LaSalle shall, for any reason, cease to act as Trustee under the
Pooling and Servicing Agreement, ABN AMRO likewise shall no longer serve in the
capacity of Fiscal Agent thereunder.
FINAL SCHEDULED DISTRIBUTION DATE; FINAL RATED DISTRIBUTION DATE
The Final Scheduled Distribution Date for each Class of Certificates
is the date on which such Class is expected to be paid in full, assuming timely
payments (and no Principal Prepayments) will be made on the Mortgage Loans in
accordance with their terms and otherwise based on the Maturity Assumptions (as
defined herein).
The Final Rated Distribution Date of each Class of Certificates is the
Distribution Date in July 2032. The Final Rated Distribution Date is the first
Distribution Date that follows by at least 36 months the end of the
amortization term of the Mortgage Loan that, as of the Cut-Off Date, has the
longest remaining amortization term.
The ratings assigned by the Rating Agencies to each Class of Principal
Balance Certificates reflects on assessment of the likelihood that the
Certificateholders of such Class will receive, on or before the Final Rated
Distribution Date, all principal distributions to which they are entitled.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
GENERAL
The yield to maturity on the Offered Certificates will be affected by
the price paid by the Certificateholder, the related Pass-Through Rates and the
rate, timing and amount of distributions on such Offered Certificates. The
rate, timing and amount of distributions on any such Certificate will in turn
depend on, among
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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 in reduction of the Certificate Balance of such
Certificate, (iii) the rate, timing and severity of Realized Losses and Expense
Losses and the extent to which such losses and expenses are allocable in
reduction of the Certificate Balance 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. The yield to maturity of the
Class A-MF1 Certificates will be particularly sensitive to the rate, timing and
receipt of the A-MF1 Principal Distribution Amount. The yield to maturity of
the Class A-MF2 Certificates will be particularly sensitive to the rate, timing
and receipt of the A-MF2 Principal Distribution Amount. In addition, the
effective yield to holders of the Certificates that bear interest will differ
from the yield otherwise produced by the applicable Pass-Through Rate and
purchase prices of such Certificates because interest distributions will not be
payable to such holders until at least the 15th day of the month following the
month of accrual (without any additional distribution of interest or earnings
thereon in respect of such delay).
RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to maturity on each Class of Offered Certificate purchased
at a discount or premium will be affected by the rate and timing of principal
payments made in reduction of the aggregate Certificate Balance of such Class
of Certificates. As described herein, the Principal Distribution Amount (other
than the A-MF1 Principal Distribution Amount and A-MF2 Principal Distribution
Amount) for each Distribution Date will be distributable entirely in respect of
the Class A-1 Certificates until the Certificate Balance thereof is reduced to
zero, and will thereafter be distributable entirely in respect of each other
Class of Principal Balance Certificates, in descending alphabetical, and, if
applicable, descending numerical, order of Class designation (except with
respect to the Class A-MF1 and Class A-MF2 Certificates, which are paid pro
rata), in each case until the Certificate Balance of such Class of Certificates
is, in turn, reduced to zero. Consequently, the rate and timing of principal
payments that are distributed or otherwise result in reduction of the aggregate
Certificate Balance 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 in turn be affected by the amortization schedules
thereof, the dates on which Balloon Payments are due and the rate and timing of
Principal Prepayments and other unscheduled collections thereon (including for
this purpose, collections made in connection with liquidations of Mortgage
Loans due to defaults, casualties or condemnations affecting the Mortgaged
Properties and purchases 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
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 the Principal Balance Certificates. Any early termination of the Trust Fund
as described herein under "Description of the Certificates--Optional
Termination" will also shorten the weighted average lives of those Certificates
then outstanding. 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 Principal Balance 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--Mortgage Loan Modifications."
The yield to maturity on the Class A-MF1 Certificates is particularly
sensitive to the rate and timing of Principal Prepayments and other unscheduled
collections on the Mortgage Loans in Loan Group 2 (including collections made
in connection with liquidations of Mortgage Loans due to defaults, casualties
or condemnations affecting such Mortgage Loans and purchases of such Mortgage
Loans out of the Trust Fund).
The yield to maturity on the Class A-MF2 Certificates is particularly
sensitive to the rate and timing of Principal Prepayments and other unscheduled
collections on the Mortgage Loans in Loan Group 3 (including collections made
in connection with liquidations of Mortgage Loans due to defaults, casualties
or condemnations affecting such Mortgage Loans and purchases of such Mortgage
Loans out of the Trust Fund).
The extent to which the yield to maturity of any Offered Certificate
may vary from the anticipated yield will depend upon the degree to which such
Certificate is purchased at a discount or premium and when, and to
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what degree, payments of principal on the Mortgage Loans in turn are
distributed or otherwise result in a reduction of the aggregate Certificate
Balance of its Class. An investor should consider, in the case of any such
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 such Class of Certificates 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, if a Certificate is purchased at a discount or premium, the
earlier a payment of principal on the Mortgage Loans is distributed or
otherwise results in reduction of the Certificate Balance of the related Class,
the greater will be the effect on the yield to maturity of such Certificate. 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 may not be fully offset by a
subsequent like reduction (or increase) in the rate of such principal payments.
With respect to the Class X, Class A, Class B, Class C, Class D and Class E
Certificates, the allocation of a portion of collected Prepayment Premiums to
the Certificates as described herein is intended to mitigate those risks;
however, such allocation (if any) may be insufficient to offset fully the
adverse effects on yield that such prepayments may have. 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. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal
Balance Certificates in the following order: first, to the Class N Certificates
until the Certificate Balance thereof has been reduced to zero; then to the
other respective Classes of Principal Balance Certificates, in ascending (that
is, from M to A) alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of Certificates has been reduced to
zero. Net Aggregate Prepayment Interest Shortfalls will be borne by the holders
of the respective Classes of REMIC Regular Certificates on a pro rata basis as
described herein. Shortfalls arising from delinquencies and defaults (to the
extent the Master Servicer determines that P&I Advances would be
nonrecoverable), Appraisal Reductions, Expense Losses and Realized Losses
generally will result in (among other things) a shortfall in current
distributions of interest payable to the most subordinate Class of Certificates
outstanding.
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 prohibiting Principal Prepayments for
certain periods and/or requiring the payment of Prepayment 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 and Other
Special Considerations" herein and "Risk Factors" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected
by prevailing market interest rates for mortgage loans of a comparable type,
term and risk level. When the prevailing market interest rate is below a
mortgage interest rate, the related borrower has an incentive to refinance its
mortgage loan. A requirement that a prepayment be accompanied by a Prepayment
Premium may not provide a sufficient economic disincentive to deter a borrower
from refinancing at a more favorable interest rate.
S-72
<PAGE>
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to
meet cash flow needs or to make other investments. In addition, some borrowers
may be motivated by federal and state tax laws (which are subject to change) to
sell Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors
that will affect the rate and timing of prepayments and defaults on the
Mortgage Loans, as to the relative importance of such factors, as to the
percentage of the principal balance of the Mortgage Loans that will be prepaid
or as to whether a default will have occurred as of any date or as to the
overall rate of prepayment or default on the Mortgage Loans.
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time from the
date of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of any Certificate
that entitles the holders thereof to distributions of principal will be
influenced by, among other things, the rate at which principal on the Mortgage
Loans is paid or otherwise collected or advanced and applied to reduce the
Certificate Balance of such Certificate.
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" or "CPR" model. The CPR model
represents an assumed constant rate of prepayment each month (which is
expressed on a per annum 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 a historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated
rate of prepayment of any mortgage loans, including the Mortgage Loans. The
Depositor makes no representation as to the appropriateness of using the CPR
model for purposes of analyzing an investment in the Certificates.
The following tables indicate the percent of the initial Certificate
Balance of each Class of Offered Certificates after each of the dates shown and
the corresponding weighted average life of each such Class of the Certificates,
if the Mortgage Pool were to prepay at the indicated levels of CPR and sets
forth the percentage of the initial Certificate Balance of such Certificates
that would be outstanding after each of the dates shown. The tables below have
also been prepared generally on the basis of the assumptions (collectively, the
"Maturity Assumptions") that (i) the initial Certificate Balances and initial
Pass-Through Rates of the Certificates are as set forth herein, (ii) the
settlement date for the sale of the Certificates is August 27, 1998, (iii)
distributions on the Certificates are made on the 15th day of each month,
commencing in September 1998, (iv) there are no delinquencies, defaults or
Realized Losses with respect to the Mortgage Loans, (v) Scheduled Payments on
the Mortgage Loans are timely received on the first day of each month
commencing in September 1998, (vi) there are no Expense Losses, (vii) no
Principal Prepayment on any Mortgage Loan is made for so long as the Mortgage
Loan is in a Lock-Out Period or Defeasance or while Principal Prepayments on
such Mortgage Loans are required to be accompanied by a Yield Maintenance
Premium (notwithstanding any provision of such Mortgage Loan that permits
partial Principal Prepayments without imposition of a Yield Maintenance
Premium), and thereafter Principal Prepayments are made on the Mortgage Loans
at the indicated levels of CPR, (viii) partial prepayments are permitted under
the Mortgage Loans and are applied to reduce the outstanding principal balance
of the Mortgage Loans, (ix) there are no Prepayment Premiums collected; (x) no
Prepayment Interest Shortfalls occur; (xi) no Mortgage Loan is the subject of a
repurchase or substitution by the Seller and no optional termination of the
Trust Fund occurs; (xii) the Mortgage Rate of the variable rate Mortgage Loan
is fixed at its current rate; and (xiii) any Mortgage Loan that has an accrual
basis of actual/actual is treated as having a 30/360 accrual basis.
The Mortgage Loans do not have all of the characteristics assumed
above. To the extent that the Mortgage Loans have characteristics that differ
from those assumed in preparing the tables, the Classes of Certificates
analyzed in the tables may mature earlier or later than indicated by the
tables. The Mortgage Loans generally do not permit partial prepayments and do
not prepay at any constant rate. Accordingly, it is highly unlikely that the
Mortgage Loans will prepay in a manner consistent with the Maturity
Assumptions.
S-73
<PAGE>
Furthermore, it is unlikely that the Mortgage Loans will experience no defaults
or losses. In addition, variations in the actual prepayment experience and the
balance of the Mortgage Loans that prepay may increase or decrease the
percentages of initial Certificate Balances (and shorten or extend the weighted
average lives) shown in the following tables. Investors are urged to conduct
their own analyses of the rates at which the Mortgage Loans may be expected to
prepay.
For the purposes of each table, the weighted average life of a
Certificate is determined by (A) multiplying the amount of each principal
distribution thereon by the number of years from the date of issuance of the
Certificate to the related Distribution Date, (B) summing the results and (C)
dividing the sum by the aggregate amount of the reductions in the Certificate
Balance of such Certificate.
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-1 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ----- ---- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 94 94 94 94 94 94
August 2000 87 87 87 87 87 87
August 2001 78 78 78 78 78 78
August 2002 70 70 70 70 70 70
August 2003 56 55 55 55 55 54
August 2004 47 46 46 45 44 43
August 2005 34 33 32 31 30 29
August 2006 21 20 19 18 17 15
August 2007 6 4 3 2 0 0
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 5.43 5.38 5.35 5.32 5.28 5.22
</TABLE>
S-74
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-2 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ----------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 100 100 100 100
August 2006 100 100 100 100 100 100
August 2007 100 100 100 100 100 99
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 9.63 9.62 9.62 9.61 9.60 9.59
</TABLE>
S-75
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-MF1 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- --------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 99 99 98 98
August 2006 100 99 98 98 97 95
August 2007 100 98 97 96 95 92
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 9.55 9.52 9.50 9.48 9.45 9.40
</TABLE>
S-76
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-MF2 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- -------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 99 99
August 2005 96 95 95 94 94 93
August 2006 70 69 68 67 66 65
August 2007 70 68 67 66 64 62
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 8.92 8.88 8.85 8.83 8.79 8.73
</TABLE>
S-77
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS B CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ---------- --------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 100 100 100 100
August 2006 100 100 100 100 100 100
August 2007 100 100 100 100 100 100
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 9.80 9.80 9.80 9.80 9.80 9.80
</TABLE>
S-78
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS C CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ---------- ---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 100 100 100 100
August 2006 100 100 100 100 100 100
August 2007 100 100 100 100 100 100
August 2008 0 0 0 0 0 0
August 2009 0 0 0 0 0 0
August 2010 0 0 0 0 0 0
August 2011 0 0 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 9.85 9.85 9.84 9.84 9.84 9.84
</TABLE>
S-79
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS D CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ---------- --------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 100 100 100 100
August 2006 100 100 100 100 100 100
August 2007 100 100 100 100 100 100
August 2008 57 55 53 52 49 46
August 2009 42 39 36 34 31 26
August 2010 27 22 19 16 12 7
August 2011 7 2 0 0 0 0
August 2012 0 0 0 0 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 11.00 10.86 10.79 10.72 10.62 10.50
</TABLE>
S-80
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS E CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0% 3% 5% 7% 10% 15%
- - ----------------- ------------ ------------ ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Initial 100% 100% 100% 100% 100% 100%
August 1999 100 100 100 100 100 100
August 2000 100 100 100 100 100 100
August 2001 100 100 100 100 100 100
August 2002 100 100 100 100 100 100
August 2003 100 100 100 100 100 100
August 2004 100 100 100 100 100 100
August 2005 100 100 100 100 100 100
August 2006 100 100 100 100 100 100
August 2007 100 100 100 100 100 100
August 2008 100 100 100 100 100 100
August 2009 100 100 100 100 100 100
August 2010 100 100 100 100 100 100
August 2011 100 100 94 84 70 51
August 2012 57 36 24 12 0 0
August 2013 0 0 0 0 0 0
August 2014 0 0 0 0 0 0
August 2015 0 0 0 0 0 0
August 2016 0 0 0 0 0 0
August 2017 0 0 0 0 0 0
August 2018 0 0 0 0 0 0
August 2019 0 0 0 0 0 0
August 2020 0 0 0 0 0 0
August 2021 0 0 0 0 0 0
August 2022 0 0 0 0 0 0
August 2023 0 0 0 0 0 0
Weighted average life (years) 14.00 13.79 13.63 13.48 13.29 13.03
</TABLE>
S-81
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
Generally, the Mortgage Pool will consist of three hundred and eighty
(380) fixed-rate mortgage loans (the "Mortgage Loans") with an aggregate
principal balance as of the Cut-Off Date of approximately $1,107,291,368 (the
"Initial Pool Balance"), subject to a variance of plus or minus 5% which are
secured by first liens on 380 multifamily and commercial properties (the
"Mortgaged Properties"). The Cut-Off Date Balances of the Mortgage Loans range
from $129,582 to $26,481,230 and the Mortgage Loans have an average Cut-Off
Date Balance of $2,913,925. Three hundred thirty-nine (339) of the Mortgage
Loans, representing 91.0% of the Initial Pool Balance, are Balloon Loans. All
numerical information provided herein with respect to the Mortgage Loans,
including information provided in Appendix I (Mortgage Pool Information
(Tables)), Appendix II (Certain Characteristics of the Mortgage Loans) and
Appendix III (Significant Loan Summaries), is provided on an approximate basis.
For purposes of the presentation of certain Mortgage Pool Information herein,
each Mortgage Loan is deemed to be secured by a mortgage on one Mortgaged
Property. For Mortgage Loans where one note is secured by multiple mortgaged
properties, the loan amount has been allocated to each Mortgaged Property and
such loans are treated as if they were multiple loans that are
cross-collateralized and cross-defaulted. All percentages of the Mortgage Pool,
or of any specified sub-group thereof, referred to herein without further
description are approximate percentages of the Initial Pool Balance.
Descriptions of the terms and provisions of the Mortgage Loans are generalized
descriptions of the terms and provisions of the Mortgage Loans in the
aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgage Loan is evidenced by one or more promissory notes (each,
a "Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (a "Mortgage"). Each of the Mortgages creates a first lien
on the interests of the related borrower in the related Mortgaged Property, as
set forth on the following table:
SECURITY FOR THE MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
INITIAL POOL
INTEREST OF BORROWER ENCUMBERED BALANCE
------------------------------- ------------
<S> <C>
Fee Simple Estate (1) 98.4%
Leasehold (2) 1.6%
----
Total 100.0%
</TABLE>
- - ------------------
(1) For any Mortgaged Property where the ground lessee and ground lessor are
both parties to the Mortgage, the Mortgaged Property was categorized as a
fee simple estate.
(2) Includes any Mortgaged Property where a material portion of such property
is subject to a ground lease and the ground lessor is not a party to the
Mortgage.
Each Mortgaged Property consists of land improved by (i) a retail
property (a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an apartment building or complex consisting of five or more rental
units (a "Multifamily Property," and any Mortgage Loan secured thereby, a
"Multifamily Loan"), (iii) an office building (an "Office Property," and any
Mortgage Loan secured thereby, an "Office Loan"), (iv) a nursing home or
assisted living facility (each, a "Healthcare Property," and any Mortgage Loan
secured thereby, a "Healthcare Loan"), (v) a full or limited service or
extended stay hotel or other hospitality facility (a "Hospitality Property,"
and any Mortgage Loan secured thereby, a "Hospitality Loan"), (vi) an
industrial property (an "Industrial Property," and any Mortgage Loan secured
thereby, an "Industrial Loan"), (vii) a mini-warehouse or self-storage facility
(a "Self-Storage Property" and any Mortgage Loan secured thereby, a
"Self-Storage Loan"), (viii) a mobile home community (a "Mobile Home Property,"
and any Mortgage Loan secured thereby, a "Mobile Home Loan") or
S-82
<PAGE>
(ix) other commercial properties in the percentages of Initial Pool Balance
listed below. Certain statistical information relating to the various types of
Mortgaged Properties is set forth at Appendix I hereto.
PROPERTY TYPE % OF INITIAL POOL BALANCE
----------------------------------- -------------------------
Multifamily 23.1
Retail 22.5
Hospitality 12.2
Healthcare 11.3
Office 11.0
Industrial 7.9
Mixed Use 7.3
Self-Storage 2.3
Mobile Home 1.7
Other 0.8
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is secured by one or more Mortgages encumbering the
related borrower's interest in the applicable Mortgaged Property or Properties
and is also secured by an assignment of the related borrower's interest in the
leases, rents, issues and profits of the related Mortgaged Properties. In
certain instances, additional collateral exists in the nature of partial
indemnities or guaranties, or the establishment and pledge of one or more
reserve or escrow accounts for, among other things, necessary repairs,
replacements and environmental remediation, real estate taxes and insurance
premiums, deferred maintenance and/or scheduled capital improvements and
re-leasing reserves (such accounts, "Reserve Accounts"). The Mortgage Loans
generally provide for the indemnification of the mortgagee by the borrower for
the presence of any hazardous substances affecting the Mortgaged Property. Each
Mortgage constitutes a first lien on a Mortgaged Property, subject generally
only to (i) liens for real estate and other taxes and special assessments not
yet due and payable, (ii) covenants, conditions, restrictions, rights of way,
easements and other encumbrances whether or not of public record as of the date
of recording of the related Mortgage, such exceptions having been acceptable to
the related Seller in connection with the purchase or origination of the
related Mortgage Loan and (iii) such other exceptions and encumbrances on
Mortgaged Properties as are reflected in the related title insurance policies.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans--Escrows", herein.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculation of Interest
All of the Mortgage Rates for the Mortgage Loans are fixed, except for
the Mortgage Loan known as Silver Creek Manor, which is a variable rate loan.
9.2% of the Mortgage Loans, based on the Initial Pool Balance, accrue interest
on the basis of a 360 day year consisting of twelve 30-day months, 89.4% of the
Mortgage Loans, based on the Initial Pool Balance, accrue interest on the basis
of the actual number of days elapsed and a 360 day year and 1.4% of the
Mortgage Loans, based on Initial Pool Balance accrue interest on the basis of
the actual number of days elapsed and a 365 or 366 day year.
S-83
<PAGE>
Excess Interest
One hundred and five of the Mortgage Loans, representing approximately
39.3% of the Initial Pool Balance, are ARD Loans. Commencing on or within three
months of the respective Anticipated Repayment Date, each such Mortgage Loan
generally will bear interest at a fixed rate (the "Revised Rate") per annum,
equal to the Mortgage Rate plus a percentage ranging from 2% to 5%. Until the
principal balance of each such Mortgage Loan has been reduced to zero, such
Mortgage Loan will only be required to pay interest at the Mortgage Rate and
the interest accrued at the excess, if any, of the related Revised Rate over
the related Mortgage Rate will be deferred (such accrued and deferred interest
and interest thereon, if any, the "Excess Interest"). Except where limited by
applicable law, Excess Interest so accrued will generally earn interest at the
Revised Rate. On or prior to the Anticipated Repayment Date, borrowers under
ARD Loans will be required to enter into an agreement establishing an account
in the name of the Lender (a "Lock Box Account") whereby all revenue will be
deposited directly into the Lock Box Account which will be controlled by the
Master Servicer. From and after the Anticipated Repayment Date, in addition to
paying interest (at the Mortgage Rate) and principal (based on the amortization
schedule) (together, the "Monthly Debt Service Payment"), the related borrower
generally will be required to apply all monthly cash flow from the related
Mortgaged Property or Properties to pay the following amounts, generally, in
the following order of priority: (i) required payments to the tax and insurance
escrow fund and any ground lease escrow fund, (ii) payments of any amounts due
under the Note or other documents securing the related Mortgage Loan and
payments to any other required escrow funds, (iii) payment of operating
expenses pursuant to the terms of an annual budget approved by the Master
Servicer, (iv) payment of approved extraordinary operating expenses or capital
expenses not set forth in the approved annual budget or allotted for in any
escrow fund, (v) principal on the Mortgage Loan until such principal is paid in
full and (vi) to Excess Interest. The cash flow from the Mortgaged Property or
Properties securing an ARD Loan after payments of the Monthly Debt Service
Payment and items (i) through (iv) above is referred to herein as "Excess Cash
Flow". As described below, ARD Loans generally provide that the related
borrower is prohibited from prepaying the Mortgage Loan without penalties until
generally one to six months prior to the Anticipated Repayment Date but, upon
the commencement of such period, may prepay the loan, in whole or in part,
without payment of a Prepayment Premium.
The Anticipated Repayment Date for each ARD Loan is listed in Appendix II.
Amortization of Principal
Certain Mortgage Loans (the "Balloon Loans"), representing 91.0% of
the Initial Pool Balance, provide for monthly payments of principal based on
amortization schedules longer than their original terms thereby leaving
substantial principal amounts due and payable (each such payment, a "Balloon
Payment") on their respective maturity dates, unless previously prepaid.
Certain Balloon Loans, representing 3.6% of the Initial Pool Balance, provide
for payment of interest only for initial periods of 12 months after the
origination date of such Mortgage Loans. The remaining Mortgage Loans have
remaining amortization terms that are generally the same as their respective
remaining terms to maturity. See Appendix II hereto for additional information
regarding the amortization characteristics of the Mortgage Loans.
Due Dates
Each Mortgage Loan has a Due Date (that is, the date upon which the
related Scheduled Payments are due) that occurs on the first day of each month.
Prepayment Provisions
All of the Mortgage Loans either (i) prohibit voluntary prepayment for
a specified period (each, a "Lock-Out Period") and/or (ii) require the payment
of a premium or fee (a "Prepayment Premium") upon the voluntary prepayment of
such Mortgage Loans during a specified period described on Appendix I hereto.
The weighted average Lock-Out Period remaining from the Cut-Off Date for the
Mortgage Loans is approximately 44.9 months.
S-84
<PAGE>
OVERVIEW OF PREPAYMENT RESTRICTIONS
<TABLE>
<CAPTION>
% OF INITIAL POOL
PREPAYMENT RESTRICTION BALANCE
- - ------------------------------------------ -----------------
<S> <C>
Lock-Out Period with defeasance 43.6
Lock-Out Period with yield maintenance 36.9
Lock-Out Period with prepayment premium 5.1
Yield maintenance only 4.3
Yield maintenance with prepayment premium 3.4
Lock-Out Period only 1.1
Lock-Out Period with yield maintenance and 1.0
prepayment premium
Other(1) 4.6
-----
Total 100.0
</TABLE>
- - -----------------------------------------------------------------------
(1) Includes Mortgage Loans with other types and combinations of
prepayment restrictions such as open periods greater than or equal to
twenty-four months prior to maturity.
In the case of most of the Mortgage Loans, if an award or loss
resulting from an event of condemnation or casualty is less than a specified
percentage of the original principal balance of the Mortgage Loan and if in the
reasonable judgment of the mortgagee (i) the Mortgaged Property can be restored
within six months prior to the maturity of the related Note to a property no
less valuable or useful than it was prior to the condemnation or casualty, (ii)
after a restoration the Mortgaged Property would adequately secure the
outstanding balance of the Note and (iii) no event of default has occurred or
is continuing, the proceeds or award may be applied by the borrower to the
costs of repairing or replacing the Mortgaged Property. In all other
circumstances, the Mortgage Loans provide generally that in the event of a
condemnation or casualty, the mortgagee may apply the condemnation award or
insurance proceeds to the repayment of debt, without payment of a Prepayment
Premium.
Certain Mortgage Loans provide that if casualty or condemnation
proceeds are above a specified amount, the borrower will be permitted to
supplement such proceeds with an amount sufficient to prepay the entire
principal balance of the Mortgage Loan. In such event, no Prepayment Premium
would be required to be paid.
Neither the Depositor nor any of the Sellers makes any representation
as to the enforceability of the provision of any Mortgage Loan requiring the
payment of a Prepayment Premium, or of the collectability of any Prepayment
Premium. See "Risk Factors and Other Special Considerations--The
Certificates--Certain Yield Considerations" herein and "Certain Legal Aspects
of Mortgage Loans--Default Interest and Limitations on Prepayments" in the
Prospectus.
Subordinate Financing
Generally the Mortgage Loans prohibit the borrower from incurring
secured subordinate indebtedness or require the consent of the holder of the
Mortgage prior to doing so. In all cases where secured subordinate debt is
permitted, such subordinate loan is not part of the Mortgage Pool. With respect
to eleven (11) Mortgage Loans representing 1.8% of the Initial Pool Balance,
the related Mortgaged Property secures subordinate debt to the originator or a
third party, but in substantially all of such cases, the holder of such
subordinate debt has agreed in writing not to pursue a foreclosure action with
respect to such subordinate loan while the related Mortgage Loan remains
outstanding. With respect to forty-seven (47) of the Mortgage Loans,
representing 9.5% of the Initial Pool Balance, the related borrower may incur
secured subordinate debt but only if the holder of the Mortgage Loan grants its
consent, which consent may be conditioned on the satisfaction of certain
requirements. See Appendix II herein and "Certain Legal Aspects of the Mortgage
Loans and the Leases--Subordinate Financing" in the Prospectus.
Defeasance
Mortgage Loans representing 45.1% of the Initial Pool Balance permit
the applicable borrower at any time after a specified period (the "Defeasance
Lock-Out Period"), which is generally not earlier than the greater of
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approximately three years from the date of origination and two years from the
Closing Date, provided no event of default exists, to obtain a release of a
Mortgaged Property from the lien of the related Mortgage (a "Defeasance
Option"), provided that, among other conditions, the borrower (a) pays on any
Due Date (the "Release Date") (i) all interest accrued and unpaid on the
principal balance of the Note to and including the Release Date, (ii) all other
sums, excluding scheduled interest or principal payments, due under the
Mortgage Loan and all other loan documents executed in connection therewith,
(iii) an amount (the "Collateral Substitution Deposit") that will be sufficient
to purchase direct non-callable obligations of the United States of America
providing payments (1) on or prior to, but as close as possible to, all
successive scheduled payment dates from the Release Date to the related
maturity date, assuming, in the case of an ARD Loan, that such loan prepays on
the related Anticipated Repayment Date, (2) in amounts equal to the scheduled
payments due on such dates under the Mortgage Loan or the defeased amount
thereof in the case of a partial defeasance and (3) any costs and expenses
incurred in connection with the purchase of such U.S. government obligations
and (b) delivers a security agreement granting the Trust Fund a first priority
lien on the Collateral Substitution Deposit and the U.S. government obligations
purchased with the Collateral Substitution Deposit and generally, an opinion of
counsel to such effect. The Pool Loans generally require that (i) in the case
of a partial defeasance, prior to the release of a related Mortgaged Property,
a specified percentage (generally 125%) of the Allocated Loan Amount for such
Mortgaged Property be defeased and (ii) generally, that the DSCR with respect
to the remaining Mortgaged Properties after the defeasance be no less than the
greater of (x) the DSCR at origination (y) the DSCR immediately prior to such
defeasance or (z) the DSCR as set forth in the related note. Any amount in
excess of the amount necessary to purchase such U.S. government obligations
will be returned to the borrower. Simultaneously with such actions, the related
Mortgaged Property will be released from the lien of the Mortgage Loan and the
pledged U.S. government obligations (together with any Mortgaged Property not
released, in the case of a partial defeasance) will be substituted as the
collateral securing the Mortgage Loan.
In general, a successor borrower established or designated pursuant to
the related loan documents will assume all of the defeased obligations of a
borrower exercising a Defeasance Option under a Mortgage Loan and the borrower
will be relieved of all of the defeased obligations thereunder. If a Mortgage
Loan is partially defeased, the related Note will be split and only the
defeased portion of the borrower's obligations will be transferred to the
successor borrower (except with respect to the Morgan Stanley Loans, whereby
such a split will be at the option of the lender).
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors and Other Special
Considerations--The Certificates--Certain Yield Considerations" herein.
Property Releases
One hundred fifteen (115) Mortgage Loans as described herein,
representing 23.8% of the Initial Pool Balance are secured by more than one
Mortgaged Property either by cross-collaterization or by multiproperty single
notes. Certain of such Mortgage Loans, representing 8.4% of the Initial Pool
Balance, permit the borrower at any time after a specified period from the date
of origination, to obtain a partial release of a Mortgaged Property from the
lien of the related Mortgage (a "Partial Release"), provided that (i) no event
of default exists and (ii) among other conditions, (a) the borrower pays a
partial release payment (the "Release Payment") in an amount generally equal to
at least 125% of the Allocated Loan Amount (as reduced by amortization of the
related Mortgage Loan as of the date of the Release Payment), and (b)
satisfaction of certain tests regarding DSCR and/or LTV. See Appendix II for
additional information.
Escrows
83.0% of the Mortgage Loans provide for monthly escrows to cover
property taxes. 75.4% of the Mortgage Loans, based on Initial Pool Balance,
provide for monthly escrows to cover insurance premiums on the Mortgaged
Properties and in certain cases from three months to one year of insurance
premiums are required to be escrowed. 67.0% of the Mortgage Loans, based on
Initial Pool Balance, require escrows to cover ongoing replacements and capital
repairs.
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Non-recourse Obligations
Except for certain of the Conti Small Loans, each Mortgage Loan is
generally non-recourse and, upon any such borrower's default in the payment of
any amount due under the related Mortgage Loan, the holder thereof may look
only to the related Mortgaged Property for satisfaction of the borrower's
obligations. However, generally, the Mortgage Loans may become recourse (full
or limited) upon the occurrence of certain events of default under the Mortgage
Loans, including, in most cases, the transfer or voluntary encumbrance of the
Mortgaged Property without the consent of the mortgagee. In those cases where
the loan documents permit recourse to the borrower or a guarantor, the
Depositor has not necessarily evaluated the financial condition of any such
person, and prospective investors should thus consider all of the Mortgage
Loans to be non-recourse. None of the Mortgage Loans is insured or guaranteed
by the United States, any government entity or instrumentality, any private
mortgage insurer or by the Depositor, any of the Sellers, the Master Servicer,
the Special Servicer, the Trustee, any of their respective affiliates or any
other person.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions
The Mortgage Loans all contain "due-on-sale" and "due-on-encumbrance"
clauses that, in each case, permit the holder of the Mortgage Loan to
accelerate the maturity of the Mortgage Loan if the borrower sells or otherwise
transfers or encumbers the related Mortgaged Property without the consent of
the mortgagee. The Special Servicer will determine, in a manner consistent with
the Servicing Standard, whether to exercise any right the mortgagee may have
under any such clause to accelerate payment of the related Mortgage Loan upon,
or to withhold its consent to, any transfer or further encumbrance of the
related Mortgaged Property provided that, if the Stated Principal Balance of
such Mortgage Loan exceeds 5% of the total aggregate Stated Principal Balance
of the Mortgage Loans, such action shall not be taken unless the Special
Servicer has received written confirmation from each Rating Agency that such
assumption or substitution, in and of itself, would not cause a downgrade,
withdrawal or qualification of the then current ratings assigned to the
Certificates. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee, which
is in most cases equal to one percent of the then unpaid principal balance of
the applicable Note, in addition to the payment of all costs and expenses
incurred in connection with such assumption. Some of the Mortgage Loans permit
either: (i) a one-time transfer of the related Mortgaged Property if certain
specified conditions are satisfied or if the transfer is to a borrower
reasonably acceptable to the lender; or (ii) transfers to parties related to
the borrower. See "Description of the Pooling Agreements--Due-on-Sale and
Due-on-Encumbrance Provisions" and "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance Provisions" in the Prospectus.
Certain of the Mortgage Loans provide that such consent may not be unreasonably
withheld provided that one or more of the following conditions are satisfied
depending on the particular Mortgage Loan (i) no event of default has occurred,
(ii) the proposed transferee is creditworthy and has sufficient experience in
the ownership and management of properties similar to the Mortgaged Property,
(iii) with respect to any Mortgage Loans whose Stated Principal Balance exceeds
5% of the total aggregate Stated Principal Balance of the Mortgage Loans, the
Rating Agencies have confirmed in writing that such transfer will not result in
a qualification, downgrade or withdrawal of the then current ratings of the
Certificates or with respect to any Mortgage Loan, the Rating Agencies have
confirmed that further encumbrances will not result in a qualification,
downgrade or withdrawal of the then current ratings of the Certificates, (iv)
the transferee has executed and delivered an assumption agreement evidencing
its agreement to abide by the terms of the Mortgage Loan together with legal
opinions and title insurance endorsements and (v) the assumption fee has been
received (which assumption fee will be paid in the case of Mortgage Loans that
are not Specially Serviced, 50% to the Master Servicer and 50% to the Special
Servicer and in the case of Specially Serviced Mortgage Loans, 100% to the
Special Servicer, as provided in the Pooling and Servicing Agreement, and will
not be paid to the Certificateholders). See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance Provisions" in the Prospectus. The
Depositor makes no representation as to the enforceability of any due-on-sale
or due-on-encumbrance provision in any Mortgage Loan.
Low Income Housing Tax Credits
One of the Mortgage Loans, representing 0.3% of the Initial Pool
Balance, is secured by a Multifamily Property eligible to receive low-income
housing tax credits ("Tax Credits") pursuant to Section 42 of the Code (such
Multifamily Properties, the "Section 42 Properties"). Section 42 of the Code
provides a Tax Credit for owners of
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residential rental property meeting the definition of low-income housing who
have received a tax credit allocation from the state or local allocating
agency.
In the event a Section 42 Property does not maintain compliance with
the Tax Credit restrictions on tenant income or rental rates, the owners of the
Section 42 Property project may lose the Tax Credits related to the period of
the noncompliance and face the partial recapture of previously taken Tax
Credits.
HUD Section 8 Loans.
Five of the Mortgage Loans, representing 1.1% of the Initial Pool
Balance, are Multifamily Loans secured by Mortgaged Properties that are
eligible for low income rent subsidies under the United States Department of
Housing and Urban Development ("HUD") "Section 8" program ("Section 8"). With
respect to certain of these Mortgage Loans, only a portion of the apartment
units are designated for participation in the Section 8 program. Section 8 rent
subsidies provide for the direct or indirect payment of rental subsidies by HUD
to owners of certain types of low income multifamily housing properties on
behalf of eligible tenants. Tenant eligibility is determined based upon family
income and size, as well as the median income for the area. The subsidy paid by
HUD is based on the difference between the rent charged to the tenant (which
rent is established by HUD) and the tenant's ability to pay. The payment of
subsidies to a particular project owner is made pursuant to a Housing
Assistance Payment contract (a "HAP Contract") between HUD and the owner of the
project or a local public housing authority. Upon expiration of a HAP Contract,
the rental subsidies terminate.
Cross-Collateralization and Cross-Default of Certain Mortgage Loans and
Multiple Property Mortgage Loans
One hundred fifteen (115) of the Mortgage Loans as described herein,
representing 23.8% of the Initial Pool Balance, are secured by more than one
Mortgaged Property either by cross-collaterization or by multiproperty single
notes. However, because certain states require the payment of a mortgage
recording or documentary stamp tax based upon the principal amount of debt
secured by a mortgage, the Mortgages recorded with respect to certain Mortgaged
Properties do not secure the full amount of the related Mortgage Loan, but
rather secure only 150% of the Allocated Loan Amount (or, with respect to
certain of such Mortgage Loans, less than 150% of the Allocated Loan Amount or
less than 150% of the appraised value of the Mortgaged Property) of each
Mortgaged Property located in such states. See "Risk Factors and Other Special
Considerations--The Mortgage Loans--Cross-Collateralization; Related Parties"
herein and Appendix II.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Environmental Assessments
Each of the Sellers has represented to the Depositor that each of the
related Mortgaged Properties (except for those Mortgaged Properties securing
the Conti Small Loans) was subject to a "Phase I" environmental site assessment
or similar study (or an update of a previously conducted assessment or an
update of an assessment based upon information in an established database),
which was performed on behalf of the related Seller, or as to which the related
report was delivered to the related Seller in connection with its origination
or acquisition of the related Mortgage Loan. In the case of the Conti Small
Loans, a more limited environmental review (limited to, in many cases, a
database search) was performed. Such environmental assessments, updates or
reviews were conducted within the 18-month period prior to the Cut-Off Date.
The Sellers have informed the Depositor that no such environmental assessment
revealed any material adverse environmental condition or circumstance with
respect to any Mortgaged Property, except for: (i) those cases in which an
operations and maintenance plan or periodic monitoring of such Mortgaged
Property or nearby properties was recommended or an escrow reserve to cover the
estimated cost of remediation was established; (ii) those cases involving a
leaking underground storage tank or groundwater contamination at a nearby
property, which condition has not yet affected such Mortgaged Property and as
to which a responsible party has been identified under applicable law; (iii)
those cases where such conditions were either (x) remediated or abated prior to
the Closing Date or as to which the property is the subject of an
administrative consent order with a party that has established a remediation
fund pursuant to such order or as to which the responsible party has provided
an indemnity or guaranty, or (y) the borrower or other responsible party has
otherwise agreed to bear the
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costs of such abatement or remediation; and (iv) those cases in which
groundwater or soil contamination was identified or suspected, and either
environmental insurance was obtained or a letter of credit was provided to
cover estimated costs of continued monitoring or remediation.
The information contained herein is based on the environmental
assessments or similar studies and has not been independently verified by the
Depositor, the Sellers, the Underwriters, or any of their respective
affiliates.
Property Condition Assessments
Generally, except with respect to Mortgaged Properties where there was
new construction, the Sellers have informed the Depositor that inspections of
the Mortgaged Properties (or updates of previously conducted inspections) were
conducted by independent licensed engineers or other representatives or
designees of the related Seller within 15 months of the Cut - Off Date. Such
inspections were commissioned to inspect the exterior walls, roofing, interior
construction, mechanical and electrical systems (in most cases) and general
condition of the site, buildings and other improvements located at a Mortgaged
Property. Healthcare Properties facilities are subject to state and federal
inspections. A part of the inspection process involves determining whether or
not the physical environment and the physical plant are suitable for patients
and/or residents. This involves looking at both structural, aesthetic and life
safety code issues. Because of these inspections, it has been the custom and
practice of the originators of the RMF Healthcare Loans not to require further
engineering reports on Healthcare Properties. With respect to certain of the
Mortgage Loans, the resulting reports indicated a variety of deferred
maintenance items and recommended capital expenditures. The estimated cost of
the necessary repairs or replacements at a Mortgaged Property was included in
the related property condition assessment. In some (but not all) instances,
cash reserves were established to fund such deferred maintenance and/or
replacement items.
Appraisals
The Sellers have informed the Depositor that an appraisal for all of
the Mortgaged Properties was performed (or an existing appraisal or market
analysis updated) on behalf of the related Seller within 12 months of
origination of the related Mortgage Loan. See Appendix II hereto. Such
appraisal was generally conducted by an independent appraiser that was state
certified and/or designated as a Member of the Appraisal Institute ("MAI"), in
order to establish that the appraised value of the related Mortgaged Property
or Properties exceeded the original principal balance of the Mortgage Loan. In
general, such appraisals represent the analysis and opinions of the respective
appraisers at or before the time made, and are not guarantees of, and may not
be indicative of, present or future value. 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 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. Furthermore, not all of the
above-described appraisals of the Mortgaged Properties conformed to the
appraisal guidelines set forth in Title XI of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). See "Risk Factors and
Other Special Considerations--The Mortgage Loans--Limitations of Appraisals and
Market Studies" herein.
Hazard, Liability and Other Insurance
The Mortgage Loans require that the Mortgaged Property be insured by a
hazard insurance policy (or, in the case of a limited number of Mortgage Loans,
self-insurance covering hazards) in an amount (subject to a customary
deductible) at least equal to the lesser of the outstanding principal balance
of the related Mortgage Loan, 100% of the full insurable replacement cost of
the improvements located on the related Mortgaged Property or, with respect to
certain Mortgage Loans, the full insurable actual cash value of the Mortgaged
Property. In addition, with respect to any Mortgaged Property where any portion
of the improvements of such Mortgaged Property securing any Mortgage Loan were,
at the time of the origination of such Mortgage Loan, in an area identified in
the "Federal Register" by the Federal 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 in effect with a generally acceptable insurance
carrier, in an amount representing coverage not less
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than the least of (1) the outstanding principal balance of such Mortgage Loan,
(2) the full insurable actual cash value of such Mortgaged Property, (3) the
maximum amount of insurance required by the terms of the related Mortgage and
available for the related Mortgaged Property under the National Flood Insurance
Act of 1968, as amended and (4) 100% of the replacement cost of the
improvements located in the special flood hazard area on the related Mortgaged
Property except in certain cases where self insurance was permitted. 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.
Each Mortgage generally also requires the related borrower 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 customarily required by institutional lenders.
Each Mortgage generally further requires the related borrower to maintain
business interruption or rent loss insurance in an amount not less than 100% of
the projected rental income from the related Mortgaged Property for not less
than six months. In general, the Mortgaged Properties are not insured for
earthquake risk, floods and other water-related causes, hurricanes, landslides
and mudflow, vermin, nuclear reaction or war.
ContiTrade Small Loan Program
Seventy-five Mortgage Loans (as identified in Appendix II)
representing 4.7% of the Initial Pool Balance were originated for the
ContiTrade Small Loan Program (the "Conti Small Loans"). Mortgage Loans made
under the ContiTrade Small Loan Program are often with full recourse to the
borrower or guarantor, and borrowers under the program are not required to be
single purpose entities or bankruptcy remote and may be revocable trusts. In
addition, some of the Mortgaged Properties are borrower-occupied. Environmental
reviews conducted with respect to Conti Small Loans are generally more limited
than for other Mortgage Loans and engineering and site inspections generally
have not been conducted unless warranted through review of the related
appraisal.
ADDITIONAL MORTGAGE LOAN INFORMATION
General
Each of the tables set forth in Appendix I sets forth certain
characteristics of the Mortgage Pool presented, where applicable, as of the
Cut-Off Date. For a detailed presentation of certain of the characteristics of
the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of the largest Mortgage Loans in
the Mortgage Pool see Appendix III hereto. Certain additional information
regarding the Mortgage Loans is contained herein under "Risk Factors and Other
Special Considerations-The Mortgage Loans", elsewhere in this "Description of
the Mortgage Pool" section and under "Certain Legal Aspects of Mortgage Loans
and the Leases" in the Prospectus. The sum of the amounts in any column of any
of the tables of in Appendix I, Appendix II, Appendix III or any of the other
tables in this Prospectus Supplement, may not equal the indicated total under
such column due to rounding.
The statistics in such schedule and tables were derived, in many
cases, from information and operating statements furnished by or on behalf of
the respective borrowers. Such information and operating statements were
generally unaudited and have not been independently verified by the Depositor
or the Underwriters or any of their respective affiliates or any other person.
Net income for a Mortgaged Property as determined in accordance with
generally accepted accounting principles ("GAAP") would not be the same as the
stated Underwritten Cash Flow for such Mortgaged Property as set forth in the
following schedule or tables. In addition, Underwritten Cash Flow 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 or a
substitute for cash flows from operating activities determined in accordance
with GAAP as a measure of liquidity. No representation is made as to the future
net cash flow of the Mortgaged Properties, nor is the Underwritten Cash Flow
set forth herein with respect to any Mortgaged Property intended to represent
such future net cash flow.
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In the schedule set forth in Appendix II, with respect to Mortgage
Loans evidenced by one Note (or group of cross-collateralized Mortgage Loans),
but secured by multiple Mortgaged Properties, for certain purposes, including
Underwritten Cash Flow, separate amounts for each such related Mortgaged
Property are shown where available. However, certain information, such as
Cut-Off Date Balance Loan/Unit or SF, DSCR and Loan-to-Value Ratio and Balloon
LTV are presented on an aggregate basis.
Definitions
For purposes of the Prospectus Supplement, including the tables in
Appendix I and for the information set forth in Appendix II and Appendix III,
the indicated terms shall have the following meanings, modified accordingly, by
reference to footnotes to such Appendices.
1. "Underwritten Cash Flow" or "Underwritable Cash Flow," with respect
to any Mortgaged Property, means an estimate of cash flow available for debt
service in a typical year of stable, normal operations. In general, it is the
estimated revenue derived from the use and operation of such Mortgaged Property
less the sum of (a) estimated operating expenses (such as utilities,
administrative expenses, repairs and maintenance, management and franchise fees
and advertising), (b) fixed expenses (such as insurance, real estate taxes and,
if applicable, ground lease payments) and (c) capital expenditures and reserves
for capital expenditures, including tenant improvement costs and leasing
commissions. Underwritten Cash Flow generally does not reflect interest expense
and non-cash items such as depreciation and amortization.
In determining Underwritten Cash Flow for a Mortgaged Property, the
Sellers generally relied on rent rolls and/or other generally unaudited
financial information provided by the respective borrowers; in some cases the
appraisal and/or local market information was the primary basis for the
determination. From that information, the Sellers calculated stabilized
estimates of cash flow that took into consideration historical financial
statements when available, material changes in the operating position of a
Mortgaged Property of which the applicable Seller was aware (e.g., newly signed
leases, expirations of "free rent" periods and market rent and market vacancy
data), and estimated capital expenditures, leasing commission and tenant
improvement reserves. In certain cases, the applicable Seller's estimate of
Underwritten Cash Flow reflected differences from the information contained in
the operating statements obtained from the respective borrowers (resulting in
either an increase or decrease in the estimate of Underwritten Cash Flow
derived therefrom) based upon the Seller's own analysis of such operating
statements and the assumptions applied by the respective borrowers in preparing
such statements and information. In certain instances, for example, property
management fees and other expenses may have been included in the calculation of
Underwritten Cash Flow even though such expense may not have been reflected in
actual historic operating statements or excluded even though such expense may
have been reflected in actual historic operating statements. In some cases, the
information was annualized, (excluding certain items deemed not appropriate to
be annualized) before using it as a basis for the determination of Underwritten
Cash Flow. No assurance can be given with respect to the accuracy of the
information provided by any borrowers, or the adequacy of the procedures used
by any Seller in determining the presented operating information.
2. "Annual Debt Service" means, for any Mortgage Loan, 12 times the
Monthly Payment in effect as of the Cut-Off Date or, for any Mortgage Loans
that pay interest only for a period of time, 12 times the Monthly Payment in
effect once the amortization commences.
3. "Debt Service Coverage Ratio," "DSCR," "Underwritten Debt Service
Coverage Ratio" or "Underwritten DSCR" means, with respect to any Mortgage
Loan, or with respect to a Mortgage Loan evidenced by one Note, but secured by
multiple Mortgaged Properties, (a) the Underwritten Cash Flow for the Mortgaged
Property or Properties divided by (b) the Annual Debt Service for such Mortgage
Loan. With respect to Cross-Collateralized Loans, the Underwritten DSCR set
forth in Appendix I, Appendix II and Appendix III is based upon the combined
Underwritten Cash Flow and Annual Debt Service for the Cross-Collateralized
Loans on an aggregate basis.
In general, debt service coverage ratios are used by income property
lenders to measure the ratio of (a) cash currently generated by a property that
is available for debt service to (b) required debt service payments. However,
debt service coverage ratios only measure the current, or recent, ability of a
property to service mortgage debt. If a
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property does not possess a stable operating expectancy (for instance, if it is
subject to material leases that are scheduled to expire during the loan term
and that provide for above-market rents and/or that may be difficult to
replace), a debt service coverage ratio may not be a reliable indicator of a
property's ability to service the mortgage debt over the entire remaining loan
term. The Underwritten DSCRs are presented herein for illustrative purposes
only and, as discussed above, are limited in their usefulness in assessing the
current, or predicting the future, ability of a Mortgaged Property to generate
sufficient cash flow to repay the related Mortgage Loan. Accordingly, no
assurance can be given, and no representation is made, that the Underwritten
DSCR accurately reflects that ability.
4. "Property Value" means, for any Mortgaged Property, the appraiser's
adjusted value as stated in the most recent third party appraisal available to
the Depositor. No representation is made that any such value would approximate
either the value that would be determined in a current appraisal of the related
Mortgaged Property or the amount that would be realized upon a sale.
5. "Cut-Off Date Loan-to-Value Ratio," "Loan-to-Value Ratio" or "LTV"
means, with respect to any Mortgage Loan, or with respect to a Mortgage Loan
evidenced by one Note, but secured by multiple Mortgaged Properties, (a) the
Cut-Off Date Principal Balance of such Mortgage Loan divided (b) by the
Appraised Value of the Mortgaged Property or Mortgaged Properties.
6. "NSF" means, in the case of a Mortgaged Property operated as a
retail center, office or medical office complex, industrial/warehouse facility,
self-storage facility, combination retail office facility, the square footage
of the net rentable or leaseable area. "Units" means: (i) in the case of a
Mortgaged Property operated as multifamily housing, the number of apartments,
regardless of the size of or number of rooms in such apartment; (ii) in the
case of a Mortgaged Property operated as a self-storage facility, the number of
self-storage units; (iii) in the case of a Mortgaged Property operated as a
skilled nursing or congregate care facility, the number of beds; (iv) in case
of a Mortgaged Property constituting a mobile home park, the number of pads;
and (v) in the case of a Mortgaged Property operated as a hospitality property,
the number of guest rooms.
7. "Maturity Balance", "ARD Balance" or "Balloon Balance" means, with
respect to any Balloon Loan or ARD Loan, the principal amount that will be due
at maturity or on the Anticipated Repayment Date for such Balloon Loan based on
the Maturity Assumptions and a 0% CPR.
8. "Maturity Date LTV," "ARD LTV" or "Balloon LTV" means, with respect
to any Balloon Loan or ARD Loan, the Maturity Balance for such Balloon Loan or
ARD Balance divided by the Appraised Value of the related Mortgaged property.
9. "Mortgage Rate" means, with respect to any Mortgage Loan, the
Mortgage Rate in effect as of the Cut-Off Date.
10. "Administrative Cost Rate" means the administrative costs on each
Mortgage Loan in any month which will equal the sum of the related Master
Servicing Fee, the Primary Servicing Fee, any RMF Retained Fee, any Healthcare
Adviser Fee and the Trustee Fee for such month (collectively, expressed as a
per annum rate).
11. "Years Built/Renovated" are references to the later of the year in
which a Mortgaged Property was originally constructed or the most recent year
in which such Mortgaged Property was substantially renovated.
12. "Weighted Averages" are references to averages weighted on the
basis of the Cut-Off Date Balances of the related Mortgage Loans.
THE SELLERS
The Depositor will purchase the Mortgage Loans to be included in the
Mortgage Pool on or before the Closing Date from the Sellers pursuant to
certain Mortgage Loan Purchase Agreements (collectively, the "Mortgage Loan
Purchase Agreements"), each to be dated as of the Cut-Off Date, and each
between the related Seller and the Depositor.
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ContiTrade Services L.L.C.
Two hundred fifty-nine (259) of the Mortgage Loans, representing 54.7%
of the Initial Pool Balance, were sold to the Depositor by ContiTrade.
ContiTrade was organized under the laws of the State of Delaware on June 1,
1995 and is an indirect wholly-owned subsidiary of ContiFinancial Corporation,
a Delaware corporation. ContiFinancial Corporation is a majority-owned
subsidiary of Continental Grain Company. ContiTrade is also an affiliate of
ContiFinancial Services Corporation, a member of the selling group. While the
ContiTrade Mortgage Loans are originated by correspondents participating in
ContiTrade's commercial and multifamily mortgage conduit program, each
borrower's application is reviewed and approved by a ContiTrade underwriter.
Gate Capital, a third party due diligence firm, performs certain due diligence
procedures on behalf of ContiTrade. ContiFinancial Corporation engages in the
consumer and commercial finance business by originating and servicing home
equity mortgage loans, providing financing and asset securitization expertise
to originators of a broad range of loans, leases and receivables and acquiring
and selling commercial and home equity mortgage loans. ContiTrade was
organized, among other things, for the purposes of acquiring and selling
mortgage assets. Through its commercial and multifamily mortgage conduit
program, ContiMAP(R), ContiTrade purchases commercial mortgage loans from its
select correspondent network, then pools loans for securitization. Each of the
Mortgage Loans sold to the Depositor by ContiTrade was originated by one of the
participants in ContiTrade's ContiMAP(R) conduit program or acquired in the
secondary market in accordance with the ContiMAP(R) guidelines. The principal
executive offices of ContiTrade are located at 277 Park Avenue, New York, New
York 10172. Its telephone number is (212) 207-2800.
Morgan Stanley Mortgage Capital Inc.
Eighty-three (83) of the Mortgage Loans, representing 29.4% of the
Initial Pool Balance, were sold to the Depositor by MSMC. MSMC is a subsidiary
of Morgan Stanley & Co., Inc. formed as a New York corporation to originate and
acquire loans secured by mortgages on commercial and multifamily real estate.
Each of the Mortgage Loans sold by MSMC to the Depositor was originated by one
of the participants in MSMC's commercial and multifamily mortgage loan conduit
program, was originated directly by MSMC, or was purchased in the secondary
market. All loans were underwritten by MSMC underwriters. The principal office
of MSMC are located at 1585 Broadway, New York, New York 10036. Its telephone
number is (212) 761-4700.
Red Mountain Funding, L.L.C.
Thirty-eight (38) of the Mortgage Loans, representing 15.9% of the
Initial Pool Balance, were sold to the Depositor by RMF. RMF is a limited
liability company organized under the laws of the State of Delaware in 1997. It
is owned by ContiTrade, Health Care Capital Finance, L.L.C. ("HCCF"), based in
Atlanta, Georgia, and Survey, L.L.C. ("Survey LLC"). RMF was created to
originate and/or purchase, aggregate and warehouse commercial mortgage loans
for securitization. RMF works in conjunction with PRN Mortgage Capital, L.L.C.
("PRN"), which operates as RMF's exclusive underwriting agent for healthcare
loans. SouthTrust Capital Funding Corporation, a Delaware corporation and a
wholly owned subsidiary of SouthTrust bank, N.A. ("SouthTrust Capital
Funding"), HCCF and ContiTrade participate in the credit review process of RMF
and SouthTrust Capital Funding provides loan closing and assistance and loan
servicing to RMF. RMF has also purchased multi-family and commercial mortgage
loans from SouthTrust Capital Funding. SouthTrust Capital Funding is an
affiliate of SouthTrust Securities, Inc., a member of the selling group. The
principal offices of RMF are located at 420 North 20th Street, 9th floor,
Birmingham, Alabama 35203. Its telephone number is (205) 254-5771.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Closing Date, each Seller will assign its Mortgage
Loans, without recourse, to the Depositor, and the Depositor will assign all
the Mortgage Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with such assignments, each Seller is
required in accordance with the related Mortgage Loan Purchase Agreement to
deliver the following documents, among others, with respect to each Mortgage
Loan so assigned by it (such documents, collectively as to any Mortgage Loan, a
"Mortgage File") to the Trustee: (a) the original Mortgage Note, endorsed
(without recourse) in blank or to the order of Trustee; (b)
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the original or a copy of the related Mortgage(s), together with originals or
copies of any intervening assignments of such document(s), in each case with
evidence of recording thereon (unless such document(s) have not been returned
by the applicable recorder's office); (c) the original or a copy of any related
assignment(s) of rents and leases (if any such item is a document separate from
the Mortgage), together with originals or copies of any intervening assignments
of such document(s), in each case with evidence of recording thereon (unless
such document(s) have not been returned by the applicable recorder's office);
(d) an assignment of each related Mortgage in blank or in favor of the Trustee,
in recordable form; (e) an assignment of any related assignment(s) of rents and
leases (if any such item is a document separate from the Mortgage) in blank or
in favor of the Trustee, in recordable form; (f) an original or copy of the
related lender's title insurance policy (or, if a title insurance policy has
not yet been issued, a commitment for title insurance "marked-up" at the
closing of such Mortgage Loan); and (g) when relevant, the related ground lease
or a copy thereof. The Trustee will be required to review the documents
delivered by each Seller with respect to its Mortgage Loans within 90 days
following the Closing Date, and the Trustee will hold the related documents in
trust.
Within 45 days following the Closing Date, pursuant to the Pooling and
Servicing Agreement, the assignments with respect to each Mortgage Loan
described in clauses (d) and (e) of the preceding paragraph are to be completed
in the name of the Trustee (if delivered in blank) and submitted for recording
in the real property records of the appropriate jurisdictions.
REPRESENTATIONS AND WARRANTIES
In each Mortgage Loan Purchase Agreement, the related Seller has
represented and warranted with respect to each of its Mortgage Loans, subject
to certain specified exceptions set forth in the related Mortgage Loan Purchase
Agreement, as of the Closing Date or as of such other date specifically
provided in the representation and warranty, among other things, generally to
the effect that: (1) the information set forth in the schedule of the mortgage
loans attached to the related Mortgage Loan Purchase Agreement is true and
correct in all material respects; (2) each Mortgage Loan is a whole loan and
not a participation interest in a Mortgage Loan; (3) prior to transfer of the
Mortgage Loans to the Depositor, Seller had good title to, and was the sole
owner of, each Mortgage Loan; (4) such Seller owns the Mortgage Loan free and
clear of any and all pledges, liens and/or other encumbrances; (5) the Seller
need not obtain any governmental or regulatory approval or consent that has not
been obtained, to sell the Mortgage Loans; (6) no scheduled payment of
principal and interest under the Mortgage Loan was 30 days or more past due as
of the Cut-Off Date, and the Mortgage Loan has not been 30 days or more
delinquent in the twelve-month period immediately preceding the Cut-Off Date;
(7) the related Mortgage constitutes a valid and, subject to certain creditors'
rights exceptions, enforceable first priority mortgage lien (subject to certain
permitted encumbrances) upon the related Mortgaged Property; (8) the assignment
of the related Mortgage in favor of the Trustee constitutes a legal, valid and
binding assignment; (9) the related assignment of leases establishes and
creates a valid and, subject to certain creditor's rights exceptions,
enforceable first priority lien in the related borrower's interest in all
leases of the Mortgaged Property; (10) the Mortgage has not been satisfied,
canceled, rescinded or subordinated in whole or in material part, and the
related Mortgaged Property has not been released from the lien of such
Mortgage, in whole or in material part; (11) none of the terms of any Mortgage
Note, Mortgage or Assignment of Leases has been impaired, waived, altered or
modified in any material respect, except by written instruments; (12) except as
set forth in a property inspection report prepared in connection with the
origination of the Mortgage Loan, the related Mortgaged Property is, to the
Seller's knowledge, free and clear of any damage that would materially and
adversely affect its value as security for the Mortgage Loan; (13) to the
Seller's knowledge, there is no proceeding pending for the condemnation of all
or any material portion of any Mortgaged Property; (14) to Seller's knowledge
all material improvements on the related Mortgaged Property which were
considered in determining the appraised value of the Mortgaged Property lay
wholly within the boundaries and building restriction lines of such property,
and no improvements on adjoining properties materially encroached upon such
Mortgaged Property so as to materially and adversely affect the value or
marketability of such Mortgaged Property, except for encroachments that are
insured against by the lender's title insurance policy; (15) the related
Mortgaged Property is covered by an American Land Title Association (or an
equivalent form of) lender's title insurance policy that insures that the
related Mortgage is a valid, first priority lien on such Mortgaged Property,
subject only to the exceptions stated therein; (16) the proceeds of the
Mortgage Loan have been fully disbursed and there is no obligation for future
advances with respect thereto; (17) any and all
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requirements as to completion of any on-site or off-site improvement and as to
disbursements of any funds escrowed for such purpose on or before the Closing
Date have been materially complied with or such funds have not been released;
(18) the Mortgage Note or Mortgage for each Mortgage Loan, together with
applicable state law, contains customary and enforceable provisions; (19) an
environmental site assessment was performed with respect to the Mortgaged
Property in connection with the origination of the related Mortgage Loan, a
report of each such assessment has been delivered to the Depositor, and such
Seller has no knowledge of any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in such
report and where such report disclosed the existence of a material and adverse
environmental condition (i) a party not related to the Mortgagor was identified
as the responsible party or (ii) the related Mortgagor was required to provide
additional security and/or to obtain an Operations and Maintenance Plan; (20)
each Mortgage or related agreement requires the related Mortgagor to comply
with all applicable federal, state and local laws and regulations; (21) each
Mortgage Note, Mortgage and other agreement that evidences or secures the
Mortgage Loan is, subject to certain creditors' rights exceptions and other
exceptions of general application, the legal, valid and binding obligation of
the maker thereof, enforceable in accordance with its terms, and to the
knowledge of the Seller there is no valid defense, counterclaim or right of
offset or rescission available to the related borrower with respect to such
Mortgage Note, Mortgage or other agreement; (22) the related Mortgaged Property
is, and is required pursuant to the related Mortgage, to be insured by casualty
and liability insurance policies of a type specified in the related Mortgage
Loan Purchase Agreement; (23) to such Seller's knowledge, there are no
delinquent or unpaid taxes, assessments or other outstanding charges affecting
the related Mortgaged Property that are or may become a lien of priority equal
to or higher than the lien of the related Mortgage; (24) the related borrower
is not, to the Seller's knowledge, a debtor in any state or federal bankruptcy
or insolvency proceeding; (25) the related Mortgaged Property consists of the
related borrower's fee simple estate in real estate or, if the related Mortgage
encumbers the interest of a borrower as a lessee under a ground lease of the
Mortgaged Property (a) such ground lease or a memorandum thereof has been or
will be duly recorded and permits the interest of the lessee thereunder to be
encumbered by the related Mortgage; (b) the lessee's interest in such Ground
Lease is not subject to any liens or encumbrances superior to, of equal
priority with, the related Mortgages other than Permitted Encumbrances; (c) the
borrower's interest in such ground lease is assignable to the Depositor and its
successors and assigns upon notice to, but without the consent of, the lessor
thereunder; (d) such ground lease is in full force and effect and, to the
knowledge of the Seller, no material default has occurred thereunder; (e) such
ground lease, or an estoppel letter related thereto, requires the lessor under
such ground lease to give notice of any default by the lessee to the holder of
the Mortgage, and further provides that no notice of termination given under
such ground lease is effective against such holder unless a copy has been
delivered to such holder; (f) the holder of the Mortgage is permitted a
reasonable opportunity (including, where necessary, sufficient time to gain
possession of the interest of the lessee under such ground lease) to cure any
default under such ground lease, which is curable after the receipt of notice
of any such default, before the lessor thereunder may terminate such ground
lease; and (g) such ground lease has an original term (including any extension
options set forth therein) which extends not less than ten years beyond the
scheduled maturity date of the Mortgage Loan; (26) the gross proceeds of each
Mortgage Loan to the related Mortgagor at origination did not exceed the
non-contingent principal amount of the Mortgage Loan and either (a) such
Mortgage Loan is secured by an interest in real property having a fair market
value (i) at the date the Mortgage Loan was originated at least equal to 80
percent of the original principal balance of the Mortgage Loan or (ii) at the
Closing Date at least equal to 80 percent of the principal balance of the
Mortgage Loan on such date; provided that for purposes hereof, the fair market
value of the real property interest must first be reduced by (x) the amount of
any lien on the real property interest that is senior to the Mortgage Loan and
(y) a proportionate amount of any lien that is in parity with the Mortgage Loan
(unless such other lien secures a Mortgage Loan that is cross-collateralized
with such Mortgage Loan, in which event the computation described in clauses
(a)(i) and (a)(ii) shall be made on a pro rata basis in accordance with the
fair market values of the Mortgaged Properties securing such
cross-collateralized Mortgage Loans) or (b) substantially all the proceeds of
such Mortgage Loan were used to acquire, improve or protect the real property
which served as the only security for such Mortgage Loan (other than a recourse
feature or other third party credit enhancement within the meaning of Treasury
Regulations Section 1.860G-2(a)(1)(ii)); (27) any Mortgage Loan that was
"significantly modified" prior to the Closing Date so as to result in a taxable
exchange under Section 1001 of the Code either (a) was modified as a result of
the default or reasonably foreseeable default of such Mortgage Loan or (b)
satisfied the LTV Ratio requirements; (28) no holder of a Mortgage Loan has
advanced funds or induced, solicited or knowingly received any advance of funds
from a party other than the owner or lessee of the related Mortgaged
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Property, directly or indirectly, for the payment of any amount required by
such Mortgage Loan; (29) as of the date of origination of such Mortgage Loan
and, to the knowledge of the Seller, as of the Closing Date, each Mortgaged
Property was free and clear of any mechanics' and materialmen's liens that are
prior or equal to the lien of the related Mortgage, except for liens insured
against by the related title policy; (30) each Mortgage Loan complied with all
applicable usury laws in effect at its date of origination; (31) the Mortgage
Loan is not cross-collateralized with any loan other than one or more other
Mortgage Loans; (32) except (i) for the release of a portion of the Mortgaged
Property which was contemplated at origination of the Mortgage Loan and such
portion was not material to underwriting such Mortgage Loan or (ii) as
described in the next clause, no Mortgage requires the holder thereof to
release all or any material portion of the related Mortgaged Property from the
lien thereof except, upon payment in full of the Mortgage Loan or, in certain
cases, upon (a) the satisfaction of certain legal and underwriting requirements
and (b) the payment of a release price and substitution of other permitted
collateral in connection therewith; (33) any Mortgage Loan which contains a
provision for any defeasance of mortgage collateral either (a) requires the
consent of the holder of the Mortgage Loan to any defeasance or (b) permits
defeasance (i) no earlier than two years after the Closing Date, (ii) only with
substitute collateral constituting "government securities" within the meaning
of Treas. Reg. ss. 1.860G-2(a)(8)(i) and (iii) only to facilitate the
disposition of the Mortgaged Property and not as a part of an arrangement to
collateralize a REMIC offering with obligations that are not real estate
mortgages; (34) no Mortgage Loan contains any equity participation by the
Seller or provides for negative amortization or for any contingent or
additional interest in the form of participation in the cash flow of the
related Mortgaged Property; (35) to such Seller's knowledge, there exists no
material default, breach, violation or event of acceleration (and no event
which, with the passage of time or the giving of notice, or both, would
constitute any of the foregoing) under the related Mortgage Note or Mortgage in
any such case to the extent the same materially and adversely affects the value
of the Mortgage Loan and the related Mortgaged Property; (36) the Seller (or if
the Seller is not the originator, the originator of the Mortgage Loan) has
inspected or caused to be inspected each Mortgaged Property in connection with
the origination of the related Mortgage Loan; (37) to the Seller's knowledge,
based on opinions of counsel, endorsements of title insurance or due diligence,
the improvements located on or forming part of each Mortgaged Property comply
with applicable zoning laws and ordinances, or constitute a legal
non-conforming use or structure or, if any such improvement does not so comply,
such non-compliance does not materially and adversely affect the value of the
related Mortgaged Property; (38) none of the Mortgage Loans permits the related
Mortgaged Property to be encumbered by any lien junior to or of equal priority
with the lien of the related Mortgage without the prior written consent of the
holder thereof or the satisfaction of debt service coverage or similar criteria
specified and the Seller has no knowledge that any of the Mortgaged Properties
is encumbered by any lien junior to the lien of the related Mortgage; (39) to
the knowledge of the Seller, there are no actions, suits or proceedings before
any court, administrative agency or arbitrator concerning any Mortgage Loan,
Mortgagor or related Mortgaged Property that might adversely affect title to
the Mortgage Loan or the validity or enforceability of the related Mortgage or
that might if determined adversely, materially and adversely affect the value
of the Mortgaged Property as security for the Mortgage Loan or the use for
which the premises were intended; (40) to the Seller's knowledge, based on due
diligence that it customarily performs in the origination of comparable
mortgage loans, as of the date of origination or promptly thereafter of each
Mortgage Loan, (i) the related Mortgagor was in possession of all material
licenses, permits and franchises required by applicable law for the ownership
and operation of the related Mortgage Property as it was then operated and (ii)
if a related Mortgaged Property is improved by a skilled nursing, congregate
care or assisted living facility, the most recent inspection or survey by
governmental authorities having jurisdiction in connection with such licenses,
permits and authorizations did not cite such Mortgaged Property for material
violations (which shall include only "Level IV" (or equivalent) violations in
the case of skilled nursing facilities) that had not been cured or as to which
a plan of correction had not been submitted to and accepted by such
governmental authorities. To the extent such facility participates in Medicaid
or Medicare, the Seller has not received any notice that such facility is not
in compliance in all material respects with the requirements of such program,
such that such facility's continued participation in such program be adversely
affected.
REPURCHASES AND OTHER REMEDIES
If any Mortgage Loan document required to be delivered to the Trustee
by a Seller as described under "--Assignment of the Mortgage Loans" above is
not delivered as and when required, contains information that does not conform
to the corresponding information in the Mortgage Loan schedule attached to the
related Mortgage
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Loan Purchase Agreement, is not properly executed or is
defective on its face (any such omission, nonconformity or other defect, a
"Document Defect"), or if there is a breach of any of the representations and
warranties required to be made by a Seller regarding the characteristics of its
Mortgage Loans and/or the related Mortgaged Properties as described under
"--Representations and Warranties" above, and in either case such Document
Defect or breach materially and adversely affects the interests of the holders
of the Certificates or, in the case of a breach of any of the representations
and warranties required to be made by a Seller, such breach materially and
adversely affects the value of the Mortgage Loans or the interest of the Trust
Fund in such Mortgage Loans (a "Material Document Defect" and a "Material
Breach", respectively), then the Seller will be obligated to cure such Material
Document Defect or Material Breach in all material respects within the
applicable Permitted Cure Period. If any such Material Document Defect or
Material Breach cannot be corrected or cured in all material respects within
the applicable Permitted Cure Period, the Seller will be obligated, not later
than the last day of such Permitted Cure Period, to (i) repurchase the affected
Mortgage Loan from the Depositor or its assignee at a price (the "Purchase
Price") at least equal to the unpaid principal balance of such Mortgage Loan,
together with accrued but unpaid interest thereon to but not including the Due
Date in the Collection Period of the repurchase and any related unreimbursed
Servicing Advances, or (ii) if within the three-month period commencing on the
Closing Date (or within the two-year period commencing on the Closing Date if
the related 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)), at its option, (A) replace such Mortgage Loan with a mortgage
loan having certain payment term comparable to the Mortgage Loan to be replaced
and that is acceptable to each Rating Agency (a "Qualifying Substitute Mortgage
Loan") 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 Qualifying Substitute
Mortgage Loan as of the date of substitution, after application of all payments
due on or before such date, whether or not received.
For purposes of the foregoing, the "Permitted Cure Period" applicable
to any Material Document Defect or Material Breach in respect of any Mortgage
Loan will generally be the 90-day period immediately following the earlier of
the discovery by the related Seller or receipt by the related Seller of notice
of such Material Document Defect or Material Breach, as the case may be.
However, if such Material Document Defect or Material Breach, as the case may
be, cannot be corrected or cured in all material respects within such 90-day
period, but it is reasonably likely that such Material Document Defect or
Material Breach, as the case may be, could be corrected or cured within 180
days of the earlier of discovery by the related Seller and receipt by the
related Seller of notice of such Material Document Defect or Material Breach,
as the case may be, and the related Seller is diligently attempting to effect
such correction or cure, then the applicable Permitted Cure Period will, with
the consent of the Trustee (which consent may not be unreasonably withheld), be
extended for an additional 90 days; provided, that any Material Document Defect
or Material Breach that causes the Mortgage Loan not to be a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code shall be
corrected, amended, repurchased or substituted within 90 days of the discovery
thereof.
The foregoing obligations of each Seller to cure a Material Document
Defect or a Material Breach in respect of any of its Mortgage Loans or
repurchase or replace the defective Mortgage Loan, will constitute the sole
remedies of the Trustee and the Certificateholders with respect to such
Material Document Defect or Material Breach; and none of the Depositor, any of
the other Sellers or any other person or entity will be obligated to repurchase
or replace the affected Mortgage Loan if the related Seller defaults on its
obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-Off, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-Off. Prior to the issuance of the Offered Certificates, a Mortgage Loan may
be removed from the Mortgage Pool if the Depositor deems such removal necessary
or appropriate or if it is prepaid. This may cause the range of Mortgage Rates
and maturities as well as the other characteristics of the Mortgage Loans to
vary from those described herein.
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A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Mortgage
Pool as set forth in the preceding paragraph, such removal will be noted in the
Form 8-K. Such Form 8-K will be available to purchasers and potential
purchasers of the Offered Certificates.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or
through sub-servicers, will be required to service and administer the Mortgage
Loans with the higher of the following standards of care (the "Servicing
Standard"):
(a) in the same manner in which and with the same care, skill,
prudence and diligence with which the Master Servicer or the Special Servicer,
as the case may be, services and administers similar mortgage loans for other
third-party portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage lenders
servicing their own mortgage loans and to the maximization of the net present
value of the mortgage loans; and
(b) the care, skill, prudence and diligence the Master Servicer or the
Special Servicer, as the case may be, uses for loans which it owns and which
are substantially the same as the Mortgage Loans, giving due consideration to
the maximization of the net present value of the mortgage loans.
Each of the Master Servicer and the Special Servicer is required to
adhere to the Servicing Standard without regard to any conflict of interest
that it may have, any fees or other compensation to which it is entitled and
any relationship with the borrower and without regard to the different payment
priorities among the Classes of Certificates. Each of the Master Servicer and
the Special Servicer may become the owner or pledgee of Certificates with the
same rights as each would have if it were not the Master Servicer or a Special
Servicer, as the case may be. Any such interest of the Master Servicer or the
Special Servicer in the Certificates will not be taken into account when
evaluating whether actions of the Master Servicer or the Special Servicer are
consistent with their respective obligations in accordance with the Servicing
Standard, regardless of whether such actions may have the effect of benefiting
the Class or Classes of Certificates owned by the Master Servicer or the
Special Servicer. In addition, the Master Servicer or the Special Servicer may
lend money on an unsecured basis, accept deposits from, and otherwise generally
engage in any kind of business or dealings with, any borrower as though the
Master Servicer or the Special Servicer were not a party to the transactions
contemplated hereby.
Each of the Master Servicer and the Special Servicer is permitted to
enter into a servicing agreement with a servicer (a "Sub-Servicer"), and any
such Sub-Servicer will receive a fee for the services specified in such
servicing agreement. However, the Master Servicer or the Special Servicer, as
the case may be, will remain liable for its servicing obligations under the
Pooling and Servicing Agreement. The Master Servicer or the Special Servicer,
as the case may be, will be required to pay any servicing compensation due to
any Sub-Servicer out of its own funds or through assignment of a portion of its
respective Servicing Compensation.
The Master Servicer may resign from the obligations and duties imposed
on it under the Pooling and Servicing Agreement, upon 30 days notice to the
Trustee, provided that (a) a successor servicer is available and willing to
assume the obligations of the Master Servicer on substantially the same terms
and conditions, and for not more than equivalent compensation; (b) the Master
Servicer bears all costs associated with its resignation and the transfer of
servicing; and (c) the Rating Agencies have confirmed in writing that such
servicing transfer will not result in a withdrawal, downgrade or qualification
of the then current ratings on the Certificates. Furthermore, the Master
Servicer may resign as Master Servicer if it determines that the Master
Servicer's duties 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. If the Master Servicer ceases to serve as such and shall not have
been replaced by a qualified successor, the Trustee will assume the Master
Servicer's duties and obligations under the Pooling and Servicing
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Agreement. If the Special Servicer shall cease to serve as such and a qualified
successor shall not have been engaged, the Master Servicer will assume the
Special Servicer's duties and obligations and, in the absence of the Master
Servicer to so assume such duties and responsibilities, the Trustee will assume
the duties and obligations of the Special Servicer. The relationship of each of
the Master Servicer and the Special Servicer to the Trustee is intended to be
that of an independent contractor and not that of a joint venture, partner or
agent.
The Master Servicer will have no responsibility for the performance by
the Special Servicer of its duties under the Pooling and Servicing Agreement,
and the Special Servicer shall have no responsibility for the performance by
the Master Servicer of its duties under the Pooling and Servicing Agreement.
The Master Servicer initially will be responsible for the servicing
and administration of the entire Mortgage Pool. However, the Special Servicer
will be responsible for servicing and administering of (i) any Mortgage Loan as
to which a Balloon Payment is past due, and the Master Servicer has determined
that payment is unlikely to be made on or before the second succeeding Due
Date, or any other payment is more than 60 days past due or has not been made
on or before the second Due Date following the date such payment was due; (ii)
any Mortgage Loan as to which, to the Master Servicer's knowledge, the borrower
has entered into or consented to bankruptcy, appointment of a receiver or
conservator or a similar insolvency or similar proceeding, or the borrower has
become the subject of a decree or order for such a proceeding and such
proceeding shall have remained undischarged or unstayed for a period of 60
days; (iii) any Mortgage Loan as to which the Master Servicer shall have
received notice of the foreclosure or proposed foreclosure of any other lien on
the Mortgaged Property; (iv) any Mortgage Loan as to which the Master Servicer
has knowledge of a default (other than a failure by the related borrower to pay
principal or interest) which in the judgment of the Master Servicer materially
and adversely affects the interests of the Certificateholders and which has
occurred and remains unremedied for the applicable grace period specified in
such Mortgage Loan (or, if no grace period is specified, 60 days); (v) any
Mortgage Loan as to which the borrower admits in writing its inability to pay
its debts generally as they become due, files a petition to take advantage of
any applicable insolvency or reorganization statute, makes an assignment for
the benefit of its creditors or voluntarily suspends payment of its
obligations; (vi) (A) in the case of a Healthcare Loan in which the related
Healthcare Property is a nursing facility (1) the license or certificate of
need to operate the related Mortgaged Property as a Healthcare Property, (2)
the certification of the related Healthcare Property to participate as a
nursing home provider in Medicare or Medicaid (and their successor programs),
or (3) the right to admit residents and/or receive payments under Medicare or
Medicaid (and their successor programs) has been terminated, revoked,
surrendered or suspended; (B) in the case of Healthcare Loan in which the
related Healthcare Property is an assisted living facility, the right to admit
residents or the license to operate as an assisted living facility has been
terminated, revoked, surrendered or suspended; (C) in the case of any
Healthcare Loan, the related Healthcare Property has been cited for a material
deficiency for which its license or certificate can be revoked and which is not
cured within the earlier of the time permitted by the applicable regulatory
authority or 180 days; or (D) in the case of any Healthcare Loan, more than 10%
of the licensed beds of the related Healthcare Property becomes unavailable for
use either (1) through a taking by condemnation or eminent domain, or (2)
through a casualty loss; provided, however, that the Master Servicer has
determined that as a result of (1) or (2) above the related Mortgagor's ability
to pay the debt service on such Healthcare Loan has been impaired; and (vii)
any Mortgage Loan as to which, in the judgment of the Master Servicer, a
default has occurred or in the judgment of the Master Servicer is imminent or
is likely to occur within 60 days (any of the foregoing events, a "Servicing
Transfer Event" and any Mortgage Loan as to which any of the foregoing events
has occurred, a "Specially Serviced Mortgage Loan").
In the event of any of the foregoing with respect to any Mortgage
Loan, the Master Servicer will be required to transfer its principal servicing
responsibilities with respect thereto to the Special Servicer in accordance
with certain procedures set forth in the Pooling and Servicing Agreement.
Notwithstanding such transfer, the Master Servicer will continue to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), to make certain calculations with respect to such Mortgage Loan, and
to make remittances and prepare certain reports to the Trustee with respect to
such Mortgage Loan. If title to the related Mortgaged Property is acquired by
the Trust Fund (upon acquisition, an "REO Property"), whether through
foreclosure, deed-in-lieu of foreclosure or otherwise, the Special Servicer
will be responsible for the operation and management
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thereof. Mortgage Loans serviced by the Special Servicer are referred to herein
as "Specially Serviced Mortgage Loans."
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan
(and will become a "Rehabilitated Mortgage Loan" as to which the Master
Servicer will re-assume all servicing responsibilities) when (i) three
consecutive Scheduled Payments have been made (in the case of any such Mortgage
Loan that was modified, based on the modified terms), (ii) no other Servicing
Transfer Event occurred and is continuing with respect to such Mortgage Loan
and (iii) the Trust Fund has been reimbursed for all costs incurred as a result
of the occurrence of a Servicing Transfer Event or such amounts have been
forgiven.
The Master Servicer and the Special Servicer will, in general, each be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement and will not be
entitled to reimbursement therefor except as expressly provided in the Pooling
and Servicing Agreement. See "Description of the
Certificates--Advances--Servicing Advances" herein.
THE MASTER SERVICER
AMRESCO Services, L.P., a Delaware limited partnership, will serve as
master servicer (the "Master Servicer") and in such capacity will be
responsible for servicing the Mortgage Loans (other than Specially Serviced
Mortgage Loans and REO Properties). The Master Servicer is a wholly owned
subsidiary of AMRESCO, Inc., ("AMRESCO") a diversified financial services
company which is publicly traded on NASDAQ. The Master Servicer's principal
offices are located at 235 Peachtree Street, NE, Suite 900, Atlanta, Georgia
30303.
As of June 30 1998, AMRESCO serviced approximately 16,325 commercial
and multi-family loans, totaling approximately $37.5 billion in aggregate
outstanding principal amount, including 6,691 loans representing approximately
$25.9 billion that are currently included in 64 securitized transactions. The
portfolio is significantly diversified both geographically and by product type.
As of September 30, 1997, the Mortgage Bankers Association of America
ranked AMRESCO as the second largest commercial mortgage servicing firm.
Standard & Poor's has approved AMRESCO as a master and special servicer for
investment grade commercial and multifamily mortgaged-backed securities.
AMRESCO is ranked "Strong" as a commercial loan servicer and asset manager by
Standard & Poor's, and "Above Average" as a commercial master servicer by the
same entity. Standard & Poor's ranks commercial loan servicers, commercial
master servicers and asset managers in one of five rating categories: Strong,
Above Average, Average, Below Average and Weak.
The information set forth herein concerning the Master Servicer has
been provided by the Master Servicer. Neither the Depositor nor any other
person makes any representation or warranty as to the accuracy or completeness
of such information.
Master Servicer Compensation
The Master Servicer will be entitled to receive each month a servicing
fee (the "Master Servicing Fee") equal to a specified rate per annum equal to
0.025% (the "Master Servicing Fee Rate") applicable to such month (determined
in the same manner as the applicable Mortgage Rate is determined for each
Mortgage Loan for such month) of the Scheduled Principal Balance of each
Mortgage Loan (including REO Properties) immediately before the respective Due
Date for such month as compensation for servicing the Mortgage Loans. The
"Administrative Cost Rate" will be payable monthly on a loan-by-loan basis and
will accrue at a percentage rate per annum (the "Administrative Cost Rate") set
forth on Appendix II for each Mortgage Loan and will include the Master
Servicing Fee, the Primary Servicing Fee, the Trustee Fee, the RMF Retained
Fee, and the Healthcare Adviser Fee. The "RMF Retained Fee" is a fee specified
in the Pooling and Servicing Agreement with respect to certain Mortgage Loans,
is not terminable and is not subject to set-off against other liabilities of
the Master Servicer. The Master Servicer will be entitled to retain as
additional servicing compensation all investment income earned on
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amounts on deposit in the Certificate Account and Escrow Accounts, if not paid
to the applicable borrower (in each case to the extent not payable to the
Special Servicer or any Sub-Servicer as provided in the Pooling and Servicing
Agreement), late payment charges, default interest payable at a rate above the
Mortgage Rate (net of such amounts used to pay interest on Advances) and 50% of
all assumption fees paid by a borrower with respect to a Mortgage Loan that is
not a Specially Serviced Mortgage Loan. To the extent of that portion of its
aggregate Master Servicing Fee for the related Collection Period that is, in
the case of each and every Mortgage Loan, calculated at 0.015% per annum, the
Master Servicer is required, with respect to each Distribution Date, to cover
the aggregate of any Prepayment Interest Shortfalls incurred with respect to
the Mortgage Pool during such Collection Period that are not offset by
Prepayment Interest Excesses collected on the Mortgage Loans during such
Collection Period. Any Net Aggregate Prepayment Interest Shortfall will be
allocated as set forth under "Description of the
Certificates--Distributions--Prepayment Interest Shortfalls and Prepayment
Interest Excesses" herein. If Prepayment Interest Excesses for all Mortgage
Loans exceed Prepayment Interest Shortfalls for all Mortgage Loans as of any
Distribution Date, such excess amount will be payable to the Master Servicer as
additional compensation.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR
Property Corporation ("LNR"), will serve as the Special Servicer and in such
capacity will be responsible for servicing the Specially Serviced Mortgage
Loans. The principal executive offices of the Special Servicer are located at
700 N.W. 107th Avenue, Miami, Florida 33172, and its telephone number is (305)
485-2000. LNR, its subsidiaries and affiliates are involved in the real estate
investment and management business and engage principally in (i) developing,
acquiring and actively managing commercial and residential multi-family rental
real estate, (ii) acquiring portfolios of commercial mortgage loans and
properties and providing workout, property management and asset sale services
with regard to the portfolio assets, (iii) acting as special servicer with
regard to commercial mortgage pools which are the subject of commercial
mortgage backed securities ("CMBS"), (iv) acquiring unrated and rated CMBS
issued with regard to commercial mortgage pools as to which the Special
Servicer acts as special servicer, and (v) making mortgage loans to companies
and individuals engaged in commercial real estate activities and to developers
and builders of residential communities. The Special Servicer has regional
offices located across the country in Florida, Georgia, Oregon and California.
As of July 1, 1998, the Special Servicer and its affiliates were managing a
portfolio including over 7,800 assets in most states with an original face
value of over $24.4 billion, most of which are commercial real estate assets.
Included in this managed portfolio are $18.6 billion of commercial real estate
assets representing 41 securitization transactions, for which the Special
Servicer is the servicer or special servicer. The Special Servicer and its
affiliates own and are in the business of acquiring assets similar in type to
the assets of the Trust Fund. Accordingly, the assets of the Special Servicer
and its affiliates may, depending upon the particular circumstances, including
the nature and location of such assets, compete with the Mortgaged Properties
for tenants, purchasers, financing and so forth.
The information set forth herein concerning the Special Servicer has
been provided by the Special Servicer, and none of the Depositor, the Master
Servicer or the Underwriter make any representation or warranty as to the
accuracy or completeness of such information.
Special Servicer Compensation
The Special Servicer will be entitled to receive (i) a special
servicing fee (the "Special Servicing Fee") equal to, in any month, the portion
of a rate equal to 0.25% per annum applicable to such month (determined in the
same manner as the applicable Mortgage Rate is determined for each Mortgage
Loan for such month) of the outstanding Scheduled Principal Balance of each
Specially Serviced Mortgage Loan, (ii) a fee (the "Liquidation Fee") equal to
the product of (x) 1.0%, (y) a fraction, the numerator of which is equal to the
Liquidation Proceeds received in connection with a final disposition of a
Specially Serviced Mortgage Loan or REO Property and the denominator of which
is equal to the unpaid principal balance of the related Mortgage Loan or REO
Property and accrued and unpaid interest thereon and (z) the related
Liquidation Proceeds and (iii) a fee (the "Workout Fee") payable out of, and
calculated by application of a "Workout Fee Rate" of 0.50% to, each collection
of interest and principal (including scheduled payments, prepayments, Balloon
Payments and payments at maturity) received on
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such Mortgage Loan for so long as it remains a Rehabilitated Mortgage Loan,
(collectively, such fees payable to the Special Servicer, the "Special Servicer
Compensation"). The Workout Fee with respect to any Rehabilitated Mortgage Loan
will cease to be payable if such 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 Rehabilitated Mortgage Loan. If the Special Servicer is
terminated (other than for cause) or resigns with respect to any or all of its
servicing duties, it shall retain the right to receive any and all Workout Fees
payable with respect to Mortgage Loans that became Rehabilitated Mortgage Loans
during the period that it had responsibility for servicing Specially Serviced
Mortgage Loans and that were still Rehabilitated 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 loan ceases to be payable in accordance with the
preceding sentence. The Special Servicer is also permitted to retain, in
general, certain assumption fees, modification fees and extension fees
collected on Specially Serviced Mortgage Loans, certain borrower-paid fees,
investment income earned on amounts on deposit in any accounts maintained for
REO Property collections and charges specified in the Pooling and Servicing
Agreement. The Special Servicing Fee and Liquidation Fee will be obligations of
the Trust Fund and will represent Expense Losses. The Special Servicing
Compensation will be payable in addition to the Master Servicing Fee payable to
the Master Servicer.
As described herein under "--The Operating Adviser," the Operating
Adviser will have the right to replace the Special Servicer, subject to the
limitations described herein.
TERMINATION OF SPECIAL SERVICER
The Trustee may terminate the Special Servicer due to (i) any failure
by the Special Servicer to remit to the Trustee or the Master Servicer when due
any amount required to be so remitted under the terms of the Pooling and
Servicing Agreement; (ii) any failure on the part of the Special Servicer duly
to observe or perform in any material respect any other of the covenants or
agreements on the part of the Special Servicer contained in the Pooling and
Servicing Agreement which continues unremedied for a period of 90 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Special Servicer by the Depositor or the
Trustee; provided, however, that to the extent that the Special Servicer
certifies to the Trustee and the Depositor that the Special Servicer is in good
faith attempting to remedy such failure and the Certificateholders shall not be
materially and adversely affected thereby, such cure period will be extended
for up to an additional 60 days; (iii) any breach by the Special Servicer of
the representations and warranties contained in the Pooling and Servicing
Agreement that materially and adversely affects the interest of any holder of
any Class of Certificateholders and that continues unremedied for a period of
120 days after the date on which notice of such breach, requiring the same to
be remedied, shall have been given to the Special Servicer by the Depositor or
the Trustee, provided, however, that to the extent that the Special Servicer is
in good faith attempting to remedy such breach and the Certificateholders shall
not be materially and adversely affected thereby, such cure period may be
extended for up to an additional 60 days; (iv) the Trustee shall receive notice
from any Rating Agency to the effect that the continuation of the Special
Servicer in such capacity would result in the downgrade, qualification or
withdrawal of any rating then assigned by such Rating Agency to any Class of
Certificates; (v) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law for
the appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Special
Servicer and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; (vi) the Special Servicer shall consent to
the appointment of a conservator, receiver, liquidator, trustee or similar
official in any bankruptcy, insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings or relating to the Special
Servicer or of or relating to all or substantially all of its property; or
(vii) the Special Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its
obligations, or take any corporate action in furtherance of the foregoing. In
addition to the above events of termination, upon the direction of the
Operating Adviser, subject to the satisfaction of certain conditions, the
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Trustee will remove the Special Servicer from its duties as Special Servicer at
any time upon the appointment and acceptance of such appointment by a successor
Special Servicer appointed by the Operating Adviser; provided that, prior to
the effectiveness of any such appointment the Trustee shall have received a
letter from each Rating Agency to the effect that such appointment would not
result in a withdrawal, qualification or downgrade in any rating then assigned
to any Class of Certificates.
THE OPERATING ADVISER
An operating adviser (the "Operating Adviser") appointed by the
holders of a majority of the Controlling Class will have the right to remove
and replace the Special Servicer. The Special Servicer will be required to
provide notice to the Operating Adviser before taking the following actions,
among other things, (i) any proposed modification of a Money Term of a Mortgage
Loan other than an extension of the original maturity date for two years or
less, (ii) any foreclosure or comparable conversion of the ownership of a
Mortgaged Property, (iii) any proposed sale of a Specially Serviced Mortgage
Loan (other than in connection with the termination of the Trust Fund as
described herein under "Description of the Certificates--Optional
Termination"), (iv) any proposal to bring an REO Property into compliance with
applicable environmental laws and (v) any acceptance of substitute or
additional collateral for a Mortgage Loan. Subject to the satisfaction of
certain conditions, the Operating Adviser will have the right to direct the
Trustee to remove the Special Servicer at any time upon the appointment and
acceptance of such appointment by a successor Special Servicer appointed by the
Operating Adviser; provided that, prior to the effectiveness of any such
appointment the Trustee shall have received a letter from each Rating Agency to
the effect that such appointment would not result in a withdrawal,
qualification or downgrade in any rating then assigned to any Class of
Certificates.
The "Controlling Class" will be the most subordinate Class of
Subordinate Certificates outstanding at any time of determination; provided,
however, that the Certificate Balance of such Class of Certificates is not less
than 50% (or 20% in the case of the Class N Certificates) of the initial
Certificate Balance of such Class, in which case the Controlling Class shall be
the next most subordinate Class of Certificates.
At any time, the holders of a majority of the Controlling Class may
direct the Trustee in writing to hold an election for an Operating Adviser,
which election will be held commencing as soon as practicable thereafter or
upon (i) the resignation or removal of the person acting as Operating Adviser
or (ii) upon a determination by the Trustee that the Controlling Class has
changed. After such receipt or determination, the Trustee is required to call a
meeting of such holders (which may be held by telephone) in the manner
specified in the Pooling and Servicing Agreement. The meeting will be held in
accordance with the procedures specified in the Pooling and Servicing
Agreement. At the meeting, each such holder will be entitled to nominate one
person to act as Operating Adviser.
THE HEALTHCARE ADVISER
Election of the Healthcare Adviser
On the Closing Date and as otherwise provided, the Controlling Class
will be entitled to elect a consultant with respect to certain of the
Healthcare Loans (the ContiTrade Loans and RMF Loans which are Healthcare
Loans) and the Healthcare Properties (the "Healthcare Adviser"), who shall be
appointed by the Trustee to provide the Special Servicer and the Controlling
Class with advice with respect to such Healthcare Loans and Healthcare
Properties. Upon (i) the receipt by the Trustee of written requests for an
election of a Healthcare Adviser from the Controlling Class, (ii) the
resignation or removal of the person acting as Healthcare Adviser or (iii) a
determination by the Trustee that the Controlling Class has changed, an
election of a successor Healthcare Adviser will be held commencing as soon as
practicable thereafter. The Healthcare Adviser may be removed at any time by
the written vote of the Controlling Class.
The initial Healthcare Adviser will be Survey, LLC, an Alabama limited
liability company, formed in 1995. Survey, LLC is an entity specializing in
providing oversight management services and consulting services to lenders to
long-term care facilities in areas of regulatory compliance and program
effectiveness.
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In the event that after the Closing Date a Healthcare Adviser shall
have resigned or been removed and a successor Healthcare Adviser shall not have
been elected, there shall be no Healthcare Adviser; and, notwithstanding
anything to the contrary described herein, the Master Servicer and the Special
Servicer shall not have any right or obligation to consult with or to seek
and/or receive advice from the Healthcare Adviser, and the provisions of the
Pooling and Servicing Agreement relating thereto shall be of no effect, during
any such period that there is no Healthcare Adviser.
Duties of the Healthcare Adviser
The Trustee and the Special Servicer will be required to deliver to
the Healthcare Adviser all reports and other information they receive (to the
extent received and Master Servicer routinely prepares such report), with
respect to any Healthcare Property and Healthcare Loan. The Healthcare Adviser
will monitor such Healthcare Loans and Healthcare Properties and will provide
advice to the Special Servicer and the Controlling Class with respect thereto.
The Special Servicer will be restricted from taking any material actions with
respect to Healthcare Loans and the Healthcare Properties without first
providing notice to, and consulting with, the Healthcare Adviser. The
Healthcare Adviser in turn will recommend to the Special Servicer what action
should be taken with respect to such Healthcare Loan or Healthcare Property,
provided that in no case shall the Special Servicer be required to follow any
recommendation given to it by the Healthcare Adviser.
Pursuant to the Pooling and Servicing Agreement, the Healthcare
Adviser will be entitled to receive from the Distribution Account a monthly fee
with respect to certain of the Healthcare Loans (the "Healthcare Adviser Fee"),
which constitutes a portion of the Administrative Cost Rate.
Limitation on Liability of Healthcare Adviser
The Healthcare Adviser will have no responsibility or liability to the
Trust or any Class of Certificateholders for any action taken, or for
refraining from the taking of any action, in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment; provided that the
Healthcare Adviser will not be protected against any liability which would
otherwise be imposed by reason of willful misconduct, bad faith, fraud or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations or duties. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Healthcare Adviser may
advise actions that favor the interests of one or more Classes of the
Certificates over other Classes of the Certificates, and that the Healthcare
Adviser may have special relationships and interests that conflict with those
of Holders of some Classes of the Certificates and, absent willful misconduct,
bad faith, fraud or gross negligence on the part of the Healthcare Adviser,
agree to take no action against the Healthcare Adviser or any of its officers,
directors, employees, principals or agents as a result of such special
relationship or conflict.
MORTGAGE LOAN MODIFICATIONS
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Special
Servicer may amend any term, other than a Money Term, of a Mortgage Loan that
is not a Specially Serviced Mortgage Loan and may extend the maturity date of
any Balloon Loan (other than a Specially Serviced Mortgage Loan) to a date not
more than 60 days beyond the original maturity date. Subject to any
restrictions applicable to REMICs and with notice to the Operating Adviser,
(and the Healthcare Adviser in the case of certain of the Healthcare Loans) the
Special Servicer will be permitted to enter into a modification, waiver or
amendment of the terms of any Specially Serviced Mortgage Loan, including any
modification, waiver or amendment to (i) reduce the amounts owing under any
Specially Serviced Mortgage Loan by forgiving principal, accrued interest
and/or any Prepayment Premium, (ii) reduce the amount of the Scheduled Payment
on any Specially Serviced Mortgage Loan, including by way of a reduction in the
related Mortgage Rate, (iii) forebear in the enforcement of any right granted
under any Mortgage Note or Mortgage relating to a Specially Serviced Mortgage
Loan, (iv) extend the maturity date of any Specially Serviced Mortgage Loan
and/or (v) accept a principal prepayment during any Lock-Out Period; provided
in each case that (x) the related borrower is in default with respect to the
Specially Serviced Mortgage Loan or, in the reasonable judgment of the Special
Servicer, such default is reasonably foreseeable and (y) in the reasonable
judgment of the Special Servicer, such
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modification, waiver or amendment would increase the recovery to
Certificateholders on a net present value basis documented to the Trustee.
In no event, however, will the Special Servicer be permitted to (i)
extend the maturity date of a Specially Serviced Mortgage Loan beyond a date
that is two years prior to the Final Rated Distribution Date, (ii) extend the
maturity date of a Specially Serviced Mortgage Loan and provide for an interest
rate during such extension below the then prevailing interest rate for
comparable loans, as determined by the Special Servicer (such limitation of
extensions made at a below market rate shall not limit the ability of the
Special Servicer to extend the maturity date of any Specially Serviced Mortgage
Loan at an interest rate at or in excess of the prevailing rate for comparable
loans at the time of such modification), (iii) if the Specially Serviced
Mortgage Loan is secured by a ground lease, extend the maturity date of such
Specially Serviced Mortgage Loan beyond a date which is ten (10) years prior to
the expiration of the term of such ground lease, (iv) reduce the Mortgage Rate
of a Specially Serviced Mortgage Loan to a rate below the then prevailing
interest rate for comparable loans, as determined by the Special Servicer or
(v) defer interest due on any Specially Serviced Mortgage Loan in excess of 10%
of the Scheduled Principal Balance of such Specially Serviced Mortgage Loan or
defer the collection of interest on any Specially Serviced Mortgage Loan
without accruing interest on such deferred interest at a rate at least equal to
the Mortgage Rate of such Specially Serviced Mortgage Loan.
Notwithstanding the foregoing, if a Mortgage Loan is a Balloon Loan
that has failed to make the Balloon Payment at its scheduled maturity, and such
Balloon Loan is not a Specially Serviced Mortgage Loan (other than by reason of
failure to make the Balloon Payment) and has not been delinquent in the
preceding 12 months (other than with respect to the Balloon Payment), then in
addition to the other alternatives specified above, the Special Servicer may
make up to three one-year extensions at the existing Mortgage Rate for such
Mortgage Loans.
Modifications of a Mortgage Loan that forgive principal or interest
will result in Realized Losses on such Mortgage Loan and such Realized Losses
will be allocated among the various Classes of Certificates in the manner
described under "Description of the Certificates--Distributions--Subordination;
Allocation of Losses and Certain Expenses" herein.
The modification of a Mortgage Loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
Certificates beyond that which might otherwise be the case.
See "Yield, Prepayment And Maturity Considerations" herein.
SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES
The Special Servicer, after providing notice to the Operating Adviser,
may offer to sell for cash to any person, for an amount equal to the Purchase
Price, any REO Property or any Mortgage Loan that is in default or as to which
the Special Servicer has made a determination that default is imminent. The
Special Servicer is required to give the Operating Adviser, the Master Servicer
and the Trustee not less than five days' prior written notice of its intention
to sell any such defaulted Mortgage Loan or REO Property, to offer such
defaulted Mortgage Loan or REO Property for sale in a fair auction or other
manner as is consistent with the Servicing Standard, and to accept the highest
cash bid received in such auction or other procedure from any person other than
an interested person (as described in the Pooling and Servicing Agreement) for
any defaulted Mortgage Loan or REO Property in an amount, except as otherwise
provided in the Pooling and Servicing Agreement in the case of REO Property, at
least equal to the Purchase Price.
In the absence of any bid in the amount of the Purchase Price, the
Special Servicer may accept the highest cash bid, if the Special Servicer
determines, consistent with the Servicing Standard, that such sale at such
price is in the best interest of Certificateholders; provided that the Special
Servicer may not accept such bid if made by the Trustee in its individual
capacity, any of its affiliates, or any interested person (as described in the
Pooling and Servicing Agreement), except in limited circumstances described in
the Pooling and Servicing Agreement, including the ability of the Special
Servicer to purchase a defaulted Mortgage Loan or REO Property only if it is
the highest bidder and at least three offers are received from independent
third parties.
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FORECLOSURES
The Special Servicer may at any time, after providing notice to the
Operating Adviser and in accordance with the Pooling and Servicing Agreement
institute foreclosure proceedings, exercise any power of sale contained in any
Mortgage, obtain a deed in lieu of foreclosure or otherwise acquire title to a
Mortgaged Property by operation of law or otherwise, if such action is
consistent with the Servicing Standard and a default on the related Mortgage
Loan has occurred but subject, in all cases, to certain limitations concerning
environmental matters and, in certain cases, the receipt of an opinion of
counsel relating to certain REMIC requirements.
If any Mortgaged Property is acquired as described in the preceding
paragraph, the Special Servicer is required to sell the REO Property prior to
the close of the third calendar year beginning after the year of acquisition,
or any applicable extension period, unless the Special Servicer has previously
delivered to the Trustee an opinion of counsel to the effect that the holding
of the REO Property by the Trust Fund subsequent to such period, or to the
expiration of such extension period, will not result in the failure of such REO
Property to qualify as "foreclosure property" under the REMIC provisions of the
Code. In addition, the Special Servicer is required to use its best efforts to
sell any REO Property prior to the Final Rated Distribution Date.
In general, the Special Servicer will be obligated to, or may contract
with a third party to, operate and manage any Mortgaged Property acquired as
REO Property in a manner that would, to the extent commercially feasible,
maximize the Trust Fund's net after-tax proceeds from such property. Generally,
REMIC I will not be taxable on income received with respect to a Mortgaged
Property to the extent that it constitutes "rents from real property," within
the meaning of the Code Section 856(c)(3)(A) and Treasury regulations
thereunder. "Rents from real property" do not include the portion of any rental
based on the net income or gain of any tenant or sub-tenant. No determination
has been made whether rent on any of the Mortgaged Properties meets this
requirement. "Rents from real property" include charges for services
customarily furnished or rendered in connection with the rental of real
property, whether or not the charges are separately stated. Services furnished
to the tenants of a particular building will be considered as customary if, in
the geographic market in which the building is located, tenants in buildings
which are of similar class are customarily provided with the service. No
determination has been made whether the services furnished to the tenants of
the Mortgaged Properties are "customary" within the meaning of applicable
regulations. It is therefore possible that a portion of the rental income with
respect to a Mortgaged Property owned by REMIC I, presumably allocated based on
the value of any non-qualifying services, would not constitute "rents from real
property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on Mortgaged Property
owned by REMIC I, such as a hotel property or skilled health care facility,
will not constitute "rents from real property." Any of the foregoing types of
income may instead constitute "net income from foreclosure property." After the
Special Servicer reviews the operation of such property and consults with the
Trustee to determine the Trust Fund's federal income tax reporting position
with respect to income it is anticipated that the Trust Fund would derive from
such property, the Special Servicer could determine that it would not be
commercially feasible to manage and operate such property in a manner that
would avoid the imposition of a tax on "net income from foreclosure property"
within the meaning of the REMIC provisions of the Code (such tax referred to
herein as an "REO Tax"). To the extent that income the Trust Fund receives from
an REO Property is subject to a tax on "net income from foreclosure property",
such income would be subject to federal tax at the highest marginal corporate
tax rate (currently 35%). Any REO Tax imposed on the Trust Fund's income from
an REO Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their own tax
advisors regarding the possible imposition of REO Taxes in connection with the
operation of commercial REO Properties by REMICs.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Elections will be made to treat the portion of the Trust Fund
exclusive of Excess Interest, and, in the opinion of Cadwalader, Wickersham &
Taft, special tax counsel to the Depositor, such portion of the Trust Fund will
qualify, as three separate REMICs ("REMIC I," "REMIC II" and "REMIC III,"
respectively) within the meaning of Code Section 860D. REMIC I will hold the
Mortgage Loans (exclusive of Excess Interest), proceeds therefrom, and any REO
Property, and will issue (i) certain uncertificated classes of regular
interests (the "REMIC I Regular Interests") to REMIC II and (ii) the Class R-I
Certificates, which will represent the sole class
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<PAGE>
of residual interests in REMIC I. REMIC II will hold the REMIC I Regular
Interests and proceeds therefrom, and will issue (i) certain uncertificated
classes of regular interests (the "REMIC II Regular Interests") to REMIC III
and (ii) the Class R-II Certificates, which will represent the sole class of
residual interests in REMIC II. REMIC III will hold the REMIC II Regular
Interests, and the account in which distributions thereon will be deposited and
will issue (i) classes of regular interests represented by the Offered
Certificates and the Private Certificates and (ii) the Class R-III
Certificates, which will represent the sole class of residual interests in
REMIC III. In addition, the Class Q Certificates will represent pro rata
undivided beneficial interests in designated portions of the Excess Interest,
which portion of the Trust Fund will be treated as part of a grantor trust for
federal income tax purposes.
The Offered Certificates will be treated as "real estate assets" under
Code Section 856(c)(4)(A), to the extent that the assets of the REMICs are so
treated. The interest on the Offered Certificates will be "interest on
obligations secured by mortgages on real property" described in Code Section
856(c)(3)(B) for a real estate investment trust, in the same proportion that
the income of the REMICs is so treated.
A beneficial owner's interest in an Offered Certificate will qualify
for the foregoing treatments under Sections 856(c)(4)(A) and 856(c)(3)(B) in
their entirety if at least 95% of the REMICs' assets qualify for such
treatment, and otherwise will qualify to the extent of the REMICs' percentage
of such assets. A beneficial owner's interest in an Offered Certificate will
constitute "loans . . . secured by an interest in real property which is . . .
residential real property" within the meaning of Code Section 7701(a)(19)(C)(v)
in the case of a domestic building and loan association only to the extent of
the portion of the Offered Certificate allocable to Multifamily Loans,
Healthcare Loans and Mobile Home Loans. A Mortgage Loan that has been defeased
with U.S. Treasury securities will not qualify for the foregoing treatments.
REMIC I, REMIC II and REMIC III will be treated as one REMIC solely for the
purpose of making the foregoing determinations.
The regular interests represented by the Offered Certificates
generally will be treated as newly originated debt instruments for federal
income tax purposes. Beneficial owners of the Offered Certificates will be
required to report income on the regular interests represented by the Offered
Certificates in accordance with the accrual method of accounting. See "Certain
Federal Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--General" in the Prospectus.
It is anticipated that the Class A-1, Class A-2, Class A-MF1, Class
A-MF2, Class B and Class C Certificates will be issued at a premium, that the
Class D Certificates will be issued with de minimis original issue discount and
that the Class E Certificates will be issued with original issue discount for
federal income tax purposes. See "Certain Federal Income Tax
Consequences--REMIC's--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount and Premium" in the Prospectus.
The prepayment assumption that will be used to accrue original issue
discount or to amortize premium of an initial owner will be 0% CPR as described
under "Yield, Prepayment and Maturity Considerations--Weighted Average Life"
above, but assuming that all ARD Loans will prepay on their Anticipated
Prepayment Dates
Although not free from doubt, it is anticipated that any prepayment
premiums will be treated as ordinary income to the extent allocable to
beneficial owners of the Offered Certificates as such amounts become due to
such beneficial owners.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
LOCATED IN CALIFORNIA AND FLORIDA
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in California (approximately 22.0% of the
Initial Pool Balance) and Florida (approximately 10.7% of the Initial Pool
Balance) which is general in nature. This summary does not purport to be
complete and is qualified in its entirety by reference to the applicable
federal and state laws governing the Mortgage Loans.
California
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Mortgage Loans in California generally are secured by deeds of trust
on the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust or by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is given for a statutory period of time
after which the mortgaged real estate may be sold by the Trustee, if foreclosed
pursuant to the Trustee's power of sale, or by court appointed sheriff under a
judicial foreclosure. Following a judicial foreclosure sale, the borrower or
its successor in interest may, for a period of up to one year, redeem the
property. California's "one action rule" requires the lender to exhaust the
security afforded under the deed of trust by foreclosure in an attempt to
satisfy the full debt before bringing a personal action (if otherwise
permitted) against the borrower for recovery of the debt except in certain
cases involving environmentally impaired real property. California case law has
held that acts such as an offset of an unpledged account or the application of
rents from secured property prior to foreclosure, under some circumstances,
constitute violations of such statutes. Violations of such statutes may result
in the loss of some or all of the security under the loan. Other statutory
provisions in California limit any deficiency judgment (if otherwise permitted)
against the borrower following a judicial sale to the excess of the outstanding
debt over the greater of (i) the fair market value of the property at the time
of the public sale or (ii) the amount of the winning bid in the foreclosure.
Further, under California law, once a property has been sold pursuant to a
power-of-sale clause contained in a deed of trust, the lender is precluded from
seeking a deficiency judgment from the borrower or, under certain
circumstances, guarantors. In certain circumstances, the lender may have a
receiver appointed.
Florida
Mortgage loans involving real property in Florida are generally
secured by mortgages and foreclosures are accomplished by judicial foreclosure.
There is no power of sale in Florida, except as permitted by federal law. After
an action for foreclosure is commenced and the lender secures a judgment, the
final judgment will provide that the property be sold at public sale at the
courthouse if the full amount of the judgment is not paid prior to the
scheduled sale. Generally, the foreclosure sale must occur no later than 35
days after the judgment is entered. During this period, a notice of sale must
be published twice in the county in which the property is located. The
mortgagor or any junior lienor may redeem the property at any time before the
sale by paying the amount of the judgment. There is no right of redemption
after issuance of the certificate of title to the buyer of the property.
Florida does not have a "one action rule" or "anti-deficiency legislation."
Subsequent to a foreclosure sale, however, a lender must prove the value of the
property sold as of the date of foreclosure in order to recover a deficiency.
In certain circumstance, the lender may have a receiver appointed.
CERTAIN ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on employee benefit and
other plans ("Plans") that are subject to ERISA and/or Section 4975 of the Code
and on persons that have certain specified relationships to such Plans
("parties in interest" under ERISA or "disqualified persons" under Section 4975
of the Code) (collectively, "Parties in Interest"). ERISA also imposes certain
duties on persons who are fiduciaries of Plans subject to ERISA and prohibits
certain transactions between a Plan and Parties in Interest with respect to
such Plan. Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a Plan, and any
person who provides investment advice with respect to such assets for a fee, is
a fiduciary of such Plan.
PLAN ASSETS
A final regulation (the "DOL Regulation") promulgated by the
Department of Labor (the "DOL") defining the term "plan assets" provides,
generally, that when a Plan makes an equity investment in another entity, the
underlying assets of that entity may be considered plan assets unless certain
exceptions apply. There can be no assurance, however, that any of the
exceptions set forth in the DOL Regulation will apply to the purchase or
holding of Certificates. Accordingly, a Plan's investment in Certificates may
cause the Mortgage Loans or other assets constituting, or underlying the assets
of, the Trust Fund to be deemed plan assets. If the Mortgage Loans or other
Trust Fund assets constitute plan assets, then any party exercising management
or discretionary control regarding those assets may be deemed to be a
"fiduciary" with respect to those assets, and thus subject to the
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fiduciary requirements and prohibited transaction provisions of ERISA and
Section 4975 of the Code with respect to the Mortgage Loans and other Trust
Fund assets. Certain affiliates of the Depositor, the Underwriters, the Master
Servicer and certain of their respective affiliates might be considered or
might become fiduciaries or other Parties in Interest with respect to investing
Plans. Moreover, the Trustee, the Master Servicer, the Special Servicer, the
Operating Adviser, any insurer, special hazard insurer, primary insurer or any
other issuer of a credit support instrument relating to the primary assets in
the Trust Fund or certain of their respective affiliates might be considered
fiduciaries or other Parties in Interest with respect to investing Plans. In
the absence of an applicable exemption, "prohibited transactions" (within the
meaning of ERISA and Section 4975 of the Code) could arise if Certificates were
acquired by, or with "plan assets" of, a Plan with respect to which any such
person is a Party in Interest.
In addition, a life insurance company proposing to acquire or hold the
Subordinate Certificates or the Residual Certificates with assets of its
general account should consider the extent to which such acquisition or holding
would be subject to the requirements of ERISA and Section 4975 of the Code
under John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank,
510 U.S. 86 (1993), and Section 401(c) of ERISA, as amended by the Small
Business Job Protection Act of 1996, Public Law No. 104-188, and subsequent DOL
and judicial guidance. See "--Insurance Company General Accounts" below.
SPECIAL EXEMPTION APPLICABLE TO SENIOR CERTIFICATES
With respect to the acquisition and holding of Senior Certificates,
the DOL has issued individual prohibited transaction exemptions to the
Underwriters (Deutsche Bank Securities Inc. as Department exemption application
number E-0003 (the "Deutsche Exemption") and Morgan Stanley & Co. Incorporated
as Prohibited Transaction Exemption ("PTE") 90-24, as amended by PTE 92-34,
(the "MCSI Exemption" and collectively with the Deutsche Exemption, the
"Exemptions")), which generally exempt from certain of the prohibited
transaction rules of ERISA and Section 4975 of the Code transactions relating
to (i) the initial purchase, the holding, and the subsequent resale by Plans of
Certificates evidencing interests in pass-through trusts and (ii) transactions
in connection with the servicing, management and operation of such trusts,
provided that the assets of such trusts consist of certain secured receivables,
loans and other obligations that meet the conditions and requirements of the
Exemption. The assets covered by the Exemption include mortgage loans such as
the Mortgage Loans and fractional undivided interests in such Loans.
Among the conditions that must be satisfied for the Exemptions to
apply are the following:
(1) The acquisition of the Certificates by a Plan must be on
terms (including the price for the Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) The rights and interests evidenced by the Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other Certificates of the Trust Fund;
(3) The Certificates acquired by the Plan must have received
a rating at the time of such acquisition that is in one of the three
highest generic rating categories from Duff & Phelps Credit Rating
Co., Fitch IBCA, Inc., Moody's or S&P;
(4) The sum of all payments made to the Underwriters in
connection with the Distribution of the Certificates must represent
not more than reasonable compensation for underwriting the
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
Mortgage Loans; the sum of all payments made to and retained by the
Master Servicer, the Special Servicer, and any sub-servicer must
represent not more than reasonable compensation for such person's
services under the Pooling and Servicing Agreement or other relevant
servicing agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
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(5) The Plan investing in the Certificates must be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of
the Securities and Exchange Commission under the 1933 Act.
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions only if, among other
requirements, (i) the investing Plan fiduciary (or its affiliates) is an
obligor with respect to five percent or less of the fair market value of the
obligations contained in the trust; (ii) the Plan's investment in certificates
does not exceed 25 percent of all of the certificates outstanding at the time
of the acquisition; and (iii) immediately after the acquisition, no more than
25 percent of the assets of the Plan are invested in certificates representing
an interest in one or more trusts containing assets sold or serviced by the
same entity.
The Depositor believes that the Exemptions will apply to the
acquisition and holding of Senior Certificates by Plans or persons acting on
behalf of or with "plan assets" of Plans, and that all conditions of the
Exemptions, other than those within the control of the investing Plans (or Plan
investors), have been met. Upon request, the Underwriters will deliver to any
fiduciary or other person considering investing "plan assets" of any Plan in
the Certificates a list identifying each borrower that is the obligor under
each Mortgage Loan that constitutes more than five percent of the aggregate
principal balance of the assets of the Trust Fund.
Because the characteristics of the Subordinate Certificates do not
meet the requirements of the Exemptions, the purchase or holding of such
Certificates by, on behalf of or with "plan assets" of any Plan may result in a
non-exempt prohibited transaction or the imposition of excise taxes or civil
penalties under ERISA and/or Section 4975 of the Code. Accordingly, the
Subordinate Certificates may not be purchased by, transferred to or held by a
Plan or any person using "plan assets" of any Plan to effect such acquisition
or holding. Each person that acquires or holds any Subordinate Certificates
shall be deemed to have represented and warranted to the Depositor, the Trustee
and the Master Servicer that it satisfies the foregoing limitation, provided
that an insurance company investing solely assets of its general account may
acquire and hold the Subordinate Certificates subject to the limitations
described in "--Insurance Company General Accounts" below.
INSURANCE COMPANY GENERAL ACCOUNTS
The Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA ("Section 401(c)"), 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 a life
insurance company general account. The DOL issued proposed regulations under
Section 401(c) on December 22, 1997, but the required final regulations have
not been issued as of the date hereof. Section 401(c) required the DOL to issue
final regulations (the "401(c) Regulations") no later than December 31, 1997 to
provide guidance for purposes of determining, in cases where insurance policies
or annuity contracts 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) 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" of any Plan, except
(i) as otherwise provided by the DOL in the 401(c) Regulations to prevent
avoidance of the Regulations or (ii) as determined in an action brought by the
DOL 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 or annuity contracts issued to
Plans after December 31, 1998, or on or before that date for which the insurer
does not comply with the 401(c) Regulations, may be treated as "plan assets" of
such Plans. Because Section 401(c) does not relate to insurance company
separate accounts, separate account assets continue to be treated as "plan
assets" of any Plan that is invested in such separate account. Insurance
companies contemplating the investment of general account assets in the
Subordinate Certificates or the Residual Certificates should consult with their
legal counsel with respect to the applicability of Section 401(c), including
the general account's ability to continue to hold such Certificates after the
401(c) Regulations become final.
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Accordingly, any insurance company that acquires or holds any
Subordinate Certificate shall be deemed to have represented and warranted to
the Depositor, the Trustee and the Master Servicer that (i) such acquisition
and holding is permissible under applicable law, will not constitute or result
on a non-exempt prohibited transaction under ERISA or Section 4975 of the Code,
and will not subject the Company, the Trustee or the Master Servicer to any
obligation in addition to those undertaken in the Pooling and Servicing
Agreement and (ii) the statements made in either of the following two
paragraphs is correct:
(a) The source of funds used to acquire and hold such
Subordinate Certificates is an "insurance company general account" (as
defined in DOL Prohibited Transaction Class Exemption ("PTCE") 95-60)
and the conditions set forth in Sections I and III of PTCE 95-60 have
been satisfied; or
(b) (1) The source of funds used to acquire and hold such
Subordinate Certificates is an insurance company general account, (2)
applicable requirements of Section 401(c) and the 401(c) Regulations
to be promulgated thereunder have been satisfied and will continue to
be satisfied, and (3) the insurance company represents that it
understands that the operation of the general account after December
31, 1998 may affect its ability to continue to hold such Certificates
after the 401(c) Regulations become final, and if the assets of the
general account then include "plan assets" of any Plan, it will
dispose of such Certificates prior to the date the 401(c) Regulations
become effective as to such investment, unless the continued holding
of such Certificates is then permissible under PTCE 95-60, another
PTCE or an exception under Section 401(c).
GENERAL INVESTMENT CONSIDERATIONS
Prospective Plan investors should consult with their legal counsel
concerning the impact of ERISA and Section 4975 of the Code, the applicability
of the Exemption or other exemptive relief, and the potential consequences to
their specific circumstances, prior to making an investment in the
Certificates. Moreover, each Plan fiduciary should determine whether, under the
general fiduciary standards of ERISA regarding prudent investment procedure and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). The appropriate characterization of the Offered
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase Offered Certificates,
may be subject to significant interpretive uncertainties. All investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent, the Offered
Certificates will constitute legal investments for them.
No representations are made as to the proper characterization of the
Offered Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase the Offered
Certificates under applicable legal investment restrictions. The uncertainties
referred to above (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the Offered
Certificates) may adversely affect the liquidity of the Offered Certificates.
See "Legal Investment" in the Prospectus.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the offering of the
Certificates towards the simultaneous purchase of the Mortgage Loans from the
Sellers and to pay certain expenses in connection with the Issuance of the
Certificates.
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PLAN OF DISTRIBUTION
The Depositor has entered into an underwriting agreement (the
"Underwriting Agreement") with Morgan Stanley & Co. Incorporated, an affiliate
of the Depositor, and Deutsche Bank Securities Inc. (collectively, the
"Underwriters"). Subject to the terms and conditions set forth in the
Underwriting Agreement, the Depositor has agreed to sell to each Underwriter,
and each Underwriter has agreed severally to purchase from the Depositor, the
percentage of the respective aggregate Certificate Balance of each Class of
Offered Certificates set forth below.
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-1 CLASS A-2 CLASS A-MF1 CLASS A-MF2 CLASS B CLASS C CLASS D CLASS E
- - ----------- --------- --------- ----------- ----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley 50% 50% 50% 50% 50% 50% 50% 50%
& Co.
Incorporated...........
Deutsche Bank 50% 50% 50% 50% 50% 50% 50% 50%
Securities Inc.........
--------- --------- ----------- ----------- ------- ------- ------- -------
Total...............100% 100% 100% 100% 100% 100% 100% 100%
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters severally will be obligated to purchase all of the Offered
Certificates if any are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that the purchase commitment
of the non-defaulting Underwriters may be increased. Proceeds to the Depositor
from the sale of the Offered Certificates, before deducting expenses payable by
the Depositor, will be approximately $982,493,635, plus accrued interest.
The Underwriters have advised the Depositor that they propose to offer
the Offered Certificates from time to time for sale in one or more negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. The Underwriters may effect such transactions by selling such Classes of
Offered Certificates to or through dealers and such dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters and any purchasers of such Classes of Offered
Certificates for whom they may act as agent.
The Offered Certificates are offered by the Underwriters when, as and
if issued by the Depositor, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form
through the facilities of DTC against payment therefor on or about August 27,
1998, which is the tenth business day following the date of pricing of the
Certificates. Under Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended, trade in the secondary market generally are required to settle in
three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade Offered Certificates in
the secondary market prior to such delivery should specify a longer settlement
cycle, or should refrain from specifying a shorter settlement cycle, to the
extent that failing to do so would result in a settlement date that is earlier
than the date of delivery of such Offered Certificates.
The Underwriters and any dealers that participate with the
Underwriters in the distribution of the Offered Certificates may be deemed to
be underwriters, and any discounts or commissions received by them and any
profit on the resale of such Classes of Offered Certificates by them may be
deemed to be underwriting discounts or commissions, under the Securities Act of
1933, as amended.
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ContiFinancial Services Corporation and SouthTrust Securities, Inc.
are members of the selling group. ContiFinancial Services Corporation is an
affiliate of ContiTrade, a Seller.
The Depositor has agreed to indemnify the Underwriters against civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments the Underwriters may be required to make in
respect thereof.
The Underwriters currently intend to make a secondary market in the
Offered Certificates, but they are not obligated to do so.
LEGAL MATTERS
The validity of the Offered Certificates and the material federal
income tax consequences of investing in the Offered Certificates will be passed
upon for the Depositor by Cadwalader, Wickersham & Taft, New York, New York.
Certain legal matters with respect to the Offered Certificates will be passed
upon for the Underwriters by Thacher Proffitt & Wood, New York, New York.
Certain legal matters will be passed upon for ContiTrade by Graham & James LLP,
New York, New York.
RATINGS
It is a condition of the issuance of the Offered Certificates that
they receive the following credit ratings from Moody's and S&P:
CLASS MOODY'S S&P
- - ----- ------- ---
Class A-1................................... Aaa AAA
Class A-2................................... Aaa AAA
Class A-MF1................................. Aaa AAA
Class A-MF2................................. Aaa AAA
Class B..................................... Aa2 AA
Class C..................................... A2 A
Class D..................................... Baa2 BBB
Class E..................................... Baa3 BBB-
The ratings of the Offered Certificates address the likelihood of the
timely payment of interest and the ultimate payment of principal, if any, due
on the Offered Certificates by the Final Rated Distribution Date. The ratings
on the Offered Certificates should be evaluated independently from similar
ratings on other types of securities. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating agency.
The ratings of the Certificates do not represent any assessment of (i)
the likelihood or frequency of principal prepayments on the Mortgage Loans,
(ii) the degree to which such prepayments might differ from those originally
anticipated, (iii) whether and to what extent Prepayment Premiums will be
received or (iv) the allocation of any Net Aggregate Prepayment Interest
Shortfall.
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 ratings assigned
thereto at the request of the Depositor.
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INDEX OF PRINCIPAL DEFINITIONS
Page(s) on which term
is defined in the
Term Prospectus Supplement
- - ---- ---------------------
4
401(c) Regulations................................................110
A
ABN AMRO...........................................................70
Accrued Certificate Interest...................................23, 58
Actual/360 Mortgage Loans..........................................18
ADA................................................................51
Administrative Cost Rate..................................29, 92, 100
Advance Rate...................................................29, 65
Advances.......................................................29, 65
A-MF1 Principal Distribution Amount.........................3, 19, 32
A-MF2 Principal Distribution Amount.........................3, 19, 32
AMRESCO...........................................................100
Annual Debt Service................................................91
Anticipated Repayment Date.........................................34
Appraisal Event................................................26, 61
Appraisal Reduction............................................26, 61
ARD Balance........................................................92
ARD Loan...........................................................34
ARD LTV............................................................92
ASAP...............................................................67
Assumed Scheduled Payment......................................24, 59
Available Distribution Amount..................................19, 55
B
Balloon Balance....................................................92
Balloon Loans..............................................35, 47, 84
Balloon LTV........................................................92
Balloon Payment............................................35, 47, 84
C
CEDEL.......................................................1, 15, 52
Certificate Account................................................55
Certificate Balance.........................................1, 16, 53
Certificate Owner..............................................15, 52
Certificateholders..............................................1, 51
Certificates................................................1, 12, 51
Class.......................................................1, 12, 51
Class A Certificates........................................1, 12, 51
Class X Certificates........................................1, 12, 52
Closing Date....................................................1, 51
Code...............................................................36
Collateral Substitution Deposit....................................86
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Collection Period..................................................14
Commission..........................................................6
Compensating Interest Payment......................................28
Constant Prepayment Rate...........................................73
Conti Small Loans..................................................90
ContiTrade......................................................3, 13
ContiTrade Loans...................................................13
Controlling Class.............................................14, 103
CPR................................................................73
CSSA...............................................................67
Cut-Off Date.......................................................69
Cut-Off Date Loan-to-Value Ratio...................................92
D
Debt Service Coverage Ratio........................................91
Defeasance Lock-Out Period.........................................85
Defeasance Option..................................................86
Definitive Certificate.........................................15, 52
Depositor.......................................................1, 12
Determination Date.................................................69
Deutsche Exemption............................................37, 109
Discount Rate......................................................60
Distributable Certificate Interest.............................23, 58
Distribution Date...........................................3, 55, 69
Document Defect....................................................97
DOL...............................................................108
DOL Regulation....................................................108
DSCR...........................................................86, 91
DTC.........................................................1, 15, 52
Due Date...........................................................27
E
ERISA..............................................................37
Euroclear...................................................1, 15, 52
Excess Cash Flow...................................................84
Excess Interest................................................34, 84
Exemptions....................................................37, 109
Expense Losses.....................................................63
F
Final Rated Distribution Date......................................31
Final Scheduled Distribution Date..................................70
FIRREA.............................................................89
Fiscal Agent....................................................1, 14
Form 8-K...........................................................98
G
GAAP...............................................................90
H
HAP Contract.......................................................88
HCCF...............................................................93
Healthcare Adviser........................................13, 14, 103
Healthcare Adviser Fee............................................104
S-115
<PAGE>
Healthcare Loan....................................................82
Healthcare Loans...................................................44
Healthcare Properties..............................................44
Healthcare Property................................................82
Hospitality Loan...................................................82
Hospitality Loans..................................................43
Hospitality Properties.............................................43
Hospitality Property...............................................82
HUD................................................................88
I
Industrial Loan....................................................82
Industrial Loans...................................................41
Industrial Properties..............................................42
Industrial Property................................................82
Initial Pool Balance........................................3, 12, 82
Insurance Proceeds.................................................59
Interest Accrual Period........................................23, 58
Interest Only Certificates..................................1, 12, 51
Interest Reserve Loans.............................................61
L
LaSalle............................................................69
Liquidation Fee...................................................101
Liquidation Proceeds...............................................59
Loan Group......................................................3, 32
Loan-to-Value Ratio................................................92
Lock Box Account...................................................84
Lock-Out Period....................................................84
LTV............................................................86, 92
M
MAI............................................................49, 89
Master Servicer................................................1, 100
Master Servicer Remittance Date....................................69
Master Servicing Fee..............................................100
Master Servicing Fee Rate.........................................100
Material Breach....................................................97
Material Document Defect...........................................97
Maturity Assumptions...............................................73
Maturity Balance...................................................92
Maturity Date LTV..................................................92
MCSI Exemption................................................37, 109
Mixed Use Loans....................................................42
Mixed Use Properties...............................................42
Mobile Home Loan...................................................82
Mobile Home Loans..................................................45
Mobile Home Properties.............................................45
Mobile Home Property...............................................82
Money Rates........................................................29
Money Term.........................................................26
Monthly Debt Service Payment.......................................84
Moody's.........................................................1, 31
Morgan Stanley Loans...............................................13
S-116
<PAGE>
Mortgage...........................................................82
Mortgage File......................................................93
Mortgage Loan......................................................12
Mortgage Loan Purchase Agreement...................................13
Mortgage Loan Purchase Agreements..................................92
Mortgage Loans..................................................3, 82
Mortgage Pool.......................................................3
Mortgage Rate..................................................34, 92
Mortgaged Properties...............................................82
Mortgaged Property.................................................34
MSMC............................................................3, 13
Multifamily Loan...................................................82
Multifamily Loans..................................................42
Multifamily Properties.............................................42
Multifamily Property...............................................82
N
Net Aggregate Prepayment Interest Shortfall........................28
Net Mortgage Rate..............................................18, 54
Non-30/360 Loan....................................................54
Nonrecoverable Advance.............................................70
Note...............................................................82
Notional Amount.............................................1, 17, 53
NSF................................................................92
O
Offered Certificates........................................1, 12, 52
Office Loan........................................................82
Office Loans.......................................................41
Office Properties..................................................41
Office Property....................................................82
Operating Advisor.............................................14, 103
P
P&I Advance........................................................65
P&I Advances.......................................................29
Partial Release....................................................86
Participants.......................................................52
Parties in Interest...............................................108
Pass-Through Rate...............................................1, 54
Percentage Interest................................................55
Permitted Cure Period..............................................97
Plans.............................................................108
Pooling and Servicing Agreement.............................1, 12, 51
PPS................................................................44
Prepayment Assumption..............................................37
Prepayment Interest Excess.....................................27, 64
Prepayment Interest Shortfall..................................27, 63
Prepayment Premium.................................................84
Primary Service Fee................................................29
Prime Rate.........................................................29
Principal Balance Certificates..............................4, 16, 53
Principal Distribution Amount..................................23, 59
Principal Prepayments..............................................59
S-117
<PAGE>
Principal Window...................................................11
Private Certificates...........................................13, 52
PRN................................................................93
Property Value.....................................................92
PTCE..............................................................111
PTE...........................................................37, 109
Purchase Price.....................................................97
Q
Qualifying Substitute Mortgage Loan................................97
R
Rating Agencies.................................................1, 31
Realized Losses....................................................63
Record Date....................................................55, 69
Rehabilitated Mortgage Loan.......................................100
Release Date.......................................................86
Release Payment....................................................86
REMIC...........................................................4, 36
REMIC I........................................................4, 106
REMIC I Regular Interests.........................................106
REMIC II...................................................4, 36, 106
REMIC II Regular Interests........................................107
REMIC III..................................................4, 36, 106
REMIC Regular Certificates..................................1, 12, 52
REMIC I............................................................36
REO Income.........................................................59
REO Property...............................................12, 51, 99
REO Tax...........................................................106
Reserve Accounts...................................................83
Residual Certificates.......................................1, 12, 52
Retail Loan........................................................82
Retail Loans.......................................................41
Retail Properties..................................................41
Retail Property....................................................82
Revised Rate.......................................................84
RMF.............................................................3, 13
RMF Loans..........................................................13
S
S&P.............................................................1, 31
Scheduled Payment..............................................24, 59
Scheduled Principal Balance........................................54
Section 401(c)....................................................110
Section 42 Properties..............................................87
Section 8..........................................................88
Self-Storage Loan..................................................82
Self-Storage Loans.................................................45
Self-Storage Properties............................................45
Self-Storage Property..............................................82
Seller..............................................................3
Senior Certificates.........................................1, 12, 52
Servicing Advances.............................................29, 65
Servicing Standard.................................................98
S-118
<PAGE>
Servicing Transfer Event...........................................99
SF.................................................................91
SMMEA.........................................................37, 111
SouthTrust Capital Funding............... .........................93
Special Servicer....................................................1
Special Servicer Compensation.....................................102
Special Servicing Fee.............................................101
Specially Serviced Mortgage Loan...................................99
Specially Serviced Mortgage Loans.................................100
Stated Principal Balance...........................................63
Subordinate Certificates....................................1, 12, 52
Sub-Servicer.......................................................98
Substitution Shortfall Amount......................................97
Survey LLC.........................................................93
T
Tax Credits........................................................87
The Collection Period..............................................69
Transaction Overview...............................................11
Treasury Rate .....................................................60
Trust Fund..................................................1, 12, 51
Trustee.............................................................1
Trustee Fee........................................................70
U
Underwritable Cash Flow............................................91
Underwriters...................................................1, 112
Underwriting Agreement............................................112
Underwritten Cash Flow.............................................91
Underwritten Debt Service Coverage Ratio...........................91
Underwritten DSCR..................................................91
Units..............................................................92
Unpaid Interest................................................23, 58
W
Weighted Average Net Mortgage Rate.............................18, 54
Weighted Averages..................................................92
Withheld Amounts...................................................61
Y
Years Built/Renovated..............................................92
Z
Zoning Laws........................................................50
S-119
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 95 56,890,522 5.14 8.423 135 1.36 70.4 51.3
1,000,001 to 2,000,000 108 157,898,817 14.26 7.823 140 1.38 70.0 46.6
2,000,001 to 3,000,000 54 135,488,901 12.24 7.606 140 1.41 71.3 49.1
3,000,001 to 4,000,000 33 113,226,711 10.23 7.689 126 1.40 70.3 54.8
4,000,001 to 5,000,000 29 131,052,626 11.84 7.504 132 1.46 70.7 52.9
5,000,001 to 6,000,000 18 95,716,040 8.64 7.668 126 1.37 70.9 56.2
6,000,001 to 7,000,000 13 84,915,685 7.67 7.344 116 1.39 71.3 61.3
7,000,001 to 8,000,000 11 81,259,313 7.34 7.491 134 1.38 72.3 55.2
8,000,001 to 9,000,000 5 42,544,905 3.84 7.560 149 1.59 63.3 48.5
9,000,001 to 10,000,000 1 9,979,120 0.90 6.990 117 1.28 72.3 63.2
10,000,001 to 15,000,000 8 93,670,393 8.46 7.465 164 1.34 77.2 45.1
15,000,001 to 20,000,000 2 34,236,986 3.09 7.393 117 1.37 65.4 52.3
20,000,001 to 25,000,000 2 43,930,117 3.97 7.397 118 1.26 74.1 63.2
25,000,001 or greater 1 26,481,230 2.39 6.925 119 1.41 75.4 64.8
===================================================================================================================================
Total or Weighted Average: 380 $1,107,291,368 100.00% 7.602% 134 1.39x 71.2% 52.7%
===================================================================================================================================
Minimum: $129,582
Maximum: $26,481,230
Average: $2,913,925
</TABLE>
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 76 243,186,430 21.96 7.587 127 1.38 69.2 55.1
Florida 37 118,417,401 10.69 7.561 125 1.38 74.2 57.8
Texas 38 87,596,995 7.91 7.615 142 1.34 70.7 44.5
New York 21 79,820,284 7.21 7.709 143 1.50 65.4 41.3
New Jersey 15 65,703,962 5.93 7.427 129 1.34 71.8 54.5
Washington 12 52,637,425 4.75 7.424 131 1.30 71.8 58.0
Georgia 22 52,497,587 4.74 7.634 129 1.36 75.5 57.2
Wisconsin 20 42,675,856 3.85 7.609 119 1.49 72.3 55.1
Illinois 9 39,073,156 3.53 7.105 125 1.41 74.0 60.5
New Hampshire 9 32,708,824 2.95 7.742 116 1.53 73.2 58.8
Massachusetts 9 32,557,192 2.94 7.814 106 1.40 67.0 57.0
Louisiana 6 30,746,634 2.78 8.129 147 1.46 74.0 59.1
Ohio 12 30,676,516 2.77 7.211 151 1.40 76.1 53.5
Pennsylvania 9 30,183,576 2.73 7.386 142 1.36 69.1 44.0
Tennessee 8 21,824,371 1.97 7.962 158 1.45 73.9 53.7
Virginia 7 21,602,207 1.95 7.641 183 1.41 73.2 50.8
Oregon 4 16,976,279 1.53 7.433 137 1.34 70.1 42.1
North Carolina 8 16,659,246 1.50 7.840 132 1.39 73.3 55.6
Arizona 6 10,195,294 0.92 7.262 155 1.50 68.0 47.9
Maryland 8 9,476,545 0.86 8.266 154 1.31 70.5 49.6
South Carolina 4 8,189,461 0.74 8.237 166 1.35 77.8 51.9
Kentucky 2 8,000,223 0.72 6.930 281 1.36 75.9 6.9
Colorado 7 6,238,555 0.56 7.807 124 1.41 72.5 58.3
Indiana 1 5,449,637 0.49 8.400 111 1.22 68.5 56.6
Alabama 2 4,987,529 0.45 7.314 222 1.34 74.2 30.9
Missouri 3 4,838,249 0.44 7.247 116 1.37 70.6 55.1
New Mexico 2 4,607,840 0.42 8.205 78 1.53 69.8 55.5
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
(CONTINUED)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nevada 4 4,385,306 0.40 8.355 152 1.29 65.5 29.9
Maine 3 3,756,625 0.34 7.648 118 1.77 70.2 57.3
Kansas 2 3,239,816 0.29 7.887 168 1.43 74.8 49.9
Iowa 1 3,034,671 0.27 7.510 117 2.19 50.6 35.3
Connecticut 2 2,987,739 0.27 8.073 116 1.41 60.4 49.1
Alaska 1 2,690,841 0.24 7.860 238 1.21 79.1 0.0
Vermont 3 2,290,529 0.21 8.000 116 1.18 76.2 62.0
Mississippi 2 2,149,462 0.19 8.076 115 1.30 59.3 48.8
Arkansas 1 1,848,871 0.17 7.080 119 1.37 68.2 59.7
Utah 1 1,492,796 0.13 8.640 115 1.29 74.6 61.5
Minnesota 1 1,395,135 0.13 7.550 115 1.26 69.8 61.0
Michigan 2 492,305 0.04 9.998 183 1.95 51.7 11.2
================================ ================================================================================ =========
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
================================ ================================================================================ =========
</TABLE>
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily:
Garden 61 203,106,920 79.37 7.365 132 1.35 73.9 55.6
Low-Rise 15 46,818,366 18.30 7.071 118 1.34 73.2 63.6
High-Rise 2 5,958,669 2.33 7.043 117 1.31 75.6 65.9
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 78 $255,883,955 23.11% 7.303% 129 1.35X 73.8% 57.3%
Retail:
Anchored 35 150,194,126 60.35 7.299 149 1.33 73.4 51.4
Unanchored 52 82,559,685 33.18 7.697 138 1.35 69.5 51.5
Shadow Anchored 3 12,130,401 4.87 7.507 201 1.51 72.7 47.7
Restaurant 4 3,971,487 1.6 7.791 138 1.23 72.2 53.7
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 94 $248,855,698 22.47% 7.449% 148 1.34X 72.0% 51.3%
Hospitality:
Limited Service 29 72,371,036 53.45 7.872 131 1.52 68.8 49.4
Full Service 12 63,038,158 46.55 7.750 127 1.47 67.3 49.7
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 41 $135,409,194 12.23% 7.815% 129 1.50X 68.1% 49.5%
Healthcare:
Skilled Nursing Facility 19 92,352,807 73.51 8.087 159 1.54 75.5 51.0
Assisted Living Facility 8 20,754,330 16.52 7.986 133 1.49 75.3 52.2
Congregate Care 10 12,522,802 9.97 8.181 118 1.41 77.2 57.5
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 37 $125,629,939 11.35% 8.080% 151 1.52X 75.7% 51.8%
Office:
Suburban Office 34 65,392,627 53.84 7.883 121 1.33 67.5 53.8
Urban Office 6 56,071,579 46.16 7.500 123 1.41 62.0 50.8
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 40 $121,464,206 10.97% 7.706% 122 1.37X 65.0% 52. 4%
</TABLE>
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
(CONTINUED)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
PROPERTY TYPE LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial:
Light Industrial 12 36,066,583 41.45 7.843 116 1.29 68.5 52.1
Warehouse 17 36,003,011 41.38 7.790 109 1.36 66.5 54.3
Flex 3 14,942,781 17.17 7.505 135 1.31 75.5 59.8
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 32 $87,012,374 7.86% 7.763% 116 1.32X 68.9% 54.3%
Mixed Use:
Retail/Office 11 59,195,306 73.36 7.367 119 1.33 71.9 58.4
Multifamily/Retail 4 5,725,426 7.10 7.198 137 1.58 70.1 54.6
Office/Industrial 1 5,444,662 6.75 7.625 119 1.37 68.9 55.3
Multifamily/Office 3 4,432,351 5.49 8.104 114 1.47 70.2 58.6
Office/Warehouse 1 3,504,224 4.34 7.100 31 1.24 67.1 64.2
Multifamily/Retail/Office 1 2,389,037 2.96 7.375 116 2.14 35.1 28.1
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 21 $80,691,006 7.29% 7.402% 116 1.38X 70.2% 57.3%
Self-Storage:
Self-Storage 16 25,011,017 100.00 7.844 151 1.39 67.0 28.5
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 16 $25,011,017 2.26% 7.844% 151 1.39X 67.0% 28.5%
Mobile Home Park:
Mobile Home Park 13 18,868,494 100.00 7.440 118 1.51 77.1 66.1
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 13 $18,868,494 1.70% 7.440% 118 1.51X 77.1% 66.1%
Special Purpose:
Car Wash 7 8,137,417 96.12 8.967 237 1.67 69.2 0.0
Day Care 1 328,068 3.88 9.750 108 1.33 62.5 56.9
- - -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 8 $8,465,484 0.76% 8.997% 232 1.66X 68.9% 2.2%
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
===================================================================================================================================
</TABLE>
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
MORTGAGE RATE (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.501 to 7.000 26 141,793,504 12.81 6.958 135 1.38 72.5 56.4
7.001 to 7.500 120 458,533,636 41.41 7.311 131 1.37 71.9 54.5
7.501 to 8.000 95 302,782,090 27.34 7.753 136 1.42 69.8 49.3
8.001 to 8.500 67 141,803,241 12.81 8.274 136 1.42 72.7 55.4
8.501 to 9.000 41 40,443,054 3.65 8.738 140 1.38 66.5 41.7
9.001 to 9.500 22 18,080,414 1.63 9.180 155 1.42 65.2 38.2
9.501 to 10.000 6 2,298,289 0.21 9.702 89 1.24 66.3 50.2
10.001 to 10.500 2 1,343,222 0.12 10.171 112 1.74 61.5 53.8
11.001 to 11.500 1 213,917 0.02 11.050 114 2.75 30.6 25.8
=========================================================================================================================
380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
TOTAL:
=========================================================================================================================
Minimum: 6.900%
Maximum: 11,050%
Weighted Average: 7.602%
</TABLE>
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
ORIGINAL TERM TO MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
STATED MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 7 18,219,301 1.65 8.073 50 1.55 72.6 66.4
61 to 120 271 843,417,770 76.17 7.54 115 1.39 70.8 59.1
121 to 180 71 138,615,905 12.52 7.937 174 1.37 72.7 44.8
181 to 240 22 84,905,023 7.67 7.643 236 1.41 72.6 12.5
241 to 300 9 22,133,369 2.00 7.287 297 1.34 70.3 0.0
=============================================================================================================================
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
=============================================================================================================================
Minimum: 36
Maximum: 300
Weighted Average: 139
</TABLE>
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
REMAINING TERMS TO MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
STATED MATURITY (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 60 7 18,219,301 1.65 8.073 50 1.55 72.6 66.4
61 to 120 271 843,417,770 76.17 7.540 115 1.39 70.8 59.1
121 to 180 71 138,615,905 12.52 7.937 174 1.37 72.7 44.8
181 to 240 22 84,905,023 7.67 7.643 236 1.41 72.6 12.5
241 to 300 9 22,133,369 2.00 7.287 297 1.34 70.3 0.0
===============================================================================================================================
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
===============================================================================================================================
Minimum: 31
Maximum: 299
Weighted Average: 134
</TABLE>
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
ORIGINAL AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
TERM (MOS) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALLOON LOANS
240 36 52,164,351 5.18 8.146 129 1.43 68.3 43.8
241 to 299 8 27,109,639 2.69 7.490 115 1.49 72.1 56.2
300 176 469,549,133 46.60 7.698 121 1.41 69.1 54.5
301 to 359 7 12,240,271 1.21 8.043 91 1.44 64.2 57.7
360 111 440,611,509 43.73 7.412 127 1.36 74.3 63.2
361 or greater 1 5,981,248 0.59 7.500 115 1.22 75.7 67.1
- - ----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 339 $1,007,656,151 91.00% 7.594% 124 1.39X 71.4% 57.9%
FULLY-AMORTIZING LOANS
179 or Less 1 150,076 0.15 9.875 152 1.35 85.8 0.0
180 11 16,858,929 16.92 8.037 176 1.28 61.6 0.0
181 to 239 3 16,423,708 16.48 7.198 231 1.21 81.1 0.2
240 17 44,069,135 44.23 7.915 237 1.52 67.1 0.3
241 to 299 1 2,400,000 2.41 7.350 298 1.21 64.4 0.0
300 8 19,733,369 19.81 7.279 297 1.36 71.0 0.0
- - ----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 41 $99,635,217 9.00% 7.681% 239 1.39X 69.2% 0.2%
==================================================================================================================================
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
==================================================================================================================================
Minimum: 156
Maximum: 376
Weighted Average: 316
</TABLE>
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
DEBT SERVICE COVERAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.01 to 1.15 8 11,582,663 1.05 7.589 170 1.13 75.0 35.7
1.16 to 1.25 63 179,354,689 16.20 7.623 147 1.22 74.6 49.5
1.26 to 1.35 136 400,301,954 36.15 7.557 127 1.31 72.4 56.8
1.36 to 1.50 102 309,708,224 27.97 7.613 132 1.44 71.4 54.6
1.51 to 1.75 53 169,191,236 15.28 7.612 141 1.59 66.1 45.6
1.76 to 2.00 13 26,684,056 2.41 7.820 132 1.87 61.0 42.9
2.01 or greater 5 10,468,545 0.95 7.899 91 2.23 60.0 51.1
================================================================================================================================
TOTAL: 380 $1,107,291,368 100.00 7.602% 134 1.39X 71.2% 52.7%
================================================================================================================================
Minimum: 1.06x
Maximum: 2.75x
Weighted Average: 1.39x
</TABLE>
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
CUT-OFF DATE LOAN-TO- MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
VALUE RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.1 to 30.0 1 8,107,637 0.73 7.500 108 1.73 28.6 23.2
30.1 to 40.0 4 3,128,415 0.28 7.878 122 2.13 34.8 25.4
40.1 to 50.0 4 8,896,008 0.80 7.874 201 1.51 46.9 11.8
50.1 to 60.0 41 105,084,957 9.49 7.662 130 1.55 57.0 40.0
60.1 to 70.0 104 276,772,021 25.00 7.762 128 1.40 66.2 47.3
70.1 to 80.0 217 674,182,447 60.89 7.522 134 1.36 75.8 58.9
80.1 to 90.0 9 31,119,882 2.81 7.612 188 1.26 83.4 30.5
===================================================================================================================================
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
===================================================================================================================================
Minimum: 28.6%
Maximum: 86.8%
Weighted Average: 71.2%
</TABLE>
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
NUMBER PERCENT BY WEIGHTED AVERAGE AVERAGE WEIGHTED
OF AGGREGATE AGGREGATE AVERAGE REMAINING WEIGHTED CUT-OFF AVERAGE
BALLOON LOAN-TO- MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE TERM TO AVERAGE DATE BALLOON
VALUE RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) MATURITY (MOS) DSCR (X) LTV (%) LTV (%)
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 38 80,012,497 7.23 7.781 239 1.42 66.8 0.0
0.1 to 10.0 3 19,622,720 1.77 7.275 237 1.25 78.9 0.9
20.1 to 30.0 10 19,995,367 1.81 7.650 154 1.61 48.3 25.6
30.1 to 40.0 12 21,657,542 1.96 7.973 154 1.51 61.6 35.6
40.1 to 50.0 57 150,952,423 13.63 7.711 143 1.43 64.7 46.7
50.1 to 60.0 123 324,181,371 29.28 7.628 119 1.41 69.1 55.6
60.1 to 70.0 129 462,883,060 41.80 7.497 119 1.35 76.0 64.7
70.1 to 80.0 8 27,986,389 2.53 7.842 98 1.42 80.9 72.9
================================================================================================================================
TOTAL: 380 $1,107,291,368 100.00% 7.602% 134 1.39X 71.2% 52.7%
================================================================================================================ ================
Minimum: 0.0%
Maximum: 76.7%
Weighted Average: 52.7%
</TABLE>
I-12
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT RESTRICTION
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
PREPAYMENT RESTRICTION AUG-1998 AUG-1999 AUG-2000 AUG-2001 AUG-2002 AUG-2003 AUG-2004 AUG-2005 AUG-2006 AUG-2007 AUG-2008
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out 90.99% 91.00% 89.39% 80.99% 76.78% 52.08% 52.09% 50.51% 49.53% 48.14% 54.12%
Yield Maintenance 8.82% 8.81% 10.41% 18.63% 22.29% 44.36% 43.30% 41.39% 41.56% 33.83% 29.48%
Penalty Points
5.00% and greater 0.19% 0.00% 0.00% 0.19% 0.08% 2.94% 0.00% 0.02% 0.55% 0.00% 6.73%
4.00% to 4.99% 0.00% 0.19% 0.00% 0.00% 0.19% 0.08% 2.95% 0.00% 0.02% 0.55% 0.59%
3.00% to 3.99% 0.00% 0.00% 0.19% 0.06% 0.00% 0.34% 0.08% 6.46% 0.89% 0.02% 2.48%
2.00% to 2.99% 0.00% 0.00% 0.00% 0.14% 0.06% 0.06% 0.34% 0.55% 5.78% 1.09% 4.96%
1.00% to 1.99% 0.00% 0.00% 0.00% 0.00% 0.14% 0.14% 0.06% 0.35% 0.75% 2.03% 0.00%
Open 0.00% 0.00% 0.00% 0.00% 0.47% 0.00% 1.18% 0.72% 0.91% 14.33% 1.65%
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Pool Balance Outstanding 1,107.29 1,093.11 1,077.51 1,057.12 1,038.76 1,005.31 984.37 950.17 900.79 864.30 186.90
(in millions)
% Initial Pool Balance 100.00% 98.72% 97.31% 95.47% 93.81% 90.79% 88.90% 85.81% 81.35% 78.06% 16.88%
</TABLE>
I-13
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Loan Groups Cut-Off Date Bal./ Mortgage
No. Seller(1) Group Property Name(2) (by Loan No.) Date Balance Unit or SF(3 Rate(4)
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 MS 2 2677 Larkin Street (2I) $6,386,567 $118,983 6.970%
2 MS 2 645 Stockton Street (2I) $5,674,747 $118,983 6.970%
3 MS 2 1340 -1390 Taylor Street (2I) $5,054,295 $118,983 6.970%
4 MS 2 1401 Jones Street (2I) $4,695,700 $118,983 6.970%
5 MS 2 1870 Pacific Avenue (2I) $3,416,813 $118,983 6.970%
6 MS 2 500 Stanyan Street (2I) $3,281,099 $118,983 6.970%
7 MS 2 2075 - 2079 Market Street (2I) $3,013,074 $118,983 6.970%
8 MS 2 1290 20th Avenue (2I) $2,953,787 $118,983 6.970%
9 MS 2 78 Buchanan Street (2I) $2,714,291 $118,983 6.970%
10 MS 1 2095 - 2099 Market Street (2I) $2,650,425 $120 6.970%
11 MS 2 235 - 241 Church Street (2I) $1,428,994 $118,983 6.970%
12 MS 1 1465 Burlingame Avenue (2I) $810,321 $120 6.970%
13 MS 2 252 - 258 Church Street (2I) $753,794 $118,983 6.970%
14 RMF 1 Fountain View Nursing Home (2A) $8,117,519 $41,802 8.260%
15 RMF 1 Greeneville West Health Care Center (2A) $7,003,349 $41,802 8.260%
16 RMF 1 Bay St. Joseph Care Center (2A) $5,650,430 $41,802 8.260%
17 RMF 1 Heritage Manor of Abbeville (2A) $5,411,679 $41,802 8.260%
18 RMF 1 Panola Nursing Home (2A) $3,820,009 $41,802 8.260%
19 RMF 1 Jackson Manor Nursing Home (2A) $3,262,924 $41,802 8.260%
20 RMF 1 West Mesa Health Care Center (2A) $2,715,502 $41,802 8.260%
21 RMF 1 Pickett County Nursing Home (2A) $2,142,251 $41,802 8.260%
22 CT 1 Broadview Village Square $26,481,230 $75 6.925%
23 RMF 1 The Courville at Nashua & Villas at Nashua (2II) $12,024,709 $96,606 7.890%
24 RMF 1 Aynsley Place (2II) $4,788,347 $96,606 7.890%
25 RMF 1 The Courville at Manchester (2II) $4,089,471 $96,606 7.890%
26 RMF 1 Carlyle Place (2II) $4,021,822 $96,606 7.890%
27 MS 1 Holiday Inn-Fond du Lac, WI (2III) $5,154,623 $36,706 7.320%
28 MS 1 Comfort Suites-Appleton, WI (2III) $5,068,111 $36,706 7.320%
29 MS 1 Comfort Suites-Madison, WI (2III) $4,260,673 $36,706 7.320%
30 MS 1 Budgetel-Madison, WI (2III) $4,109,279 $36,706 7.320%
31 MS 1 Holiday Inn Express-Osh Kosh, WI (2III) $2,696,264 $36,706 7.320%
32 MS 1 Budgetel-Fond du Lac, WI (2III) $2,386,266 $36,706 7.320%
33 MS 1 Elliott Bay Office Park $23,000,000 $105 7.440%
34 CT 1 The Cable Building $20,930,117 $101 7.350%
35 CT 1 NationsBank Tower (2IV) $6,173,898 $27 7.250%
36 CT 1 Woodhaven Shopping Center (2IV) $4,206,145 $27 7.250%
37 CT 1 Radford Hills Shopping Center (2IV) $2,621,775 $27 7.250%
38 CT 1 Crossroads Shopping Center (2IV) $1,822,823 $27 7.250%
39 CT 1 Pioneer Square (2IV) $1,245,784 $27 7.250%
40 CT 1 Mesa Verde Shopping Center (2IV) $1,105,000 $27 7.250%
41 CT 1 Park Plaza Shopping Center (2IV) $1,052,246 $27 7.250%
42 CT 3 Cambridge Square Shopping Center $17,806,773 $77 6.980%
43 CT 1 Holiday Inn BayView Plaza $16,430,213 $52,830 7.840%
44 MS 1 Westbrook (2V) $4,529,835 $13,705 7.200%
45 MS 1 Green Acres (2V) $3,541,863 $13,705 7.200%
46 MS 1 Compton Hills (2V) $2,452,359 $13,705 7.200%
47 MS 1 Skymeadow (2V) $2,042,331 $13,705 7.200%
48 MS 1 Eastgate (2V) $1,249,610 $13,705 7.200%
49 MS 1 Lake Remington (2V) $1,191,034 $13,705 7.200%
50 MS 1 Shady Terrace (2V) $808,341 $13,705 7.200%
51 CT 1 Preston Place Apartments $14,150,000 $59,205 7.150%
52 CT 1 Pharmaceutical Formulations Building $11,561,566 $53 7.375%
53 CT 1 Bristol Market Place $11,475,394 $116 7.730%
54 CT 1 Heritage Square $11,298,152 $136 7.375%
55 MS 1 Jockey Hollow Office Complex $11,250,000 $114 7.290%
56 RMF 2 Ashton Pointe Apartments $10,965,690 $45,690 7.120%
57 RMF 1 Wedgewood Care Center $10,944,882 $54,724 7.840%
58 MS 3 River Oaks Apartments $9,979,120 $55,440 6.990%
59 RMF 1 Oakwood Nursing Home (2VI) $4,527,017 $21,547 8.010%
60 RMF 1 Tanglewood Nursing Home (2VI) $2,518,433 $21,547 8.010%
61 RMF 1 Forsyth Nursing Home (2VI) $1,238,523 $21,547 8.010%
62 RMF 1 Hilltop Nursing Home (2VI) $1,132,269 $21,547 8.010%
63 MS 1 Harrows Warehouse-Melville, NY (2VII) $3,603,513 $47 8.250%
64 MS 1 Harrows Shopping Center-Centereach, NY (2VII) $3,319,025 $47 8.250%
65 MS 1 Harrows Shopping Center-Lynbrook, NY (2VII) $1,212,817 $47 8.250%
66 MS 1 Harrows Shopping Center-Patchogue, NY (2VII) $848,473 $47 8.250%
67 CT 1 132 West 125th Street $8,950,758 $66 7.540%
68 MS 1 Friendship Manor - Janesville (2VIII) $1,563,902 $38,691 8.430%
69 MS 1 Friendship Manor - Mayville (2VIII) $1,360,594 $38,691 8.430%
70 MS 1 Friendship Manor - North Hume (2VIII) $1,333,693 $38,691 8.430%
71 MS 1 Friendship Manor - West Mann (2VIII) $980,881 $38,691 8.430%
72 MS 1 Friendship Manor - Hartford (2VIII) $914,882 $38,691 8.430%
73 MS 1 Friendship Manor - Wisconsin Rapids (2VIII) $774,131 $38,691 8.430%
74 MS 1 Friendship Manor - Medford (2VIII) $735,033 $38,691 8.430%
75 MS 1 Friendship Manor - Fond du Lac (2VIII) $641,199 $38,691 8.430%
76 MS 1 Friendship Manor - Shawano (2VIII) $633,380 $38,691 8.430%
77 CT 1 Van Dorn Station $8,767,718 $118 7.300%
78 MS 1 Brooksedge Corporate Center $8,601,273 $47 7.240%
79 MS 1 Bayside Plaza $8,107,637 $64 7.500%
80 CT 1 Transicoil $7,974,066 $60 7.500%
81 MS 1 Holiday Inn-Lauderdale, FL $7,677,558 $41,056 7.680%
82 RMF 3 Highland Walk Apartments (120) $7,482,950 $35,976 7.040%
83 CT 2 Deep Ellum Lofts $7,476,631 $59,338 7.125%
84 MS 1 Galleries of Syracuse $7,439,285 $32 7.890%
85 RMF 2 Sandlewood Apartments (105), (108), (133) $7,305,576 $36,528 7.500%
86 MS 3 Emerald Pointe Apartments $7,302,992 $53,698 7.300%
87 MS 1 Sheraton Inn-Columbus, GA (106), (134), (165) $7,235,226 $40,877 7.605%
88 CT 1 Gardenside Shopping Center $7,191,881 $38 6.900%
89 CT 1 Apple Valley Square Shopping Center $7,169,800 $66 7.625%
90 CT 1 Abington Shopping Center (2B) $4,430,490 $56 7.200%
91 CT 1 Dunmore Shopping Center (2B) $2,545,602 $56 7.200%
92 CT 1 Westland Plaza Shopping Center $6,964,809 $69 7.200%
93 CT 1 Blackburn Center $6,956,185 $25 7.637%
94 MS 1 Pleasanton Square II $6,904,653 $133 6.970%
95 MS 3 West Garden Apartments (247) $6,814,960 $36,058 6.940%
96 CT 1 Foster-Richardson Rest Home (2C) $2,839,073 $29,525 7.870%
97 CT 1 Pinnacle Rest Home (2C) $2,234,728 $29,525 7.870%
98 CT 1 Mount Pleasant Rest Home (2C) $1,687,403 $29,525 7.870%
99 CT 1 1650 Sherman Ave. (2IX) (2D) $2,001,761 $18 7.550%
100 CT 1 8290 National Highway (2IX) (2D) $1,764,338 $18 7.550%
101 CT 1 7101 Westfield Ave. (2X) (2D) $1,200,917 $18 7.550%
102 CT 1 1601 Hylton Road (2X) (2D) $863,769 $18 7.550%
103 CT 1 1625 Hylton Road (2X) (2D) $846,342 $18 7.550%
104 MS 3 Cranbrook III $6,545,028 $30,301 8.340%
105 RMF 3 The Palms of Apalachee Apartments (85), (108), (133) $6,484,777 $23,411 7.500%
106 MS 1 Courtyard by Marriott-Naples, FL (87), (134), (165) $6,461,424 $63,347 7.455%
107 RMF 2 Columbia Arms Apartments $6,380,363 $46,914 7.200%
108 RMF 3 Palms of Magnolia (85), (105), (133) $6,365,425 $27,919 7.500%
109 CT 1 Winds of Santa Fe $6,245,793 $35,895 7.125%
110 MS 1 225 Arizona Avenue $6,231,804 $227 7.400%
111 CT 1 Battlefield Business Park $5,981,248 $65 7.500%
112 CT 1 5 & 7 Allen Street (2XI) $3,238,487 $88 7.000%
113 CT 1 Lyme Road Office Building (2XI) $2,417,546 $88 7.000%
114 RMF 2 Spring Valley Club Apartments $5,469,441 $34,184 7.350%
115 CT 1 Wolf Lake Industrial Center $5,449,637 $9 8.400%
116 CT 1 Aura Systems, Inc. $5,444,662 $73 7.625%
117 CT 1 Tustin Square $5,284,315 $79 7.375%
118 CT 1 The Market at Hobe Sound Shopping Center $5,283,006 $35 7.563%
119 MS 1 Courtyard by Marriott-Springfield, OR $5,281,924 $45,534 7.510%
120 RMF 2 Highland Estates (82) $5,171,215 $34,246 7.370%
121 MS 1 19 Crosby Drive $5,119,222 $72 7.990%
122 MS 3 Heritage House Apartments $5,102,890 $31,695 8.660%
123 MS 1 Fairfield Inn-New Orleans Airport $5,090,066 $48,019 7.840%
124 MS 1 Kearny Office Park $5,024,528 $37 7.750%
125 CT 1 Holiday Inn- Holidome $4,984,554 $25,431 8.170%
126 CT 1 Oxford Nursing Home $4,974,724 $41,456 8.000%
127 CT 1 Brandywine Village Shopping Center $4,971,680 $60 6.900%
128 CT 1 Loop Inn (2E) $3,723,275 $45,131 9.160%
129 CT 1 Gallery Motel (2E) $1,241,092 $45,131 9.160%
130 MS 3 Arnaz Arms Apartments $4,944,632 $52,049 7.430%
131 CT 1 So. Calif. Institute of Arch. Building $4,848,712 $56 7.625%
132 MS 3 Phoenix Court $4,785,965 $23,461 6.990%
133 RMF 2 Wynstone Apartments (85), (105), (108) $4,770,988 $23,387 7.500%
134 MS 1 Holiday Inn-Treasure Island, FL (87), (106), (165) $4,700,000 $40,171 7.455%
135 CT 1 Cedar Hills Shopping Center $4,605,023 $43 7.500%
136 CT 1 Knollwood Center $4,546,971 $66,867 8.210%
137 CT 1 Kenilworth Fidelco Industrial Center $4,480,518 $30 7.700%
138 CT 1 Timberline Shopping Center $4,474,999 $46 7.450%
139 RMF 1 West Lawrence Care Center $4,393,126 $20,433 7.945%
140 MS 1 Reservoir Plaza $4,391,144 $122 7.130%
141 RMF 2 Cambridge Park Apartments $4,382,532 $19,392 6.930%
142 CT 1 Taylor Crossing $4,359,863 $32,058 7.125%
143 MS 2 St. Doris Apartments $4,350,592 $14,502 7.750%
144 MS 1 Shoppes of Arrowhead $4,247,894 $100 7.720%
145 CT 1 University Place Apartments I & II $4,179,930 $34,545 7.100%
146 CT 1 Sunsations #3 (2F)* $1,806,339 $113 8.330%
147 CT 1 Sunsations #1 (2F)* $1,059,918 $113 8.330%
148 CT 1 Sunsations #8 (2F)* $1,134,560 $113 8.330%
149 RMF 3 Golden Pointe Apartments (167) $3,981,336 $33,178 7.620%
150 CT 1 Sunsations #7 (2G)* $1,278,868 $112 8.330%
151 CT 1 Sunsations #2 (2G)* $1,229,107 $112 8.330%
152 CT 1 Sunsations #4 (2G)* $761,349 $112 8.330%
153 CT 1 Sunsations #5 (2G)* $696,660 $112 8.330%
154 MS 1 Days Inn-Tacoma, WA $3,884,647 $30,114 7.820%
155 RMF 1 Marriott Fairfield Inn $3,879,892 $48,499 7.886%
156 CT 1 Colonial Nursing Center $3,839,020 $42,656 8.220%
157 MS 1 349 Main Street (2H) $1,897,591 $143 7.540%
158 MS 1 300/310 Main Street (2H) $1,897,591 $143 7.540%
159 CT 2 Village North Townhouses and Apartments $3,738,315 $38,941 7.125%
160 CT 1 One First Avenue Warehouse $3,735,181 $28 8.245%
161 MS 1 Prime Time Medford Apartments $3,585,107 $42,680 7.560%
162 MS 1 Warmington Building $3,582,062 $85 7.570%
163 CT 3 Westwood Apartments $3,539,494 $42,137 7.375%
164 CT 1 Columbia Pacific Plaza $3,504,224 $33 7.100%
165 MS 1 Holiday Inn-Bath, ME (87), (106), (134) $3,492,731 $24,771 7.505%
166 CT 1 Home Sweet Home $3,476,883 $60,998 8.125%
167 RMF 2 Belle Rive Club Apartments (149) $3,389,525 $32,592 7.180%
168 CT 1 Clean Machine - Kingston Pike (West Hills) (2I) $1,432,096 $345 9.065%
169 CT 1 Clean Machine - Merchant (2I) $1,004,210 $345 9.065%
170 CT 1 Clean Machine - Maynardville (Halls) (2I) $938,869 $345 9.065%
171 CT 1 Market & Noe Center $3,256,959 $162 7.500%
172 CT 1 Sentry Plaza Shopping Center (2XII) $1,834,720 $31 7.500%
173 CT 1 Sentry Grocery Store (2XII) $1,404,744 $31 7.500%
174 CT 1 International Food & Fashion Center (267) $3,220,506 $153 8.500%
175 CT 1 Colony Square 1, 2, 4 (2XIII) $2,260,650 $67 7.625%
176 CT 1 Williamsburg Center (2XIII) $929,201 $67 7.625%
177 MS 1 Colima Plaza $3,164,709 $94 7.810%
178 CT 1 Royal Oaks Shopping Center $3,159,596 $44 7.400%
179 CT 1 Schoolhouse Shopping Center $3,143,717 $100 7.625%
180 CT 1 Shadow Rose Apartments $3,137,809 $21,201 7.050%
181 MS 1 60 Messenger Street $3,095,389 $134 7.950%
182 CT 1 Summit Court Apartments $3,086,411 $25 7.625%
183 CT 1 Walsh Avenue Industrial $3,078,447 $36 7.720%
184 MS 1 Hampton Inn-Cedar Rapids, IA $3,034,671 $28,629 7.510%
185 RMF 1 Spalding Plaza Retail and Office Complex $2,982,701 $63 7.230%
186 CT 1 16 Brooklyn Industrial $2,949,822 $14 8.750%
187 MS 1 Lemon Grove Square $2,934,979 $88 7.730%
188 CT 1 Ramada Inn Speedway $2,885,774 $22,723 8.000%
189 CT 1 Triangle Crossroads $2,881,396 $64 8.000%
190 CT 1 Rosewood Apartments $2,843,815 $31,598 7.250%
191 CT 1 Tehachapi Towne Center $2,833,963 $80 7.375%
192 CT 3 Pinellas Pointe Apartments $2,829,193 $20,803 7.375%
193 CT 1 Quail Hill Apartments $2,789,048 $41,015 7.000%
194 CT 1 Wal Mart - Whitinsville $2,787,300 $47 7.310%
195 MS 1 Central Heights Shopping Center $2,732,001 $27 7.680%
196 CT 1 Premier Corporate Center $2,693,998 $81 7.500%
197 RMF 1 Pharr Plaza $2,693,948 $89 7.450%
198 CT 1 Office Max - Bentley Mall $2,690,841 $112 7.860%
199 CT 2 Woodknoll Townhomes $2,689,716 $17,931 7.125%
200 CT 1 Microtel Inn $2,686,351 $26,337 8.000%
201 CT 1 Walnut Auto Care Center $2,651,781 $88 7.438%
202 CT 1 Andresen Plaza $2,591,934 $54 7.750%
203 CT 3 Hartland Apartments $2,492,218 $51,921 7.130%
204 CT 1 Mr. Gatti's Restaurant, San Angelo (2XIV) $1,265,005 $48 7.875%
205 CT 1 Mr Gattis Restaurant, Midland (2XIV) $1,224,483 $48 7.875%
206 MS 1 Super 8-Madison, WI $2,487,507 $28,267 7.550%
207 CT 1 Access Self Storage $2,469,919 $33 7.500%
208 CT 1 Executive Car Wash - Roswell (2XV) $1,431,273 $178 8.950%
209 CT 1 Executive Car Wash - Johnson Ferry (2XV) $1,033,998 $178 8.950%
210 CT 1 Rooker Building $2,453,089 $9 7.625%
211 CT 1 Alta Vista Corporate Center $2,432,598 $52 7.150%
212 CT 1 75 Montgomery Street $2,400,000 $53 7.350%
213 CT 1 North Kitsap Self Storage (2J) $1,692,554 $29 7.630%
214 CT 1 Poulsbo Business Park (2J) $696,934 $29 7.630%
215 CT 1 13-17 Laight Street $2,389,037 $31 7.375%
216 CT 1 Quality Inn - Vallejo $2,387,332 $30,607 7.750%
217 CT 1 Executive Inn II (2XVI) $661,128 $12,423 8.625%
218 CT 1 Executive Inn I (2XVI) $647,285 $12,423 8.625%
219 CT 1 Super 8 Motel (2XVI) $553,668 $12,423 8.625%
220 CT 1 Travelodge (2XVI) $523,051 $12,423 8.625%
221 MS 1 H.S.T. Building $2,334,443 $42 8.420%
222 CT 1 The French/ Cabot Block Building (2XVII) $1,113,494 $75 8.000%
223 CT 1 The Waterman Place Building (2XVII) $830,549 $75 8.000%
224 CT 1 The Morgan Block (2XVII) $346,485 $75 8.000%
225 CT 1 Holiday Inn Express- Lemoore $2,290,529 $37,550 8.000%
226 CT 1 Holiday Inn Express- Killeen $2,240,340 $32,469 7.750%
227 CT 1 Country Inn by Carlson $2,223,956 $38,344 8.500%
228 CT 1 Atlantic Self Storage- Dunn Avenue (229), (243) $2,174,684 $18 8.000%
229 CT 1 Atlantic Self Storage I-295 (228), (243) $2,125,259 $25 8.000%
230 CT 1 Renaissance Apartments $2,095,392 $87,308 7.200%
231 CT 1 Ames Department Store $2,082,913 $37 7.270%
232 CT 1 The Store House Self Storage $2,037,765 $28 8.810%
233 CT 1 Comfort Inn- Killeen $2,016,835 $34,773 8.125%
234 CT 1 SeaTac Inn $2,013,481 $26,846 8.250%
235 CT 1 KEW Industrial Park $1,993,193 $19 7.220%
236 CT 1 Hazel Ridge Plaza $1,991,233 $82 7.625%
237 CT 1 Gray Road Self Storage $1,990,674 $44 7.250%
238 CT 2 Virginia Square Apartments $1,990,318 $38,275 7.020%
239 RMF 2 Premier Club Apartments $1,989,134 $22,604 7.470%
240 CT 1 1058 Southern Blvd. $1,988,093 $35 7.040%
241 CT 1 Watson Centex-San Antonio* (305) $1,982,644 $30 9.375%
242 CT 3 Lakeside Meadows Apartments $1,979,260 $30,926 8.375%
243 CT 1 Atlantic Self Storage- Millcoe Road (228), (229) $1,976,985 $24 8.000%
244 CT 1 Holiday Inn - Reidsville $1,962,362 $19,624 8.270%
245 CT 1 Parkway Plaza* $1,947,723 $61 8.625%
246 CT 1 Lantern Plaza* $1,914,472 $147 8.625%
247 MS 2 West 24th Street Apartments (95) $1,897,298 $36,487 7.080%
248 CT 1 Airport Circle Plaza $1,893,341 $16 7.050%
249 CT 1 El Pueblo Lodge $1,892,339 $31,539 8.125%
250 MS 1 Maple Manor Apartments $1,848,871 $14,444 7.080%
251 MS 1 Regency Walk $1,836,982 $53 7.870%
252 CT 1 The Coach Store $1,794,103 $294 7.440%
253 CT 1 WIPAC Distribution Warehouse $1,793,958 $17 7.300%
254 MS 1 Oceanside Square $1,787,918 $52 8.640%
255 CT 1 North Las Vegas Self Storage $1,784,387 $22 7.770%
256 CT 1 Village Plaza $1,774,875 $81 7.700%
257 CT 3 Lake Margaret Village Apartments (2K)* $995,578 $20,047 8.760%
258 CT 3 Townhouse Apartments (2K)* $768,586 $20,047 8.760%
259 MS 3 Whispering Pines Apartments $1,697,565 $15,718 7.050%
260 CT 1 Beechmont Professional Building $1,693,702 $80 8.625%
261 CT 1 204 Loudon Road $1,691,266 $62 7.650%
262 CT 3 Atlantic Arms Apartments (2L) $1,386,123 $35,797 7.500%
263 CT 2 Kilbreth Apartments (2L) $296,315 $35,797 7.500%
264 CT 1 Ramada Limited- South Padre $1,665,897 $34,706 8.250%
265 CT 1 U.S. Rentals, Inc. $1,664,875 $146 7.375%
266 CT 1 El Campo Inn $1,621,937 $27,032 8.125%
267 CT 1 1318 Wilshire Boulevard (174) $1,620,285 $147 7.470%
268 CT 1 PETCO Building $1,596,201 $84 7.100%
269 CT 1 333 West Indian School - Phoenix (2M) $1,196,656 $72 7.875%
270 CT 1 2502 North Alvernon Way - Tucson (2M) $395,364 $72 7.875%
271 CT 1 Victory Self Storage - Staten Island $1,588,946 $42 7.750%
272 CT 1 Sheridan Retail Shops $1,574,765 $92 7.375%
273 CT 1 485 Kings Highway $1,493,506 $73 7.700%
274 CT 1 Norwest Business Park* $1,492,796 $34 8.640%
275 CT 1 Silver Creek Manor $1,492,158 $35,528 8.310%
276 CT 1 The Square Shopping Center $1,491,379 $82 7.250%
277 CT 1 301-315 East Tremont Ave. $1,488,714 $24,012 7.170%
278 CT 1 Jack In The Box - Galena Park (2XVIII) $771,530 $290 7.650%
279 CT 1 Jack in the Box - Terrell (2XVIII) $710,469 $290 7.650%
280 CT 3 Terrace View (Chateau) Apartments (2N) $994,153 $29,507 7.700%
281 CT 2 Garner Avenue Apartments (2N) $481,215 $29,507 7.700%
282 CT 1 Lake Ridge Apartments - DRK (283), (284), (285) $1,468,122 $36,703 7.250%
283 CT 1 Lake Ridge Apartments - FEM (282), (284), (285) $1,468,122 $36,703 7.250%
284 CT 1 Lake Ridge Apartments - JMK (282), (283), (285) $1,468,122 $36,703 7.250%
285 CT 1 Lake Ridge Apartments - MJK (282), (283), (284) $1,468,122 $36,703 7.250%
286 MS 1 Our Shopping Center $1,414,092 $13 7.530%
287 CT 1 Diffley Square Shopping Center $1,395,135 $46 7.550%
288 CT 1 Westridge Shopping Center* $1,353,243 $61 8.500%
289 CT 1 CVS Drug Store $1,345,109 $133 7.500%
290 RMF 1 Rite Aid Drug Store - Griffin, GA $1,310,326 $117 7.300%
291 CT 2 1525 & 1535 Central Avenue $1,294,037 $15,047 7.350%
292 CT 1 Lowry Expressway Office Building* $1,292,738 $65 8.250%
293 CT 1 Monarch Bank Building* $1,275,631 $133 8.500%
294 CT 1 Innovative Metals Warehouse $1,248,210 $43 7.500%
295 CT 1 Archer Road Self Storage $1,230,735 $27 7.188%
296 CT 1 Econo-Pak Warehouse $1,230,661 $22 7.500%
297 CT 1 Food-4-Less $1,223,470 $31 7.400%
298 CT 1 Sugarland Professional Building $1,216,380 $63 8.000%
299 CT 3 Summit Terrace Apartments $1,195,722 $12,455 6.950%
300 CT 1 Red Carpet Inn - Boone* $1,194,672 $19,911 8.740%
301 CT 2 1883-1887 Amsterdam Avenue $1,193,390 $19,890 7.500%
302 CT 1 Dave's Car Wash $1,167,962 $303 8.885%
303 CT 1 Alamo Self Storage $1,146,190 $19 7.375%
304 CT 2 Desert Pines Apartments* $1,137,537 $16,251 8.875%
305 CT 1 Watson Centex - Houston* (241) $1,133,518 $43 9.625%
306 CT 1 Blue Heron Car Wash $1,129,010 $385 8.795%
307 CT 1 30100 Crown Valley Parkway* $1,125,105 $77 8.500%
308 CT 1 Lovers Lane Retail Center $1,121,510 $167 7.750%
309 CT 1 Northway Manor MHP $1,121,432 $7,577 7.625%
310 CT 1 Budget Mini Storage-Fontana $1,096,588 $20 7.750%
311 CT 1 9D E-Z Storage $1,095,277 $29 7.750%
312 CT 1 Days Inn - Brunswick $1,092,850 $11,152 8.250%
313 CT 1 Apollo Self Storage $1,076,867 $24 8.125%
314 RMF 1 Hollywood Video Store - High Point, NC $1,070,565 $143 7.610%
315 CT 2 Cypress Woods Apartments $1,042,192 $18,611 7.250%
316 CT 1 Eagle Rock Shopping Center $1,017,653 $99 7.500%
317 RMF 1 Hollywood Video Store - Virginia Beach $999,477 $133 7.460%
318 CT 1 Airport South Building $995,882 $33 8.000%
319 CT 1 Thriftway Supermarket $992,762 $45 7.400%
320 RMF 1 Hollywood Video Store - Pikesville, MD $979,567 $136 7.460%
321 CT 1 Roof Garden Mobile Home Court* $955,934 $9,018 9.000%
322 CT 1 Sandalon East Office Building* $948,501 $43 8.625%
323 CT 1 Westgate Regency Center* $935,407 $99 8.050%
324 CT 1 Roger's Green Hills Supermarket $925,063 $40 7.400%
325 CT 1 Taco Bell & US Auto Glass $918,793 $208 8.000%
326 CT 1 555 Broadway* $901,773 $23 9.125%
327 CT 1 Aussie Self Storage $896,521 $29 8.375%
328 CT 3 Roselea Villas* $847,696 $22,308 8.500%
329 CT 1 Knights Inn-Summerton* $845,860 $6,042 10.125%
330 CT 1 1610 Broadway* $838,749 $112 9.250%
331 CT 1 Morrone Company* $821,213 $21 8.550%
332 CT 3 Peppertree Apartments $817,309 $10,216 7.430%
333 CT 1 Islip Terrace Plaza* $792,047 $76 8.610%
334 CT 1 1626 Logan Street* $776,125 $14,925 8.500%
335 CT 1 TX Human Serv. & Work Force Comm. Off.* $771,433 $35 8.875%
336 CT 1 Fielders Bridge Office Building* $742,239 $50 8.000%
337 CT 1 2906 North State Street Building* $735,370 $12 9.125%
338 CT 1 Days Inn - Orange City* $723,550 $19,041 9.125%
339 CT 3 Edgewood Court Apartments* $678,397 $18,844 9.250%
340 CT 1 Super Safe Self Service Storage $627,666 $18 8.625%
341 CT 1 Pioneer Plaza* $597,681 $67 8.375%
342 CT 1 287 Appleton Street* $596,274 $24 8.800%
343 CT 1 2059 E. Sahara Avenue* $566,861 $81 9.125%
344 CT 1 560 Virginia Way* $557,070 $103 9.375%
345 CT 1 Calibra Sunnyside* $531,739 $36 8.600%
346 CT 1 Bolling Building* $507,815 $40 9.000%
347 CT 1 512 Main Street* $507,191 $152 9.125%
348 CT 1 Panola Road Office Building* $498,337 $68 9.250%
349 CT 1 1920 Ledbetter Drive* $497,387 $85 8.250%
350 CT 1 2727-2745 Gundry Avenue* $497,362 $26 10.250%
351 CT 2 Citadel Apartments* $483,745 $14,659 8.750%
352 CT 2 1400-1410 E. Florida* $452,753 $22,638 9.125%
353 CT 3 Vance St. Apartment Building* $448,862 $26,404 8.875%
354 CT 1 3200 Race Street* $413,109 $77 8.250%
355 CT 1 Covington Office Center* $405,225 $30 8.875%
356 CT 1 4201 Dimmitt Road* $366,251 $3,663 9.675%
357 CT 1 10660 Silicon Avenue* $360,931 $19 9.000%
358 CT 1 5401 Cherry Avenue* $347,045 $58 8.875%
359 CT 1 110 Adams Ave.* $337,458 $28 8.875%
360 CT 1 Miss Meme's Kreative Kids Bldg.* $328,068 $98 9.750%
361 CT 1 La Canasta Furniture & Appliance Store* $315,913 $27 8.875%
362 CT 1 Great Southwestern Parkway* $313,505 $17 8.360%
363 CT 1 503 W. 26th Street* $298,633 $37,329 8.250%
364 CT 3 Mosstree Apartments* $298,151 $11,043 8.250%
365 CT 3 Marshall/Catamount Apartments* $283,950 $14,945 9.100%
366 CT 2 Sannella* $283,921 $11,830 8.500%
367 CT 1 1005 Abbott Road* $278,388 $66 9.190%
368 CT 1 6452 Nine Mile Bridge Road* $268,632 $5,373 9.000%
369 CT 1 301 South Richey Road* $248,965 $18 9.125%
370 CT 1 Moore's Adult Care Facility* $213,917 $17,826 11.050%
371 CT 1 Bass Pro Shop* $209,548 $16 8.875%
372 CT 3 619-623 W. Brookside* $199,335 $19,933 9.250%
373 CT 1 50-52 Ferry Street* $195,271 $72 8.600%
374 CT 1 Hillside Mobile Home Park* $190,795 $12,720 10.000%
375 CT 1 Bailey Hardwoods* $177,556 $27 8.583%
376 CT 1 3050 Austin Bluffs Parkway* $169,409 $63 9.000%
377 CT 1 Kelley St. Office Building* $153,227 $10 9.500%
378 CT 1 Northlake MHP* $150,076 $9,380 9.875%
379 CT 2 59-61 Carlton Street Apartments* $134,312 $22,385 9.410%
380 CT 1 Sabattus Street Office Building* $129,582 $67 9.690%
Total/Weighted Average: $1,107,291,368 7.602%
</TABLE>
<PAGE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity to Maturity Amort. Scheduled
Loan Note Hyper- Maturity Date or ARD or ARD Term(6)(7) Balloon Balloon Security
No. Date Amortizing or ARD(5) (mos) (mos) (mos) Balance LTV(3) Type
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4/7/98 Yes 5/1/08 120 117 360 $5,578,984 66.4% Fee
2 4/7/98 Yes 5/1/08 120 117 360 $4,957,174 66.4% Fee
3 4/7/98 Yes 5/1/08 120 117 360 $4,415,178 66.4% Fee
4 4/7/98 Yes 5/1/08 120 117 360 $4,101,927 66.4% Fee
5 4/7/98 Yes 5/1/08 120 117 360 $2,984,756 66.4% Fee
6 4/7/98 Yes 5/1/08 120 117 360 $2,866,203 66.4% Fee
7 4/7/98 Yes 5/1/08 120 117 360 $2,632,070 66.4% Fee
8 4/7/98 Yes 5/1/08 120 117 360 $2,580,280 66.4% Fee
9 4/7/98 Yes 5/1/08 120 117 360 $2,371,068 66.4% Fee
10 4/7/98 Yes 5/1/08 120 117 360 $2,315,279 66.4% Fee
11 4/7/98 Yes 5/1/08 120 117 360 $1,248,298 66.4% Fee
12 4/7/98 Yes 5/1/08 120 117 360 $707,855 66.4% Fee
13 4/7/98 Yes 5/1/08 120 117 360 $658,476 66.4% Fee
14 11/24/97 Yes 12/1/12 180 172 360 $6,346,920 61.1% Fee
15 11/24/97 Yes 12/1/12 180 172 360 $5,475,774 61.1% Fee
16 11/24/97 Yes 12/1/12 180 172 360 $4,417,954 61.1% Fee
17 11/24/97 Yes 12/1/12 180 172 360 $4,231,280 61.1% Fee
18 11/24/97 Yes 12/1/12 180 172 360 $2,986,786 61.1% Fee
19 11/24/97 Yes 12/1/12 180 172 360 $2,551,215 61.1% Fee
20 11/24/97 No 12/1/02 60 52 300 $2,537,070 61.1% Leasehold
21 11/24/97 No 12/1/12 180 172 300 $1,396,067 61.1% Leasehold
22 6/29/98 Yes 7/1/08 120 119 360 $22,756,229 64.8% Fee
23 4/30/98 No 5/1/08 120 117 300 $9,743,255 63.3% Fee
24 4/30/98 No 5/1/08 120 117 300 $3,879,851 63.3% Fee
25 4/30/98 No 5/1/08 120 117 300 $3,313,573 63.3% Fee
26 4/30/98 No 5/1/08 120 117 300 $3,258,759 63.3% Fee
27 3/20/98 No 4/1/08 120 116 276 $3,979,004 55.7% Fee
28 3/20/98 No 4/1/08 120 116 276 $3,912,223 55.7% Fee
29 3/20/98 No 4/1/08 120 116 276 $3,288,938 55.7% Fee
30 3/20/98 No 4/1/08 120 116 276 $3,172,073 55.7% Fee
31 3/20/98 No 4/1/08 120 116 276 $2,081,324 55.7% Fee
32 3/20/98 No 4/1/08 120 116 276 $1,842,027 55.7% Fee
33 6/1/98 Yes 6/1/08 120 118 360 $20,753,242 66.3% Fee
34 4/20/98 Yes 5/1/08 120 117 300 $16,723,057 59.7% Fee
35 5/28/98 Yes 6/1/08 120 118 300 $4,914,449 46.5% Fee
36 5/28/98 Yes 6/1/08 120 118 300 $3,348,110 46.5% Fee
37 5/28/98 Yes 6/1/08 120 118 300 $2,086,944 46.5% Fee
38 5/28/98 Yes 6/1/08 120 118 300 $1,450,975 46.5% Fee
39 5/28/98 Yes 6/1/08 120 118 300 $991,650 46.5% Fee
40 5/28/98 Yes 6/1/08 120 118 300 $879,585 46.5% Fee
41 5/28/98 Yes 6/1/08 120 118 300 $837,592 46.5% Fee
42 5/14/98 Yes 6/1/08 120 118 300 $14,069,444 55.2% Fee
43 3/27/98 No 4/1/08 120 116 300 $13,311,754 49.1% Fee
44 5/20/98 No 6/1/08 120 118 360 $3,977,624 68.6% Fee
45 5/20/98 No 6/1/08 120 118 360 $3,110,091 68.6% Fee
46 5/20/98 No 6/1/08 120 118 360 $2,153,403 68.6% Fee
47 5/20/98 No 6/1/08 120 118 360 $1,793,359 68.6% Fee
48 5/20/98 No 6/1/08 120 118 360 $1,097,276 68.6% Fee
49 5/20/98 No 6/1/08 120 118 360 $1,045,840 68.6% Fee
50 5/20/98 No 6/1/08 120 118 360 $709,800 68.6% Fee
51 5/27/98 No 6/1/18 240 238 229 $26,547 0.2% Fee
52 4/22/98 Yes 5/1/08 120 117 300 $9,243,782 61.2% Fee
53 4/15/98 No 5/1/18 240 237 360 $6,857,769 47.3% Fee
54 3/30/98 No 4/1/08 120 116 300 $9,044,555 62.8% Fee
55 7/1/98 No 8/1/08 120 120 360 $9,902,494 66.0% Fee
56 12/31/97 Yes 1/1/08 120 113 360 $9,542,467 69.1% Fee
57 4/24/98 No 5/1/18 240 237 240 $0 0.0% Fee
58 4/23/98 No 5/1/08 120 117 360 $8,721,809 63.2% Fee
59 2/2/98 No 3/1/13 180 175 300 $2,910,064 51.2% Fee
60 2/2/98 No 3/1/13 180 175 300 $1,618,903 51.2% Fee
61 2/2/98 No 3/1/13 180 175 300 $796,149 51.2% Fee
62 2/2/98 No 3/1/13 180 175 300 $727,847 51.2% Fee
63 5/21/98 No 6/1/08 120 118 300 $2,997,672 53.8% Fee
64 5/21/98 No 6/1/08 120 118 300 $2,761,014 53.8% Fee
65 5/21/98 No 6/1/08 120 118 300 $1,008,912 53.8% Fee
66 5/21/98 No 6/1/08 120 118 300 $705,823 53.8% Fee
67 2/27/98 Yes 3/1/08 120 115 300 $7,203,843 48.2% Fee
68 6/18/98 No 7/1/08 120 119 240 $1,121,443 56.1% Fee
69 6/18/98 No 7/1/08 120 119 240 $975,655 56.1% Fee
70 6/18/98 No 7/1/08 120 119 240 $956,365 56.1% Fee
71 6/18/98 No 7/1/08 120 119 240 $703,371 56.1% Fee
72 6/18/98 No 7/1/08 120 119 240 $656,044 56.1% Fee
73 6/18/98 No 7/1/08 120 119 240 $555,115 56.1% Fee
74 6/18/98 No 7/1/08 120 119 240 $527,077 56.1% Fee
75 6/18/98 No 7/1/08 120 119 240 $459,792 56.1% Fee
76 6/18/98 No 7/1/08 120 119 240 $454,154 56.1% Fee
77 2/10/98 No 3/1/18 240 235 360 $5,157,462 43.7% Fee
78 3/20/98 No 4/1/08 120 116 360 $7,571,192 65.8% Fee
79 6/20/97 No 8/1/07 120 108 300 $6,556,054 23.2% Fee
80 5/1/98 Yes 5/1/08 120 117 300 $6,396,575 53.1% Fee
81 4/3/98 Yes 5/1/08 120 117 300 $6,290,591 61.1% Fee
82 4/7/98 No 5/1/08 120 117 360 $6,457,952 68.3% Fee
83 3/31/98 Yes 4/1/08 120 116 360 $6,470,754 51.8% Fee
84 11/10/97 No 12/1/07 120 112 300 $6,161,070 56.0% Fee
85 11/11/97 Yes 12/1/07 120 112 360 $6,393,999 69.5% Fee
86 12/15/95 No 1/1/06 120 89 360 $6,480,559 55.9% Fee
87 5/14/98 No 6/1/08 120 118 300 $5,908,632 56.3% Fee
88 6/30/98 No 7/1/23 300 299 300 $0 0.0% Fee
89 3/31/98 Yes 4/1/08 120 116 360 $6,273,218 73.4% Fee
90 4/28/98 No 5/1/08 120 117 300 $3,525,709 58.2% Fee
91 4/28/98 No 5/1/08 120 117 300 $2,025,747 58.2% Fee
92 1/29/98 Yes 2/1/08 120 114 360 $6,048,614 65.7% Fee
93 2/4/98 No 11/1/04 80 75 356 $6,454,430 52.5% Fee
94 3/26/98 No 4/1/13 180 176 360 $5,292,457 57.2% Fee
95 5/28/98 Yes 6/1/08 120 118 360 $5,943,861 65.3% Fee
96 2/24/98 No 3/1/08 120 115 300 $2,304,177 63.1% Fee
97 1/8/98 No 2/1/08 120 114 300 $1,816,252 63.1% Fee
98 2/24/98 No 3/1/08 120 115 300 $1,369,488 63.1% Fee
99 4/20/98 No 5/1/08 120 117 300 $1,603,355 53.0% Fee
100 4/20/98 No 5/1/08 120 117 300 $1,413,186 53.0% Fee
101 4/20/98 No 5/1/08 120 117 300 $961,901 53.0% Fee
102 4/20/98 No 5/1/08 120 117 300 $691,855 53.0% Fee
103 4/20/98 No 5/1/08 120 117 300 $677,896 53.0% Fee
104 10/2/95 No 11/1/05 120 87 360 $5,917,923 55.8% Fee
105 12/10/97 Yes 1/1/08 120 113 360 $5,671,950 69.6% Fee
106 5/13/98 No 6/1/08 120 118 300 $5,253,375 56.8% Fee
107 3/31/98 Yes 4/1/08 120 116 360 $5,531,269 66.7% Fee
108 12/10/97 Yes 1/1/08 120 113 360 $5,576,765 69.7% Fee
109 6/5/98 No 7/1/08 120 119 360 $5,392,307 64.2% Fee
110 5/15/98 No 6/1/08 120 118 360 $5,499,962 61.1% Fee
111 2/9/98 Yes 3/1/08 120 115 376 $5,302,868 67.1% Fee
112 1/20/98 No 2/1/08 120 114 300 $2,573,377 41.7% Fee
113 1/20/98 No 2/1/08 120 114 300 $1,921,038 41.7% Fee
114 12/30/97 Yes 1/1/08 120 113 360 $4,768,688 66.2% Fee
115 10/14/97 No 11/1/07 120 111 300 $4,499,257 56.6% Fee
116 6/3/98 No 7/1/08 120 119 300 $4,372,222 55.3% Fee
117 3/26/98 No 4/1/08 120 116 360 $4,598,799 61.3% Leasehold
118 1/9/98 No 5/1/08 120 117 300 $4,244,819 48.8% Fee
119 5/28/98 No 6/1/18 240 238 240 $201,653 2.6% Fee
120 12/19/97 Yes 1/1/08 120 113 360 $4,510,601 69.4% Fee
121 5/27/98 No 6/1/08 120 118 360 $4,583,435 62.8% Fee
122 4/24/96 No 5/1/06 120 93 300 $4,309,448 51.9% Fee
123 5/22/98 No 6/1/08 120 118 300 $4,185,317 55.1% Fee
124 12/27/95 No 1/1/06 120 89 300 $4,188,801 45.5% Fee
125 4/28/98 No 5/1/08 120 117 300 $4,055,505 55.4% Fee/Leasehold
126 2/12/98 No 3/1/08 120 115 300 $4,050,489 58.7% Fee
127 4/9/98 No 5/1/18 240 237 240 $0 0.0% Fee
128 2/26/98 Yes 3/1/13 180 175 240 $1,648,376 31.8% Fee
129 2/26/98 Yes 3/1/13 180 175 240 $549,457 31.8% Fee
130 1/11/96 No 2/1/06 120 90 360 $4,393,695 44.8% Fee
131 2/19/98 No 3/1/13 180 175 300 $3,066,577 48.7% Fee
132 3/31/98 No 4/1/08 120 116 360 $4,185,991 54.4% Fee
133 11/11/97 Yes 12/1/07 120 112 360 $4,175,673 69.6% Fee
134 7/1/98 No 8/1/08 120 120 300 $3,813,117 53.7% Fee
135 4/22/98 No 5/1/08 120 117 300 $3,694,021 56.0% Fee
136 4/21/98 Yes 5/1/03 60 57 300 $4,223,006 74.1% Fee
137 3/16/98 Yes 4/1/08 120 116 300 $3,617,233 60.3% Fee
138 2/27/98 No 3/1/08 120 115 300 $3,593,229 56.1% Fee
139 6/4/98 No 6/1/18 239 238 240 $0 0.0% Fee
140 4/6/98 No 5/1/08 120 117 360 $3,851,814 55.0% Fee
141 2/4/98 Yes 3/1/08 120 115 360 $3,778,833 64.0% Fee
142 4/15/98 Yes 5/1/18 240 237 300 $1,585,365 27.3% Fee
143 9/22/97 No 10/1/07 120 110 360 $3,891,720 53.7% Fee
144 6/30/98 No 7/1/08 120 119 360 $3,776,606 71.0% Fee
145 3/18/98 Yes 4/1/13 180 176 300 $2,580,546 44.3% Fee
146 2/4/98 No 3/1/13 180 175 300 $1,176,496 47.2% Fee
147 2/4/98 No 3/1/13 180 175 300 $690,340 47.2% Fee
148 2/4/98 No 3/1/13 180 175 300 $738,956 47.2% Fee
149 12/31/97 Yes 2/1/05 84 78 360 $3,685,656 73.3% Fee
150 2/4/98 No 3/1/13 180 175 300 $832,948 46.8% Fee
151 2/4/98 No 3/1/13 180 175 300 $800,536 46.8% Fee
152 2/4/98 No 3/1/13 180 175 300 $495,880 46.8% Fee
153 2/4/98 No 3/1/13 180 175 300 $453,744 46.8% Fee
154 3/11/98 No 4/1/08 120 116 300 $3,198,796 55.6% Fee
155 2/27/98 Yes 3/1/08 120 115 300 $3,150,157 60.6% Fee
156 4/13/98 Yes 5/1/08 120 117 300 $3,136,234 64.7% Fee
157 5/11/98 No 6/1/08 120 118 360 $1,680,601 65.9% Fee
158 5/11/98 No 6/1/08 120 118 360 $1,680,601 65.9% Fee
159 3/18/98 Yes 4/1/08 120 116 360 $3,235,377 64.7% Fee
160 3/27/98 No 4/1/03 60 56 300 $3,474,220 62.0% Fee
161 3/16/98 No 4/1/08 120 116 300 $2,930,120 61.0% Fee
162 4/29/98 No 5/1/08 120 117 240 $2,502,339 39.4% Fee
163 3/31/98 Yes 4/1/08 120 116 360 $3,080,327 67.0% Fee
164 2/27/98 No 3/1/01 36 31 300 $3,356,412 64.2% Fee
165 5/13/98 No 6/1/08 120 118 300 $2,843,932 56.9% Fee
166 3/26/98 No 4/1/18 240 236 240 $0 0.0% Fee
167 3/26/98 Yes 4/1/08 120 116 360 $2,937,137 66.8% Fee
168 5/1/98 No 6/1/18 240 238 240 $0 0.0% Fee
169 5/1/98 No 6/1/18 240 238 240 $0 0.0% Fee
170 5/1/98 No 6/1/18 240 238 240 $0 0.0% Fee
171 2/26/98 No 3/1/23 300 295 300 $0 0.0% Fee
172 5/1/98 Yes 5/1/08 120 117 300 $1,471,761 54.0% Fee
173 5/1/98 Yes 5/1/08 120 117 300 $1,126,846 54.0% Fee
174 3/11/98 No 10/1/07 114 110 294 $2,667,334 62.0% Fee
175 4/9/98 No 5/1/13 180 177 300 $1,426,568 43.3% Fee
176 4/9/98 No 5/1/13 180 177 300 $586,366 43.3% Fee
177 3/23/98 No 5/1/08 120 117 360 $2,823,228 57.6% Fee
178 1/15/98 Yes 2/1/08 120 114 360 $2,755,915 68.9% Fee
179 4/2/98 Yes 5/1/08 120 117 360 $2,748,352 67.0% Fee
180 2/25/98 No 3/1/13 180 175 360 $2,345,436 52.1% Fee
181 6/9/98 No 7/1/08 120 119 240 $2,183,626 46.5% Fee
182 3/27/98 Yes 4/1/08 120 116 300 $2,486,944 57.2% Fee
183 3/10/98 No 4/1/08 120 116 240 $2,126,283 46.2% Fee
184 4/24/98 No 5/1/08 120 117 240 $2,115,521 35.3% Fee
185 2/13/98 Yes 3/1/08 120 115 300 $2,381,161 52.9% Fee
186 1/29/98 No 2/1/13 180 174 180 $0 0.0% Fee
187 4/16/98 No 5/1/08 120 117 360 $2,613,257 71.1% Fee
188 4/14/98 No 5/1/08 120 117 240 $2,006,657 48.9% Fee
189 1/28/98 Yes 2/1/08 120 114 300 $2,342,136 59.9% Fee
190 4/17/98 Yes 5/1/13 180 177 360 $2,138,345 57.8% Fee
191 2/26/98 No 3/1/08 120 115 300 $2,271,097 61.4% Fee
192 1/29/98 Yes 2/1/08 120 114 300 $2,270,633 63.4% Fee
193 2/12/98 No 3/1/13 180 175 360 $2,080,796 59.5% Fee
194 3/31/98 No 4/1/13 180 176 360 $2,094,144 63.5% Fee
195 5/15/98 No 6/1/13 180 178 300 $1,795,017 49.2% Fee
196 5/6/98 Yes 6/1/08 120 118 300 $2,158,845 60.0% Fee
197 5/29/98 No 6/1/08 120 118 300 $2,155,944 59.9% Fee
198 5/7/98 No 6/1/18 240 238 240 $0 0.0% Leasehold
199 2/4/98 Yes 3/1/08 120 115 360 $2,329,470 58.6% Fee
200 2/27/98 Yes 3/1/08 120 115 300 $2,187,264 60.3% Fee
201 4/28/98 No 5/1/08 120 117 300 $2,123,686 63.0% Fee
202 4/28/98 No 5/1/13 180 177 300 $1,644,455 42.2% Fee
203 3/3/98 Yes 4/1/08 120 116 360 $2,157,168 68.0% Fee
204 3/27/98 Yes 4/1/08 120 116 300 $1,025,810 57.7% Fee
205 3/27/98 Yes 4/1/08 120 116 300 $992,949 57.7% Fee
206 4/24/98 No 5/1/08 120 117 240 $1,736,502 40.4% Fee
207 3/6/98 No 4/1/13 180 176 180 $0 0.0% Fee
208 3/31/98 No 4/1/18 240 236 240 $0 0.0% Fee
209 3/31/98 No 4/1/18 240 236 240 $0 0.0% Fee
210 3/13/98 No 4/1/08 120 116 360 $2,146,331 57.5% Fee
211 1/29/98 Yes 2/1/08 120 114 360 $2,110,268 64.9% Fee
212 5/1/98 No 6/1/23 300 298 288 $0 0.0% Fee
213 3/23/98 No 4/1/08 120 116 300 $1,363,988 58.0% Fee
214 3/23/98 No 4/1/08 120 116 300 $561,642 58.0% Fee
215 3/19/98 No 4/1/08 120 116 300 $1,912,505 28.1% Fee
216 2/6/98 No 3/1/08 120 115 300 $1,931,721 56.9% Fee
217 3/26/98 No 4/1/13 180 176 240 $284,893 27.0% Fee
218 3/26/98 No 4/1/13 180 176 240 $278,928 27.0% Fee
219 3/26/98 No 4/1/13 180 176 240 $238,587 27.0% Fee
220 3/26/98 No 4/1/13 180 176 240 $225,393 27.0% Fee
221 7/1/97 No 6/1/07 120 106 240 $1,667,526 48.5% Fee
222 3/5/98 No 4/1/08 120 116 300 $905,771 62.0% Fee
223 3/5/98 No 4/1/08 120 116 300 $675,609 62.0% Fee
224 3/5/98 No 4/1/08 120 116 300 $281,848 62.0% Fee
225 3/19/98 No 4/1/23 300 296 300 $0 0.0% Fee
226 3/26/98 No 4/1/08 120 116 300 $1,810,990 63.5% Fee
227 4/16/98 No 5/1/13 180 177 300 $1,455,623 38.3% Fee
228 3/18/98 No 4/1/13 180 176 180 $0 0.0% Fee
229 3/18/98 No 4/1/13 180 176 180 $0 0.0% Fee
230 4/29/98 Yes 5/1/13 180 177 360 $1,572,642 54.6% Fee
231 4/28/98 No 5/1/14 192 189 192 $0 0.0% Fee
232 1/28/98 No 8/1/07 114 108 355 $1,830,419 73.2% Fee
233 3/13/98 No 4/1/08 120 116 300 $1,645,654 61.0% Fee
234 5/19/98 Yes 6/1/08 120 118 240 $1,408,544 48.9% Fee
235 4/28/98 Yes 5/1/08 120 117 300 $1,587,007 57.3% Fee
236 3/27/98 No 4/1/08 120 116 300 $1,604,480 59.0% Fee
237 3/4/98 Yes 4/1/13 180 176 300 $1,237,247 34.4% Fee
238 3/31/98 No 4/1/08 120 116 300 $1,578,184 60.7% Fee
239 12/22/97 Yes 1/1/08 120 113 360 $1,738,711 69.5% Fee
240 2/4/98 No 3/1/08 120 115 300 $1,579,070 52.6% Fee
241 9/2/97 No 10/1/07 120 110 300 $1,668,810 49.8% Fee
242 2/3/98 No 3/1/08 120 115 360 $1,758,849 66.6% Fee
243 3/18/98 No 4/1/13 180 176 180 $0 0.0% Fee
244 1/20/98 No 2/1/08 120 114 300 $1,610,477 48.8% Fee
245 10/20/97 No 11/1/07 120 111 300 $1,611,623 50.4% Fee
246 10/10/97 No 11/1/07 120 111 360 $1,709,671 62.2% Fee
247 5/28/98 Yes 6/1/08 120 118 360 $1,660,855 65.1% Fee
248 4/7/98 Yes 5/1/08 120 117 300 $1,500,542 56.1% Fee
249 3/19/98 No 4/1/08 120 116 300 $1,544,070 47.5% Fee
250 6/9/98 No 7/1/08 120 119 360 $1,617,337 59.7% Fee
251 4/2/98 No 5/1/08 120 117 360 $1,641,114 71.4% Fee
252 4/3/98 Yes 5/1/11 156 153 300 $1,262,742 50.5% Fee
253 4/2/98 Yes 5/1/13 180 177 300 $1,116,041 39.9% Fee
254 8/14/97 No 9/1/07 120 109 360 $1,599,106 58.4% Fee
255 4/9/98 No 5/1/13 180 177 180 $0 0.0% Fee
256 3/31/98 No 4/1/08 120 116 360 $1,551,683 69.7% Fee
257 2/6/98 No 3/1/08 120 115 300 $825,340 64.6% Fee
258 2/6/98 No 3/1/08 120 115 300 $637,162 64.6% Fee
259 5/21/98 No 6/1/08 120 118 360 $1,484,854 64.6% Fee
260 3/27/98 No 4/1/08 120 116 300 $1,398,590 46.6% Fee
261 4/29/98 Yes 5/1/08 120 117 240 $1,163,441 48.5% Fee
262 3/4/98 Yes 4/1/08 120 116 300 $1,113,285 61.6% Fee
263 3/4/98 Yes 4/1/08 120 116 300 $237,990 61.6% Fee
264 3/30/98 Yes 4/1/08 120 116 300 $1,363,445 60.9% Fee
265 2/23/98 No 3/1/18 240 235 240 $0 0.0% Fee
266 2/25/98 No 3/1/08 120 115 300 $1,324,648 60.9% Fee
267 3/31/98 No 4/1/08 120 116 360 $1,412,995 61.7% Fee
268 5/18/98 Yes 6/1/08 120 118 300 $1,265,384 60.3% Fee
269 4/30/98 No 5/1/13 180 177 240 $495,887 32.3% Fee
270 4/30/98 No 5/1/13 180 177 240 $163,836 32.3% Fee
271 1/16/98 No 2/1/08 120 114 300 $1,287,538 46.0% Fee
272 4/7/98 Yes 5/1/08 120 117 300 $1,259,066 57.5% Fee
273 3/11/98 No 4/1/08 120 116 300 $1,205,744 40.2% Fee
274 2/27/98 No 3/1/08 120 115 300 $1,230,685 61.5% Fee
275 1/29/98 No 2/1/05 84 78 327 $1,364,300 62.0% Fee
276 2/9/98 Yes 3/1/08 120 115 300 $1,191,237 50.9% Fee
277 1/29/98 No 2/1/08 120 114 300 $1,188,371 57.5% Fee
278 2/4/98 Yes 3/1/13 180 175 300 $488,480 46.9% Fee
279 2/4/98 Yes 3/1/13 180 175 300 $449,820 46.9% Fee
280 4/30/98 Yes 5/1/08 120 117 300 $801,640 60.3% Fee
281 4/30/98 Yes 5/1/08 120 117 300 $388,030 60.3% Fee
282 3/17/98 No 4/1/23 300 296 300 $0 0.0% Fee
283 3/17/98 No 4/1/23 300 296 300 $0 0.0% Fee
284 3/17/98 No 4/1/23 300 296 300 $0 0.0% Fee
285 3/17/98 No 4/1/23 300 296 300 $0 0.0% Fee
286 3/13/98 No 4/1/08 120 116 300 $1,154,733 51.3% Fee
287 2/23/98 No 3/1/08 120 115 360 $1,219,494 61.0% Fee
288 11/6/97 No 12/1/02 60 52 360 $1,298,668 66.9% Fee
289 5/8/98 Yes 6/1/13 180 178 240 $542,742 29.7% Fee
290 3/19/98 No 4/1/18 240 236 240 $0 0.0% Fee
291 3/26/98 Yes 4/1/08 120 116 300 $1,035,236 52.4% Fee
292 5/7/98 No 6/1/13 180 178 180 $0 0.0% Fee
293 10/24/97 No 12/1/07 120 112 360 $1,135,885 60.1% Fee
294 5/6/98 Yes 6/1/08 120 118 360 $1,087,641 64.0% Fee
295 2/18/98 No 3/1/13 180 175 180 $0 0.0% Fee
296 2/20/98 Yes 3/1/03 60 55 360 $1,169,719 76.7% Fee
297 4/2/98 No 5/1/08 120 117 240 $835,051 49.1% Fee
298 4/6/98 No 5/1/13 180 177 300 $779,955 49.5% Fee
299 4/3/98 Yes 5/1/08 120 117 300 $945,041 37.8% Fee
300 4/6/98 No 5/1/13 180 177 240 $516,825 24.0% Fee
301 2/17/98 No 3/1/08 120 115 300 $959,484 58.2% Fee
302 3/3/98 No 4/1/18 240 236 240 $0 0.0% Fee
303 4/29/98 No 5/1/08 120 117 300 $916,411 55.5% Fee
304 12/19/97 No 1/1/08 120 113 300 $944,635 51.1% Fee
305 9/2/97 No 10/1/02 60 50 240 $1,028,120 57.1% Fee
306 1/21/98 No 2/1/18 240 234 240 $0 0.0% Fee
307 12/18/97 No 1/1/08 120 113 360 $1,001,209 58.0% Fee
308 4/30/98 No 5/1/23 300 297 300 $0 0.0% Fee
309 4/9/98 No 5/1/08 120 117 300 $902,520 56.4% Fee
310 4/8/98 No 5/1/08 120 117 300 $885,374 56.4% Fee
311 3/30/98 No 4/1/08 120 116 300 $885,372 46.6% Fee
312 3/12/98 No 4/1/08 120 116 240 $767,025 46.5% Fee
313 4/3/98 No 5/1/08 120 117 300 $877,683 65.0% Fee
314 2/9/98 Yes 3/1/12 168 163 240 $508,566 34.5% Fee
315 1/9/98 No 2/1/08 120 114 300 $833,699 45.1% Fee
316 1/20/98 No 2/1/08 120 114 300 $819,389 60.7% Fee
317 3/2/98 Yes 4/1/12 168 164 300 $667,448 53.2% Fee
318 3/23/98 No 4/1/08 120 116 300 $810,099 57.9% Fee
319 3/6/98 Yes 4/1/08 120 116 240 $678,903 50.3% Fee
320 3/2/98 Yes 10/1/11 162 158 300 $672,827 54.7% Fee
321 3/9/98 No 3/1/08 120 115 300 $796,764 63.7% Fee
322 4/30/98 No 5/1/13 180 177 360 $747,840 49.9% Fee
323 1/30/98 No 2/1/13 180 174 345 $697,587 53.7% Fee
324 4/2/98 No 5/1/08 120 117 240 $631,380 52.6% Fee
325 3/11/98 No 4/1/18 240 236 240 $0 0.0% Fee
326 9/5/97 No 10/1/07 120 110 300 $755,076 58.1% Fee
327 3/26/98 No 4/1/13 180 176 300 $584,470 48.3% Fee
328 4/1/98 No 5/1/08 120 117 300 $697,196 63.4% Fee
329 1/30/98 No 2/1/08 120 114 300 $722,656 55.6% Fee
330 8/4/97 No 9/1/07 120 109 360 $757,897 62.1% Fee
331 2/3/98 No 3/1/08 120 115 300 $677,507 61.6% Fee
332 4/29/98 No 5/1/08 120 117 300 $654,416 63.8% Fee
333 3/20/98 No 4/1/13 180 176 300 $521,251 49.2% Fee
334 10/28/97 No 12/1/12 180 172 360 $609,045 49.2% Fee
335 10/24/97 No 12/1/07 120 112 360 $691,514 53.2% Fee
336 4/29/98 No 5/1/08 120 117 360 $653,946 64.1% Fee
337 11/7/97 No 1/1/08 120 113 300 $614,017 43.9% Fee
338 4/14/98 No 5/1/08 120 117 300 $603,694 52.2% Fee
339 4/6/98 No 5/1/08 120 117 300 $567,584 66.8% Fee
340 3/27/98 No 4/1/08 120 116 300 $518,301 55.7% Fee
341 3/3/98 No 4/1/08 120 116 300 $490,640 61.3% Fee
342 3/10/98 No 4/1/08 120 116 240 $423,694 53.0% Fee
343 9/10/97 No 10/1/07 120 110 360 $510,884 52.7% Fee
344 8/28/97 No 10/1/07 120 110 360 $504,099 65.5% Fee
345 1/27/98 No 2/1/13 180 174 300 $350,638 48.7% Fee
346 4/13/98 No 5/1/08 120 117 240 $363,637 53.5% Fee
347 9/5/97 No 10/1/07 120 110 360 $457,106 60.9% Fee
348 3/16/98 No 4/1/08 120 116 300 $417,341 56.4% Fee
349 11/19/97 No 12/1/07 120 112 360 $440,851 51.0% Fee
350 7/3/97 No 8/1/07 120 108 360 $456,428 50.7% Fee
351 4/23/98 No 5/1/08 120 117 300 $400,196 61.6% Fee
352 10/14/97 No 11/1/07 120 111 360 $407,811 63.2% Fee
353 4/3/98 No 5/1/08 120 117 300 $372,407 61.6% Fee
354 12/8/97 No 1/1/08 120 113 360 $365,905 50.1% Fee
355 2/18/98 No 3/1/08 120 115 313 $343,783 54.6% Fee
356 12/12/97 No 1/1/08 120 113 360 $332,472 63.3% Fee
357 9/30/97 No 11/1/12 180 171 180 $0 0.0% Fee
358 10/3/97 No 11/1/07 120 111 300 $288,754 51.1% Fee
359 11/5/97 No 12/1/07 120 112 300 $280,502 49.2% Fee
360 7/15/97 No 8/1/07 120 108 360 $298,910 56.9% Fee
361 11/6/97 No 12/1/12 180 172 180 $0 0.0% Fee
362 2/20/98 No 3/1/13 180 175 300 $204,440 47.0% Fee
363 12/26/97 No 1/1/13 180 173 360 $232,317 54.0% Fee
364 1/16/98 No 2/1/08 120 114 300 $243,815 57.4% Fee
365 2/20/98 No 3/1/08 120 115 314 $242,306 65.3% Fee
366 3/11/98 No 4/1/08 120 116 300 $233,766 55.7% Fee
367 3/17/98 No 4/1/18 240 236 240 $0 0.0% Fee
368 10/7/97 No 11/1/07 120 111 360 $241,461 56.8% Fee
369 2/26/98 No 3/1/08 120 115 300 $208,083 52.0% Fee
370 1/22/98 No 2/1/08 120 114 284 $180,355 25.8% Fee
371 3/26/98 No 4/1/08 120 116 360 $187,838 32.4% Fee
372 3/4/98 No 4/1/08 120 116 300 $166,936 66.8% Fee
373 3/18/98 No 4/1/08 120 116 300 $161,154 53.7% Fee
374 2/10/98 No 3/1/13 180 175 184 $7,491 2.5% Fee
375 2/20/98 No 3/1/13 180 175 180 $0 0.0% Fee
376 3/10/98 No 4/1/08 120 116 300 $141,094 58.8% Fee
377 1/20/98 No 2/1/08 120 114 300 $128,851 52.6% Fee
378 3/6/98 No 4/1/11 156 152 156 $0 0.0% Fee
379 1/12/98 No 2/1/08 120 114 300 $112,731 61.3% Fee
380 2/20/98 No 3/1/08 120 115 316 $112,231 64.5% Fee
139 134 316 52.7%
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name(2) Address
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 2677 Larkin Street (2I) 2677 Larkin Street
2 645 Stockton Street (2I) 645 Stockton Street
3 1340 -1390 Taylor Street (2I) 1340--1390 Taylor Street
4 1401 Jones Street (2I) 1401 Jones Street
5 1870 Pacific Avenue (2I) 1870 Pacific Avenue
6 500 Stanyan Street (2I) 500 Stanyan Street
7 2075 - 2079 Market Street (2I) 2075 - 2079 Market Street
8 1290 20th Avenue (2I) 1290 20th Avenue
9 78 Buchanan Street (2I) 78 Buchanan Street
10 2095 - 2099 Market Street (2I) 2095 - 2099 Market Street & 211 & 213 Church Street
11 235 - 241 Church Street (2I) 235 - 241 Church Street
12 1465 Burlingame Avenue (2I) 1465 Burlingame Avenue
13 252 - 258 Church Street (2I) 252 - 258 Church Street
14 Fountain View Nursing Home (2A) 215 First Street N.E.
15 Greeneville West Health Care Center (2A) 106 Holt Court
16 Bay St. Joseph Care Center (2A) 220 9th Street
17 Heritage Manor of Abbeville (2A) 2403 Alonzo Drive
18 Panola Nursing Home (2A) 501 Cottage Road
19 Jackson Manor Nursing Home (2A) U.S. Highway 167 South
20 West Mesa Health Care Center (2A) 9150 McMahon Blvd. N.W.
21 Pickett County Nursing Home (2A) 129 Hillcrest Drive
22 Broadview Village Square Cermak Road & 17th Avenue
23 The Courville at Nashua & Villas at Nashua (2II) 22 Hunt Street/22.5 Hunt Street
24 Aynsley Place (2II) 80 Lake Street
25 The Courville at Manchester (2II) 44 West Webster Street
26 Carlyle Place (2II) 44 Route 101
27 Holiday Inn-Fond du Lac, WI (2III) 625 West Rolling Meadows Drive
28 Comfort Suites-Appleton, WI (2III) 3809 West Wisconsin Ave
29 Comfort Suites-Madison, WI (2III) 1253 John Q. Hammons Drive
30 Budgetel-Madison, WI (2III) 8102 Excelsior Drive
31 Holiday Inn Express-Osh Kosh, WI (2III) 2251 Westowne Avenue
32 Budgetel-Fond du Lac, WI (2III) 77 Holiday Lane
33 Elliott Bay Office Park 300 Elliott Avenue W.
34 The Cable Building 611 Broadway
35 NationsBank Tower (2IV) 500 Chestnut Street
36 Woodhaven Shopping Center (2IV) 4602-4654 South 14th Street
37 Radford Hills Shopping Center (2IV) 800-900 North Judge Ely Boulevard
38 Crossroads Shopping Center (2IV) 4102 Buffalo Gap Road
39 Pioneer Square (2IV) 2302-2310 Lubbock Highway
40 Mesa Verde Shopping Center (2IV) 2215 North Midland Drive
41 Park Plaza Shopping Center (2IV) Austin Avenue and Coggin Avenue
42 Cambridge Square Shopping Center 280 U.S. Highway 9 North
43 Holiday Inn BayView Plaza 530 West Pico Boulevard
44 Westbrook (2V) 5747 State Route 128
45 Green Acres (2V) 6074 Deerfield Road
46 Compton Hills (2V) 9109 Pippin Road
47 Skymeadow (2V) 2169 Tuley Road
48 Eastgate (2V) 1751 East Ohio Pike
49 Lake Remington (2V) 70 Glendale-Milford Road
50 Shady Terrace (2V) 724 Covert Run Pike
51 Preston Place Apartments 5000 Old Shepard Place
52 Pharmaceutical Formulations Building 460 Plainfield Avenue
53 Bristol Market Place 1702 N. Bristol Street
54 Heritage Square 14100-14160 Culver Drive
55 Jockey Hollow Office Complex 1300 Mt. Kemble Ave.
56 Ashton Pointe Apartments 308 Frankford Avenue
57 Wedgewood Care Center 199 Community Drive
58 River Oaks Apartments 20702 El Toro Road
59 Oakwood Nursing Home (2VI) 401 Witsell Street
60 Tanglewood Nursing Home (2VI) Third Street
61 Forsyth Nursing Home (2VI) 521 Cabiness Road
62 Hilltop Nursing Home (2VI) 4796 Highway 42 North
63 Harrows Warehouse-Melville, NY (2VII) 270 Spagnoli Road
64 Harrows Shopping Center-Centereach, NY (2VII) 1953 Middle Country Road
65 Harrows Shopping Center-Lynbrook, NY (2VII) 831-839 Sunrise Highway
66 Harrows Shopping Center-Patchogue, NY (2VII) 573 Sunrise Highway
67 132 West 125th Street 132 West 125th Street
68 Friendship Manor - Janesville (2VIII) 1918 North Washington Street
69 Friendship Manor - Mayville (2VIII) 1091 Horicon Street
70 Friendship Manor - North Hume (2VIII) 1316 North Hume Avenue
71 Friendship Manor - West Mann (2VIII) 3013-3017 West Mann Road
72 Friendship Manor - Hartford (2VIII) 109 Lone Oak Road
73 Friendship Manor - Wisconsin Rapids (2VIII) 2511 Strawberry Lane
74 Friendship Manor - Medford (2VIII) 509 Lemke Oak lane
75 Friendship Manor - Fond du Lac (2VIII) 496 Wisconsin Court
76 Friendship Manor - Shawano (2VIII) 844 Olsen Street
77 Van Dorn Station 504-616 South Van Dorn Street
78 Brooksedge Corporate Center Green Crest Drive
79 Bayside Plaza 700 Airport Blvd.
80 Transicoil 2560 General Armistead Avenue
81 Holiday Inn-Lauderdale, FL 4116 North Ocean Boulevard
82 Highland Walk Apartments 6069 Norcross Tucker Road
83 Deep Ellum Lofts 3300 Main Street, 3401 Commerce Street, 3311 Elm Street
84 Galleries of Syracuse 415-447 South Salina Street
85 Sandlewood Apartments 6519 Mt. Zion Boulevard
86 Emerald Pointe Apartments 8670 Camino Collegio
87 Sheraton Inn-Columbus, GA 5351 Simons Boulevard
88 Gardenside Shopping Center 2606 Zion Road
89 Apple Valley Square Shopping Center 21510-21680 Bear Valley Road
90 Abington Shopping Center (2B) Route 6
91 Dunmore Shopping Center (2B) O'Neill Highway and Monahan Avenue
92 Westland Plaza Shopping Center 5348 West 16th Avenue
93 Blackburn Center Blackburn Drive
94 Pleasanton Square II 5755- 6015 Johnson Drive
95 West Garden Apartments 3011 West 76th Street
96 Foster-Richardson Rest Home (2C) 176 Rest Home Road
97 Pinnacle Rest Home (2C) Pinnacle Church Road
98 Mount Pleasant Rest Home (2C) 8307 West U.S. Hwy. 421
99 1650 Sherman Ave. (2IX) (2D) 1650 Sherman Ave.
100 8290 National Highway (2IX) (2D) 8290 National Highway
101 7101 Westfield Ave. (2X) (2D) 7101 Westfield Ave.
102 1601 Hylton Road (2X) (2D) 1601 Hylton Road
103 1625 Hylton Road (2X) (2D) 1625 Hylton Road
104 Cranbrook III 955 Cranbrook Court
105 The Palms of Apalachee Apartments 2855 Apalachee Parkway
106 Courtyard by Marriott-Naples, FL 3250 9th Street North
107 Columbia Arms Apartments 1600 Columbia Arms Circle
108 Palms of Magnolia 1112 So. Magnolia Drive
109 Winds of Santa Fe 2660-2780 W. 76th Street
110 225 Arizona Avenue 225 Arizona Avenue
111 Battlefield Business Park 10503-10553 Battlefield Parkway and 7000 Infantry Ridge Rd.
112 5 & 7 Allen Street (2XI) 5-7 Allen Street
113 Lyme Road Office Building (2XI) 45 Lyme Road
114 Spring Valley Club Apartments 2121 Harrison Avenue
115 Wolf Lake Industrial Center 3200 Sheffield Avenue
116 Aura Systems, Inc. 2335 Alaska Ave. & 2330 Utah Ave.
117 Tustin Square 1888-1944 N. Tustin Avenue
118 The Market at Hobe Sound Shopping Center 8767-8947 S.E. Bridge Road
119 Courtyard by Marriott-Springfield, OR 3443 Hutton Street
120 Highland Estates 27 Maypop Lane
121 19 Crosby Drive 19 Crosby Drive
122 Heritage House Apartments 515-545 Sycamore Lane
123 Fairfield Inn-New Orleans Airport 1801 32nd Street
124 Kearny Office Park 8304-8344 Clairemont Mesa
125 Holiday Inn- Holidome 210 South Hollywood Road
126 Oxford Nursing Home 689 Main Street
127 Brandywine Village Shopping Center Route 322 N. Guthriesville Road
128 Loop Inn (2E) 1 Rodgers Street
129 Gallery Motel (2E) 2020 US Route 35 North
130 Arnaz Arms Apartments 467 S. Arnaz Drive
131 So. Calif. Institute of Arch. Building 5454 Beethoven Street
132 Phoenix Court 11026 SE 240th St.
133 Wynstone Apartments 205 Millwood Drive
134 Holiday Inn-Treasure Island, FL 10908 Gulf Boulevard
135 Cedar Hills Shopping Center 10184 SW Parkway
136 Knollwood Center 5900 Brockton Avenue
137 Kenilworth Fidelco Industrial Center 251 South 31st St.
138 Timberline Shopping Center 660 Woodbury-Glassboro Road
139 West Lawrence Care Center 1410 Seagirt Boulevard
140 Reservoir Plaza 473-479 Winter Street
141 Cambridge Park Apartments 621 Memorial Drive
142 Taylor Crossing 100 Taylor Road North
143 St. Doris Apartments 1451-1491 N. Peach Ave.
144 Shoppes of Arrowhead 2471 South University Drive
145 University Place Apartments I & II 501 East 18th Avenue
146 Sunsations #3 (2F)* 12401 Coastal Highway
147 Sunsations #1 (2F)* 7601 Coastal Highway
148 Sunsations #8 (2F)* 500 Atlantic Avenue
149 Golden Pointe Apartments 7325 Golden Pointe Boulevard
150 Sunsations #7 (2G)* 2300 Atlantic Avenue
151 Sunsations #2 (2G)* 5701 Coastal Highway
152 Sunsations #4 (2G)* 2408 N. Philadelphia Ave. (Coastal Highway)
153 Sunsations #5 (2G)* 9303A-9307 Coastal Highway
154 Days Inn-Tacoma, WA 6802 Tacoma Mall Boulevard
155 Marriott Fairfield Inn 2225 Northwest Evangeline Thruway
156 Colonial Nursing Center 508 Pierce Street
157 349 Main Street (2H) 349 Main Street
158 300/310 Main Street (2H) 300/310 Main Street
159 Village North Townhouses and Apartments 3990 North Water Street
160 One First Avenue Warehouse One First Avenue
161 Prime Time Medford Apartments 2979 Barnett Road
162 Warmington Building 3090 Pullman Street
163 Westwood Apartments 4317-4337 Eighth Avenue, N.E.
164 Columbia Pacific Plaza 2201 N. Columbia Boulevard
165 Holiday Inn-Bath, ME 139 Western Avenue
166 Home Sweet Home 205 Collins Avenue
167 Belle Rive Club Apartments 8715 Belle Rive Boulevard
168 Clean Machine - Kingston Pike (West Hills) (2I) 7914 Kingston Pike
169 Clean Machine - Merchant (2I) 507 Merchant Drive
170 Clean Machine - Maynardville (Halls) (2I) 6852 Maynardville Pike
171 Market & Noe Center 2276-2288 Market Street
172 Sentry Plaza Shopping Center (2XII) 4275-83 South 76th Street
173 Sentry Grocery Store (2XII) 6700 West State Street
174 International Food & Fashion Center 934 S. Los Angeles Street
175 Colony Square 1, 2, 4 (2XIII) 703, 723 & 735 Seibert Road
176 Williamsburg Center (2XIII) 1135 Eastgate Drive
177 Colima Plaza 18720-18742 Colima Road
178 Royal Oaks Shopping Center 1890 Knox McCrae Drive
179 Schoolhouse Shopping Center 1034 Second Street Pike
180 Shadow Rose Apartments 6231 N. 67th Avenue
181 60 Messenger Street 60 Messenger Street
182 Summit Court Apartments 262 King Street
183 Walsh Avenue Industrial 850-890 Walsh Ave. & 2605-2655 Lafayette St.
184 Hampton Inn-Cedar Rapids, IA 3265 6th Street SW
185 Spalding Plaza Retail and Office Complex 6450-6470 Spalding Drive
186 16 Brooklyn Industrial Various Street Adresses
187 Lemon Grove Square 7103-7155 Broadway
188 Ramada Inn Speedway 1798 West International Speedway Blvd.
189 Triangle Crossroads 130 South Highway 16
190 Rosewood Apartments 300 Silverado Drive
191 Tehachapi Towne Center 801-31 Tucker Road
192 Pinellas Pointe Apartments 2150 62nd Avenue South
193 Quail Hill Apartments 500 Smithwood Street
194 Wal Mart - Whitinsville 1161 Providence Road
195 Central Heights Shopping Center 7301-97 West Central
196 Premier Corporate Center 3938 Premier North Drive
197 Pharr Plaza 375 Pharr Road, NE
198 Office Max - Bentley Mall 24 College Road
199 Woodknoll Townhomes 9192 Vanity Fair Drive
200 Microtel Inn 801 East Highway 83
201 Walnut Auto Care Center 19116-19130 Walnut Drive
202 Andresen Plaza 2700 NE Andresen Road
203 Hartland Apartments 3939 10th Street S.E.
204 Mr. Gatti's Restaurant, San Angelo (2XIV) 4349 Sherwood Way
205 Mr Gattis Restaurant, Midland (2XIV) 614 West Wadley Avenue
206 Super 8-Madison, WI 1602 West Beltline Highway
207 Access Self Storage 3427 Marvin D. Love Freeway
208 Executive Car Wash - Roswell (2XV) 2063 Roswell Road
209 Executive Car Wash - Johnson Ferry (2XV) 1274 Johnson Ferry Road
210 Rooker Building 1122 Milledge Street
211 Alta Vista Corporate Center 14040 North Cave Creek Road
212 75 Montgomery Street 75 Montgomery Street
213 North Kitsap Self Storage (2J) 541 North Bernt Road
214 Poulsbo Business Park (2J) 20714-20726 State Highway 305
215 13-17 Laight Street 13-17 Laight Street
216 Quality Inn - Vallejo 44 Admiral Callaghan Lane
217 Executive Inn II (2XVI) 9401 South Orange Blossom Trail
218 Executive Inn I (2XVI) 5870 South Orange Blossom Trail
219 Super 8 Motel (2XVI) 1634 North U.S. Highway 1
220 Travelodge (2XVI) 2250 West International Speedway Blvd.
221 H.S.T. Building 8985 Crestmar Point
222 The French/ Cabot Block Building (2XVII) 3 Elm Street
223 The Waterman Place Building (2XVII) Route 4 Waterman Place
224 The Morgan Block (2XVII) 20 Central Street
225 Holiday Inn Express- Lemoore 820 E. Bush Street
226 Holiday Inn Express- Killeen 1602 East Central Texas Expressway
227 Country Inn by Carlson 153 Garrisonville Road
228 Atlantic Self Storage- Dunn Avenue 1650 Dunn Ave.
229 Atlantic Self Storage I-295 11351 St. Augustine Road
230 Renaissance Apartments 5259 University Way
231 Ames Department Store 801 S 4th Street
232 The Store House Self Storage 4924 Mercer University Drive
233 Comfort Inn- Killeen 2506 Trimmier Road
234 SeaTac Inn 17108 International Blvd.
235 KEW Industrial Park 7005-7101 Julian Street & 3200-3204 West 71st Avenue
236 Hazel Ridge Plaza 4301-4347 Hazel Avenue
237 Gray Road Self Storage 7821 East Gray Road
238 Virginia Square Apartments 1170 Murchison Avenue
239 Premier Club Apartments 5100 Highpoint Road
240 1058 Southern Blvd. 1058 Southern Blvd.
241 Watson Centex-San Antonio* 11307 Roszell Drive
242 Lakeside Meadows Apartments 12817 Mapleview Street
243 Atlantic Self Storage- Millcoe Road 1510 Millcoe Road
244 Holiday Inn - Reidsville 2100 Barnes Street
245 Parkway Plaza* 10410 Kensington Parkway
246 Lantern Plaza* 28940-28950 Golden Lantern
247 West 24th Street Apartments 6011-6041 West 24th Avenue
248 Airport Circle Plaza 7500 S. Crescent Boulevard
249 El Pueblo Lodge 412 Paseo del Pueblo Norte
250 Maple Manor Apartments 3001 Wedington Drive
251 Regency Walk 10230 Atlantic Blvd.
252 The Coach Store 69 Main Street
253 WIPAC Distribution Warehouse 3501 Electronics Way
254 Oceanside Square 4750-4760 Oceanside Blvd.
255 North Las Vegas Self Storage 3360 North Las Vegas Boulevard
256 Village Plaza 15355 Sherman Way
257 Lake Margaret Village Apartments (2K)* 3039 South Fern Creek Avenue
258 Townhouse Apartments (2K)* 2950 NE 14th Street
259 Whispering Pines Apartments 5801 Altama Avenue
260 Beechmont Professional Building 3180 Main Street
261 204 Loudon Road 204 Loudon Road
262 Atlantic Arms Apartments (2L) 1052-1056 Atlantic Street
263 Kilbreth Apartments (2L) 776 Kilbreth Avenue
264 Ramada Limited- South Padre 4109 Padre Blvd.
265 U.S. Rentals, Inc. 3400 Lind Avenue SW
266 El Campo Inn 210 Highway 59 West
267 1318 Wilshire Boulevard 1318 - 1332 Wilshire Boulevard
268 PETCO Building 403 North 8th Street
269 333 West Indian School - Phoenix (2M) 333 West Indian School Road
270 2502 North Alvernon Way - Tucson (2M) 2502 North Alvernon Way
271 Victory Self Storage - Staten Island 3493 and 3511 Victory Boulevard
272 Sheridan Retail Shops 1945 S. Sheridan Blvd.
273 485 Kings Highway 485 Kings Highway
274 Norwest Business Park* 551-595 North 1200 West
275 Silver Creek Manor 150 North Douglas Street
276 The Square Shopping Center 2301 - 2323 W. Lawrence Avenue
277 301-315 East Tremont Ave. 301-315 East Tremont Avenue
278 Jack In The Box - Galena Park (2XVIII) 2607 Clinton Drive
279 Jack in the Box - Terrell (2XVIII) 1898 W. Moore Avenue
280 Terrace View (Chateau) Apartments (2N) 784, 788 & 792 Garner Avenue
281 Garner Avenue Apartments (2N) 1337 Garner Avenue
282 Lake Ridge Apartments - DRK 2600-2636 Goldenstrand Drive, 2741-2757 & 2800-2836 Silverstrand Drive
283 Lake Ridge Apartments - FEM 6133-6169 Goldenstrand Drive, 2631-2667 & 2721-2737 Silverstrand Drive
284 Lake Ridge Apartments - JMK 2761-2797 Goldenstrand Drive, 2640-2676 & 2761-2797 Silverstrand Drive
285 Lake Ridge Apartments - MJK 2680-2716 & 6134-6170 Goldenstrand Drive, 2671-2687 Silverstrand Drive
286 Our Shopping Center 2006 Waveland Road
287 Diffley Square Shopping Center 4130 Blackhawk Road
288 Westridge Shopping Center* 6605 I-40 West
289 CVS Drug Store 1029 Forest Parkway
290 Rite Aid Drug Store - Griffin, GA 405 S. Hill Street
291 1525 & 1535 Central Avenue 1525 & 1535 Central Avenue
292 Lowry Expressway Office Building* 8900 Emmett F. Lowry Expressway
293 Monarch Bank Building* 401 Glenneyre Street
294 Innovative Metals Warehouse 180 Clydesdale Court
295 Archer Road Self Storage 6505 SW Archer Road
296 Econo-Pak Warehouse 4944 West 73rd Street
297 Food-4-Less 519 U.S. Highway 24 East
298 Sugarland Professional Building 201-203 Elden Street
299 Summit Terrace Apartments 461-471 Summit Street
300 Red Carpet Inn - Boone* 862 Blowing Rock Road
301 1883-1887 Amsterdam Avenue 1883-1887 Amsterdam Avenue
302 Dave's Car Wash 449 North Bolingbrook Drive
303 Alamo Self Storage 43357 Division Street
304 Desert Pines Apartments* 118 South 15th Street
305 Watson Centex - Houston* 2110 Telephone Road
306 Blue Heron Car Wash 1450 S. Military Trail
307 30100 Crown Valley Parkway* 30100 Crown Valley Parkway
308 Lovers Lane Retail Center 5647 & 5655 West Lovers Lane
309 Northway Manor MHP 338 Country Route Number 11
310 Budget Mini Storage-Fontana 15991 Valley Boulevard
311 9D E-Z Storage 1190 Route 9D
312 Days Inn - Brunswick 2307 Glouscester Street
313 Apollo Self Storage 17120 State Highway 72
314 Hollywood Video Store - High Point, NC 2118 N. Main Street
315 Cypress Woods Apartments 2135 West Campbell Avenue
316 Eagle Rock Shopping Center 2750 E. Colorado Boulevard
317 Hollywood Video Store - Virginia Beach 629 Newtown Road
318 Airport South Building 2301 Dorsey Road
319 Thriftway Supermarket 326 S. Walnut Street
320 Hollywood Video Store - Pikesville, MD 211 Reisterstown Road
321 Roof Garden Mobile Home Court* Route 281
322 Sandalon East Office Building* 5299 Roswell Road
323 Westgate Regency Center* 11909-11929 W. Pico Boulevard
324 Roger's Green Hills Supermarket 1004 Fifth Avenue
325 Taco Bell & US Auto Glass 1610-1680 El Camino Real
326 555 Broadway* 555 Broadway
327 Aussie Self Storage 30 East Victorian Avenue
328 Roselea Villas* 2550 A Hartweel Ave.
329 Knights Inn-Summerton* 248 Buff Road
330 1610 Broadway* 1610 Broadway
331 Morrone Company* 465 Albert Street
332 Peppertree Apartments 3309 Robinson Drive
333 Islip Terrace Plaza* 500 Islip Avenue
334 1626 Logan Street* 1626 Logan Street
335 TX Human Serv. & Work Force Comm. Off.* 2501 Palo Alto Drive
336 Fielders Bridge Office Building* 1615 West Abram Street
337 2906 North State Street Building* 2906 North State Street
338 Days Inn - Orange City* 2501 North Volusia Avenue
339 Edgewood Court Apartments* 611 S. Ennis Ave
340 Super Safe Self Service Storage 1401 Jordan Lane
341 Pioneer Plaza* 120 Broadway
342 287 Appleton Street* 287 Appleton Street
343 2059 E. Sahara Avenue* 2059 Sahara Avenue
344 560 Virginia Way* 560 Virgina Way
345 Calibra Sunnyside* 197 North Sunnyside Avenue
346 Bolling Building* 910 North 47th St.
347 512 Main Street* 512 Main Street
348 Panola Road Office Building* 5353 Fairington Road
349 1920 Ledbetter Drive* 1920 Ledbetter Drive
350 2727-2745 Gundry Avenue* 2725-2745 Gundry Avenue
351 Citadel Apartments* 104 Pleasant Street
352 1400-1410 E. Florida* 1400-1410 East Florida Street
353 Vance St. Apartment Building* 1600 Vance Street
354 3200 Race Street* 3200 Race Street
355 Covington Office Center* 4336 Covington Highway
356 4201 Dimmitt Road* 4201 Dimmitt Road
357 10660 Silicon Avenue* 10660 Silicon Avenue
358 5401 Cherry Avenue* 5401 Cherry Avenue
359 110 Adams Ave.* 110 Adams Ave., 1605-1623 Alabama St.
360 Miss Meme's Kreative Kids Bldg.* 25112 Marguerite Parkway
361 La Canasta Furniture & Appliance Store* 3231 E. Florence Avenue
362 Great Southwestern Parkway* 800-810 North Great Southwest Parkway
363 503 W. 26th Street* 503 W. 26th Street
364 Mosstree Apartments* 1215 Mosstree Road
365 Marshall/Catamount Apartments* 8 Marshall Court/222 Catamount Road
366 Sannella* 516 West 169th Street
367 1005 Abbott Road* 1005 Abbott Road
368 6452 Nine Mile Bridge Road* 6452 Nine Mile Bridge Road
369 301 South Richey Road* 301 South Richey Road
370 Moore's Adult Care Facility* 1385 Gidner Road
371 Bass Pro Shop* 354 East I-30
372 619-623 W. Brookside* 619-623 W. Brookside Street
373 50-52 Ferry Street* 50-52 Ferry Street
374 Hillside Mobile Home Park* 31 Young Road
375 Bailey Hardwoods* 628 East Kimble Court
376 3050 Austin Bluffs Parkway* 3050 Austin Bluffs Parkway
377 Kelley St. Office Building* 336-340 Kelley St.
378 Northlake MHP* Northlake Drive
379 59-61 Carlton Street Apartments* 59-61 Carleton Street
380 Sabattus Street Office Building* 917 Sabattus Street
</TABLE>
<PAGE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Loan Property Sub-Property Year Built/
No. City State Zipcode Type Type Units/NSF Renovated(8)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 San Francisco CA 94109 Multifamily Low-Rise 33 1996
2 San Francisco CA 94108 Multifamily High-Rise 70 1997
3 San Francisco CA 94108 Multifamily Low-Rise 35 1987
4 San Francisco CA 94109 Multifamily Low-Rise 36 1997
5 San Francisco CA 94109 Multifamily Low-Rise 30 1997
6 San Francisco CA 92714 Multifamily Low-Rise 36 1995
7 San Francisco CA 94104 Multifamily Low-Rise 32 1996
8 San Francisco CA 94122 Multifamily Low-Rise 38 1997
9 San Francisco CA 94102 Multifamily Low-Rise 36 1996
10 San Francisco CA 94104 Mixed Use Retail/Office 16,000 1985
11 San Francisco CA 94104 Multifamily Low-Rise 8 1996
12 Burlingame CA 94010 Retail Unanchored 5,130 1997
13 San Francisco CA 94104 Multifamily Low-Rise 5 1997
14 Springhill LA 71075 Healthcare Skilled Nursing Facility 153 1989
15 Greeneville TN 37743 Healthcare Skilled Nursing Facility 144 1989
16 Port St. Joe FL 32456 Healthcare Skilled Nursing Facility 120 1983
17 Abbeville LA 70510 Healthcare Skilled Nursing Facility 120 1995
18 Carthage TX 75633 Healthcare Skilled Nursing Facility 108 1971
19 Jonesboro LA 71251 Healthcare Skilled Nursing Facility 84 1977
20 Albuquerque NM 87114 Healthcare Skilled Nursing Facility 120 1986
21 Byrdstown TN 38549 Healthcare Skilled Nursing Facility 63 1990
22 Broadview IL 60153 Retail Anchored 353,787 1994
23 Nashua NH 03060 Healthcare Skilled Nursing Facility 102 1996
24 Nashua NH 03060 Healthcare Assisted Living Facility 46 1988
25 Manchester NH 03104 Healthcare Skilled Nursing Facility 70 1995
26 Bedford NH 03110 Healthcare Assisted Living Facility 40 1988
27 Fond du Lac WI 54937 Hospitality Full Service 141 1994
28 Appleton WI 54914 Hospitality Limited Service 130 1990
29 Madison WI 53717 Hospitality Limited Service 95 1995
30 Madison WI 53717 Hospitality Limited Service 130 1989
31 Oshkosh WI 32328 Hospitality Limited Service 70 1997
32 Fond du Lac WI 54937 Hospitality Limited Service 79 1994
33 Seattle WA 98119 Office Urban Office 218,086 1980
34 New York NY 10012 Mixed Use Retail/Office 207,544 1997
35 Abilene TX 79602 Office Urban Office 285,793 1984
36 Abilene TX 79605 Retail Unanchored 82,237 1994
37 Abilene TX 79601 Retail Unanchored 82,830 1978
38 Abilene TX 79605 Retail Unanchored 44,624 1979
39 Lamesa TX 79331 Retail Anchored 87,200 1978
40 Midland TX 79707 Retail Unanchored 42,606 1982
41 Brownwood TX 76801 Retail Anchored 61,626 1996
42 Morganville NJ 07751 Retail Anchored 230,549 1996
43 Santa Monica CA 90405 Hospitality Full Service 311 1996
44 Cleves OH 45002 Mobile Home Park Mobile Home Park 270 1979
45 Goshen Township OH 45150 Mobile Home Park Mobile Home Park 269 1970
46 Cincinnati OH 45239 Mobile Home Park Mobile Home Park 155 1971
47 Hamilton OH 45015 Mobile Home Park Mobile Home Park 119 1976
48 Amelia OH 45102 Mobile Home Park Mobile Home Park 159 1974
49 Loveland OH 45140 Mobile Home Park Mobile Home Park 86 1958
50 Bellevue KY 41073 Mobile Home Park Mobile Home Park 96 1955
51 Plano TX 75093 Multifamily Garden 239 1996
52 Edison NJ 08817 Industrial Light Industrial 220,000 1989
53 Santa Ana CA 92706 Retail Anchored 99,256 1996
54 Irvine CA 92604 Mixed Use Retail/Office 82,850 1985
55 Harding Township NJ 07960 Office Suburban Office 98,280 1992
56 Lubbock TX 79416 Multifamily Garden 240 1997
57 Great Neck NY 11021 Healthcare Skilled Nursing Facility 200 1998
58 Lake Forest CA 92630 Multifamily Garden 180 1984
59 Walterboro SC 29488 Healthcare Skilled Nursing Facility 132 1996
60 Ridgeway SC 29130 Healthcare Skilled Nursing Facility 150 1996
61 Forsyth GA 30129 Healthcare Skilled Nursing Facility 72 1970
62 Forsyth GA 30129 Healthcare Skilled Nursing Facility 83 1972
63 Melville NY 11747 Industrial Light Industrial 102,897 1983
64 Centereach NY 11720 Retail Anchored 47,606 1970
65 Lynbrook NY 11563 Retail Anchored 18,400 1972
66 Patchogue NY 11772 Retail Anchored 21,775 1987
67 New York NY 10027 Office Urban Office 135,897 1996
68 Janesville WI 53545 Healthcare Congregate Care 38 1992
69 Mayville WI 53050 Healthcare Congregate Care 34 1992
70 Marshfield WI 54449 Healthcare Congregate Care 40 1993
71 Marshfield WI 54449 Healthcare Congregate Care 23 1991
72 Hartford WI 54720 Healthcare Congregate Care 23 1993
73 Wisconsin Rapids WI 54494 Healthcare Congregate Care 20 1988
74 Medford WI 54451 Healthcare Congregate Care 15 1993
75 Fond du Lac WI 54937 Healthcare Congregate Care 23 1993
76 Shawano WI 54166 Healthcare Congregate Care 15 1993
77 Alexandria VA 22304 Retail Shadow Anchored 74,464 1990
78 Westerville OH 43802 Industrial Flex 182,694 1980
79 Burlingame CA 94010 Office Urban Office 126,658 1985
80 Norristown PA 19403 Industrial Light Industrial 133,156 1990
81 Lauderdale by the Sea FL 33308 Hospitality Full Service 187 1996
82 Norcross GA 30093 Multifamily Garden 208 1997
83 Dallas TX 75226 Multifamily Low-Rise 126 1997
84 Syracuse NY 13202 Office Urban Office 231,173 1987
85 Atlanta GA 30260 Multifamily Garden 200 1996
86 Rohnert Park CA 94928 Multifamily Garden 136 1994
87 Columbus GA 31904 Hospitality Full Service 177 1997
88 Henderson KY 42420 Retail Anchored 187,866 1991
89 Apple Valley CA 92308 Retail Anchored 108,938 1988
90 South Abington Twp. PA 18411 Retail Unanchored 83,110 1996
91 Dunmore PA 18512 Retail Unanchored 41,554 1996
92 Hialeah FL 33012 Retail Anchored 101,287 1996
93 Gloucester MA 01930 Industrial Warehouse 276,705 1998
94 Pleasanton CA 94566 Retail Anchored 52,019 1997
95 Hialeah FL 33016 Multifamily Garden 189 1991
96 Wilkesboro NC 28697 Healthcare Assisted Living Facility 99 1996
97 Nebo NC 28761 Healthcare Assisted Living Facility 80 1983
98 Wilkesboro NC 28697 Healthcare Assisted Living Facility 50 1966
99 Pennsauken NJ 08110 Industrial Warehouse 121,200 1969
100 Pennsauken NJ 08110 Industrial Warehouse 111,200 1969
101 Pennsuaken NJ 08110 Industrial Warehouse 78,000 1975
102 Pennsauken NJ 08110 Industrial Warehouse 34,868 1986
103 Pennsauken NJ 08110 Industrial Warehouse 35,238 1986
104 Davis CA 95616 Multifamily Garden 216 1995
105 Tallahassee FL 32301 Multifamily Garden 277 1997
106 Naples FL 34103 Hospitality Limited Service 102 1996
107 Kissimmee FL 34741 Multifamily Garden 136 1994
108 Tallahassee FL 32301 Multifamily Garden 228 1997
109 Hialeah FL 33016 Multifamily Garden 174 1990
110 Santa Monica CA 90401 Mixed Use Retail/Office 27,396 1991
111 Manassas VA 20109 Office Suburban Office 92,715 1988
112 Hanover NH 03755 Mixed Use Retail/Office 27,942 1992
113 Hanover NH 03755 Office Suburban Office 36,225 1990
114 Panama City FL 32405 Multifamily Garden 160 1986
115 Hammond IN 46327 Industrial Warehouse 600,000 1980
116 El Segundo CA 90245 Mixed Use Office/Industrial 74,688 1996
117 Orange CA 92865 Mixed Use Retail/Office 66,816 1990
118 Hobe Sound FL 33455 Retail Anchored 153,070 1997
119 Springfield OR 97477 Hospitality Full Service 116 1996
120 Decatur GA 30035 Multifamily Garden 151 1997
121 Bedford MA 01730 Office Suburban Office 71,553 1996
122 Davis CA 95616 Multifamily Garden 161 1994
123 Kenner LA 70065 Hospitality Limited Service 106 1997
124 San Diego CA 92111 Office Suburban Office 134,645 1986
125 Houma LA 70360 Hospitality Full Service 196 1997
126 Haverhill MA 01830 Healthcare Skilled Nursing Facility 120 1996
127 East Brandywine Twp .PA 19335 Retail Anchored 82,935 1995
128 Avenel NJ 07001 Hospitality Limited Service 71 1988
129 Sayreville NJ 08879 Hospitality Limited Service 39 1984
130 Los Angeles CA 90048 Multifamily Garden 95 1991
131 Los Angeles CA 90066 Industrial Flex 86,940 1991
132 Kent WA 98031 Multifamily Garden 204 1993
133 Nashville TN 37217 Multifamily Garden 204 1997
134 Treasure Island FL 33706 Hospitality Full Service 117 1986
135 Portland OR 97225 Retail Anchored 106,630 1995
136 Riverside CA 92506 Healthcare Skilled Nursing Facility 68 1991
137 Kenilworth NJ 07033 Industrial Warehouse 150,000 1985
138 Sewell NJ 08080 Retail Anchored 98,348 1991
139 Far Rockaway NY 11691 Healthcare Skilled Nursing Facility 215 1974
140 Waltham MA 02154 Retail Unanchored 35,986 1991
141 Red Bank TN 37415 Multifamily Garden 226 1997
142 Montgomery AL 36117 Multifamily Garden 136 1996
143 Fresno CA 93727 Multifamily Garden 300 1995
144 Davie FL 33318 Retail Unanchored 42,392 1985
145 Ellensburg WA 98926 Multifamily Garden 121 1994
146 Ocean City MD 21842 Retail Unanchored 16,700 1994
147 Ocean City MD 21842 Retail Unanchored 8,740 1993
148 Virgina Beach VA 23451 Retail Unanchored 9,933 1994
149 Orlando FL 32807 Multifamily Garden 120 1987
150 Virgina Beach VA 23451 Retail Unanchored 11,862 1992
151 Ocean City MD 21842 Retail Unanchored 10,128 1994
152 Ocean City MD 21842 Retail Unanchored 6,337 1995
153 Ocean City MD 21842 Retail Unanchored 7,240 1975
154 Tacoma WA 98409 Hospitality Limited Service 129 1997
155 Lafayette LA 70501 Hospitality Limited Service 80 1996
156 Lindale TX 75771 Healthcare Skilled Nursing Facility 90 1997
157 Pleasanton CA 94566 Mixed Use Retail/Office 12,735 1997
158 Pleasanton CA 94566 Retail Unanchored 13,766 1998
159 Decatur IL 62526 Multifamily Garden 96 1996
160 Peabody MA 01960 Industrial Light Industrial 134,400 1990
161 Medford OR 97504 Healthcare Congregate Care 84 1980
162 Costa Mesa CA 92626 Office Suburban Office 42,191 1986
163 Seattle WA 98105 Multifamily Low-Rise 84 1985
164 Portland OR 97217 Mixed Use Office/Warehouse 107,007 1985
165 Bath ME 04530 Hospitality Full Service 141 1987
166 Colma CA 94014 Healthcare Assisted Living Facility 57 1995
167 Jacksonville FL 32256 Multifamily Garden 104 1990
168 Knoxville TN 37919 Other Car Wash 2,808 1993
169 Knoxville TN 37912 Other Car Wash 3,473 1993
170 Knoxville TN 37918 Other Car Wash 3,500 1993
171 San Francisco CA 94144 Retail Unanchored 20,092 1986
172 Greenfield WI 53220 Retail Anchored 53,293 1987
173 Wauwatosa WI 53213 Retail Anchored 52,881 1988
174 Los Angeles CA 90015 Retail Unanchored 21,045 1996
175 Scott Air Force Bas eIL 62225 Office Suburban Office 33,260 1996
176 O'Fallon IL 62269 Office Suburban Office 14,600 1995
177 Rowland Heights CA 91748 Retail Unanchored 33,552 1988
178 Titusville FL 32780 Retail Anchored 72,570 1996
179 Richboro PA 18954 Retail Anchored 31,564 1988
180 Glendale AZ 85301 Multifamily Garden 148 1985
181 Plainville MA 02762 Office Suburban Office 23,100 1991
182 Pottstown PA 19464 Mixed Use Multifamily/Office 122,050 1998
183 Santa Clara CA 95050 Industrial Warehouse 85,400 1957
184 Cedar Rapids IA 52404 Hospitality Limited Service 106 1994
185 Norcross GA 30092 Mixed Use Retail/Office 47,572 1989
186 Brooklyn NY 11211 Industrial Light Industrial 213,300 1990
187 Lemon Grove CA 91945 Retail Anchored 33,215 1990
188 Daytona Beach FL 32114 Hospitality Full Service 127 1997
189 Denver NC 28037 Retail Anchored 44,900 1997
190 Stoughton WI 53589 Multifamily Garden 90 1996
191 Tehachapi CA 93561 Retail Anchored 35,548 1989
192 St. Petersburg FL 33712 Multifamily Garden 136 1995
193 Fuquay-Varina NC 27526 Multifamily Garden 68 1997
194 Whitinsville MA 01588 Retail Anchored 59,350 1997
195 Wichita KS 67208 Retail Anchored 99,504 1990
196 Tampa FL 33624 Office Suburban Office 33,232 1997
197 Atlanta GA 30305 Retail Unanchored 30,378 1973
198 Fairbanks AK 99701 Retail Anchored 24,000 1998
199 St. Louis MO 63136 Multifamily Garden 150 1971
200 McAllen TX 78501 Hospitality Limited Service 102 1994
201 Rowland Heights CA 91748 Retail Unanchored 30,032 1989
202 Vancouver WA 98661 Mixed Use Retail/Office 47,804 1978
203 Puyallup WA 98374 Multifamily Garden 48 1997
204 San Angelo TX 76901 Retail Restaurant 25,930 1998
205 Midland TX 79705 Retail Restaurant 25,650 1997
206 Madison WI 53713 Hospitality Limited Service 88 1997
207 Dallas TX 75224 Self Storage Facility Self Storage Facility 75,405 1996
208 Marietta GA 30062 Other Car Wash 8,830 1988
209 Marietta GA 30068 Other Car Wash 5,044 1995
210 East Point GA 30344 Industrial Warehouse 268,200 1964
211 Phoenix AZ 85022 Office Suburban Office 47,128 1985
212 Jersey City NJ 07302 Office Urban Office 44,887 1997
213 Poulsbo WA 98370 Self Storage Facility Self Storage Facility 57,550 1991
214 Poulsbo WA 98370 Industrial Light Industrial 23,546 1996
215 New York NY 10013 Mixed Use Multifamily/Retail/Office 76,350 1900
216 Vallejo CA 94591 Hospitality Full Service 78 1997
217 Orlando FL 32837 Hospitality Limited Service 48 1997
218 Orlando FL 32839 Hospitality Limited Service 48 1997
219 Ormond Beach FL 32174 Hospitality Limited Service 48 1996
220 Daytona Beach FL 32114 Hospitality Limited Service 48 1973
221 San Diego CA 92121 Industrial Light Industrial 55,261 1996
222 Woodstock VT 05091 Retail Unanchored 9,320 1977
223 Quechee VT 05059 Retail Unanchored 17,200 1996
224 Woodstock VT 05091 Retail Unanchored 4,061 1980
225 Lemoore CA 93245 Hospitality Limited Service 61 1995
226 Killeen TX 76541 Hospitality Limited Service 69 1994
227 Stafford VA 22554 Hospitality Limited Service 58 1995
228 Jacksonville FL 32218 Self Storage Facility Self Storage Facility 122,800 1996
229 Jacksonville FL 32258 Self Storage Facility Self Storage Facility 84,895 1996
230 Seattle WA 98105 Mixed Use Multifamily/Retail 24 1997
231 Hamburg PA 19526 Retail Anchored 56,748 1988
232 Macon GA 31210 Self Storage Facility Self Storage Facility 73,150 1996
233 Killeen TX 76542 Hospitality Limited Service 58 1995
234 SeaTac WA 98188 Hospitality Limited Service 75 1983
235 Westminster CO 80030 Industrial Warehouse 106,140 1977
236 Fair Oaks CA 95628 Retail Unanchored 24,137 1986
237 Scottsdale AZ 85260 Self Storage Facility Self Storage Facility 45,051 1987
238 Pomona CA 91766 Multifamily Garden 52 1997
239 Union City GA 30291 Multifamily Garden 88 1997
240 Bronx NY 10459 Mixed Use Multifamily/Retail 57,500 1980
241 San Antonio TX 78217 Office Suburban Office 65,228 1993
242 Lakeside CA 92040 Multifamily Garden 64 1987
243 Jacksonville FL 32225 Self Storage Facility Self Storage Facility 82,350 1996
244 Reidsville NC 27320 Hospitality Full Service 100 1996
245 Kensington MD 20895 Office Suburban Office 31,685 1996
246 Laguna Niguel CA 92677 Retail Unanchored 12,993 1986
247 Hialeah FL 33016 Multifamily Garden 52 1991
248 Pennsauken NJ 08109 Retail Anchored 118,853 1994
249 Taos NM 87571 Hospitality Limited Service 60 1987
250 Fayetteville AR 72701 Multifamily Garden 128 1973
251 Jacksonville FL 32246 Retail Unanchored 34,436 1988
252 East Hampton NY 11937 Retail Unanchored 6,110 1997
253 West Palm Beach FL 33407 Industrial Warehouse 107,162 1997
254 Oceanside CA 92056 Retail Shadow Anchored 34,139 1990
255 Las Vegas NV 89115 Self Storage Facility Self Storage Facility 82,565 1987
256 Van Nuys CA 91406 Retail Unanchored 21,922 1987
257 Orlando FL 32806 Multifamily Garden 40 1966
258 Ocala FL 34470 Multifamily Garden 48 1972
259 Brunswick GA 31525 Multifamily Garden 108 1994
260 Bridgeport CT 06606 Office Suburban Office 21,293 1990
261 Concord NH 03301 Retail Unanchored 27,464 1998
262 Salinas CA 93905 Multifamily Garden 39 1997
263 Salinas CA 93905 Multifamily Garden 8 1977
264 South Padre Island TX 78597 Hospitality Limited Service 48 1995
265 Renton WA 98055 Retail Unanchored 11,433 1997
266 El Campo TX 77437 Hospitality Limited Service 60 1995
267 Santa Monica CA 90403 Retail Unanchored 11,019 1994
268 West Dundee IL 60118 Retail Anchored 19,000 1986
269 Phoenix AZ 85013 Office Suburban Office 17,352 1991
270 Tucson AZ 85712 Office Suburban Office 4,768 1991
271 Staten Island NY 10314 Self Storage Facility Self Storage Facility 38,022 1996
272 Lakewood CO 80227 Retail Shadow Anchored 17,174 1993
273 Brooklyn NY 11223 Mixed Use Retail/Office 20,400 1991
274 Orem UT 84057 Industrial Flex 44,352 1997
275 Ripon WI 54971 Healthcare Assisted Living Facility 42 1996
276 Chicago IL 60625 Retail Unanchored 18,083 1991
277 Bronx NY 10457 Mixed Use Multifamily/Retail 62 1994
278 Galena Park TX 77547 Retail Restaurant 2,681 1997
279 Terrell TX 75160 Retail Restaurant 2,423 1997
280 Salinas CA 93905 Multifamily Garden 36 1978
281 Salinas CA 93905 Multifamily Garden 14 1968
282 Columbus OH 43215 Multifamily Garden 40 1997
283 Columbus OH 43215 Multifamily Garden 40 1997
284 Columbus OH 43215 Multifamily Garden 40 1997
285 Columbus OH 43215 Multifamily Garden 40 1997
286 Waveland MS 39576 Retail Anchored 112,812 1994
287 Eagan MN 55122 Retail Unanchored 30,209 1997
288 Amarillo TX 79106 Retail Unanchored 22,276 1995
289 Forest Park GA 30297 Retail Anchored 10,125 1997
290 Griffin GA 30224 Retail Anchored 11,220 1997
291 Bridgeport CT 06610 Multifamily Garden 86 1971
292 Texas City TX 77591 Office Suburban Office 20,000 1994
293 Laguna Beach CA 92651 Office Suburban Office 9,612 1969
294 Grass Valley CA 95945 Industrial Light Industrial 28,899 1998
295 Gainesville FL 32608 Self Storage Facility Self Storage Facility 45,700 1995
296 Bedford Park IL 60638 Industrial Warehouse 55,646 1997
297 Moberly MO 65270 Retail Anchored 38,941 1993
298 Herndon VA 20170 Office Suburban Office 19,200 1979
299 Bowling Green OH 43402 Multifamily Garden 96 1997
300 Boone NC 28607 Hospitality Limited Service 60 1995
301 New York NY 10032 Multifamily Low-Rise 60 1994
302 Bolingbrook IL 60440 Other Car Wash 3,858 1994
303 Lancaster CA 93535 Self Storage Facility Self Storage Facility 60,375 1987
304 Las Vegas NV 89101 Multifamily Garden 70 1997
305 Houston TX 77023 Office Suburban Office 26,220 1992
306 West Palm Beach FL 33415 Other Car Wash 2,934 1980
307 Laguna Niguel CA 92677 Office Suburban Office 14,706 1975
308 Dallas TX 75209 Retail Unanchored 6,722 1985
309 West Monroe NY 13167 Mobile Home Park Mobile Home Park 148 1957
310 Fontana CA 92335 Self Storage Facility Self Storage Facility 55,953 1986
311 Wappingers Falls NY 12590 Self Storage Facility Self Storage Facility 37,200 1987
312 Brunswick GA 31520 Hospitality Limited Service 98 1997
313 Arvada CO 80007 Self Storage Facility Self Storage Facility 45,644 1998
314 High Point NC 27262 Retail Unanchored 7,488 1997
315 Phoenix AZ 85015 Multifamily Garden 56 1997
316 Los Angeles CA 90041 Retail Unanchored 10,255 1986
317 Virginia Beach VA 23462 Retail Unanchored 7,488 1977
318 Glen Burnie MD 21061 Office Suburban Office 30,248 1982
319 Bath PA 18014 Retail Anchored 22,120 1993
320 Pikesville MD 21208 Retail Unanchored 7,200 1996
321 Somerset PA 15501 Mobile Home Park Mobile Home Park 106 N/A
322 Atlanta GA 30342 Office Suburban Office 22,210 1972
323 Los Angeles CA 90064 Retail Unanchored 9,422 1986
324 St. Joseph MO 64505 Retail Anchored 23,354 1985
325 Santa Clara CA 95050 Retail Unanchored 4,426 1994
326 Haverhill MA 01832 Industrial Warehouse 38,912 1996
327 Sparks NV 89431 Self Storage Facility Self Storage Facility 30,530 1996
328 Sanford FL 32773 Multifamily Garden 38 1994
329 Summerton SC 29148 Hospitality Full Service 140 1997
330 Santa Monica CA 90404 Mixed Use Office/Multifamily 7,500 1989
331 Macon GA 31206 Industrial Light Industrial 39,462 1996
332 Waco TX 76706 Multifamily Garden 80 1984
333 Islip Terrace NY 11751 Retail Unanchored 10,406 1994
334 Denver CO 80203 Multifamily Low-Rise 52 1941
335 San Antonio TX 78211 Office Suburban Office 21,975 1992
336 Arlington TX 76013 Office Suburban Office 14,731 1986
337 Jackson MS 39216 Office Suburban Office 59,110 1995
338 Orange City FL 32763 Hospitality Limited Service 38 1986
339 Bryan TX 77803 Multifamily Garden 36 1997
340 Huntsville AL 35816 Self Storage Facility Self Storage Facility 35,346 1976
341 Kissimmee FL 34741 Office Suburban Office 8,883 1990
342 Lowell MA 01852 Mixed Use Office/Retail 25,068 1983
343 Las Vegas NV 89104 Office Suburban Office 7,000 1985
344 Barstow CA 92311 Retail Unanchored 5,412 1996
345 Clovis CA 93611 Industrial Light Industrial 14,706 1997
346 Kansas City KS 66102 Office Suburban Office 12,750 1997
347 El Segundo CA 90245 Mixed Use Multifamily/Office 3,347 1985
348 Lithonia GA 30038 Office Suburban Office 7,300 1988
349 Dallas TX 75216 Retail Unanchored 5,850 1997
350 Signal Hill CA 90806 Industrial Warehouse 19,412 1972
351 Bryan TX 77840 Multifamily Garden 33 1997
352 Long Beach CA 90802 Multifamily Garden 20 1997
353 Lakewood CO 80215 Multifamily Garden 17 1959
354 Fort Worth TX 76111 Retail Unanchored 5,400 1997
355 Decatur GA 30035 Office Suburban Office 13,400 1996
356 Plainview TX 79072 Mobile Home Park Mobile Home Park 100 1970
357 Montclair CA 91763 Industrial Light Industrial 18,800 1977
358 Long Beach CA 90805 Retail Unanchored 6,000 1977
359 Huntington Beach CA 92648 Retail Unanchored 12,000 1963
360 Mission Viejo CA 92692 Other Day Care 3,331 1997
361 Huntington Park CA 90255 Retail Unanchored 11,518 1931
362 Arlington TX 76011 Industrial Warehouse 18,000 1970
363 Los Angeles CA 90731 Multifamily Garden 8 1962
364 North Charleston SC 29406 Multifamily Garden 27 1972
365 Pittsfield NH 03263 Multifamily Garden 19 1997
366 New York NY 10032 Multifamily High-Rise 24 1988
367 East Lansing MI 48823 Office Suburban Office 4,242 1996
368 Fort Worth TX 76135 Mobile Home Park Mobile Home Park 50 1987
369 Leesburg FL 34748 Industrial Light Industrial 13,582 1996
370 Charlotte MI 48813 Healthcare Assisted Living Facility 12 1997
371 Garland TX 75248 Retail Unanchored 13,198 1993
372 Colorado Springs CO 80906 Multifamily Garden 10 1996
373 Newark NJ 07105 Retail Unanchored 2,730 1930
374 Cartersville GA 30120 Mobile Home Park Mobile Home Park 15 1981
375 Springfield IL 62703 Industrial Warehouse 6,500 1994
376 Colorado Springs CO 80918 Office Suburban Office 2,680 1979
377 Manchester NH 03102 Mixed Use Multifamily/Retail 15,132 1900
378 Maryville TN 37801 Mobile Home Park Mobile Home Park 16 1989
379 Portland ME 04102 Multifamily Low-Rise 6 1997
380 Lewiston ME 04240 Office Suburban Office 1,920 1996
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(11)
No. Property Name(2) Cash Flow Payment(7) DSCR(3)(9) Value Date LTV(3)(10) Leased
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2677 Larkin Street (2I) $644,155 $42,450 1.31 $8,000,000 12/16/97 76.0% 97.0%
2 645 Stockton Street (2I) $549,963 $37,719 1.31 $7,400,000 12/16/97 76.0% 98.6%
3 1340 -1390 Taylor Street (2I) $538,937 $33,595 1.31 $6,560,000 12/16/97 76.0% 94.3%
4 1401 Jones Street (2I) $509,153 $31,212 1.31 $7,200,000 12/16/97 76.0% 97.2%
5 1870 Pacific Avenue (2I) $336,026 $22,711 1.31 $4,280,000 12/16/97 76.0% 100.0%
6 500 Stanyan Street (2I) $351,841 $21,809 1.31 $4,110,000 12/17/97 76.0% 100.0%
7 2075 - 2079 Market Street (2I) $336,860 $20,027 1.31 $4,270,000 12/18/97 76.0% 100.0%
8 1290 20th Avenue (2I) $301,271 $19,633 1.31 $3,700,000 12/16/97 76.0% 100.0%
9 78 Buchanan Street (2I) $292,563 $18,041 1.31 $3,400,000 12/17/97 76.0% 100.0%
10 2095 - 2099 Market Street (2I) $309,088 $17,617 1.31 $3,320,000 12/18/97 76.0% 100.0%
11 235 - 241 Church Street (2I) $157,196 $9,498 1.31 $1,790,000 12/18/97 76.0% 100.0%
12 1465 Burlingame Avenue (2I) $91,361 $5,386 1.31 $1,380,000 1/5/98 76.0% 100.0%
13 252 - 258 Church Street (2I) $73,776 $5,010 1.31 $960,000 12/18/97 76.0% 100.0%
14 Fountain View Nursing Home (2A) $932,993 $62,049 1.50 $10,200,000 10/1/97 77.8% 93.2%
15 Greeneville West Health Care Center (2A) $822,719 $53,533 1.50 $8,800,000 10/1/97 77.8% 94.5%
16 Bay St. Joseph Care Center (2A) $1,144,053 $43,191 1.50 $7,100,000 10/1/97 77.8% 92.4%
17 Heritage Manor of Abbeville (2A) $641,792 $41,366 1.50 $6,800,000 10/1/97 77.8% 93.7%
18 Panola Nursing Home (2A) $540,829 $29,200 1.50 $4,800,000 10/1/97 77.8% 86.1%
19 Jackson Manor Nursing Home (2A) $495,659 $24,941 1.50 $4,100,000 10/1/97 77.8% 87.1%
20 West Mesa Health Care Center (2A) $425,498 $21,826 1.50 $4,500,000 10/1/97 77.8% 94.5%
21 Pickett County Nursing Home (2A) $264,544 $17,218 1.50 $2,700,000 10/1/97 77.8% 98.0%
22 Broadview Village Square $2,988,064 $176,795 1.41 $35,100,000 4/7/98 75.4% 97.9%
23 The Courville at Nashua & Villas at Nashua (2II) $1,697,350 $93,149 1.52 $11,928,000 11/21/97 78.1% 94.4%
24 Aynsley Place (2II) $675,900 $37,093 1.52 $9,072,000 11/21/97 78.1% 75.8%
25 The Courville at Manchester (2II) $577,250 $31,679 1.52 $5,400,000 11/20/97 78.1% 92.8%
26 Carlyle Place (2II) $567,701 $31,155 1.52 $5,500,000 11/20/97 78.1% 100.0%
27 Holiday Inn-Fond du Lac, WI (2III) $810,973 $38,863 1.50 $7,150,000 2/1/98 72.1% 65.0%
28 Comfort Suites-Appleton, WI (2III) $733,908 $38,211 1.50 $7,030,000 2/1/98 72.1% 64.7%
29 Comfort Suites-Madison, WI (2III) $634,007 $32,123 1.50 $5,910,000 2/1/98 72.1% 76.0%
30 Budgetel-Madison, WI (2III) $590,650 $30,982 1.50 $5,700,000 2/1/98 72.1% 73.7%
31 Holiday Inn Express-Osh Kosh, WI (2III) $139,801 $20,328 1.50 $3,740,000 2/1/98 72.1% 52.3%
32 Budgetel-Fond du Lac, WI (2III) $294,048 $17,991 1.50 $3,310,000 2/1/98 72.1% 72.0%
33 Elliott Bay Office Park $2,315,727 $159,875 1.21 $31,300,000 4/7/98 73.5% 98.3%
34 The Cable Building $2,422,572 $154,632 1.31 $28,000,000 2/6/98 74.8% 97.6%
35 NationsBank Tower (2IV) $720,157 $45,155 1.33 $13,000,000 2/9/98 58.4% 73.4%
36 Woodhaven Shopping Center (2IV) $490,628 $30,763 1.33 $6,000,000 2/9/98 58.4% 97.4%
37 Radford Hills Shopping Center (2IV) $305,818 $19,175 1.33 $3,700,000 2/11/98 58.4% 90.2%
38 Crossroads Shopping Center (2IV) $212,624 $13,332 1.33 $2,600,000 2/10/98 58.4% 87.9%
39 Pioneer Square (2IV) $145,315 $9,111 1.33 $2,100,000 2/6/98 58.4% 100.0%
40 Mesa Verde Shopping Center (2IV) $128,893 $8,082 1.33 $2,000,000 2/6/98 58.4% 97.9%
41 Park Plaza Shopping Center (2IV) $122,740 $7,696 1.33 $1,800,000 2/20/98 58.4% 100.0%
42 Cambridge Square Shopping Center $2,110,208 $127,101 1.38 $25,500,000 12/5/97 69.8% 98.5%
43 Holiday Inn BayView Plaza $2,055,355 $126,864 1.35 $27,100,000 10/15/97 60.6% 82.6%
44 Westbrook (2V) $547,680 $30,791 1.55 $5,800,000 12/18/97 78.1% 100.0%
45 Green Acres (2V) $500,830 $24,075 1.55 $4,535,000 12/1/97 78.1% 95.5%
46 Compton Hills (2V) $317,675 $16,669 1.55 $3,140,000 12/18/97 78.1% 94.8%
47 Skymeadow (2V) $223,146 $13,882 1.55 $2,615,000 12/18/98 78.1% 95.8%
48 Eastgate (2V) $177,735 $8,494 1.55 $1,600,000 12/1/97 78.1% 98.7%
49 Lake Remington (2V) $124,774 $8,096 1.55 $1,525,000 12/18/97 78.1% 87.2%
50 Shady Terrace (2V) $103,340 $5,495 1.55 $1,035,000 12/10/97 78.1% 77.1%
51 Preston Place Apartments $1,635,513 $113,639 1.20 $17,100,000 1/6/98 82.7% 86.3%
52 Pharmaceutical Formulations Building $1,312,930 $85,607 1.28 $15,100,000 1/30/98 76.6% 100.0%
53 Bristol Market Place $1,181,903 $82,229 1.20 $14,500,000 9/29/97 79.1% 96.0%
54 Heritage Square $1,244,430 $83,755 1.24 $14,400,000 9/20/97 78.5% 98.0%
55 Jockey Hollow Office Complex $1,227,413 $77,050 1.33 $15,000,000 12/17/97 75.0% 100.0%
56 Ashton Pointe Apartments $1,163,447 $74,851 1.30 $13,800,000 12/8/97 79.5% 88.3%
57 Wedgewood Care Center $1,878,701 $91,714 1.71 $16,400,000 9/1/98 66.7% 98.4%
58 River Oaks Apartments $1,024,314 $66,463 1.28 $13,800,000 2/24/98 72.3% 97.8%
59 Oakwood Nursing Home (2VI) $551,829 $35,509 1.30 $4,150,000 7/30/97 79.6% 96.2%
60 Tanglewood Nursing Home (2VI) $306,989 $19,754 1.30 $3,170,000 7/30/97 79.6% 97.3%
61 Forsyth Nursing Home (2VI) $150,972 $9,715 1.30 $2,200,000 2/6/97 79.6% 98.6%
62 Hilltop Nursing Home (2VI) $138,020 $8,881 1.30 $2,310,000 2/6/97 79.6% 97.0%
63 Harrows Warehouse-Melville, NY (2VII) $448,454 $28,463 1.28 $4,600,000 9/19/97 64.7% 100.0%
64 Harrows Shopping Center-Centereach, NY (2VII) $390,756 $26,216 1.28 $4,550,000 9/18/97 64.7% 100.0%
65 Harrows Shopping Center-Lynbrook, NY (2VII) $148,147 $9,580 1.28 $2,380,000 9/15/97 64.7% 100.0%
66 Harrows Shopping Center-Patchogue, NY (2VII) $103,744 $6,702 1.28 $2,360,000 9/18/97 64.7% 100.0%
67 132 West 125th Street $1,512,698 $67,404 1.87 $14,950,000 10/15/97 59.9% 100.0%
68 Friendship Manor - Janesville (2VIII) $222,747 $13,521 1.44 $2,000,000 11/1/97 78.2% 84.2%
69 Friendship Manor - Mayville (2VIII) $240,097 $11,764 1.44 $1,740,000 11/1/97 78.2% 82.0%
70 Friendship Manor - North Hume (2VIII) $184,713 $11,531 1.44 $1,705,598 11/1/97 78.2% 80.0%
71 Friendship Manor - West Mann (2VIII) $121,616 $8,481 1.44 $1,254,402 11/1/97 78.2% 78.0%
72 Friendship Manor - Hartford (2VIII) $121,600 $7,910 1.44 $1,170,000 11/1/97 78.2% 87.0%
73 Friendship Manor - Wisconsin Rapids (2VIII) $148,370 $6,693 1.44 $990,000 11/1/97 78.2% 70.0%
74 Friendship Manor - Medford (2VIII) $102,299 $6,355 1.44 $940,000 11/1/97 78.2% 73.0%
75 Friendship Manor - Fond du Lac (2VIII) $108,987 $5,544 1.44 $820,000 11/1/97 78.2% 70.0%
76 Friendship Manor - Shawano (2VIII) $89,081 $5,476 1.44 $810,000 11/1/97 78.2% 93.0%
77 Van Dorn Station $1,157,142 $60,981 1.58 $11,800,000 12/24/97 74.3% 100.0%
78 Brooksedge Corporate Center $903,013 $58,779 1.28 $11,500,000 1/19/98 74.8% 89.4%
79 Bayside Plaza $1,260,498 $60,775 1.73 $28,300,000 5/5/98 28.6% 100.0%
80 Transicoil $934,768 $59,701 1.30 $12,040,000 1/19/98 66.2% 100.0%
81 Holiday Inn-Lauderdale, FL $1,041,993 $57,807 1.50 $10,300,000 2/20/98 74.5% 69.7%
82 Highland Walk Apartments $815,934 $50,627 1.34 $9,450,000 3/25/98 79.2% 94.7%
83 Deep Ellum Lofts $881,013 $51,061 1.44 $12,500,000 12/10/97 59.8% 94.4%
84 Galleries of Syracuse $856,940 $57,341 1.25 $11,000,000 5/1/97 67.6% 91.4%
85 Sandlewood Apartments $784,403 $51,941 1.26 $9,200,000 9/5/97 79.4% 99.0%
86 Emerald Pointe Apartments $957,083 $51,418 1.55 $11,600,000 5/7/98 63.0% 100.0%
87 Sheraton Inn-Columbus, GA $944,635 $54,073 1.46 $10,500,000 1/21/98 68.9% 65.6%
88 Gardenside Shopping Center $820,811 $50,899 1.34 $9,500,000 5/1/98 75.7% 96.1%
89 Apple Valley Square Shopping Center $739,598 $51,446 1.20 $8,541,000 10/8/97 83.9% 93.5%
90 Abington Shopping Center (2B) $532,063 $32,297 1.37 $6,090,000 10/10/97 73.1% 96.0%
91 Dunmore Shopping Center (2B) $305,704 $18,557 1.37 $3,450,000 10/10/97 73.1% 100.0%
92 Westland Plaza Shopping Center $778,594 $48,000 1.35 $9,200,000 9/3/97 75.7% 95.0%
93 Blackburn Center $856,196 $50,157 1.42 $12,300,000 6/17/97 56.6% 99.0%
94 Pleasanton Square II $740,710 $45,933 1.34 $9,250,000 1/21/98 74.6% 100.0%
95 West Garden Apartments $834,784 $45,132 1.54 $9,100,000 3/12/98 74.9% 96.8%
96 Foster-Richardson Rest Home (2C) $402,009 $22,002 1.46 $4,100,000 8/1/97 77.7% 81.8%
97 Pinnacle Rest Home (2C) $277,717 $17,338 1.46 $2,900,000 8/1/97 77.7% 82.5%
98 Mount Pleasant Rest Home (2C) $238,934 $13,077 1.46 $1,700,000 8/1/97 77.7% 90.0%
99 1650 Sherman Ave. (2IX) (2D) $249,149 $14,909 1.35 $3,000,000 11/11/97 66.1% 100.0%
100 8290 National Highway (2IX) (2D) $219,598 $13,141 1.35 $2,700,000 11/11/97 66.1% 100.0%
101 7101 Westfield Ave. (2X) (2D) $139,220 $8,944 1.35 $2,000,000 11/11/97 66.1% 100.0%
102 1601 Hylton Road (2X) (2D) $100,135 $6,433 1.35 $1,200,000 11/11/97 66.1% 100.0%
103 1625 Hylton Road (2X) (2D) $98,115 $6,303 1.35 $1,200,000 11/11/97 66.1% 100.0%
104 Cranbrook III $959,442 $50,759 1.58 $10,600,000 5/6/98 61.7% 98.6%
105 The Palms of Apalachee Apartments $710,989 $46,070 1.29 $8,150,000 9/2/97 79.6% 90.0%
106 Courtyard by Marriott-Naples, FL $884,410 $47,660 1.55 $9,250,000 2/21/98 69.9% 75.6%
107 Columbia Arms Apartments $658,613 $43,902 1.25 $8,290,000 1/26/98 77.0% 96.3%
108 Palms of Magnolia $748,448 $45,222 1.38 $8,000,000 9/2/97 79.6% 98.3%
109 Winds of Santa Fe $765,635 $42,553 1.50 $8,400,000 4/1/98 74.4% 99.4%
110 225 Arizona Avenue $660,704 $43,205 1.27 $9,000,000 3/2/98 69.2% 95.1%
111 Battlefield Business Park $615,882 $41,953 1.22 $7,900,000 11/24/97 75.7% 100.0%
112 5 & 7 Allen Street (2XI) $456,866 $23,273 1.64 $6,200,000 10/30/97 52.5% 100.0%
113 Lyme Road Office Building (2XI) $341,053 $17,374 1.64 $4,580,000 10/30/97 52.5% 95.6%
114 Spring Valley Club Apartments $595,611 $38,289 1.30 $7,200,000 11/25/97 76.0% 95.0%
115 Wolf Lake Industrial Center $647,309 $44,364 1.22 $7,950,000 7/1/97 68.5% 74.2%
116 Aura Systems, Inc. $677,529 $41,123 1.37 $7,900,000 2/25/98 68.9% 100.0%
117 Tustin Square $592,898 $36,999 1.34 $7,500,000 12/23/97 70.5% 100.0%
118 The Market at Hobe Sound Shopping Center $592,617 $39,772 1.24 $8,700,000 1/7/98 60.7% 72.8%
119 Courtyard by Marriott-Springfield, OR $719,878 $42,729 1.40 $7,625,000 3/17/98 69.3% 73.0%
120 Highland Estates $575,539 $36,273 1.32 $6,500,000 11/25/97 79.6% 98.7%
121 19 Crosby Drive $529,894 $37,570 1.18 $7,300,000 4/2/98 70.1% 97.5%
122 Heritage House Apartments $693,920 $42,842 1.35 $8,300,000 5/6/98 61.5% 100.0%
123 Fairfield Inn-New Orleans Airport $747,484 $38,824 1.60 $7,600,000 2/25/98 67.0% 86.1%
124 Kearny Office Park $682,482 $39,428 1.44 $9,200,000 5/5/98 54.6% 98.3%
125 Holiday Inn- Holidome $628,261 $39,156 1.34 $7,320,000 8/8/97 68.1% 77.0%
126 Oxford Nursing Home $699,850 $38,987 1.50 $6,900,000 8/8/97 72.1% 93.7%
127 Brandywine Village Shopping Center $720,573 $38,774 1.55 $8,450,000 1/14/98 58.8% 97.5%
128 Loop Inn (2E) $532,594 $34,460 1.29 $5,210,000 10/9/97 71.8% 77.5%
129 Gallery Motel (2E) $179,336 $11,487 1.29 $1,700,000 10/10/97 71.8% 73.4%
130 Arnaz Arms Apartments $716,936 $35,207 1.70 $9,800,000 5/5/98 50.5% 96.8%
131 So. Calif. Institute of Arch. Building $610,064 $36,786 1.38 $6,300,000 6/13/97 77.0% 100.0%
132 Phoenix Court $560,411 $31,902 1.46 $7,700,000 2/20/98 62.2% 92.2%
133 Wynstone Apartments $519,051 $33,921 1.28 $6,000,000 9/12/97 79.5% 96.1%
134 Holiday Inn-Treasure Island, FL $625,672 $34,595 1.51 $7,100,000 1/19/98 66.2% 75.7%
135 Cedar Hills Shopping Center $553,765 $34,477 1.34 $6,600,000 10/22/97 69.8% 91.7%
136 Knollwood Center $993,498 $36,204 2.29 $5,700,000 2/6/98 79.8% 52.6%
137 Kenilworth Fidelco Industrial Center $559,045 $34,177 1.36 $6,000,000 1/2/98 74.7% 100.0%
138 Timberline Shopping Center $564,621 $33,433 1.41 $6,400,000 10/20/97 69.9% 91.0%
139 West Lawrence Care Center $689,207 $36,977 1.55 $7,800,000 2/26/98 56.3% 98.0%
140 Reservoir Plaza $622,811 $29,658 1.75 $7,000,000 9/16/97 62.7% 100.0%
141 Cambridge Park Apartments $441,922 $29,371 1.25 $5,900,000 12/4/97 74.3% 91.0%
142 Taylor Crossing $498,386 $31,569 1.32 $5,800,000 12/20/97 75.2% 97.1%
143 St. Doris Apartments $481,400 $31,368 1.28 $7,250,000 6/6/95 60.0% 90.7%
144 Shoppes of Arrowhead $460,206 $30,359 1.26 $5,320,000 10/22/97 79.8% 100.0%
145 University Place Apartments I & II $472,366 $30,235 1.30 $5,820,000 12/2/97 71.8% 97.5%
146 Sunsations #3 (2F)* $223,747 $14,559 1.28 $2,500,000 11/12/97 72.5% 100.0%
147 Sunsations #1 (2F)* $131,199 $8,543 1.28 $1,440,000 11/12/97 72.5% 100.0%
148 Sunsations #8 (2F)* $140,758 $9,144 1.28 $1,580,000 11/26/97 72.5% 100.0%
149 Golden Pointe Apartments $408,444 $28,596 1.19 $5,025,000 11/21/97 79.2% 93.0%
150 Sunsations #7 (2G)* $158,186 $10,308 1.28 $1,800,000 11/26/97 71.8% 100.0%
151 Sunsations #2 (2G)* $152,482 $9,907 1.28 $1,720,000 11/12/97 71.8% 100.0%
152 Sunsations #4 (2G)* $94,435 $6,136 1.28 $1,050,000 11/12/97 71.8% 100.0%
153 Sunsations #5 (2G)* $86,371 $5,615 1.28 $950,000 11/12/97 71.8% 100.0%
154 Days Inn-Tacoma, WA $488,788 $29,637 1.37 $5,750,000 1/23/98 67.6% 60.7%
155 Marriott Fairfield Inn $454,954 $30,110 1.26 $5,200,000 10/28/97 74.6% 86.4%
156 Colonial Nursing Center $445,597 $30,593 1.21 $4,850,000 2/20/98 79.2% 96.7%
157 349 Main Street (2H) $203,878 $13,337 1.30 $2,550,000 1/9/98 74.4% 94.1%
158 300/310 Main Street (2H) $210,413 $13,337 1.30 $2,550,000 2/15/98 74.4% 100.0%
159 Village North Townhouses and Apartments $420,585 $25,530 1.37 $5,000,000 1/19/98 74.8% 95.5%
160 One First Avenue Warehouse $457,441 $29,859 1.28 $5,600,000 12/1/97 66.7% 100.0%
161 Prime Time Medford Apartments $429,963 $26,744 1.34 $4,800,000 12/16/97 74.7% 87.0%
162 Warmington Building $506,011 $29,156 1.45 $6,345,000 4/7/98 56.5% 100.0%
163 Westwood Apartments $414,026 $24,782 1.39 $4,595,000 2/17/98 77.0% 100.0%
164 Columbia Pacific Plaza $377,373 $25,379 1.24 $5,225,000 12/4/97 67.1% 100.0%
165 Holiday Inn-Bath, ME $559,874 $25,876 1.80 $5,000,000 2/1/98 69.9% 70.3%
166 Home Sweet Home $471,307 $29,811 1.32 $5,000,000 7/23/97 69.5% 90.3%
167 Belle Rive Club Apartments $339,273 $23,276 1.21 $4,400,000 2/12/98 77.0% 97.1%
168 Clean Machine - Kingston Pike (West Hills) (2I) $284,067 $13,106 1.81 $2,330,000 2/19/98 54.2% 100.0%
169 Clean Machine - Merchant (2I) $199,192 $9,190 1.81 $1,910,000 2/19/98 54.2% 100.0%
170 Clean Machine - Maynardville (Halls) (2I) $186,232 $8,592 1.81 $1,990,000 2/19/98 54.2% 100.0%
171 Market & Noe Center $481,781 $24,441 1.64 $7,100,000 12/5/97 45.9% 100.0%
172 Sentry Plaza Shopping Center (2XII) $217,850 $13,736 1.32 $2,860,000 3/1/98 67.3% 100.0%
173 Sentry Grocery Store (2XII) $166,796 $10,517 1.32 $1,950,000 1/1/98 67.3% 100.0%
174 International Food & Fashion Center $425,139 $26,463 1.34 $4,300,000 7/22/97 74.9% 96.0%
175 Colony Square 1, 2, 4 (2XIII) $284,896 $17,112 1.39 $3,200,000 1/1/98 68.6% 100.0%
176 Williamsburg Center (2XIII) $117,101 $7,034 1.39 $1,450,000 1/1/98 68.6% 100.0%
177 Colima Plaza $427,198 $22,842 1.56 $4,900,000 10/13/97 64.6% 100.0%
178 Royal Oaks Shopping Center $350,992 $22,211 1.32 $4,000,000 12/3/97 79.0% 91.0%
179 Schoolhouse Shopping Center $320,234 $22,541 1.18 $4,100,000 1/14/98 76.7% 90.7%
180 Shadow Rose Apartments $380,742 $21,286 1.49 $4,500,000 10/21/97 69.7% 91.9%
181 60 Messenger Street $442,802 $25,833 1.43 $4,700,000 5/13/97 65.9% 100.0%
182 Summit Court Apartments $421,769 $23,389 1.50 $4,350,000 12/10/97 71.0% 96.0%
183 Walsh Avenue Industrial $401,321 $25,610 1.31 $4,600,000 10/22/97 66.9% 100.0%
184 Hampton Inn-Cedar Rapids, IA $647,470 $24,589 2.19 $6,000,000 2/27/98 50.6% 76.1%
185 Spalding Plaza Retail and Office Complex $392,753 $21,854 1.50 $4,500,000 1/27/98 66.3% 90.5%
186 16 Brooklyn Industrial $492,893 $30,200 1.36 $6,400,000 5/14/97 46.1% 100.0%
187 Lemon Grove Square $338,377 $21,022 1.34 $3,675,000 1/5/97 79.9% 91.5%
188 Ramada Inn Speedway $448,145 $24,473 1.53 $4,100,000 10/29/97 70.4% 58.1%
189 Triangle Crossroads $348,411 $22,383 1.30 $3,911,000 9/1/97 73.7% 100.0%
190 Rosewood Apartments $287,611 $19,650 1.22 $3,700,000 1/23/98 76.9% 98.9%
191 Tehachapi Towne Center $328,130 $21,033 1.30 $3,700,000 11/24/97 76.6% 84.4%
192 Pinellas Pointe Apartments $343,397 $21,023 1.36 $3,580,000 11/6/97 79.0% 98.5%
193 Quail Hill Apartments $307,111 $18,825 1.36 $3,500,000 11/11/97 79.7% 98.5%
194 Wal-Mart - Whitinsville $264,787 $19,188 1.15 $3,300,000 2/9/98 84.5% 100.0%
195 Central Heights Shopping Center $351,719 $20,551 1.43 $3,650,000 12/1/97 74.8% 97.0%
196 Premier Corporate Center $303,749 $20,147 1.26 $3,600,000 12/15/97 74.8% 95.1%
197 Pharr Plaza $313,252 $20,057 1.30 $3,600,000 4/28/98 74.8% 100.0%
198 Office Max - Bentley Mall $327,731 $22,543 1.21 $3,400,000 2/3/98 79.1% 100.0%
199 Woodknoll Townhomes $322,946 $18,384 1.46 $3,975,000 10/15/97 67.7% 90.0%
200 Microtel Inn $370,289 $21,053 1.47 $3,630,000 11/17/97 74.0% 71.1%
201 Walnut Auto Care Center $293,383 $19,744 1.24 $3,370,000 2/17/98 78.7% 100.0%
202 Andresen Plaza $333,653 $19,836 1.40 $3,900,000 1/6/98 66.5% 98.3%
203 Hartland Apartments $284,197 $17,029 1.39 $3,170,000 10/3/97 78.6% 91.7%
204 Mr. Gatti's Restaurant, San Angelo (2XIV) $146,053 $9,797 1.24 $1,800,000 2/10/98 71.1% 100.0%
205 Mr Gattis Restaurant, Midland (2XIV) $141,374 $9,483 1.24 $1,700,000 2/10/98 71.1% 100.0%
206 Super 8-Madison, WI $474,564 $20,216 1.96 $4,300,000 2/12/98 57.8% 80.0%
207 Access Self Storage $382,816 $23,333 1.37 $4,000,000 12/12/97 61.7% 84.7%
208 Executive Car Wash - Roswell (2XV) $264,530 $13,031 1.69 $1,480,000 2/24/98 86.5% 100.0%
209 Executive Car Wash - Johnson Ferry (2XV) $191,105 $9,414 1.69 $1,370,000 2/24/98 86.5% 100.0%
210 Rooker Building $293,496 $17,602 1.39 $3,730,000 1/27/98 65.8% 100.0%
211 Alta Vista Corporate Center $288,203 $16,682 1.44 $3,250,000 12/5/97 74.8% 96.3%
212 75 Montgomery Street $258,927 $17,760 1.21 $3,725,000 1/19/98 64.4% 79.0%
213 North Kitsap Self Storage (2J) $190,694 $12,832 1.24 $2,100,000 12/2/97 72.0% 89.4%
214 Poulsbo Business Park (2J) $78,298 $5,284 1.24 $1,220,000 12/2/97 72.0% 100.0%
215 13-17 Laight Street $455,093 $17,710 2.14 $6,800,000 10/14/97 35.1% 94.8%
216 Quality Inn - Vallejo $429,683 $18,310 1.96 $3,395,000 10/5/97 70.3% 58.9%
217 Executive Inn II (2XVI) $101,933 $5,880 1.44 $1,100,000 10/30/97 62.8% 85.0%
218 Executive Inn I (2XVI) $99,799 $5,757 1.44 $1,110,000 10/30/97 62.8% 95.0%
219 Super 8 Motel (2XVI) $85,365 $4,924 1.44 $800,000 10/28/97 62.8% 85.0%
220 Travelodge (2XVI) $80,645 $4,652 1.44 $790,000 10/29/97 62.8% 69.0%
221 H.S.T. Building $293,513 $20,640 1.19 $3,440,000 4/30/98 67.9% 100.0%
222 The French/ Cabot Block Building (2XVII) $123,923 $8,717 1.18 $990,000 12/15/97 76.2% 100.0%
223 The Waterman Place Building (2XVII) $92,433 $6,502 1.18 $1,600,000 11/11/97 76.2% 100.0%
224 The Morgan Block (2XVII) $38,561 $2,713 1.18 $415,000 12/15/97 76.2% 100.0%
225 Holiday Inn Express- Lemoore $323,741 $17,932 1.50 $3,225,000 11/19/97 71.0% 61.1%
226 Holiday Inn Express- Killeen $352,234 $17,164 1.71 $2,850,000 11/12/97 78.6% 82.6%
227 Country Inn by Carlson $328,037 $18,147 1.51 $3,800,000 1/1/98 58.5% 86.0%
228 Atlantic Self Storage- Dunn Avenue $312,151 $21,175 1.23 $3,450,000 9/2/97 63.0% 87.5%
229 Atlantic Self Storage I-295 $287,857 $20,694 1.16 $3,260,000 9/2/97 65.2% 82.8%
230 Renaissance Apartments $244,350 $14,407 1.41 $2,880,000 11/20/97 72.8% 92.6%
231 Ames Department Store $292,746 $18,666 1.31 $2,900,000 11/13/97 71.8% 100.0%
232 The Store House Self Storage $264,123 $16,226 1.36 $2,500,000 1/27/97 81.5% 90.2%
233 Comfort Inn- Killeen $261,821 $15,959 1.37 $2,700,000 11/3/97 74.7% 83.3%
234 SeaTac Inn $277,787 $17,366 1.33 $2,880,000 3/9/98 69.9% 49.1%
235 KEW Industrial Park $266,813 $14,556 1.53 $2,770,000 12/12/97 72.0% 97.0%
236 Hazel Ridge Plaza $208,995 $15,090 1.15 $2,720,000 9/19/97 73.2% 80.9%
237 Gray Road Self Storage $283,981 $14,594 1.62 $3,600,000 9/17/97 55.3% 91.0%
238 Virginia Square Apartments $209,980 $14,293 1.22 $2,600,000 12/2/97 76.6% 96.2%
239 Premier Club Apartments $228,210 $14,090 1.35 $2,500,000 12/6/97 79.6% 98.9%
240 1058 Southern Blvd. $306,661 $14,321 1.78 $3,000,000 8/13/97 66.3% 100.0%
241 Watson Centex-San Antonio* $286,396 $17,300 1.38 $3,350,000 6/15/97 59.2% 100.0%
242 Lakeside Meadows Apartments $236,476 $15,262 1.29 $2,640,000 7/22/97 75.0% 100.0%
243 Atlantic Self Storage- Millcoe Road $290,522 $19,250 1.26 $2,650,000 9/2/97 74.6% 89.8%
244 Holiday Inn - Reidsville $267,312 $15,753 1.41 $3,300,000 2/8/97 59.5% 62.0%
245 Parkway Plaza* $257,815 $15,989 1.34 $3,200,000 9/23/97 60.9% 100.0%
246 Lantern Plaza* $224,400 $14,972 1.25 $2,750,000 8/27/97 69.6% 100.0%
247 West 24th Street Apartments $229,024 $12,743 1.50 $2,550,000 3/12/98 74.4% 96.0%
248 Airport Circle Plaza $215,684 $13,617 1.32 $2,675,000 1/13/98 70.8% 100.0%
249 El Pueblo Lodge $284,168 $14,974 1.58 $3,250,000 11/6/97 58.2% 60.0%
250 Maple Manor Apartments $203,254 $12,408 1.37 $2,710,000 2/14/98 68.2% 97.7%
251 Regency Walk $213,566 $13,335 1.33 $2,300,000 1/2/98 79.9% 92.1%
252 The Coach Store $210,237 $13,361 1.31 $2,500,000 1/20/98 71.8% 100.0%
253 WIPAC Distribution Warehouse $237,202 $13,195 1.50 $2,800,000 12/15/97 64.1% 100.0%
254 Oceanside Square $222,167 $14,019 1.32 $2,740,000 7/31/97 65.3% 84.4%
255 North Las Vegas Self Storage $217,251 $17,084 1.06 $2,700,000 1/19/98 66.1% 76.0%
256 Village Plaza $196,146 $12,691 1.29 $2,225,000 1/15/98 79.8% 95.2%
257 Lake Margaret Village Apartments (2K)* $127,789 $8,317 1.29 $1,300,000 10/15/97 77.9% 100.0%
258 Townhouse Apartments (2K)* $99,638 $6,421 1.29 $965,000 12/12/97 77.9% 93.8%
259 Whispering Pines Apartments $195,333 $11,367 1.43 $2,300,000 2/27/98 73.8% 96.2%
260 Beechmont Professional Building $211,188 $13,979 1.26 $3,000,000 10/20/97 56.5% 100.0%
261 204 Loudon Road $210,601 $13,971 1.26 $2,400,000 3/6/98 70.5% 100.0%
262 Atlantic Arms Apartments (2L) $155,754 $10,390 1.25 $1,745,000 12/2/97 76.6% 94.9%
263 Kilbreth Apartments (2L) $33,296 $2,221 1.25 $450,000 12/2/97 76.6% 100.0%
264 Ramada Limited- South Padre $252,635 $13,323 1.58 $2,240,000 2/16/98 74.4% 77.0%
265 U.S. Rentals, Inc. $199,485 $13,519 1.23 $2,300,000 10/10/97 72.4% 100.0%
266 El Campo Inn $215,088 $12,848 1.40 $2,175,000 11/18/97 74.6% 78.5%
267 1318 Wilshire Boulevard $174,007 $11,451 1.27 $2,290,000 3/10/98 70.8% 100.0%
268 PETCO Building $197,980 $11,518 1.43 $2,100,000 12/1/97 76.0% 100.0%
269 333 West Indian School - Phoenix (2M) $139,735 $10,054 1.16 $1,540,000 11/17/97 78.0% 100.0%
270 2502 North Alvernon Way - Tucson (2M) $46,167 $3,322 1.16 $500,000 11/19/97 78.0% 100.0%
271 Victory Self Storage - Staten Island $286,294 $12,201 1.96 $2,800,000 8/4/97 56.7% 96.7%
272 Sheridan Retail Shops $186,473 $11,660 1.33 $2,190,000 2/20/98 71.9% 100.0%
273 485 Kings Highway $218,990 $11,392 1.60 $3,000,000 10/31/97 49.8% 100.0%
274 Norwest Business Park* $189,740 $12,220 1.29 $2,000,000 9/30/97 74.6% 100.0%
275 Silver Creek Manor $236,410 $11,727 1.68 $2,200,000 11/19/97 67.8% 95.2%
276 The Square Shopping Center $201,202 $10,947 1.53 $2,340,000 12/23/97 63.7% 100.0%
277 301-315 East Tremont Ave. $207,895 $10,863 1.59 $2,065,000 8/19/97 72.1% 91.9%
278 Jack In The Box - Galena Park (2XVIII) $84,809 $5,866 1.20 $1,050,000 1/15/98 74.1% 100.0%
279 Jack in the Box - Terrell (2XVIII) $78,097 $5,402 1.20 $950,000 1/9/98 74.1% 100.0%
280 Terrace View (Chateau) Apartments (2N) $106,067 $7,575 1.17 $1,394,000 1/15/98 74.7% 100.0%
281 Garner Avenue Apartments (2N) $51,341 $3,667 1.17 $580,000 1/20/98 74.7% 100.0%
282 Lake Ridge Apartments - DRK $155,067 $10,763 1.20 $1,850,000 1/23/98 79.4% 95.0%
283 Lake Ridge Apartments - FEM $155,067 $10,763 1.20 $1,900,000 1/23/98 77.3% 93.1%
284 Lake Ridge Apartments - JMK $155,067 $10,763 1.20 $1,850,000 1/23/98 79.4% 93.1%
285 Lake Ridge Apartments - MJK $155,067 $10,763 1.20 $1,850,000 1/23/98 79.4% 93.1%
286 Our Shopping Center $162,802 $10,521 1.29 $2,250,000 1/31/98 62.8% 97.0%
287 Diffley Square Shopping Center $150,377 $9,945 1.26 $2,000,000 10/31/97 69.8% 100.0%
288 Westridge Shopping Center* $152,920 $10,457 1.22 $1,940,000 10/13/97 69.8% 100.0%
289 CVS Drug Store $147,307 $10,876 1.13 $1,830,000 2/12/98 73.5% 100.0%
290 Rite Aid Drug Store - Griffin, GA $144,764 $10,559 1.14 $1,660,000 2/13/98 78.9% 100.0%
291 1525 & 1535 Central Avenue $183,613 $9,572 1.60 $1,975,000 1/2/98 65.5% 95.4%
292 Lowry Expressway Office Building* $185,983 $12,704 1.22 $2,000,000 12/17/97 64.6% 100.0%
293 Monarch Bank Building* $166,325 $9,857 1.41 $1,890,000 10/10/97 67.5% 100.0%
294 Innovative Metals Warehouse $139,999 $8,835 1.32 $1,700,000 2/27/98 73.4% 100.0%
295 Archer Road Self Storage $208,768 $11,443 1.52 $1,900,000 11/17/97 64.8% 76.5%
296 Econo-Pak Warehouse $133,111 $8,730 1.27 $1,525,000 1/13/98 80.7% 100.0%
297 Food-4-Less $150,041 $9,917 1.26 $1,700,000 12/1/97 72.0% 100.0%
298 Sugarland Professional Building $145,259 $9,513 1.27 $1,575,000 2/3/98 77.2% 90.6%
299 Summit Terrace Apartments $143,148 $8,522 1.40 $2,500,000 12/1/97 47.8% 97.9%
300 Red Carpet Inn - Boone* $183,614 $10,697 1.43 $2,150,000 12/9/97 55.6% 45.8%
301 1883-1887 Amsterdam Avenue $146,895 $8,955 1.37 $1,650,000 10/1/97 72.3% 98.3%
302 Dave's Car Wash $187,245 $10,584 1.47 $1,990,000 1/8/98 58.7% 100.0%
303 Alamo Self Storage $175,220 $8,487 1.72 $1,650,000 12/16/97 69.5% 94.7%
304 Desert Pines Apartments* $185,624 $9,511 1.63 $1,850,000 10/30/97 61.5% 91.4%
305 Watson Centex - Houston* $153,385 $10,814 1.18 $1,800,000 3/15/97 63.0% 100.0%
306 Blue Heron Car Wash $174,317 $10,197 1.42 $1,300,000 10/27/97 86.8% 100.0%
307 30100 Crown Valley Parkway* $135,506 $8,689 1.30 $1,725,000 9/17/97 65.2% 98.4%
308 Lovers Lane Retail Center $125,414 $8,583 1.22 $1,550,000 3/9/98 72.4% 100.0%
309 Northway Manor MHP $129,821 $8,489 1.27 $1,600,000 1/12/98 70.1% 78.2%
310 Budget Mini Storage-Fontana $127,203 $8,392 1.26 $1,570,000 1/26/98 69.8% 88.2%
311 9D E-Z Storage $160,041 $8,391 1.59 $1,900,000 10/12/97 57.6% 79.0%
312 Days Inn - Brunswick $187,386 $9,457 1.65 $1,650,000 11/19/97 66.2% 58.0%
313 Apollo Self Storage $136,950 $8,512 1.34 $1,350,000 11/4/97 79.8% 84.4%
314 Hollywood Video Store - High Point, NC $132,468 $8,849 1.25 $1,475,000 11/7/97 72.6% 100.0%
315 Cypress Woods Apartments $176,737 $7,659 1.92 $1,850,000 10/22/97 56.3% 98.2%
316 Eagle Rock Shopping Center $120,457 $7,645 1.31 $1,350,000 12/1/97 75.4% 100.0%
317 Hollywood Video Store - Virginia Beach $112,432 $7,465 1.26 $1,255,000 10/27/97 79.6% 100.0%
318 Airport South Building $137,844 $7,796 1.47 $1,400,000 11/19/97 71.1% 100.0%
319 Thriftway Supermarket $109,793 $8,062 1.13 $1,350,000 11/6/97 73.5% 100.0%
320 Hollywood Video Store - Pikesville, MD $110,450 $7,316 1.26 $1,230,000 11/6/97 79.6% 100.0%
321 Roof Garden Mobile Home Court* $132,157 $8,145 1.35 $1,250,000 1/13/98 76.5% 100.0%
322 Sandalon East Office Building* $109,906 $7,476 1.23 $1,500,000 3/2/98 63.2% 85.8%
323 Westgate Regency Center* $105,560 $7,005 1.26 $1,300,000 12/20/97 72.0% 100.0%
324 Roger's Green Hills Supermarket $111,739 $7,498 1.24 $1,200,000 12/1/97 77.1% 100.0%
325 Taco Bell & US Auto Glass $104,118 $7,805 1.11 $1,350,000 7/15/97 68.1% 100.0%
326 555 Broadway* $117,311 $7,715 1.27 $1,300,000 7/17/97 69.4% 100.0%
327 Aussie Self Storage $119,372 $7,246 1.37 $1,210,000 12/1/97 74.1% 84.8%
328 Roselea Villas* $103,133 $6,917 1.24 $1,100,000 2/18/98 77.1% 100.0%
329 Knights Inn-Summerton* $171,855 $7,885 1.82 $1,300,000 10/21/97 65.1% 66.0%
330 1610 Broadway* $121,607 $6,941 1.46 $1,220,000 7/21/97 68.7% 100.0%
331 Morrone Company* $100,119 $6,742 1.24 $1,100,000 10/20/97 74.7% 100.0%
332 Peppertree Apartments $103,487 $6,081 1.42 $1,025,000 11/25/97 79.7% 92.5%
333 Islip Terrace Plaza* $98,527 $6,529 1.26 $1,060,000 11/19/97 74.7% 100.0%
334 1626 Logan Street* $96,217 $5,998 1.34 $1,237,000 7/25/97 62.7% 92.3%
335 TX Human Serv. & Work Force Comm. Off.* $98,543 $6,166 1.33 $1,300,000 9/3/97 59.3% 100.0%
336 Fielders Bridge Office Building* $96,219 $5,518 1.45 $1,020,000 3/6/98 72.8% 95.8%
337 2906 North State Street Building* $99,426 $6,274 1.32 $1,400,000 9/10/97 52.5% 92.7%
338 Days Inn - Orange City* $97,200 $6,217 1.30 $1,156,000 2/23/98 62.6% 85.0%
339 Edgewood Court Apartments* $91,763 $5,888 1.30 $850,000 3/6/98 79.8% 97.2%
340 Super Safe Self Service Storage $93,976 $5,180 1.51 $930,000 6/10/97 67.5% 87.1%
341 Pioneer Plaza* $71,128 $4,831 1.23 $800,000 1/8/98 74.7% 100.0%
342 287 Appleton Street* $91,181 $5,321 1.43 $800,000 8/14/97 74.5% 99.3%
343 2059 E. Sahara Avenue* $67,672 $4,638 1.22 $970,000 5/9/97 58.4% 100.0%
344 560 Virginia Way* $76,891 $4,658 1.38 $770,000 8/8/97 72.3% 100.0%
345 Calibra Sunnyside* $70,304 $4,388 1.34 $720,000 10/21/97 73.9% 100.0%
346 Bolling Building* $78,237 $4,633 1.41 $680,000 2/3/98 74.7% 100.0%
347 512 Main Street* $66,733 $4,150 1.34 $750,000 8/12/97 67.6% 100.0%
348 Panola Road Office Building* $60,256 $4,329 1.16 $740,000 1/15/98 67.3% 92.0%
349 1920 Ledbetter Drive* $74,752 $3,756 1.66 $865,000 11/4/97 57.5% 100.0%
350 2727-2745 Gundry Avenue* $86,207 $4,481 1.60 $900,000 5/14/97 55.3% 100.0%
351 Citadel Apartments* $64,351 $4,030 1.33 $650,000 3/2/98 74.4% 100.0%
352 1400-1410 E. Florida* $50,650 $3,702 1.14 $645,000 7/2/97 70.2% 80.0%
353 Vance St. Apartment Building* $72,116 $3,779 1.59 $605,000 2/24/98 74.2% 100.0%
354 3200 Race Street* $62,842 $3,118 1.68 $730,000 11/18/97 56.6% 100.0%
355 Covington Office Center* $57,413 $3,379 1.42 $630,000 12/29/97 64.3% 93.8%
356 4201 Dimmitt Road* $49,005 $3,137 1.30 $525,000 11/19/97 69.8% 85.0%
357 10660 Silicon Avenue* $54,081 $3,753 1.20 $575,000 8/26/97 62.8% 100.0%
358 5401 Cherry Avenue* $50,309 $2,907 1.44 $565,000 7/21/97 61.4% 100.0%
359 110 Adams Ave.* $45,713 $2,824 1.35 $570,000 10/6/97 59.2% 100.0%
360 Miss Meme's Kreative Kids Bldg.* $45,409 $2,835 1.33 $525,000 4/28/97 62.5% 100.0%
361 La Canasta Furniture & Appliance Store* $68,496 $3,252 1.76 $920,000 10/23/97 34.3% 100.0%
362 Great Southwestern Parkway* $44,334 $2,533 1.46 $435,000 12/19/97 72.1% 100.0%
363 503 W. 26th Street* $38,009 $2,254 1.41 $430,000 12/5/97 69.4% 100.0%
364 Mosstree Apartments* $36,791 $2,365 1.30 $425,000 11/21/97 70.2% 100.0%
365 Marshall/Catamount Apartments* $62,869 $2,411 2.17 $371,000 8/22/97 76.5% 100.0%
366 Sannella* $34,774 $2,319 1.25 $420,000 11/5/97 67.6% 100.0%
367 1005 Abbott Road* $41,507 $2,578 1.34 $410,000 1/12/98 67.9% 100.0%
368 6452 Nine Mile Bridge Road* $34,485 $2,172 1.32 $425,000 8/11/97 63.2% 94.3%
369 301 South Richey Road* $37,711 $2,143 1.47 $400,000 12/8/97 62.2% 100.0%
370 Moore's Adult Care Facility* $70,475 $2,139 2.75 $700,000 11/25/97 30.6% 100.0%
371 Bass Pro Shop* $37,973 $1,691 1.87 $580,000 1/23/98 36.1% 100.0%
372 619-623 W. Brookside* $25,110 $1,732 1.21 $250,000 1/9/98 79.7% 90.0%
373 50-52 Ferry Street* $28,916 $1,608 1.50 $300,000 9/17/97 65.1% 100.0%
374 Hillside Mobile Home Park* $31,567 $2,074 1.27 $295,000 12/7/97 64.7% 100.0%
375 Bailey Hardwoods* $29,708 $1,795 1.38 $260,000 12/23/97 68.3% 100.0%
376 3050 Austin Bluffs Parkway* $22,807 $1,442 1.32 $240,000 1/20/98 70.6% 100.0%
377 Kelley St. Office Building* $18,998 $1,345 1.18 $245,000 12/9/97 62.5% 87.9%
378 Northlake MHP* $28,232 $1,747 1.35 $175,000 9/10/97 85.8% 100.0%
379 59-61 Carlton Street Apartments* $21,946 $1,171 1.56 $184,000 6/23/97 73.0% 100.0%
380 Sabattus Street Office Building* $16,697 $1,153 1.21 $174,000 10/4/97 74.5% 100.0%
Total/Weighted Average: 1.39 71.2%
</TABLE>
<PAGE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------
Loan Tenant Information(12) Insurance Tax Replacement
No. Date Largest Tenant % NSF Escrow Escrow Reserves
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 2/24/98 Yes Yes Yes
2 2/24/98 Yes Yes Yes
3 2/24/98 Yes Yes Yes
4 2/24/98 Yes Yes Yes
5 2/24/98 Yes Yes Yes
6 2/24/98 Yes Yes Yes
7 2/24/98 Yes Yes Yes
8 2/24/98 Yes Yes Yes
9 2/24/98 Yes Yes Yes
10 2/24/98 California Federal Bank 43.8% Yes Yes Yes
11 2/24/98 Yes Yes Yes
12 2/24/98 Geneve Jewelers, Inc. 48.7% Yes Yes Yes
13 2/24/98 Yes Yes Yes
14 12/31/97 Sunrise Health Care 100.0% No No No
15 12/31/97 Sunrise Health Care 100.0% No No No
16 12/31/97 Sunrise Health Care 100.0% No No No
17 12/31/97 Sunrise Health Care 100.0% No No No
18 12/31/97 Sunrise Health Care 100.0% No No No
19 12/31/97 Sunrise Health Care 100.0% No No No
20 12/31/97 Sunrise Health Care 100.0% No No No
21 12/31/97 Sunrise Health Care 100.0% No No No
22 1/31/98 Super K Mart 55.3% No No No
23 12/31/97 No No No
24 12/31/97 No No No
25 12/31/97 No No No
26 12/31/97 No No No
27 12/31/97 Yes Yes Yes
28 11/30/97 Yes Yes Yes
29 11/30/97 Yes Yes Yes
30 11/1/97 Yes Yes Yes
31 3/31/98 Yes Yes Yes
32 12/31/97 Yes Yes Yes
33 3/26/98 Holland America Line 20.8% Yes Yes No
34 4/6/98 Yes Yes Yes
35 4/8/98 Yes Yes No
36 4/2/98 Yes Yes No
37 4/6/98 Yes Yes No
38 4/2/98 Yes Yes No
39 4/2/98 Wal-Mart 45.9% Yes Yes No
40 4/2/98 Yes Yes No
41 4/2/98 Winn Dixie 49.7% Yes Yes No
42 1/1/98 K Mart 49.1% Yes Yes Yes
43 12/31/97 Yes Yes Yes
44 4/30/98 No Yes No
45 3/19/98 No Yes No
46 4/30/98 No Yes No
47 4/30/98 No Yes No
48 4/30/98 No Yes No
49 4/30/98 No Yes No
50 4/30/98 No Yes No
51 5/7/98 Yes Yes No
52 3/16/98 Private Formulations, Inc. 100.0% Yes Yes Yes
53 4/8/98 Ralphs 36.3% Yes Yes Yes
54 3/24/98 Yes Yes No
55 12/1/97 McElroy, Deutsch & Mulvaney 50.9% Yes Yes Yes
56 3/20/98 Yes Yes Yes
57 11/30/97 No No No
58 2/24/98 Yes Yes Yes
59 11/17/97 No No No
60 11/17/97 No No No
61 11/14/97 No No No
62 6/1/97 No No No
63 4/24/98 Harrow Stores 79.1% Yes Yes Yes
64 4/24/98 Harrow Stores 40.3% Yes Yes Yes
65 4/24/98 Harrow Stores 94.0% Yes Yes Yes
66 4/24/98 Harrow Stores 100.0% Yes Yes Yes
67 12/31/97 City of New York 80.9% Yes Yes Yes
68 5/20/98 Yes Yes Yes
69 5/20/98 Yes Yes Yes
70 5/20/98 Yes Yes Yes
71 5/20/98 Yes Yes Yes
72 5/20/98 Yes Yes Yes
73 5/20/98 Yes Yes Yes
74 5/20/98 Yes Yes Yes
75 5/20/98 Yes Yes Yes
76 5/20/98 Yes Yes Yes
77 2/12/98 Jones Intercable 26.1% Yes Yes Yes
78 5/11/98 Cutler-Hammer, IDT 26.3% No Yes Yes
79 5/6/98 DHL Systems, Inc. 26.0% No No No
80 1/19/98 Transicoil, Inc. 100.0% No No Yes
81 3/31/98 No Yes Yes
82 3/31/98 Yes Yes Yes
83 3/27/98 Yes Yes Yes
84 5/7/98 Travelers Office 26.7% Yes Yes Yes
85 4/30/98 Yes Yes Yes
86 3/1/98 No No No
87 12/31/97 No Yes Yes
88 1/1/98 K Mart 46.0% No No No
89 2/19/98 Stater Brothers 32.3% Yes Yes Yes
90 1/1/98 McCrory's 24.1% Yes Yes Yes
91 1/1/98 Western Auto 20.2% Yes Yes Yes
92 1/15/98 Sedano's Supermarket 25.3% Yes Yes Yes
93 1/1/98 Nutramax 32.3% Yes Yes No
94 1/9/98 CompUSA 48.0% Yes Yes No
95 3/16/98 Yes Yes No
96 10/31/97 Yes Yes Yes
97 8/22/97 Yes Yes Yes
98 10/31/97 Yes Yes Yes
99 3/1/98 JMJ Warehouse Associates 100.0% Yes Yes Yes
100 3/1/98 Standard Warehouse & Distributing Co., Inc. 100.0% Yes Yes Yes
101 3/1/98 Standard Warehouse 100.0% Yes Yes Yes
102 3/1/98 Medmax, Inc. 100.0% Yes Yes Yes
103 3/1/98 Alltell Supply, Inc. 100.0% Yes Yes Yes
104 4/28/98 No No Yes
105 4/30/98 Yes Yes Yes
106 12/31/97 Yes Yes Yes
107 5/6/98 Yes Yes Yes
108 4/30/98 Yes Yes Yes
109 4/15/98 Yes Yes Yes
110 2/1/98 VTBS Offices 24.9% Yes Yes Yes
111 1/27/98 GE Capital 32.4% Yes Yes Yes
112 1/15/98 DBS 31.8% Yes Yes Yes
113 1/15/98 Yes Yes Yes
114 4/1/98 Yes Yes Yes
115 5/27/98 Post Warehouse 36.7% Yes Yes Yes
116 2/25/98 Aura Systems 100.0% No Yes No
117 3/5/98 Yes Yes Yes
118 3/31/98 Winn-Dixie Stores, Inc. 33.3% Yes Yes Yes
119 2/28/98 Yes Yes Yes
120 3/31/98 Yes Yes Yes
121 4/1/98 Yes Yes Yes
122 2/20/98 No No Yes
123 3/1/98 Yes Yes Yes
124 4/20/98 Transwestern Publishing 27.9% No No No
125 4/15/98 Yes Yes Yes
126 12/31/97 Yes Yes Yes
127 3/30/98 Cropper's Market 53.4% Yes Yes Yes
128 12/31/97 Yes Yes Yes
129 12/31/97 Yes Yes Yes
130 4/1/97 No No No
131 12/15/97 Quotron Systems, Inc. 100.0% Yes Yes No
132 4/23/98 Yes Yes Yes
133 4/30/98 Yes Yes Yes
134 12/31/97 No Yes Yes
135 3/31/98 Thriftway 22.5% Yes Yes Yes
136 2/28/98 Yes Yes Yes
137 3/10/98 Lewmar Paper (subtenant: Salton Maxim) 42.0% Yes Yes Yes
138 2/1/98 Shop N Bag 44.1% Yes Yes Yes
139 3/12/98 No No No
140 3/1/98 Kids, Inc. 20.1% Yes Yes No
141 4/30/98 Yes Yes Yes
142 4/2/98 Yes Yes Yes
143 5/1/98 Yes Yes Yes
144 5/1/98 Yes Yes Yes
145 12/31/97 Yes Yes No
146 11/12/97 Ocean City Boardwalk, Inc. 100.0% Yes Yes No
147 11/12/97 Ocean City Boardwalk, Inc. 100.0% Yes Yes No
148 11/12/97 Sunsations, Inc. 100.0% Yes Yes No
149 5/6/98 Yes Yes Yes
150 11/26/97 Sunsations, Inc. 100.0% Yes Yes No
151 11/12/97 Ocean City Boardwalk, Inc. 100.0% Yes Yes No
152 11/12/97 Ocean City Boardwalk, Inc. 100.0% Yes Yes No
153 11/12/97 Ocean City Boardwalk, Inc. 100.0% Yes Yes No
154 12/1/97 Yes Yes Yes
155 9/30/97 No Yes Yes
156 3/2/98 Yes Yes Yes
157 4/30/98 Telco 46.5% Yes Yes Yes
158 4/30/98 Bayview Federal Savings 29.8% Yes Yes Yes
159 1/29/98 Yes Yes Yes
160 3/31/98 Bicknell & Fuller Paper Box Company 100.0% No Yes Yes
161 2/1/98 No Yes Yes
162 5/1/98 Warmington Homes 100.0% Yes Yes Yes
163 3/25/98 Yes Yes Yes
164 12/11/97 U.S. National Bank 59.9% Yes Yes Yes
165 12/31/97 No Yes Yes
166 1/31/98 No Yes Yes
167 4/1/98 Yes Yes Yes
168 12/31/97 Yes Yes Yes
169 12/31/97 Yes Yes Yes
170 12/31/97 Yes Yes Yes
171 11/1/97 Tower Records 55.1% Yes Yes Yes
172 3/1/98 Super Saver Foods 83.1% Yes Yes Yes
173 1/22/98 Super Saver Foods 100.0% Yes Yes Yes
174 11/1/97 Second Floor 23.5% Yes Yes No
175 2/28/98 Dynamics Research 29.8% Yes Yes Yes
176 2/28/98 Lockheed Martin 100.0% Yes Yes Yes
177 2/28/98 Yes Yes Yes
178 11/10/97 Publix Super Markets, Inc. 54.8% Yes Yes Yes
179 11/20/97 Richboro Market CVS, Inc. 28.8% Yes Yes Yes
180 1/31/98 Yes Yes Yes
181 5/1/98 Harvard Pilgrim Health Care 58.0% No No Yes
182 3/1/98 Yes Yes Yes
183 2/9/98 A-1 Plating 39.6% Yes Yes Yes
184 12/31/97 Yes Yes Yes
185 2/2/98 N.Fulton Med.Center, Inc. 21.0% Yes Yes Yes
186 12/10/97 No Yes Yes
187 5/11/98 Smart & Final 43.7% Yes Yes Yes
188 12/31/97 Yes Yes Yes
189 11/19/97 Food Lion 73.5% Yes Yes No
190 3/31/98 Yes Yes Yes
191 1/23/98 Yes Yes Yes
192 1/19/98 Yes Yes Yes
193 11/1/97 Yes Yes Yes
194 4/10/98 Wal-Mart 100.0% Yes Yes Yes
195 4/2/98 Hobby Lobby (1989) 43.2% Yes Yes Yes
196 2/9/98 Geac Computers 83.4% Yes Yes Yes
197 4/30/98 Yes Yes Yes
198 4/28/98 Office Max 100.0% No No No
199 5/1/98 Yes Yes Yes
200 9/30/97 Yes Yes Yes
201 3/18/98 Yes Yes Yes
202 1/6/98 Yes Yes Yes
203 1/13/98 Yes Yes Yes
204 2/10/98 Kentuckiana Restaurants LLC 100.0% Yes Yes Yes
205 2/10/98 Kentuckiana Restaurants LLC 100.0% Yes Yes No
206 12/31/97 Yes Yes Yes
207 2/19/98 No Yes No
208 12/31/97 Yes Yes Yes
209 12/31/97 Yes Yes Yes
210 1/27/98 Hewitt & Day, Inc., a Georgia Corporation 100.0% No Yes Yes
211 1/1/98 Yes Yes Yes
212 2/10/98 Yes Yes Yes
213 3/19/98 Yes Yes No
214 2/23/98 Yes Yes Yes
215 2/25/98 Yes Yes No
216 10/31/97 Yes Yes Yes
217 2/23/98 Yes Yes Yes
218 2/23/98 Yes Yes Yes
219 2/23/98 Yes Yes Yes
220 2/23/98 Yes Yes Yes
221 4/30/98 Horizon Sports Tech. 100.0% No No No
222 2/20/98 Bentley's Restaurant 43.1% Yes Yes Yes
223 2/20/98 Antiques Collaborative 43.6% Yes Yes Yes
224 2/20/98 Sono 21.1% Yes Yes Yes
225 1/28/98 Yes Yes Yes
226 2/28/98 No Yes Yes
227 3/31/98 Yes Yes Yes
228 3/11/98 Yes Yes No
229 3/11/98 Yes Yes No
230 3/1/98 Yes Yes Yes
231 1/15/98 A-M-K Corp. (Ames Department Store) 100.0% Yes Yes No
232 12/31/97 No Yes No
233 9/30/97 Yes Yes Yes
234 2/28/98 Yes Yes Yes
235 4/23/98 Yes Yes No
236 3/1/98 Mikuni Restaurant 22.5% Yes Yes Yes
237 2/10/98 Yes Yes No
238 3/30/98 Yes Yes No
239 8/1/97 Yes Yes Yes
240 1/22/98 Yes Yes Yes
241 3/22/98 Texas Human Services 100.0% No No No
242 1/30/98 Yes No Yes
243 3/11/98 Yes Yes No
244 9/5/97 Yes Yes Yes
245 9/5/97 Sentient Systems 93.8% Yes Yes Yes
246 3/21/98 Yes Yes Yes
247 3/16/98 Yes Yes Yes
248 3/3/98 K-Mart 71.3% Yes Yes Yes
249 2/28/98 Yes Yes Yes
250 3/1/98 Yes Yes Yes
251 4/30/98 Yes Yes Yes
252 1/27/98 The Coach Store 100.0% Yes Yes Yes
253 3/18/98 Pierce Leahy Corporation 78.8% Yes Yes Yes
254 4/7/98 Yes Yes Yes
255 4/3/98 Yes Yes No
256 3/11/98 Yes Yes Yes
257 11/30/97 Yes Yes No
258 2/6/98 Yes Yes No
259 3/27/98 Yes Yes Yes
260 2/24/98 Yes Yes Yes
261 3/24/98 Goodwill Industries of Northern New England 100.0% Yes Yes Yes
262 2/1/98 Yes Yes Yes
263 2/1/98 Yes Yes Yes
264 1/31/98 Yes Yes Yes
265 1/31/98 U.S. Rentals, Inc. 100.0% Yes Yes No
266 11/18/97 Yes Yes Yes
267 2/27/98 Styles For Less 29.0% No Yes Yes
268 5/14/98 Petco 100.0% Yes Yes Yes
269 2/13/98 Protection One 100.0% No No No
270 2/13/98 Protection One 100.0% No No No
271 12/17/97 Yes Yes Yes
272 3/4/98 Blockbuster 39.0% Yes Yes Yes
273 2/28/98 Best Catering Corp. 44.1% Yes Yes Yes
274 1/20/98 Center Stage Performing Arts 25.0% Yes Yes No
275 10/31/97 Yes Yes No
276 1/23/98 Blockbuster Video 36.4% Yes Yes Yes
277 9/18/97 Yes Yes Yes
278 1/15/98 Jack In The Box-Foodmaker 100.0% Yes Yes No
279 1/9/98 Jack In The Box-Foodmaker 100.0% Yes Yes No
280 4/15/98 Yes Yes Yes
281 4/15/98 Yes Yes Yes
282 1/16/98 Yes Yes Yes
283 1/16/98 Yes Yes Yes
284 1/16/98 Yes Yes Yes
285 1/16/98 Yes Yes No
286 5/1/98 Hudson Salvage Center 29.9% Yes Yes Yes
287 12/15/97 Yes Yes Yes
288 11/10/97 Southwest Bell, Mobile Systems 44.9% Yes Yes No
289 3/1/98 Forrest Park CVS, Inc. 100.0% Yes Yes Yes
290 2/13/98 Rite Aid of Georgia, Inc. 100.0% No No Yes
291 2/17/98 Yes Yes Yes
292 5/4/98 Sandcastle Dialysis 25.0% Yes Yes No
293 2/26/98 Monarch Bank 51.6% Yes Yes No
294 4/27/98 Innovative Metal Fabrication, Inc. 100.0% Yes Yes Yes
295 1/29/98 Yes Yes No
296 1/13/98 Econo-Pak, Inc. 100.0% Yes Yes Yes
297 3/23/98 Fleming Companies (Food-4-Less) 100.0% Yes Yes Yes
298 3/16/98 Yes Yes Yes
299 1/7/98 Yes Yes Yes
300 12/31/97 Yes Yes No
301 2/9/98 Yes Yes Yes
302 1/8/98 Yes Yes Yes
303 3/31/98 Yes Yes No
304 12/31/97 Yes Yes No
305 4/29/97 Texas Human Services 100.0% No No No
306 10/1/98 Yes Yes Yes
307 12/29/97 Crown Dental Group 20.4% No Yes Yes
308 4/10/98 Rutherford's 48.6% Yes Yes Yes
309 2/1/98 Yes Yes No
310 3/16/98 Yes Yes No
311 12/31/97 No Yes No
312 12/31/97 Yes Yes Yes
313 3/30/98 Yes Yes No
314 2/6/98 Hollywood Video 100.0% No No Yes
315 12/31/97 Yes Yes Yes
316 12/30/97 Budget Bicycles 44.7% Yes Yes Yes
317 3/2/98 Hollywood Video 100.0% No No Yes
318 3/17/98 New American Health 36.7% Yes Yes Yes
319 3/3/98 Bath Market Inc. 100.0% Yes Yes Yes
320 1/26/98 Hollywood Video 100.0% No No Yes
321 2/23/98 Yes Yes No
322 4/30/98 Yes Yes No
323 1/27/98 Duroc USA 27.1% Yes Yes No
324 3/23/98 Fleming Companies, Inc. 100.0% Yes Yes Yes
325 2/17/98 U.S. Auto Glass 55.1% Yes Yes Yes
326 7/29/97 Graybar Electric Company, Inc. 100.0% Yes Yes Yes
327 11/13/97 Yes Yes No
328 3/1/98 Yes Yes No
329 12/31/97 Yes Yes No
330 8/5/97 Westmark Harris Advisors 37.3% No No No
331 10/20/97 The Morrone Company 100.0% Yes Yes No
332 2/22/98 Yes Yes Yes
333 2/20/98 ITP Laundramat Corp. 69.3% Yes Yes No
334 1/1/98 Yes Yes Yes
335 9/3/97 Texas Department of Human Services (DHS) 93.2% Yes Yes No
336 4/14/98 Yes Yes No
337 2/1/98 Department of Wildlife 68.2% No Yes Yes
338 2/28/98 Yes Yes No
339 4/3/98 Yes Yes No
340 2/28/98 Yes Yes No
341 1/1/98 Joanie's Diner 25.8% Yes Yes No
342 12/23/97 Durkin, Inc. 66.9% Yes Yes No
343 3/19/98 Sierra Health Service 100.0% No Yes No
344 7/8/97 Chief Auto Parts 100.0% No No No
345 12/15/97 Kontech 33.3% Yes Yes No
346 2/20/98 Alpha Therapeutic Corporation 100.0% Yes Yes No
347 12/1/97 Med-Net Billing Inc. (Office) 32.9% No Yes No
348 1/15/98 Atlantic Realty Group 31.5% Yes Yes Yes
349 11/22/97 Chief Auto Parts 100.0% Yes Yes No
350 3/19/98 Viola Studio 20.1% Yes Yes No
351 1/28/98 Yes Yes No
352 12/1/97 No Yes Yes
353 3/6/98 Yes Yes No
354 12/10/97 Chief Auto Parts 100.0% No No No
355 12/22/97 Yes Yes No
356 12/18/97 Yes Yes No
357 2/28/98 Consolidated Waste Disposal 62.5% No No No
358 3/21/98 Eddies Liquor 57.9% Yes Yes Yes
359 2/27/98 De Guelle Glass Company 25.0% Yes Yes No
360 5/5/97 Sharen Kammerer (Day Care Center) 100.0% No No No
361 3/1/98 La Canasta Furnishings, Inc. 100.0% No No No
362 10/1/97 Arlington Fastener & Industry 50.0% Yes Yes No
363 11/13/97 Yes Yes No
364 1/6/98 Yes Yes No
365 11/1/97 Yes Yes No
366 10/2/97 Yes Yes No
367 3/14/98 Brookover & Fleischman, P.C. 100.0% Yes Yes No
368 2/27/98 No Yes No
369 2/1/98 International Technology Systems, Inc. 100.0% Yes Yes No
370 12/1/97 Yes Yes No
371 2/28/98 Bass Pro Shop 98.5% Yes Yes No
372 3/4/98 Yes Yes No
373 12/31/97 Play Ball Spanish and Portugese Restaurant 53.1% Yes Yes No
374 2/6/98 Yes Yes No
375 12/1/97 Bailey Hardwoods 100.0% Yes Yes No
376 3/1/98 Marshall's Subway, Inc. 59.0% Yes Yes No
377 12/9/97 Karate Studio 27.1% Yes Yes No
378 2/1/98 Yes Yes No
379 9/19/97 Yes Yes No
380 2/20/98 Harbor Light Associates 65.1% Yes Yes No
</TABLE>
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Prepayment Code(14)
Loan Interest Accrual Lockout
No. Property Name(2) Method Seasoning(13) Period YM1 YM DEF
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2677 Larkin Street (2I) Actual/360 3 27 0 0 90
2 645 Stockton Street (2I) Actual/360 3 27 0 0 90
3 1340 -1390 Taylor Street (2I) Actual/360 3 27 0 0 90
4 1401 Jones Street (2I) Actual/360 3 27 0 0 90
5 1870 Pacific Avenue (2I) Actual/360 3 27 0 0 90
6 500 Stanyan Street (2I) Actual/360 3 27 0 0 90
7 2075 - 2079 Market Street (2I) Actual/360 3 27 0 0 90
8 1290 20th Avenue (2I) Actual/360 3 27 0 0 90
9 78 Buchanan Street (2I) Actual/360 3 27 0 0 90
10 2095 - 2099 Market Street (2I) Actual/360 3 27 0 0 90
11 235 - 241 Church Street (2I) Actual/360 3 27 0 0 90
12 1465 Burlingame Avenue (2I) Actual/360 3 27 0 0 90
13 252 - 258 Church Street (2I) Actual/360 3 27 0 0 90
14 Fountain View Nursing Home (2A) Actual/360 8 84 0 0 90
15 Greeneville West Health Care Center (2A) Actual/360 8 84 0 0 90
16 Bay St. Joseph Care Center (2A) Actual/360 8 84 0 0 90
17 Heritage Manor of Abbeville (2A) Actual/360 8 84 0 0 90
18 Panola Nursing Home (2A) Actual/360 8 84 0 0 90
19 Jackson Manor Nursing Home (2A) Actual/360 8 84 0 0 90
20 West Mesa Health Care Center (2A) Actual/360 8 54 0 0 0
21 Pickett County Nursing Home (2A) Actual/360 8 84 0 0 90
22 Broadview Village Square Actual/360 1 60 0 0 54
23 The Courville at Nashua & Villas at Nashua (2II) Actual/360 3 36 0 0 78
24 Aynsley Place (2II) Actual/360 3 36 0 0 78
25 The Courville at Manchester (2II) Actual/360 3 36 0 0 78
26 Carlyle Place (2II) Actual/360 3 36 0 0 78
27 Holiday Inn-Fond du Lac, WI (2III) Actual/360 4 48 69 0 0
28 Comfort Suites-Appleton, WI (2III) Actual/360 4 48 69 0 0
29 Comfort Suites-Madison, WI (2III) Actual/360 4 48 69 0 0
30 Budgetel-Madison, WI (2III) Actual/360 4 48 69 0 0
31 Holiday Inn Express-Osh Kosh, WI (2III) Actual/360 4 48 69 0 0
32 Budgetel-Fond du Lac, WI (2III) Actual/360 4 48 69 0 0
33 Elliott Bay Office Park Actual/360 2 26 0 0 91
34 The Cable Building Actual/360 3 60 0 0 54
35 NationsBank Tower (2IV) Actual/360 2 27 0 0 87
36 Woodhaven Shopping Center (2IV) Actual/360 2 27 0 0 87
37 Radford Hills Shopping Center (2IV) Actual/360 2 27 0 0 87
38 Crossroads Shopping Center (2IV) Actual/360 2 27 0 0 87
39 Pioneer Square (2IV) Actual/360 2 27 0 0 87
40 Mesa Verde Shopping Center (2IV) Actual/360 2 27 0 0 87
41 Park Plaza Shopping Center (2IV) Actual/360 2 27 0 0 87
42 Cambridge Square Shopping Center Actual/360 2 27 0 0 87
43 Holiday Inn BayView Plaza Actual/360 4 36 72 0 0
44 Westbrook (2V) Actual/360 2 26 0 0 91
45 Green Acres (2V) Actual/360 2 26 0 0 91
46 Compton Hills (2V) Actual/360 2 26 0 0 91
47 Skymeadow (2V) Actual/360 2 26 0 0 91
48 Eastgate (2V) Actual/360 2 26 0 0 91
49 Lake Remington (2V) Actual/360 2 26 0 0 91
50 Shady Terrace (2V) Actual/360 2 26 0 0 91
51 Preston Place Apartments Actual/Actual 2 27 0 0 207
52 Pharmaceutical Formulations Building Actual/360 3 28 0 0 86
53 Bristol Market Place 30/360 3 84 144 0 0
54 Heritage Square Actual/360 4 60 54 0 0
55 Jockey Hollow Office Complex Actual/360 0 36 81 0 0
56 Ashton Pointe Apartments Actual/360 7 36 0 78 0
57 Wedgewood Care Center Actual/360 3 84 0 0 150
58 River Oaks Apartments Actual/360 3 60 57 0 0
59 Oakwood Nursing Home (2VI) Actual/360 5 84 0 0 0
60 Tanglewood Nursing Home (2VI) Actual/360 5 84 0 0 0
61 Forsyth Nursing Home (2VI) Actual/360 5 84 0 0 0
62 Hilltop Nursing Home (2VI) Actual/360 5 84 0 0 0
63 Harrows Warehouse-Melville, NY (2VII) Actual/360 2 26 0 0 91
64 Harrows Shopping Center-Centereach, NY (2VII) Actual/360 2 26 0 0 91
65 Harrows Shopping Center-Lynbrook, NY (2VII) Actual/360 2 26 0 0 91
66 Harrows Shopping Center-Patchogue, NY (2VII) Actual/360 2 26 0 0 91
67 132 West 125th Street Actual/360 5 60 0 0 54
68 Friendship Manor - Janesville (2VIII) Actual/360 1 36 81 0 0
69 Friendship Manor - Mayville (2VIII) Actual/360 1 36 81 0 0
70 Friendship Manor - North Hume (2VIII) Actual/360 1 36 81 0 0
71 Friendship Manor - West Mann (2VIII) Actual/360 1 36 81 0 0
72 Friendship Manor - Hartford (2VIII) Actual/360 1 36 81 0 0
73 Friendship Manor - Wisconsin Rapids (2VIII) Actual/360 1 36 81 0 0
74 Friendship Manor - Medford (2VIII) Actual/360 1 36 81 0 0
75 Friendship Manor - Fond du Lac (2VIII) Actual/360 1 36 81 0 0
76 Friendship Manor - Shawano (2VIII) Actual/360 1 36 81 0 0
77 Van Dorn Station Actual/360 5 30 0 0 204
78 Brooksedge Corporate Center Actual/360 4 48 66 0 0
79 Bayside Plaza 30/360 12 0 117 0 0
80 Transicoil Actual/360 3 60 0 0 54
81 Holiday Inn-Lauderdale, FL Actual/360 3 27 0 0 90
82 Highland Walk Apartments Actual/360 3 60 0 0 48
83 Deep Ellum Lofts Actual/360 4 60 54 0 0
84 Galleries of Syracuse Actual/360 8 60 57 0 0
85 Sandlewood Apartments Actual/360 8 0 84 0 0
86 Emerald Pointe Apartments 30/360 31 0 117 0 0
87 Sheraton Inn-Columbus, GA Actual/360 2 60 57 0 0
88 Gardenside Shopping Center Actual/360 1 156 0 0 138
89 Apple Valley Square Shopping Center Actual/360 4 29 0 0 85
90 Abington Shopping Center (2B) Actual/360 3 60 54 0 0
91 Dunmore Shopping Center (2B) Actual/360 3 60 54 0 0
92 Westland Plaza Shopping Center Actual/360 6 60 54 0 0
93 Blackburn Center Actual/360 5 20 54 0 0
94 Pleasanton Square II Actual/360 4 24 153 0 0
95 West Garden Apartments Actual/360 2 26 0 0 91
96 Foster-Richardson Rest Home (2C) Actual/360 5 60 54 0 0
97 Pinnacle Rest Home (2C) Actual/360 6 60 54 0 0
98 Mount Pleasant Rest Home (2C) Actual/360 5 60 54 0 0
99 1650 Sherman Ave. (2IX) (2D) 30/360 3 36 78 0 0
100 8290 National Highway (2IX) (2D) 30/360 3 36 78 0 0
101 7101 Westfield Ave. (2X) (2D) 30/360 3 36 78 0 0
102 1601 Hylton Road (2X) (2D) 30/360 3 36 78 0 0
103 1625 Hylton Road (2X) (2D) 30/360 3 36 78 0 0
104 Cranbrook III 30/360 33 0 117 0 0
105 The Palms of Apalachee Apartments Actual/360 7 0 84 0 0
106 Courtyard by Marriott-Naples, FL Actual/360 2 60 57 0 0
107 Columbia Arms Apartments Actual/360 4 36 0 78 0
108 Palms of Magnolia Actual/360 7 0 84 0 0
109 Winds of Santa Fe Actual/360 1 60 0 0 54
110 225 Arizona Avenue Actual/360 2 26 0 0 91
111 Battlefield Business Park Actual/360 5 36 0 0 78
112 5 & 7 Allen Street (2XI) Actual/360 6 60 54 0 0
113 Lyme Road Office Building (2XI) Actual/360 6 60 54 0 0
114 Spring Valley Club Apartments Actual/360 7 36 0 78 0
115 Wolf Lake Industrial Center Actual/360 9 60 54 0 0
116 Aura Systems, Inc. Actual/360 1 60 54 0 0
117 Tustin Square Actual/360 4 60 54 0 0
118 The Market at Hobe Sound Shopping Center Actual/360 3 60 54 0 0
119 Courtyard by Marriott-Springfield, OR Actual/360 2 60 177 0 0
120 Highland Estates Actual/360 7 36 0 48 0
121 19 Crosby Drive Actual/360 2 36 0 0 81
122 Heritage House Apartments 30/360 27 0 117 0 0
123 Fairfield Inn-New Orleans Airport Actual/360 2 26 0 0 91
124 Kearny Office Park 30/360 31 0 117 0 0
125 Holiday Inn- Holidome 30/360 3 60 54 0 0
126 Oxford Nursing Home Actual/360 5 60 54 0 0
127 Brandywine Village Shopping Center Actual/360 3 120 0 0 114
128 Loop Inn (2E) Actual/360 5 96 0 0 60
129 Gallery Motel (2E) Actual/360 5 96 0 0 60
130 Arnaz Arms Apartments 30/360 30 0 117 0 0
131 So. Calif. Institute of Arch. Building Actual/360 5 96 78 0 0
132 Phoenix Court Actual/360 4 60 57 0 0
133 Wynstone Apartments Actual/360 8 0 84 0 0
134 Holiday Inn-Treasure Island, FL Actual/360 0 60 57 0 0
135 Cedar Hills Shopping Center Actual/360 3 60 54 0 0
136 Knollwood Center Actual/360 3 36 0 0 18
137 Kenilworth Fidelco Industrial Center Actual/360 4 60 0 0 54
138 Timberline Shopping Center Actual/360 5 60 54 0 0
139 West Lawrence Care Center Actual/360 1 84 0 0 149
140 Reservoir Plaza Actual/360 3 60 57 0 0
141 Cambridge Park Apartments Actual/360 5 36 0 60 0
142 Taylor Crossing Actual/360 3 28 0 0 206
143 St. Doris Apartments Actual/360 10 36 0 0 81
144 Shoppes of Arrowhead Actual/360 1 60 54 0 0
145 University Place Apartments I & II Actual/360 4 60 0 0 114
146 Sunsations #3 (2F)* Actual/360 5 0 120 0 0
147 Sunsations #1 (2F)* Actual/360 5 0 120 0 0
148 Sunsations #8 (2F)* Actual/360 5 0 120 0 0
149 Golden Pointe Apartments Actual/360 6 24 54 0 0
150 Sunsations #7 (2G)* Actual/360 5 0 120 0 0
151 Sunsations #2 (2G)* Actual/360 5 0 120 0 0
152 Sunsations #4 (2G)* Actual/360 5 0 120 0 0
153 Sunsations #5 (2G)* Actual/360 5 0 120 0 0
154 Days Inn-Tacoma, WA Actual/360 4 60 57 0 0
155 Marriott Fairfield Inn Actual/360 5 28 0 0 86
156 Colonial Nursing Center Actual/360 3 114 0 0 0
157 349 Main Street (2H) Actual/360 2 26 0 0 91
158 300/310 Main Street (2H) Actual/360 2 26 0 0 91
159 Village North Townhouses and Apartments Actual/360 4 29 0 0 85
160 One First Avenue Warehouse Actual/360 4 30 24 0 0
161 Prime Time Medford Apartments Actual/360 4 60 54 0 0
162 Warmington Building Actual/360 3 27 0 0 90
163 Westwood Apartments Actual/360 4 29 0 0 85
164 Columbia Pacific Plaza Actual/360 5 33 0 0 0
165 Holiday Inn-Bath, ME Actual/360 2 59 58 0 0
166 Home Sweet Home Actual/360 4 120 60 0 0
167 Belle Rive Club Apartments Actual/360 4 36 0 78 0
168 Clean Machine - Kingston Pike (West Hills) (2I) Actual/360 2 120 108 0 0
169 Clean Machine - Merchant (2I) Actual/360 2 120 108 0 0
170 Clean Machine - Maynardville (Halls) (2I) Actual/360 2 120 108 0 0
171 Market & Noe Center Actual/360 5 156 0 0 138
172 Sentry Plaza Shopping Center (2XII) Actual/360 3 60 54 0 0
173 Sentry Grocery Store (2XII) Actual/360 3 60 54 0 0
174 International Food & Fashion Center Actual/360 4 54 54 0 0
175 Colony Square 1, 2, 4 (2XIII) Actual/360 3 96 0 0 78
176 Williamsburg Center (2XIII) Actual/360 3 96 0 0 78
177 Colima Plaza Actual/360 3 60 57 0 0
178 Royal Oaks Shopping Center Actual/360 6 31 0 0 83
179 Schoolhouse Shopping Center Actual/360 3 60 0 0 54
180 Shadow Rose Apartments Actual/360 5 90 84 0 0
181 60 Messenger Street Actual/360 1 25 0 0 92
182 Summit Court Apartments Actual/360 4 60 0 0 0
183 Walsh Avenue Industrial Actual/360 4 60 54 0 0
184 Hampton Inn-Cedar Rapids, IA Actual/360 3 48 69 0 0
185 Spalding Plaza Retail and Office Complex Actual/360 5 60 0 0 54
186 16 Brooklyn Industrial Actual/360 6 84 72 0 0
187 Lemon Grove Square Actual/360 3 36 81 0 0
188 Ramada Inn Speedway Actual/360 3 60 54 0 0
189 Triangle Crossroads 30/360 6 31 0 0 83
190 Rosewood Apartments Actual/360 3 28 0 0 146
191 Tehachapi Towne Center Actual/360 5 60 54 0 0
192 Pinellas Pointe Apartments Actual/360 6 60 54 0 0
193 Quail Hill Apartments Actual/360 5 90 84 0 0
194 Wal Mart - Whitinsville 30/360 4 90 84 0 0
195 Central Heights Shopping Center Actual/360 2 96 78 0 0
196 Premier Corporate Center Actual/360 2 60 0 0 54
197 Pharr Plaza Actual/360 2 60 0 54 0
198 Office Max - Bentley Mall Actual/360 2 27 0 0 207
199 Woodknoll Townhomes Actual/360 5 60 0 0 54
200 Microtel Inn Actual/360 5 60 0 0 54
201 Walnut Auto Care Center Actual/360 3 60 0 0 54
202 Andresen Plaza Actual/360 3 0 156 0 0
203 Hartland Apartments Actual/360 4 60 54 0 0
204 Mr. Gatti's Restaurant, San Angelo (2XIV) Actual/360 4 36 0 0 78
205 Mr Gattis Restaurant, Midland (2XIV) Actual/360 4 36 0 0 78
206 Super 8-Madison, WI Actual/360 3 48 69 0 0
207 Access Self Storage Actual/360 4 60 60 0 0
208 Executive Car Wash - Roswell (2XV) Actual/360 4 120 108 0 0
209 Executive Car Wash - Johnson Ferry (2XV) Actual/360 4 120 108 0 0
210 Rooker Building Actual/360 4 60 54 0 0
211 Alta Vista Corporate Center Actual/360 6 36 0 0 78
212 75 Montgomery Street 30/360 2 27 0 0 267
213 North Kitsap Self Storage (2J) Actual/360 4 60 54 0 0
214 Poulsbo Business Park (2J) Actual/360 4 60 54 0 0
215 13-17 Laight Street Actual/360 4 60 54 0 0
216 Quality Inn - Vallejo Actual/360 5 60 54 0 0
217 Executive Inn II (2XVI) Actual/360 4 60 114 0 0
218 Executive Inn I (2XVI) Actual/360 4 60 114 0 0
219 Super 8 Motel (2XVI) Actual/360 4 60 114 0 0
220 Travelodge (2XVI) Actual/360 4 60 114 0 0
221 H.S.T. Building 30/360 14 0 117 0 0
222 The French/ Cabot Block Building (2XVII) Actual/360 4 60 54 0 0
223 The Waterman Place Building (2XVII) Actual/360 4 60 54 0 0
224 The Morgan Block (2XVII) Actual/360 4 60 54 0 0
225 Holiday Inn Express- Lemoore Actual/360 4 120 120 0 0
226 Holiday Inn Express- Killeen Actual/360 4 60 54 0 0
227 Country Inn by Carlson Actual/360 3 0 96 0 0
228 Atlantic Self Storage- Dunn Avenue Actual/360 4 0 144 0 0
229 Atlantic Self Storage I-295 Actual/360 4 0 144 0 0
230 Renaissance Apartments Actual/360 3 60 0 0 114
231 Ames Department Store Actual/360 3 96 72 0 0
232 The Store House Self Storage 30/360 6 42 0 0 0
233 Comfort Inn- Killeen Actual/360 4 60 54 0 0
234 SeaTac Inn Actual/360 2 60 0 0 54
235 KEW Industrial Park Actual/360 3 60 54 0 0
236 Hazel Ridge Plaza Actual/360 4 0 114 0 0
237 Gray Road Self Storage Actual/360 4 60 0 0 114
238 Virginia Square Apartments Actual/360 4 60 48 0 0
239 Premier Club Apartments Actual/360 7 36 0 48 0
240 1058 Southern Blvd. Actual/360 5 60 54 0 0
241 Watson Centex-San Antonio* 30/360 10 60 0 0 0
242 Lakeside Meadows Apartments Actual/360 5 60 54 0 0
243 Atlantic Self Storage- Millcoe Road Actual/360 4 0 144 0 0
244 Holiday Inn - Reidsville Actual/360 6 60 54 0 0
245 Parkway Plaza* 30/360 9 60 0 0 0
246 Lantern Plaza* 30/360 9 60 0 0 0
247 West 24th Street Apartments Actual/360 2 26 0 0 91
248 Airport Circle Plaza Actual/360 3 36 0 0 78
249 El Pueblo Lodge Actual/360 4 60 54 0 0
250 Maple Manor Apartments Actual/360 1 60 57 0 0
251 Regency Walk Actual/360 3 60 54 0 0
252 The Coach Store Actual/360 3 120 0 0 30
253 WIPAC Distribution Warehouse Actual/360 3 96 0 0 60
254 Oceanside Square 30/360 11 60 54 0 0
255 North Las Vegas Self Storage Actual/360 3 0 144 0 0
256 Village Plaza 30/360 4 60 54 0 0
257 Lake Margaret Village Apartments (2K)* Actual/360 5 60 0 0 0
258 Townhouse Apartments (2K)* Actual/360 5 60 0 0 0
259 Whispering Pines Apartments Actual/360 2 60 57 0 0
260 Beechmont Professional Building Actual/360 4 60 0 0 54
261 204 Loudon Road Actual/360 3 60 0 0 54
262 Atlantic Arms Apartments (2L) Actual/360 4 60 0 0 54
263 Kilbreth Apartments (2L) Actual/360 4 60 0 0 54
264 Ramada Limited- South Padre Actual/360 4 29 0 0 85
265 U.S. Rentals, Inc. Actual/360 5 48 0 0 132
266 El Campo Inn Actual/360 5 0 60 0 0
267 1318 Wilshire Boulevard Actual/360 4 60 48 0 0
268 PETCO Building Actual/360 2 60 0 0 54
269 333 West Indian School - Phoenix (2M) Actual/360 3 96 60 0 0
270 2502 North Alvernon Way - Tucson (2M) Actual/360 3 96 60 0 0
271 Victory Self Storage - Staten Island Actual/360 6 60 54 0 0
272 Sheridan Retail Shops Actual/360 3 28 0 0 86
273 485 Kings Highway Actual/360 4 60 54 0 0
274 Norwest Business Park* 30/360 5 0 114 0 0
275 Silver Creek Manor Actual/360 6 0 0 0 0
276 The Square Shopping Center Actual/360 5 60 54 0 0
277 301-315 East Tremont Ave. Actual/360 6 60 54 0 0
278 Jack In The Box - Galena Park (2XVIII) Actual/360 5 84 0 0 90
279 Jack in the Box - Terrell (2XVIII) Actual/360 5 84 0 0 90
280 Terrace View (Chateau) Apartments (2N) Actual/360 3 28 0 0 86
281 Garner Avenue Apartments (2N) Actual/360 3 28 0 0 86
282 Lake Ridge Apartments - DRK Actual/360 4 96 0 0 0
283 Lake Ridge Apartments - FEM Actual/360 4 96 0 0 0
284 Lake Ridge Apartments - JMK Actual/360 4 96 0 0 0
285 Lake Ridge Apartments - MJK Actual/360 4 96 0 0 0
286 Our Shopping Center Actual/360 4 60 57 0 0
287 Diffley Square Shopping Center Actual/360 5 36 78 0 0
288 Westridge Shopping Center* 30/360 8 54 0 0 0
289 CVS Drug Store 30/360 2 36 0 0 138
290 Rite Aid Drug Store - Griffin, GA Actual/360 4 120 0 0 114
291 1525 & 1535 Central Avenue Actual/360 4 29 0 0 85
292 Lowry Expressway Office Building* Actual/360 2 120 0 0 0
293 Monarch Bank Building* 30/360 8 60 0 0 0
294 Innovative Metals Warehouse Actual/360 2 36 0 0 78
295 Archer Road Self Storage Actual/360 5 60 60 0 0
296 Econo-Pak Warehouse Actual/360 5 30 0 0 24
297 Food-4-Less Actual/360 3 60 54 0 0
298 Sugarland Professional Building Actual/360 3 36 0 0 120
299 Summit Terrace Apartments Actual/360 3 60 54 0 0
300 Red Carpet Inn - Boone* Actual/360 3 0 120 0 0
301 1883-1887 Amsterdam Avenue Actual/360 5 60 54 0 0
302 Dave's Car Wash Actual/360 4 120 108 0 0
303 Alamo Self Storage Actual/360 3 0 114 0 0
304 Desert Pines Apartments* 30/360 7 60 0 0 0
305 Watson Centex - Houston* 30/360 10 54 0 0 0
306 Blue Heron Car Wash Actual/360 6 120 108 0 0
307 30100 Crown Valley Parkway* 30/360 7 60 0 0 0
308 Lovers Lane Retail Center Actual/360 3 156 0 0 138
309 Northway Manor MHP Actual/360 3 0 120 0 0
310 Budget Mini Storage-Fontana Actual/360 3 60 54 0 0
311 9D E-Z Storage Actual/360 4 60 54 0 0
312 Days Inn - Brunswick Actual/360 4 60 54 0 0
313 Apollo Self Storage Actual/360 3 60 54 0 0
314 Hollywood Video Store - High Point, NC Actual/360 5 48 0 115 0
315 Cypress Woods Apartments Actual/360 6 60 54 0 0
316 Eagle Rock Shopping Center Actual/360 6 60 54 0 0
317 Hollywood Video Store - Virginia Beach Actual/360 4 48 0 60 0
318 Airport South Building Actual/360 4 60 54 0 0
319 Thriftway Supermarket Actual/360 4 29 0 0 85
320 Hollywood Video Store - Pikesville, MD Actual/360 4 42 0 60 0
321 Roof Garden Mobile Home Court* Actual/360 5 60 0 0 0
322 Sandalon East Office Building* Actual/360 3 120 0 0 0
323 Westgate Regency Center* Actual/Actual 6 120 0 0 0
324 Roger's Green Hills Supermarket Actual/360 3 60 54 0 0
325 Taco Bell & US Auto Glass Actual/360 4 36 0 84 0
326 555 Broadway* 30/360 10 60 0 0 0
327 Aussie Self Storage Actual/360 4 60 60 0 0
328 Roselea Villas* Actual/360 3 60 0 0 0
329 Knights Inn-Summerton* Actual/360 6 60 0 0 0
330 1610 Broadway* 30/360 11 60 0 0 0
331 Morrone Company* Actual/360 5 0 120 0 0
332 Peppertree Apartments Actual/360 3 60 54 0 0
333 Islip Terrace Plaza* Actual/360 4 0 120 0 0
334 1626 Logan Street* 30/360 8 120 0 0 0
335 TX Human Serv. & Work Force Comm. Off.* 30/360 8 60 0 0 0
336 Fielders Bridge Office Building* Actual/360 3 60 0 0 0
337 2906 North State Street Building* 30/360 7 60 0 0 0
338 Days Inn - Orange City* Actual/360 3 60 0 0 0
339 Edgewood Court Apartments* Actual/360 3 60 0 0 0
340 Super Safe Self Service Storage Actual/360 4 0 0 0 0
341 Pioneer Plaza* Actual/360 4 60 0 0 0
342 287 Appleton Street* 30/360 4 0 114 0 0
343 2059 E. Sahara Avenue* 30/360 10 60 0 0 0
344 560 Virginia Way* 30/360 10 60 0 0 0
345 Calibra Sunnyside* Actual/360 6 0 174 0 0
346 Bolling Building* Actual/360 3 60 0 0 0
347 512 Main Street* 30/360 10 60 0 0 0
348 Panola Road Office Building* Actual/360 4 60 0 0 0
349 1920 Ledbetter Drive* 30/360 8 60 0 0 0
350 2727-2745 Gundry Avenue* 30/360 12 60 0 0 0
351 Citadel Apartments* Actual/360 3 60 0 0 0
352 1400-1410 E. Florida* 30/360 9 60 0 0 0
353 Vance St. Apartment Building* Actual/360 3 60 0 0 0
354 3200 Race Street* 30/360 7 60 0 0 0
355 Covington Office Center* Actual/360 5 60 0 0 0
356 4201 Dimmitt Road* 30/360 7 60 0 0 0
357 10660 Silicon Avenue* 30/360 9 120 0 0 0
358 5401 Cherry Avenue* 30/360 9 60 0 0 0
359 110 Adams Ave.* 30/360 8 60 0 0 0
360 Miss Meme's Kreative Kids Bldg.* 30/360 12 60 0 0 0
361 La Canasta Furniture & Appliance Store* 30/360 8 120 0 0 0
362 Great Southwestern Parkway* Actual/360 5 0 120 0 0
363 503 W. 26th Street* 30/360 7 120 0 0 0
364 Mosstree Apartments* 30/360 6 60 0 0 0
365 Marshall/Catamount Apartments* Actual/360 5 60 0 0 0
366 Sannella* Actual/360 4 0 114 0 0
367 1005 Abbott Road* Actual/360 4 0 120 0 0
368 6452 Nine Mile Bridge Road* 30/360 9 60 0 0 0
369 301 South Richey Road* Actual/360 5 60 0 0 0
370 Moore's Adult Care Facility* Actual/Actual 6 60 0 0 0
371 Bass Pro Shop* Actual/360 4 60 0 0 0
372 619-623 W. Brookside* Actual/360 4 60 0 0 0
373 50-52 Ferry Street* Actual/360 4 0 114 0 0
374 Hillside Mobile Home Park* Actual/360 5 84 0 0 0
375 Bailey Hardwoods* Actual/360 5 0 120 0 0
376 3050 Austin Bluffs Parkway* Actual/360 4 60 0 0 0
377 Kelley St. Office Building* 30/360 6 60 0 0 0
378 Northlake MHP* Actual/360 4 84 0 0 0
379 59-61 Carlton Street Apartments* 30/360 6 59 0 0 0
380 Sabattus Street Office Building* Actual/360 5 60 0 0 0
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Loan Administrative
No. 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Open Cost Rate(15)
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0 0 0 0 0 0 0 0 0 0 3 9.8
2 0 0 0 0 0 0 0 0 0 0 3 9.8
3 0 0 0 0 0 0 0 0 0 0 3 9.8
4 0 0 0 0 0 0 0 0 0 0 3 9.8
5 0 0 0 0 0 0 0 0 0 0 3 9.8
6 0 0 0 0 0 0 0 0 0 0 3 9.8
7 0 0 0 0 0 0 0 0 0 0 3 9.8
8 0 0 0 0 0 0 0 0 0 0 3 9.8
9 0 0 0 0 0 0 0 0 0 0 3 9.8
10 0 0 0 0 0 0 0 0 0 0 3 9.8
11 0 0 0 0 0 0 0 0 0 0 3 9.8
12 0 0 0 0 0 0 0 0 0 0 3 9.8
13 0 0 0 0 0 0 0 0 0 0 3 9.8
14 0 0 0 0 0 0 0 0 0 0 6 29.3
15 0 0 0 0 0 0 0 0 0 0 6 29.3
16 0 0 0 0 0 0 0 0 0 0 6 29.3
17 0 0 0 0 0 0 0 0 0 0 6 29.3
18 0 0 0 0 0 0 0 0 0 0 6 29.3
19 0 0 0 0 0 0 0 0 0 0 6 29.3
20 0 0 0 0 0 0 0 0 0 0 6 29.3
21 0 0 0 0 0 0 0 0 0 0 6 29.3
22 0 0 0 0 0 0 0 0 0 0 6 4.8
23 0 0 0 0 0 0 0 0 0 0 6 28.8
24 0 0 0 0 0 0 0 0 0 0 6 28.8
25 0 0 0 0 0 0 0 0 0 0 6 28.8
26 0 0 0 0 0 0 0 0 0 0 6 28.8
27 0 0 0 0 0 0 0 0 0 0 3 12.8
28 0 0 0 0 0 0 0 0 0 0 3 12.8
29 0 0 0 0 0 0 0 0 0 0 3 12.8
30 0 0 0 0 0 0 0 0 0 0 3 12.8
31 0 0 0 0 0 0 0 0 0 0 3 12.8
32 0 0 0 0 0 0 0 0 0 0 3 12.8
33 0 0 0 0 0 0 0 0 0 0 3 7.8
34 0 0 0 0 0 0 0 0 0 0 6 4.8
35 0 0 0 0 0 0 0 0 0 0 6 12.8
36 0 0 0 0 0 0 0 0 0 0 6 12.8
37 0 0 0 0 0 0 0 0 0 0 6 12.8
38 0 0 0 0 0 0 0 0 0 0 6 15.3
39 0 0 0 0 0 0 0 0 0 0 6 15.3
40 0 0 0 0 0 0 0 0 0 0 6 15.3
41 0 0 0 0 0 0 0 0 0 0 6 15.3
42 0 0 0 0 0 0 0 0 0 0 6 4.8
43 0 0 0 0 0 0 0 0 0 0 12 4.8
44 0 0 0 0 0 0 0 0 0 0 3 7.8
45 0 0 0 0 0 0 0 0 0 0 3 7.8
46 0 0 0 0 0 0 0 0 0 0 3 7.8
47 0 0 0 0 0 0 0 0 0 0 3 7.8
48 0 0 0 0 0 0 0 0 0 0 3 7.8
49 0 0 0 0 0 0 0 0 0 0 3 7.8
50 0 0 0 0 0 0 0 0 0 0 3 7.8
51 0 0 0 0 0 0 0 0 0 0 6 7.8
52 0 0 0 0 0 0 0 0 0 0 6 5.8
53 0 0 0 0 0 0 0 0 0 0 12 5.8
54 0 0 0 0 0 0 0 0 0 0 6 5.8
55 0 0 0 0 0 0 0 0 0 0 3 12.5
56 0 0 0 0 0 0 0 0 0 0 6 8.3
57 0 0 0 0 0 0 0 0 0 0 6 28.8
58 0 0 0 0 0 0 0 0 0 0 3 5.3
59 0 0 0 12 12 12 12 12 12 12 12 28.8
60 0 0 0 12 12 12 12 12 12 12 12 28.8
61 0 0 0 12 12 12 12 12 12 12 12 28.8
62 0 0 0 12 12 12 12 12 12 12 12 28.8
63 0 0 0 0 0 0 0 0 0 0 3 11.8
64 0 0 0 0 0 0 0 0 0 0 3 11.8
65 0 0 0 0 0 0 0 0 0 0 3 11.8
66 0 0 0 0 0 0 0 0 0 0 3 11.8
67 0 0 0 0 0 0 0 0 0 0 6 5.8
68 0 0 0 0 0 0 0 0 0 0 3 10.8
69 0 0 0 0 0 0 0 0 0 0 3 10.8
70 0 0 0 0 0 0 0 0 0 0 3 10.8
71 0 0 0 0 0 0 0 0 0 0 3 10.8
72 0 0 0 0 0 0 0 0 0 0 3 10.8
73 0 0 0 0 0 0 0 0 0 0 3 10.8
74 0 0 0 0 0 0 0 0 0 0 3 10.8
75 0 0 0 0 0 0 0 0 0 0 3 10.8
76 0 0 0 0 0 0 0 0 0 0 3 10.8
77 0 0 0 0 0 0 0 0 0 0 6 5.8
78 0 0 0 0 0 0 0 0 0 0 6 11.8
79 0 0 0 0 0 0 0 0 0 0 3 5.3
80 0 0 0 0 0 0 0 0 0 0 6 5.8
81 0 0 0 0 0 0 0 0 0 0 3 5.3
82 0 0 0 0 0 0 0 0 6 0 6 8.3
83 0 0 0 0 0 0 0 0 0 0 6 5.8
84 0 0 0 0 0 0 0 0 0 0 3 12.5
85 0 0 0 0 12 0 12 0 6 0 6 8.3
86 0 0 0 0 0 0 0 0 0 0 3 5.3
87 0 0 0 0 0 0 0 0 0 0 3 12.5
88 0 0 0 0 0 0 0 0 0 0 6 15.3
89 0 0 0 0 0 0 0 0 0 0 6 5.8
90 0 0 0 0 0 0 0 0 0 0 6 8.8
91 0 0 0 0 0 0 0 0 0 0 6 10.8
92 0 0 0 0 0 0 0 0 0 0 6 5.8
93 0 0 0 0 0 0 0 0 0 0 6 15.3
94 0 0 0 0 0 0 0 0 0 0 3 12.5
95 0 0 0 0 0 0 0 0 0 0 3 5.3
96 0 0 0 0 0 0 0 0 0 0 6 12.8
97 0 0 0 0 0 0 0 0 0 0 6 12.8
98 0 0 0 0 0 0 0 0 0 0 6 14.8
99 0 0 0 0 0 0 0 0 0 0 6 15.3
100 0 0 0 0 0 0 0 0 0 0 6 15.3
101 0 0 0 0 0 0 0 0 0 0 6 15.3
102 0 0 0 0 0 0 0 0 0 0 6 15.3
103 0 0 0 0 0 0 0 0 0 0 6 15.3
104 0 0 0 0 0 0 0 0 0 0 3 5.3
105 0 0 0 0 12 0 12 0 6 0 6 8.3
106 0 0 0 0 0 0 0 0 0 0 3 12.5
107 0 0 0 0 0 0 0 0 0 0 6 8.3
108 0 0 0 0 12 0 12 0 6 0 6 8.3
109 0 0 0 0 0 0 0 0 0 0 6 10.8
110 0 0 0 0 0 0 0 0 0 0 3 5.3
111 0 0 0 0 0 0 0 0 0 0 6 5.8
112 0 0 0 0 0 0 0 0 0 0 6 8.8
113 0 0 0 0 0 0 0 0 0 0 6 10.8
114 0 0 0 0 0 0 0 0 0 0 6 8.3
115 0 0 0 0 0 0 0 0 0 0 6 8.8
116 0 0 0 0 0 0 0 0 0 0 6 8.8
117 0 0 0 0 0 0 0 0 0 0 6 8.8
118 0 0 0 0 0 0 0 0 0 0 6 8.8
119 0 0 0 0 0 0 0 0 0 0 3 12.5
120 0 0 0 0 0 0 12 0 12 6 6 8.3
121 0 0 0 0 0 0 0 0 0 0 3 10.8
122 0 0 0 0 0 0 0 0 0 0 3 5.3
123 0 0 0 0 0 0 0 0 0 0 3 12.5
124 0 0 0 0 0 0 0 0 0 0 3 5.3
125 0 0 0 0 0 0 0 0 0 0 6 8.8
126 0 0 0 0 0 0 0 0 0 0 6 17.3
127 0 0 0 0 0 0 0 0 0 0 6 15.3
128 0 0 0 0 0 0 0 0 0 0 24 8.8
129 0 0 0 0 0 0 0 0 0 0 24 12.8
130 0 0 0 0 0 0 0 0 0 0 3 5.3
131 0 0 0 0 0 0 0 0 0 0 6 10.8
132 0 0 0 0 0 0 0 0 0 0 3 12.5
133 0 0 0 0 12 0 12 0 6 0 6 8.3
134 0 0 0 0 0 0 0 0 0 0 3 12.5
135 0 0 0 0 0 0 0 0 0 0 6 8.8
136 0 0 0 0 0 0 0 0 0 0 6 10.8
137 0 0 0 0 0 0 0 0 0 0 6 8.8
138 0 0 0 0 0 0 0 0 0 0 6 8.8
139 0 0 0 0 0 0 0 0 0 0 6 28.8
140 0 0 0 0 0 0 0 0 0 0 3 12.5
141 0 0 0 0 0 0 0 0 0 0 24 8.3
142 0 0 0 0 0 0 0 0 0 0 6 7.8
143 0 0 0 0 0 0 0 0 0 0 3 5.3
144 0 0 0 0 0 0 0 0 0 0 6 5.3
145 0 0 0 0 0 0 0 0 0 0 6 8.8
146 12 0 12 0 12 0 12 0 6 0 6 12.8
147 12 0 12 0 12 0 12 0 6 0 6 12.8
148 12 0 12 0 12 0 12 0 6 0 6 12.8
149 0 0 0 0 0 0 0 0 0 0 6 8.3
150 12 0 12 0 12 0 12 0 6 0 6 12.8
151 12 0 12 0 12 0 12 0 6 0 6 12.8
152 12 0 12 0 12 0 12 0 6 0 6 14.8
153 12 0 12 0 12 0 12 0 6 0 6 14.8
154 0 0 0 0 0 0 0 0 0 0 3 5.3
155 0 0 0 0 0 0 0 0 0 0 6 8.3
156 0 0 0 0 0 0 0 0 0 0 6 10.8
157 0 0 0 0 0 0 0 0 0 0 3 5.3
158 0 0 0 0 0 0 0 0 0 0 3 5.3
159 0 0 0 0 0 0 0 0 0 0 6 8.8
160 0 0 0 0 0 0 0 0 0 0 6 8.8
161 0 0 0 0 0 0 0 0 0 0 6 5.3
162 0 0 0 0 0 0 0 0 0 0 3 5.3
163 0 0 0 0 0 0 0 0 0 0 6 10.8
164 0 0 0 0 0 0 0 0 0 0 3 8.8
165 0 0 0 0 0 0 0 0 0 0 3 12.5
166 0 0 0 0 0 0 0 0 0 0 60 10.8
167 0 0 0 0 0 0 0 0 0 0 6 8.3
168 0 0 0 0 0 0 0 0 0 0 12 12.8
169 0 0 0 0 0 0 0 0 0 0 12 14.8
170 0 0 0 0 0 0 0 0 0 0 12 12.8
171 0 0 0 0 0 0 0 0 0 0 6 8.8
172 0 0 0 0 0 0 0 0 0 0 6 15.3
173 0 0 0 0 0 0 0 0 0 0 6 15.3
174 0 0 0 0 0 0 0 0 0 0 6 8.8
175 0 0 0 0 0 0 0 0 0 0 6 10.8
176 0 0 0 0 0 0 0 0 0 0 6 14.8
177 0 0 0 0 0 0 0 0 0 0 3 5.3
178 0 0 0 0 0 0 0 0 0 0 6 8.8
179 0 0 0 0 0 0 0 0 0 0 6 8.8
180 0 0 0 0 0 0 0 0 0 0 6 8.8
181 0 0 0 0 0 0 0 0 0 0 3 12.5
182 12 0 12 0 12 0 12 0 6 0 6 8.8
183 0 0 0 0 0 0 0 0 0 0 6 8.8
184 0 0 0 0 0 0 0 0 0 0 3 12.5
185 0 0 0 0 0 0 0 0 0 0 6 8.3
186 0 0 0 0 0 0 0 0 0 0 24 8.8
187 0 0 0 0 0 0 0 0 0 0 3 12.5
188 0 0 0 0 0 0 0 0 0 0 6 10.8
189 0 0 0 0 0 0 0 0 0 0 6 10.8
190 0 0 0 0 0 0 0 0 0 0 6 10.8
191 0 0 0 0 0 0 0 0 0 0 6 10.8
192 0 0 0 0 0 0 0 0 0 0 6 10.8
193 0 0 0 0 0 0 0 0 0 0 6 10.8
194 0 0 0 0 0 0 0 0 0 0 6 10.8
195 0 0 0 0 0 0 0 0 0 0 6 5.3
196 0 0 0 0 0 0 0 0 0 0 6 10.8
197 0 0 0 0 0 0 0 0 0 0 6 8.3
198 0 0 0 0 0 0 0 0 0 0 6 10.8
199 0 0 0 0 0 0 0 0 0 0 6 10.8
200 0 0 0 0 0 0 0 0 0 0 6 10.8
201 0 0 0 0 0 0 0 0 0 0 6 10.8
202 0 0 0 0 0 0 0 0 0 0 24 10.8
203 0 0 0 0 0 0 0 0 0 0 6 10.8
204 0 0 0 0 0 0 0 0 0 0 6 12.8
205 0 0 0 0 0 0 0 0 0 0 6 12.8
206 0 0 0 0 0 0 0 0 0 0 3 12.5
207 0 0 12 0 12 0 12 0 12 0 12 10.8
208 0 0 0 0 0 0 0 0 0 0 12 12.8
209 0 0 0 0 0 0 0 0 0 0 12 12.8
210 0 0 0 0 0 0 0 0 0 0 6 10.8
211 0 0 0 0 0 0 0 0 0 0 6 15.3
212 0 0 0 0 0 0 0 0 0 0 6 10.8
213 0 0 0 0 0 0 0 0 0 0 6 12.8
214 0 0 0 0 0 0 0 0 0 0 6 14.8
215 0 0 0 0 0 0 0 0 0 0 6 10.8
216 0 0 0 0 0 0 0 0 0 0 6 10.8
217 0 0 0 0 0 0 0 0 0 0 6 14.8
218 0 0 0 0 0 0 0 0 0 0 6 14.8
219 0 0 0 0 0 0 0 0 0 0 6 14.8
220 0 0 0 0 0 0 0 0 0 0 6 14.8
221 0 0 0 0 0 0 0 0 0 0 3 5.3
222 0 0 0 0 0 0 0 0 0 0 6 10.8
223 0 0 0 0 0 0 0 0 0 0 6 12.8
224 0 0 0 0 0 0 0 0 0 0 6 14.8
225 0 0 0 0 0 0 0 0 0 0 60 17.8
226 0 0 0 0 0 0 0 0 0 0 6 10.8
227 0 0 0 0 0 0 0 0 0 0 84 10.8
228 0 0 0 0 0 0 0 0 0 0 36 10.8
229 0 0 0 0 0 0 0 0 0 0 36 10.8
230 0 0 0 0 0 0 0 0 0 0 6 15.3
231 0 0 0 0 0 0 0 0 0 0 24 10.8
232 12 0 12 0 12 0 12 0 12 0 12 10.8
233 0 0 0 0 0 0 0 0 0 0 6 10.8
234 0 0 0 0 0 0 0 0 0 0 6 10.8
235 0 0 0 0 0 0 0 0 0 0 6 15.3
236 0 0 0 0 0 0 0 0 0 0 6 12.8
237 0 0 0 0 0 0 0 0 0 0 6 15.3
238 0 0 0 0 0 0 0 0 0 0 12 12.8
239 0 0 0 0 12 0 12 0 6 0 6 8.3
240 0 0 0 0 0 0 0 0 0 0 6 10.8
241 12 0 12 0 12 0 12 0 6 0 6 10.8
242 0 0 0 0 0 0 0 0 0 0 6 12.8
243 0 0 0 0 0 0 0 0 0 0 36 12.8
244 0 0 0 0 0 0 0 0 0 0 6 12.8
245 12 0 12 0 12 0 12 0 6 0 6 12.8
246 12 0 12 0 12 0 12 0 6 0 6 12.8
247 0 0 0 0 0 0 0 0 0 0 3 5.3
248 0 0 0 0 0 0 0 0 0 0 6 15.3
249 0 0 0 0 0 0 0 0 0 0 6 12.8
250 0 0 0 0 0 0 0 0 0 0 3 5.3
251 0 0 0 0 0 0 0 0 0 0 6 12.5
252 0 0 0 0 0 0 0 0 0 0 6 12.8
253 0 0 0 0 0 0 0 0 0 0 24 15.3
254 0 0 0 0 0 0 0 0 0 0 6 5.3
255 0 0 0 0 0 0 0 0 0 0 36 12.8
256 0 0 0 0 0 0 0 0 0 0 6 12.8
257 12 0 12 0 12 0 12 0 6 0 6 12.8
258 12 0 12 0 12 0 12 0 6 0 6 14.8
259 0 0 0 0 0 0 0 0 0 0 3 5.3
260 0 0 0 0 0 0 0 0 0 0 6 10.8
261 0 0 0 0 0 0 0 0 0 0 6 12.8
262 0 0 0 0 0 0 0 0 0 0 6 12.8
263 0 0 0 0 0 0 0 0 0 0 6 17.8
264 0 0 0 0 0 0 0 0 0 0 6 12.8
265 0 0 0 0 0 0 0 0 0 0 60 15.3
266 0 0 0 0 12 0 12 0 18 0 18 12.8
267 0 0 0 0 0 0 0 0 0 0 12 12.8
268 0 0 0 0 0 0 0 0 0 0 6 15.3
269 0 0 0 0 0 0 0 0 0 0 24 15.3
270 0 0 0 0 0 0 0 0 0 0 24 15.3
271 0 0 0 0 0 0 0 0 0 0 6 12.8
272 0 0 0 0 0 0 0 0 0 0 6 12.8
273 0 0 0 0 0 0 0 0 0 0 6 12.8
274 0 0 0 0 0 0 0 0 0 0 6 12.8
275 12 0 12 0 12 0 12 0 30 0 6 14.8
276 0 0 0 0 0 0 0 0 0 0 6 12.8
277 0 0 0 0 0 0 0 0 0 0 6 12.8
278 0 0 0 0 0 0 0 0 0 0 6 15.3
279 0 0 0 0 0 0 0 0 0 0 6 15.3
280 0 0 0 0 0 0 0 0 0 0 6 14.8
281 0 0 0 0 0 0 0 0 0 0 6 17.8
282 12 0 12 0 12 0 12 0 96 0 60 15.3
283 12 0 12 0 12 0 12 0 96 0 60 15.3
284 12 0 12 0 12 0 12 0 96 0 60 15.3
285 12 0 12 0 12 0 12 0 96 0 60 15.3
286 0 0 0 0 0 0 0 0 0 0 3 5.3
287 0 0 0 0 0 0 0 0 0 0 6 15.3
288 0 0 0 0 0 0 0 0 0 0 6 12.8
289 0 0 0 0 0 0 0 0 0 0 6 12.8
290 0 0 0 0 0 0 0 0 0 0 6 8.3
291 0 0 0 0 0 0 0 0 0 0 6 12.8
292 12 0 12 0 12 0 12 0 6 0 6 12.8
293 12 0 12 0 12 0 12 0 6 0 6 12.8
294 0 0 0 0 0 0 0 0 0 0 6 12.8
295 0 0 0 0 0 0 0 0 0 0 60 12.8
296 0 0 0 0 0 0 0 0 0 0 6 12.8
297 0 0 0 0 0 0 0 0 0 0 6 12.8
298 0 0 0 0 0 0 0 0 0 0 24 12.8
299 0 0 0 0 0 0 0 0 0 0 6 15.3
300 12 0 12 0 12 0 12 0 6 0 6 12.8
301 0 0 0 0 0 0 0 0 0 0 6 12.8
302 0 0 0 0 0 0 0 0 0 0 12 12.8
303 0 0 0 0 0 0 0 0 0 0 6 12.8
304 12 0 12 0 12 0 12 0 6 0 6 12.8
305 0 0 0 0 0 0 0 0 0 0 6 12.8
306 0 0 0 0 0 0 0 0 0 0 12 12.8
307 12 0 12 0 12 0 12 0 6 0 6 12.8
308 0 0 0 0 0 0 0 0 0 0 6 15.3
309 0 0 0 0 0 0 0 0 0 0 0 12.8
310 0 0 0 0 0 0 0 0 0 0 6 12.8
311 0 0 0 0 0 0 0 0 0 0 6 12.8
312 0 0 0 0 0 0 0 0 0 0 6 12.8
313 0 0 0 0 0 0 0 0 0 0 6 12.8
314 0 0 0 0 0 0 0 0 0 0 5 8.3
315 0 0 0 0 0 0 0 0 0 0 6 12.8
316 0 0 0 0 0 0 0 0 0 0 6 12.8
317 0 0 0 0 0 12 12 12 12 6 6 8.3
318 0 0 0 0 0 0 0 0 0 0 6 14.8
319 0 0 0 0 0 0 0 0 0 0 6 12.8
320 0 0 0 0 0 12 12 12 12 6 6 8.3
321 12 0 12 0 12 0 12 0 6 0 6 14.8
322 12 0 12 0 12 0 12 0 6 0 6 14.8
323 12 0 12 0 12 0 12 0 6 0 6 14.8
324 0 0 0 0 0 0 0 0 0 0 6 14.8
325 12 0 12 0 12 0 12 0 12 0 60 14.8
326 12 0 12 0 12 0 12 0 6 0 6 14.8
327 0 0 0 0 0 0 0 0 0 0 60 14.8
328 12 0 12 0 12 0 12 0 6 0 6 14.8
329 12 0 12 0 12 0 12 0 6 0 6 14.8
330 12 0 12 0 12 0 12 0 6 0 6 14.8
331 0 0 0 0 0 0 0 0 0 0 0 14.8
332 0 0 0 0 0 0 0 0 0 0 6 14.8
333 12 0 12 0 12 0 12 0 6 0 6 14.8
334 12 0 12 0 12 0 12 0 6 0 6 14.8
335 12 0 12 0 12 0 12 0 6 0 6 14.8
336 12 0 12 0 12 0 12 0 6 0 6 14.8
337 12 0 12 0 12 0 12 0 6 0 6 14.8
338 12 0 12 0 12 0 12 0 6 0 6 14.8
339 12 0 12 0 12 0 12 0 6 0 6 14.8
340 12 0 12 0 24 0 24 0 12 0 36 14.8
341 12 0 12 0 12 0 12 0 6 0 6 14.8
342 0 0 0 0 0 0 0 0 0 0 6 14.8
343 12 0 12 0 12 0 12 0 6 0 6 14.8
344 12 0 12 0 12 0 12 0 6 0 6 14.8
345 0 0 0 0 0 0 0 0 0 0 6 14.8
346 12 0 12 0 12 0 12 0 6 0 6 14.8
347 12 0 12 0 12 0 12 0 6 0 6 14.8
348 12 0 12 0 12 0 12 0 6 0 6 14.8
349 12 0 12 0 12 0 12 0 6 0 6 14.8
350 12 0 12 0 12 0 12 0 6 0 6 14.8
351 12 0 12 0 12 0 12 0 6 0 6 17.8
352 12 0 12 0 12 0 12 0 6 0 6 17.8
353 12 0 12 0 12 0 12 0 6 0 6 17.8
354 12 0 12 0 12 0 12 0 6 0 6 17.8
355 12 0 12 0 12 0 12 0 6 0 6 17.8
356 12 0 12 0 12 0 12 0 6 0 6 17.8
357 12 0 12 0 12 0 12 0 6 0 6 17.8
358 12 0 12 0 12 0 12 0 6 0 6 17.8
359 12 0 12 0 12 0 12 0 6 0 6 17.8
360 12 0 12 0 12 0 0 0 6 0 18 17.8
361 12 0 12 0 12 0 12 0 6 0 6 17.8
362 12 0 12 0 12 0 12 0 6 0 6 17.8
363 12 0 12 0 12 0 12 0 6 0 6 17.8
364 12 0 12 0 12 0 12 0 6 0 6 17.8
365 12 0 12 0 12 0 12 0 6 0 6 17.8
366 0 0 0 0 0 0 0 0 0 0 6 17.8
367 12 0 12 0 12 0 12 0 12 0 60 17.8
368 12 0 12 0 12 0 12 0 6 0 6 17.8
369 12 0 12 0 12 0 12 0 6 0 6 17.8
370 12 0 12 0 12 0 12 0 6 0 6 19.8
371 12 0 12 0 12 0 12 0 6 0 6 17.8
372 12 0 12 0 12 0 12 0 6 0 6 17.8
373 0 0 0 0 0 0 0 0 0 0 6 17.8
374 12 0 12 0 12 0 12 0 12 0 36 17.8
375 12 0 12 0 12 0 12 0 6 0 6 17.8
376 12 0 12 0 12 0 12 0 6 0 6 17.8
377 12 0 12 0 12 0 12 0 6 0 6 17.8
378 12 0 12 0 12 0 12 0 12 0 12 17.8
379 12 0 12 0 12 0 12 0 6 0 7 17.8
380 12 0 12 0 12 0 12 0 6 0 6 17.8
</TABLE>
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
LOAN GROUP 2
<TABLE>
<CAPTION>
Loan Utilities
No. Property Name(2) City County State Tenant Pays
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 2677 Larkin Street San Francisco San Francisco CA Electric, Gas
2 645 Stockton Street San Francisco San Francisco CA Electric, Gas
3 1340 -1390 Taylor Street San Francisco San Francisco CA Electric, Gas
4 1401 Jones Street San Francisco San Francisco CA Electric, Gas
5 1870 Pacific Avenue San Francisco San Francisco CA Electric, Gas
6 500 Stanyan Street San Francisco San Francisco CA Electric, Gas
7 2075 - 2079 Market Street San Francisco San Francisco CA Electric, Gas
8 1290 20th Avenue San Francisco San Francisco CA Electric, Gas
9 78 Buchanan Street San Francisco San Francisco CA None
11 235 - 241 Church Street San Francisco San Francisco CA Electric, Gas
13 252 - 258 Church Street San Francisco San Francisco CA Electric
56 Ashton Pointe Apartments Lubbock Lubbock TX Electric, Water, Sewer
83 Deep Ellum Lofts Dallas Dallas TX None
85 Sandlewood Apartments Atlanta Clayton GA Electric
107 Columbia Arms Apartments Kissimmee Osceola FL Electric, Gas
114 Spring Valley Club Apartments Panama City Bay FL Electric, Gas
120 Highland Estates Decatur DeKalb GA All
133 Wynstone Apartments Nashville Davidson TN Electric
143 St. Doris Apartments Fresno Fresno CA All except hot water
159 Village North Townhouses and Apartments Decatur Macon IL Electric, Gas
167 Belle Rive Club Apartments Jacksonville Duval FL All
199 Woodknoll Townhomes St. Louis North St. Louis MO None
238 Virginia Square Apartments Pomona Los Angeles CA Electric
239 Premier Club Apartments Union City Fulton GA None
247 West 24th Street Apartments Hialeah Dade FL Electric, Gas
263 Kilbreth Apartments Salinas Monterey CA Electric
281 Garner Avenue Apartments Salinas Monterey CA Electric
291 1525 & 1535 Central Avenue Bridgeport Fairfield CT Electric
301 1883-1887 Amsterdam Avenue New York New York NY All
304 Desert Pines Apartments Las Vegas Clark NV Electric
315 Cypress Woods Apartments Phoenix Maricopa AZ Electric, Water, Heat
351 Citadel Apartments Bryan Brazos TX None
352 1400-1410 E. Florida Long Beach Los Angeles CA Electric, Gas
366 Sannella New York New York NY None
379 59-61 Carlton Street Apartments Portland Cumberland ME None
Total/Weighted Average:
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Rem. Term to Maturity Studios 1 Bedrooms
Loan Cut-Off Maturity Date or ARD Wtd. Avg. Wtd. Avg.
No. Date Balance or ARD(5) (mos) Elevator # Units Rent/Month # Units Rent/Month
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 6,386,567 5/1/08 117 Yes 1 $ 441 24 $2,267
2 $ 5,674,747 5/1/08 117 Yes 17 $ 465 51 $1,048
3 $ 5,054,295 5/1/08 117 No 1 $1,140 23 $1,376
4 $ 4,695,700 5/1/08 117 Yes 10 $ 842 25 $1,309
5 $ 3,416,813 5/1/08 117 Yes 11 $1,042 19 $1,591
6 $ 3,281,099 5/1/08 117 Yes 16 $1,017 16 $1,162
7 $ 3,013,074 5/1/08 117 No 32 $ 654 N/A N/A
8 $ 2,953,787 5/1/08 117 Yes 26 $ 822 12 $ 890
9 $ 2,714,291 5/1/08 117 Yes 6 $ 841 30 $1,061
11 $ 1,428,994 5/1/08 117 No N/A N/A 8 $ 925
13 $ 753,794 5/1/08 117 No N/A N/A N/A N/A
56 $ 10,965,690 1/1/08 113 No N/A N/A 104 $ 552
83 $ 7,476,631 4/1/08 116 Yes 126 $1,109 N/A N/A
85 $ 7,305,576 12/1/07 112 No N/A N/A 81 $ 538
107 $ 6,380,363 4/1/08 116 No N/A N/A 36 $ 618
114 $ 5,469,441 1/1/08 113 No N/A N/A 40 $ 501
120 $ 5,171,215 1/1/08 113 No N/A N/A 28 $ 522
133 $ 4,770,988 12/1/07 112 No N/A N/A 72 $ 410
143 $ 4,350,592 10/1/07 110 No 44 $ 301 76 $ 338
159 $ 3,738,315 4/1/08 116 No N/A N/A N/A N/A
167 $ 3,389,525 4/1/08 116 No N/A N/A 64 N/A
199 $ 2,689,716 3/1/08 115 No N/A N/A N/A N/A
238 $ 1,990,318 4/1/08 116 No N/A N/A N/A N/A
239 $ 1,989,134 1/1/08 113 No N/A N/A 88 N/A
247 $ 1,897,298 6/1/08 118 No N/A N/A N/A N/A
263 $ 296,315 4/1/08 116 No N/A N/A 1 $ 500
281 $ 481,215 5/1/08 117 No N/A N/A N/A N/A
291 $ 1,294,037 4/1/08 116 Yes 5 $ 350 75 $ 475
301 $ 1,193,390 3/1/08 115 No N/A N/A 50 N/A
304 $ 1,137,537 1/1/08 113 No N/A N/A 70 $ 395
315 $ 1,042,192 2/1/08 114 No N/A N/A N/A N/A
351 $ 483,745 5/1/08 117 No N/A N/A 19 $ 375
352 $ 452,753 11/1/07 111 No 2 $ 395 12 $ 475
366 $ 283,921 4/1/08 116 No N/A N/A 2 $ 600
379 $ 134,312 2/1/08 114 No N/A N/A 6 $ 513
$113,757,381 115
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------
2 Bedrooms 3 Bedrooms 4 Bedrooms
Loan Wtd. Avg. Wtd. Avg. Wtd. Avg.
No. # Units Rent/Month # Units Rent/Month # Units Rent/Month
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 8 $2,540 N/A N/A N/A N/A
2 1 N/A 1 $5,726 N/A N/A
3 9 $2,306 2 $2,265 N/A N/A
4 N/A N/A 1 $1,800 N/A N/A
5 N/A N/A N/A N/A N/A N/A
6 4 $2,073 N/A N/A N/A N/A
7 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
9 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
13 2 $1,250 1 $1,975 2 $1,695
56 112 $768 24 $965 N/A N/A
83 N/A N/A N/A N/A N/A N/A
85 119 $638 N/A N/A N/A N/A
107 76 $713 24 $814 N/A N/A
114 112 $593 8 $718 N/A N/A
120 63 $664 46 $702 14 $803
133 122 $531 10 $685 N/A N/A
143 179 $389 1 $450 N/A N/A
159 45 $593 51 $580 N/A N/A
167 40 N/A N/A N/A N/A N/A
199 110 $425 40 $525 N/A N/A
238 22 $650 30 $772 N/A N/A
239 N/A N/A N/A N/A N/A N/A
247 44 $603 8 $698 N/A N/A
263 7 $600 N/A N/A N/A N/A
281 14 $553 N/A N/A N/A N/A
291 6 $475 N/A N/A N/A N/A
301 10 N/A N/A N/A N/A N/A
304 N/A N/A N/A N/A N/A N/A
315 56 $529 N/A N/A N/A N/A
351 14 $450 N/A N/A N/A N/A
352 6 $575 N/A N/A N/A N/A
366 17 $700 5 $775 N/A N/A
379 N/A N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
APPENDIX II
ADDITIONAL INFORMATION REGARDING THE MULTIFAMILY MORTGAGE LOANS
LOAN GROUP 3
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
Loan Utilities Cut-Off
No. Property Name(2) City County State Tenant Pays Date Balance
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
58 River Oaks Apartments Lake Forest Orange CA Electric, Cable T.V $9,979,120
82 Highland Walk Apartments Norcross Gwinnett GA Electric, Gas $7,482,950
86 Emerald Pointe Apartments Rohnert Park Sonoma CA Electric, Gas, Cable T.V. $7,302,992
95 West Garden Apartments Hialeah Dade FL Electric, Gas $6,814,960
104 Cranbrook III Davis Yolo CA Electric, Gas $6,545,028
105 The Palms of Apalachee Apartments Tallahassee Leon FL Electric, Water $6,484,777
108 Palms of Magnolia Tallahassee Leon FL Electric, Water $6,365,425
122 Heritage House Apartments Davis Yolo CA Electric, Gas $5,102,890
130 Arnaz Arms Apartments Los Angeles Los Angeles CA Electric, Gas $4,944,632
132 Phoenix Court Kent King WA Electric, Gas $4,785,965
141 Cambridge Park Apartments Red Bank Hamilton TN All $4,382,532
149 Golden Pointe Apartments Orlando Orange FL Electric $3,981,336
163 Westwood Apartments Seattle King WA Electric $3,539,494
192 Pinellas Pointe Apartments St. Petersburg Pinellas FL Electric $2,829,193
203 Hartland Apartments Puyallup Pierce WA None $2,492,218
242 Lakeside Meadows Apartments Lakeside San Diego CA Electric $1,979,260
257 Lake Margaret Village Apartments Orlando Orange FL Electric $995,578
258 Townhouse Apartments Ocala Marion FL None $768,586
259 Whispering Pines Apartments Brunswick Glynn GA Electric, Gas $1,697,565
262 Atlantic Arms Apartments Salinas Monterey CA Electric $1,386,123
280 Terrace View (Chateau) Apartments Salinas Monterey CA None $994,153
299 Summit Terrace Apartments Bowling Green Wood OH Electric $1,195,722
328 Roselea Villas Sanford Seminole FL Electric, Water, Gas $847,696
332 Peppertree Apartments Waco McLennan TX None $817,309
339 Edgewood Court Apartments Bryan Brazos TX Electric $678,397
353 Vance St. Apartment Building Lakewood Jefferson CO Electric $448,862
364 Mosstree Apartments North Charleston Charleston SC All $298,151
365 Marshall/Catamount Apartments Pittsfield Merrimack NH None $283,950
372 619-623 W. Brookside Colorado Springs El Paso CO Electric, Gas $199,335
Total/Weighted Average: $95,624,197
</TABLE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
Rem. Term to Maturity Studios 1 Bedrooms
Maturity Date Wtd.t Avg. Wtd. Avg. Wtd. Avg.
No. or ARD(5) (mos) Elevator # Units Rent/Month # Units Rent/Month
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
58 5/1/08 117 No N/A N/A 104 $761
82 5/1/08 117 No N/A N/A 34 $535
86 1/1/06 89 No N/A N/A 16 $762
95 6/1/08 118 No N/A N/A 32 $514
104 11/1/05 87 No N/A N/A 134 $596
105 1/1/08 113 No N/A N/A 171 $454
108 1/1/08 113 No N/A N/A 72 $431
122 5/1/06 93 No N/A N/A 83 $573
130 2/1/06 90 Yes N/A N/A 49 $952
132 4/1/08 116 No 36 $397 52 $442
141 3/1/08 115 No N/A N/A 74 $342
149 2/1/05 78 No N/A N/A 60 $490
163 4/1/08 116 Yes N/A N/A 24 $558
192 2/1/08 114 No N/A N/A 76 $375
203 4/1/08 116 No N/A N/A N/A N/A
242 3/1/08 115 No N/A N/A 40 $495
257 3/1/08 115 No N/A N/A 26 $456
258 3/1/08 115 No N/A N/A 24 $320
259 6/1/08 118 No N/A N/A 20 $399
262 4/1/08 116 No N/A N/A 25 $475
280 5/1/08 117 No N/A N/A 16 $498
299 5/1/08 117 No N/A N/A 64 $415
328 5/1/08 117 No N/A N/A N/A N/A
332 5/1/08 117 No N/A N/A 56 $335
339 5/1/08 117 No N/A N/A 2 $395
353 5/1/08 117 No N/A N/A 1 $566
364 2/1/08 114 No N/A N/A 27 $268
365 3/1/08 115 No N/A N/A 7 $310
372 4/1/08 116 No N/A N/A 10 $350
108
</TABLE>
<PAGE>
[TABLE RESTUBBED FROM ABOVE]
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------
2 Bedrooms 3 Bedrooms 4 Bedrooms
Wtd.Avg. Wtd. Avg. Wtd. Avg.
No. # Units Rent/Month # Units Rent/Month # Units Rent/Month
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
58 76 $917 N/A N/A N/A N/A
82 146 $635 28 $736 N/A N/A
86 92 $880 28 $1,059 N/A N/A
95 125 $620 32 $721 N/A N/A
104 82 $737 N/A N/A N/A N/A
105 96 $570 10 $685 N/A N/A
108 104 $532 52 $690 N/A N/A
122 78 $720 N/A N/A N/A N/A
130 46 $1,306 N/A N/A N/A N/A
132 116 $516 N/A N/A N/A N/A
141 136 $445 16 $428 N/A N/A
149 48 $590 12 $710 N/A N/A
163 39 $813 21 $887 N/A N/A
192 60 $552 N/A N/A N/A N/A
203 12 $760 36 $827 N/A N/A
242 24 $600 N/A N/A N/A N/A
257 14 $532 N/A N/A N/A N/A
258 24 $365 N/A N/A N/A N/A
259 72 $446 16 $562 N/A N/A
262 14 $575 N/A N/A N/A N/A
280 19 $573 1 N/A N/A N/A
299 32 $495 N/A N/A N/A N/A
328 38 $413 N/A N/A N/A N/A
332 24 $405 N/A N/A N/A N/A
339 32 $450 2 $500 N/A N/A
353 15 $518 1 $1,160 N/A N/A
364 N/A N/A N/A N/A N/A N/A
365 7 $610 5 $803 N/A N/A
372 N/A N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
Footnotes to Appendix II
1 "CT", "MS" and "RMF" denote ContiTrade Services L.L.C., Morgan Stanley
Mortgage Capital Inc. and Red Mountain Funding, L.L.C., respectively, as
Sellers.
2 Sets of Mortgage Loans that have identical alphabetical coding designate
multiple loans that are cross-collateralized and cross-defaulted, while
Mortgage Loans that have identical Roman Numeral coding indicate multiple
properties securing one note. For the purposes of this Prospectus
Supplement, the latter are treated as if they were multiple loans that are
cross-collateralized and cross-defaulted, with a portion of the loan
amount allocated to each property. Loan Nos. 99-103 include two sets of
multiple properties each securing one note, which two sets are further
cross-collateralized and cross-defaulted with each other. The five loans
are disclosed as one set of five cross-collateralized loans.
The following Mortgage Loans have release provisions within the Mortgage
Loan documents which permit the borrower to obtain release of certain
parts of the mortgage collateral in the case of certain events:
Loan Nos. 1-13, the Lembi Portfolio, permit release of one or more of the
Mortgaged Properties from the Mortgage Loan collateral upon payment of
125% of the related loan amount of the Mortgaged Property, and provided a
DSCR, the greater of (a) the DSCR of all properties immediately prior to
the release and (b) 1.25x for the remaining properties exist.
Loan Nos. 27-32, the WISCO Portfolio, permit release of one or more of the
Mortgaged Properties from the Mortgage Loan collateral upon payment of
125% of the related loan amount of the Mortgaged Property, and provided a
DSCR of at least 1.77x exists.
Loan No. 33, the Elliott Bay Office Building, permits release of an area
comprising 75 parking spaces provided (a) LTV tests are met and (b) the
borrower provides a substitute piece of land as security for the loan.
Loan Nos. 96, 97, & 98 Foster-Richardson Rest Home, Pinnacle Rest Home,
and Mount Pleasant Rest Home, permit release of one or more of the
Mortgaged Properties from the Mortgage Loan collateral upon payment of
125% of the related loan amount of the Mortgaged Property, and provided a
DSCR of at least 1.40x exists.
Loan Nos. 99 & 100, 1650 Sherman Avenue and 8290 National Highway, permit
release of one of the Mortgaged Properties from the Mortgage collateral
upon payment of 125% of the related loan amount of the Mortgaged Property,
and provided a DSCR of at least 1.25x exists.
Loan Nos. 101, 102, & 103, 7101 Westfield Avenue, 1601 Hylton Road, and
1625 Hylton Road, permit release of one or more of the Mortgaged
Properties from the Mortgage Loan collateral upon payment of 125% of the
related loan amount, and provided a DSCR of at least 1.25x exists.
Loan Nos. 128 & 129, Loop Inn and Gallery Motel, permit release of one of
the Mortgaged Properties from the Mortgage Loan collateral upon payment of
125% of the related loan amount of the Mortgaged Property, and provided a
DSCR of at least 1.40x exists.
Loan No. 154, Days Inn Tacoma, permits release of a restaurant parcel
without payment of any release price or further requirements. The
restaurant parcel was not underwritten at the related Mortgage Loan
origination.
Loan Nos. 157 & 158, 349 Main Street and 300/310 Main Street, permit
release of one of the Mortgaged Properties from the Mortgage Loan
collateral upon payment of 125% of the related loan amount of the
Mortgaged Property, and provided a LTV of at least 74.5% exists.
Loan Nos. 213 & 214, North Kitsap Self Storage and Poulsbo Business Park,
permit release of one of the Mortgaged Properties from the Mortgage Loan
collateral upon payment of 110% of the related loan amount, and provided a
DSCR of at least 1.35x exists.
Loan Nos. 278 & 279, Jack in the Box - Galena Park and Jack in the Box -
Terrell, permit release of one of the Mortgaged Properties from the
Mortgage Loan collateral upon payment of 125% of the related loan amount,
and provided (a) a DSCR of at least 1.20x, and (b) a LTV no greater than
80% exist and provided the remaining property has a minimum occupancy
level of 90% of the total leaseable square footage.
3 Certain ratios including Cut-Off Date Balance/Unit or SF, DSCR, LTV and
Balloon LTV are calculated on a combined basis for Mortgage Loans that are
secured by multiple properties or are cross-collateralized and
cross-defaulted. For the purposes of the statistical information set forth
in this Prospectus Supplement, as to such multiple property loans, a
portion of the aggregate Cut-Off Date Balance has been allocated to each
property, generally based on relative appraised value or Underwritable
Cash Flow. For Loan Nos. 1-13, the Lembi Portfolio, the current balance
per square foot is calculated based on the total square footage of the
portfolio, including multifamily properties. The current balance per unit
is based on the total number of multifamily units in the portfolio.
<PAGE>
4 Loan No. 275, Silver Creek Manor, is an adjustable rate Mortgage Loan,
with monthly payments of interest recomputed each month of the Mortgage
Loan's term based on 265 basis points above the then prevailing one-month
LIBOR, the then remaining amortization period and a payment of principal
that is set forth in the mortgage note. The applicable Mortgage Rate shall
not during any period of the Mortgage Loan's term be adjusted below
8.150%, or above 11.150%. The indicated principal and interest payment,
and resulting DSCR, are based on a Mortgage Rate of 8.310%.
5 "ARD" indicates the Anticipated Repayment Date for hyper-amortizing loans.
6 The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related mortgage note.
Due to the actual / 360 interest calculation methodology applied to most
Mortgage Loans, the actual amortization to a zero balance will be longer
than the indicated Amortization Term.
7 The following Mortgage Loans have interest only periods at the beginning
of their respective terms: Loan No. 33, Elliott Bay Office Building
requires interest only payments for the first 12 months. The monthly
payment shown is the principal and interest payment that will be due
beginning on July 1, 1999, when the Mortgage Loan begins to amortize over
a 360 month schedule. Loan No. 51, Preston Place Apartments, requires
interest only payments for the first 12 months. The monthly payment shown
is the principal and interest payment that will be due beginning on July
1, 1999, when the Mortgage Loan begins to amortize over a 229 month
schedule. Loan No. 212, 75 Montgomery Street, also requires interest only
payments for the first 12 months. The monthly payment shown is the
principal and interest payment that will be due beginning on July 1, 1999,
when the Mortgage Loan begins to amortize over a 288 month schedule.
8 Year indicated is the later of the property's construction date or date of
renovation.
9 Loan Nos. 14 - 21, the Health Care Capital Portfolio, encumber fee
interests, or in the case of Loan Nos. 20 and 21, West Mesa Health Care
Center and Pickett County Nursing Home, leasehold interests, that are in
turn leased, or sub-leased, to Sun Healthcare Group, Inc., or a related
entity. Underwritten DSCR is based on Underwritable Cash Flow from
property operations as health care centers. Based on lease and sub-lease
payments only, combined DSCR is 1.43x.
10 The following Mortgage Loans have secured secondary financing in place, or
permit secured secondary financing in the future, with third-party
lenders, subject to certain provisions and such amounts are not included
in the LTV calculation.
Loan Nos. 56 Ashton Pointe Apartments, 82 Highland Walk Apartments, 85
Sandlewood Apartments, 105 The Palms of Apalachee Apartments, 107 Columbia
Arms Apartments, 108 Palms of Magnolia, 114 Spring Valley Club Apartments,
120 Highland Estates, 133 Wynstone Apartments, 149 Golden Pointe
Apartments, 155 Marriott Fairfield Inn, 167 Belle River Club Apartments,
185 Spalding Plaza Retail and Office Center, 239 Premier Club Apartments,
and 290 Rite Aid Drug Store - Griffin, GA, permit future, secured
third-party debt subject to minimum DSCR and maximum LTV ratios, provided
that the proceeds of the secondary financing will be used solely and
exclusively to enhance or maintain the value of the Mortgaged Property, as
determined by the lender in its discretion, and the holder of the
secondary financing executes and delivers to the lender a subordination
and standstill agreement in form and substance acceptable to the lender.
Loan No. 83, Deep Ellum Lofts, is senior to a secured lien held by the
City of Dallas, securing a $3,000,000 promisory note which matures in
2023. The subordinate financing is junior in right of payment, but the
subordinate lender has not entered into a standstill agreement with
respect to exercise of its remedies. Upon event of default under the
subordinate loan, the subordinate lender must only provide notice and an
opportunity to the holder of the Mortgage Loan to cure such default.
Loan No. 136 Knollwood Center, permits financing of the related Mortgaged
Property's healthcare account receivables.
Loan Nos. 168, 169, and 170, Clean Machine Car Wash - Kingston Pike, Clean
Machine Car Wash - Merchant, and Clean Machine Car Wash - Maynardville are
senior to a secured lien of $1,465,000, evidenced by a promissory note
executed by the parent of the borrower. ContiTrade is the holder of the
subordinate note. The maturity date of the subordinate financing is the
earlier of June 1, 2001, or the date on which equity in the borrower or
any affiliate of the borrower is sold in a public or private offering. The
subordinate financing documentation contains subordination and standstill
provisions.
Loan No. 198 Office Max - Bently Mall, is senior to a secured blanket
mortgage on the related shopping mall. The subordinate lender has executed
a subordination and non-disturbance agreement.
Loan No. 206, Super 8 - Madison, WI, permits future, secured third-party
subordinate debt subject to a minimum DSCR of 1.45x and a maximum LTV
ratio of 70%, provided that proceeds are used only for property related
capital expenditures and property related operating expenses. In addition,
the term of any subordinate financing must extend beyond the Maturity Date
of the subject Mortgage Loan.
<PAGE>
Loan Nos. 208, and 209, Executive Car Wash - Roswell, and Executive Car
Wash - Johnson Ferry, are senior to a secured lien of $681,600, evidenced
by a promissory note executed by the parent of the borrower. ContiTrade is
the holder of the subordinate note. The maturity date of the subordinate
financing is the earlier of April 1, 2001, or the date on which equity in
the borrower or any affiliate of the borrower is sold in a public or
private offering. The subordinate financing documentation contains
subordination and standstill provisions.
Loan Nos. 241 Watson Centex-San Antonio, 245 Parkway Plaza, 246 Lantern
Plaza, 288 Westridge Shopping Center, 293 Monarch Bank Building, 304
Desert Pine Apartments, 305 Watson Centex-Houston, 307 30100 Crown Valley
Parkway, 326 555 Broadway, 330 1610 Broadway, 334 1626 Logan Street, 335
TX Human Serv. & Work Force Comm. Off., 337 2906 North State Street
Building, 343 2059 E. Sahara Avenue, 344 560 Virginia Way, 347 512 Main
Street, 349 1920 Ledbetter Drive, 350 2727-2745 Gundry Avenue, 352
1400-1410 E. Florida, 354 3200 Race Street, 356 4201 Dimmitt Road, 357
10660 Silicaon Avenue, 358 5401 Cherry Avenue, 359 110 Adams Avenue, 360
Miss Meme's Kreative Kids Bldg., 361 La Canasta Furniture & Appliance
Store, 363 503 W. 26th Street, and 368 6452 Nine Mile Bridge Road, permit
secured, secondary financing within the lender's sole discretion (which
includes the ability to deny consent to such additional financing at
lender's sole discretion).
Loan No. 302, Dave's Car Wash, is senior to a secured lien of $455,000,
evidenced by a promissory note executed by the parent of the borrower.
ContiTrade is the holder of the subordinate note. The maturity date of the
subordinate financing is the earlier of April 1, 2001, or the date on
which equity in the borrower or any affiliate of the borrower is sold in a
public or private offering. The subordinate financing documentation
contains subordination and standstill provisions.
Loan No. 306, Blue Heron Car Wash, is senior to a secured lien of
$252,525, evidenced by a promissory note executed by the parent of the
borrower. ContiTrade is the holder of the subordinate note. The maturity
date of the subordinate financing is the earlier of February 1, 2001, or
the date on which equity in the borrower or any affiliate of the borrower
is sold in a public or private offering. The subordinate financing
documentation contains subordination and standstill provisions.
Loan Nos. 314, 317, and 320, Hollywood Video Store - High Point, NC,
Hollywood Video Store - Virginia Beach, and Hollywood Video Store -
Pikesville, MD, permit future, secured third-party debt subject to certain
DSCR and LTV ratios, provided that the holder of the secondary financing
executes and delivers to the senior lender a subordination and standstill
agreement in form and substance acceptable to the senior lender.
Loan No. 321, Roof Garden Mobile Home Court, is senior to a secured lien
of $150,000. The subordinate lender has entered into a subordination and
standstill agreement with the senior lender.
Loan No. 374, Hillside Mobile Home Park, is senior to a secured lien
evidenced by a $30,900 promissory note. The subordinate lender has entered
into a subordination and standstill agreement with the senior lender.
11 In general for each property, "Percent Leased" was determined based on a
rent roll provided by the borrower. In certain cases, "Percent Leased" was
determined based on an appraisal, executed lease, operating statement or
occupancy report. "Percent Leased as of Date" indicates the date as of
which "Percent Leased" was determined based on such information. For
hospitality properties, the data shown is the average daily occupancy
rate, generally for 1997 or the preceding twelve month period, or partial
year occupancy if less than 12 months was available on such date. Health
Care Properties Percent Leased was determined by the most recent census.
12 "Largest Tenant" refers to the tenant that represents the greatest
percentage, equal to, or in excess of 20%, of the total square footage at
the subject property.
13 "Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or due date to the Cut-Off
Date.
14 Indicates prepayment provisions from the first Due Date as stated in the
Mortgage Loan. "YM" represents yield maintenance and "YM1" and represents
the greater of yield maintenance or one percent of the outstanding
principal balance at such time, respectively. The stated percentages
represent Percentage Premiums. "Open" represents a period during which
Principal Prepayments are permitted without payment of a Prepayment
Premium. For each Mortgage Loan, the number set forth under a category of
prepayment provision represents the number of months in the original term
to maturity for which such provision applies.
Loan No. 239, Premier Club Apartments, has a prepayment provision which
requires the lesser of Yield Maintenance or the percentages indicated.
In Loan No. 360, Miss Meme's Kreative Kids, the open period is not
contiguous. 12 months of the open period occur between months 97th and
108th of the loan and six months of the open period occur from the 115th
through the 120th month of the loan term.
<PAGE>
The following Mortgage Loans have letters of credit or reserves that may
be applied to the outstanding principal balance of the related Mortgage
Loan, in the case of certain events:
Loan Nos. 44 - 50, Westbrook, Green Acres, Compton Hills, Skymeadow,
Eastgate, Lake Remington, and Shady Terrace includes a $270,100 escrow for
a planned Westbrook Mobile Home Park expansion that is scheduled for
completion by May 20, 1999, or the remaining escrow balance will be
applied to the outstanding principal balance without prepayment
consideration.
Loan No. 51, Preston Place Apartments, has a $2,105,122 letter of credit,
that may be applied, at the lender's option, to the outstanding principal
balance with a prepayment penalty equal to 5% of the amount so prepaid, if
an annual effective rental revenue of $2,903,295, is not achieved for a
continuous three month period by 11/27/99. The letter of credit will be
reduced once per calender quarter in an amount equal to $6.06 for each
$1.00 in effective rental income in excess of $2,556,384, based on the
lender's review of the borrower's certified rent rolls and operating
statements. The letter of credit also serves as additional security for
the Mortgage Loan.
Loan No. 82, Highland Walk Apartments, has a $250,000 escrow that may be
drawn upon by the borrower upon achievement of certain debt service
coverage ratios, LTV ratios, and net operating income levels. The escrow
will be used to partially prepay the Mortgage Loan to the extent that the
Mortgaged Property does not satisfy by October 7, 1998. No prepayment
penalty will be due on any amount so prepaid. If the escrow is used to
partially prepay the Mortgage Loan, the Mortgage Loan will be re-amortized
based on the then outstanding principal balance and the number of months
remaining in the assumed loan term (assuming loan will repay on the ARD).
Loan No. 121, 19 Crosby, has a $500,000 letter of credit, that may, at the
lender's option, be applied to the outstanding principal balance on or
after 5/27/2000, if the underwritten DSCR for any twelve month period
between the Note date and 5/27/2000, does not reach 1.20x. Any such
application of funds will be subject to the applicable prepayment penalty.
15 The "Administrative Cost Rate" indicated for each Mortgage Loan will be
calculated based on the same interest calculation methodology (i.e.,
actual/360) applicable to such Mortgage Loan.
* Mortgage Loans that are marked with an asterisk (*) were originated
according to a Conti Small Loan program. At origination, such Mortgage
Loans may have been valued by non-MAI designated appraisers, may have
received limited environmental assessments relative to a standard Phase I
investigation and may not have been inspected or evaluated by an engineer,
unless the related appraiser suggested otherwise.
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
LOAN NOS. 1 - 13 LEMBI PORTFOLIO LOAN AND PROPERTIES
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $42,833,908 Property Types: Multifamily/Retail
Loan Type: Principal and Interest; Fixed; Location: Various
Hyper-amortizing; Balloon Year Built/Renovated: Various
Origination Date: 4/7/1998 Units/Square Feet: Various
Anticipated Repayment Date
(ARD): 5/1/2008 Appraised Value: $56,370,000
Maturity Date: 5/1/2028 Current LTV: 76.0%
Mortgage Rate: 6.970% Balance at ARD LTV: 66.4%
Annual Debt Service: $3,416,522 Percent Leased: Various
DSCR: 1.31x Percent Leased as of Date: Various
Underwritten Cash Flow $4,492,190
Balance at ARD: $37,417,550
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Lembi Portfolio Loan (the "Lembi Portfolio Loan"), represents a
single note for $42,924,000 secured by first mortgages on thirteen multi-family
and retail properties, located in California (collectively, the "Lembi
Properties"), and more particularly described below under the heading "The
Properties". The Lembi Portfolio Loan was originated by Morgan Stanley Mortgage
Capital Inc. on April 7, 1998.
THE BORROWER. The borrowers are LSL Property Holdings LLC, a
California limited liability company, FEL Properties, LLC, a California limited
liability company, and FEL-WRL Properties LLC, a California limited liability
company (collectively, the "Lembi Borrowers"). The Lembi Borrowers are
controlled by three principals: Frank Lembi, Walter Lembi and Billie Salevouris
who each own Skyline Realty, Inc., which is the property manager for the Lembi
Properties. The Lembi Borrowers are special purpose entities.
SECURITY. The Lembi Portfolio Loan is secured by thirteen Deeds of
Trust, thirteen Assignments of Rents and Leases, UCC Financing Statements and
certain additional security documents. The mortgages which secure the Lembi
Portfolio Loan are first liens on the fee interests in the Lembi Properties.
The Lembi Portfolio Loan is non-recourse, subject to certain limited
exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 6.970%. The Lembi
Portfolio Loan requires monthly payments of principal and interest of
$284,710.13 until its Anticipated Repayment Date of May 1, 2008. If the Lembi
Portfolio Loan is not repaid by May 1, 2008, a lock box, pursuant to a Cash
Management Agreement, will be established to collect rents and the interest
rate will increase by the greater of (a) the initial interest rate plus two
percentage points (2%), or (b) US Treasury rate plus two percentage points
(2.00%). All excess cash flow will be used to make payment on all outstanding
amounts under the Lembi Loan (including interest, fees, and property related
expenses). The Lembi Portfolio Loan accrues interest computed on the basis of
the actual days elapsed per month in a 360-day year.
PREPAYMENT. Prior to September 1, 2000, the Lembi Borrowers may not
prepay the Lembi Portfolio Loan (the "Lembi Lock-out Period"). Upon the
expiration of the Lembi Lock-out Period, the Lembi Borrowers may defease the
Lembi Portfolio Loan. However, the Lembi Borrowers may prepay the Lembi
Portfolio Loan in full without payment of a penalty on or after February 1,
2008.
III-1
<PAGE>
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Lembi Portfolio
Loan becomes immediately due and payable upon the transfer of the Lembi
Properties or any ownership interest in the Lembi Borrowers, except in
connection with the rights of transfer described below. The Lembi Borrowers
have the right to transfer the Lembi Properties if there is any sale or
transfer, a) of 12.5% or more of direct or indirect beneficial interest in the
Lembi Borrower, b) in a person or a group of affiliates or family members, as
applicable, acquiring more than 49% direct or indirect interest in the Lembi
Borrower or its "SPC Members", or c) of any direct interest in the Lembi
Borrowers held by the "SPC Member" of the Lembi Borrowers, provided the Lembi
Borrowers deliver a non-consolidation opinion addressed to the Lender and the
Rating Agencies and an officer's certificate certifying that such sale is not
an event of default under the applicable mortgage.
ESCROW/RESERVES. There is a tax and insurance reserve which requires
deposits in an amount sufficient to pay taxes and insurance when due. The Lembi
Borrowers were required to make an initial deposit of $139,028 to the capital
expenditure reserve which is funded monthly in the aggregate amount of
$8,590.25 until a $200,000 escrow balance is attained.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTIES
The Lembi Portfolio consists of the following thirteen Multifamily and Retail
Properties.
2677 LARKIN STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1923/1996 Square Feet: 37,750
Units: 33 Percent Leased: 97.0%
Appraised Value: $8,000,000 Percent Leased as of Date: 2/24/1998
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Larkin Property consists of two concrete and steel, eight story
buildings comprising a 33 unit apartment complex, located in San Francisco, CA.
As of February 24, 1998, the Larkin Property was 97.0% leased.
The Larkin Property was built in 1923 and renovated in 1996. The 33
units comprising the Larkin Property average 1,144 square feet and consist of
the following unit mix: 1 studio apartment unit, 24 one bedroom units, and 8
two bedroom units. The buildings are of steel frame construction with concrete
exteriors. The Larkin Property falls within the rent control ordinance of San
Francisco which covers most properties constructed prior to 1979.
645 STOCKTON STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1928/1997 Square Feet: 58,129
Units: 70 Percent Leased: 98.6%
Appraised Value: $7,400,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Stockton Property consists of one reinforced concrete, eleven
story, 70 unit apartment building, located in San Francisco, CA. As of February
24, 1998, the Stockton Property was 98.6% leased.
The Stockton Property was built in 1928 and renovated in 1997. The 70
units comprising the Stockton Property average 830 square feet and consist of
the following unit mix: 17 studio apartment units, 51 one bedroom units, 1 two
bedroom unit and 1 three bedroom unit. The building is of reinforced concrete
construction with stucco exteriors. The Stockton Property falls within the rent
control ordinance of San Francisco which covers most properties constructed
prior to 1979.
III-2
<PAGE>
1340 - 1390 TAYLOR STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1908/1987 Square Feet: 35,725
Units: 35 Percent Leased: 94.3%
Appraised Value: $6,560,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Taylor Property consists of two wood, three story buildings, a 35
unit apartment complex, located in San Francisco, CA. As of February 24, 1998,
the Taylor Property was 94.3% leased.
The Taylor Property was built in 1908 and renovated in 1987. The 35
units comprising the Taylor Property average 1,021 square feet and consist of
the following unit mix: 1 studio apartment unit, 23 one bedroom units, 9 two
bedroom units and 2 three bedroom units. The buildings are of wood construction
with stucco exteriors. The Taylor Property falls within the rent control
ordinance of San Francisco which covers most properties constructed prior to
1979.
1401 JONES STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1910/1997 Square Feet: 30,650
Units: 36 Percent Leased: 97.2%
Appraised Value: $7,200,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Jones Street Property consists of two wood, four story buildings,
a 36 unit apartment complex, located in San Francisco, CA. As of February 24,
1998, the Jones Street Property was 97.2% leased.
The Jones Street Property was built in 1910 and renovated in 1997. The
36 units comprising the Jones Street Property average 851 square feet and
consist of the following unit mix: 10 studio apartment units, 25 one bedroom
units and 1 three bedroom unit. The buildings are of wood construction with
stucco exteriors. The Jones Street Property falls within the rent control
ordinance of San Francisco which covers most properties constructed prior to
1979.
1870 PACIFIC AVENUE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1937/1997 Square Feet: 23,595
Units: 30 Percent Leased: 100.0%
Appraised Value: $4,280,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Pacific Property consists of one steel frame, seven story, 30 unit
apartment building, located in San Francisco, CA. As of February 24, 1998, the
Pacific Property was 100.0% leased.
The Pacific Property was built in 1937 and renovated in 1997. The 30
units comprising the Pacific Property average 787 square feet and consist of
the following unit mix: 11 studio apartment units, and 19 one bedroom units.
The building is of steel frame construction with stucco exteriors. The Pacific
Property falls within the rent control ordinance of San Francisco which covers
most properties constructed prior to 1979.
III-3
<PAGE>
500 STANYAN STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1928/1995 Square Feet: 31,500
Units: 36 Percent Leased: 100.0%
Appraised Value: $4,110,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Stanyan Property consists of one masonry, six story, 36 unit
apartment building, located in San Francisco, CA. As of February 24, 1998, the
Stanyan Property was 100.0% leased.
The Stanyan Property was built in 1928 and renovated in 1995. The 36
units comprising the Stanyan Property average 875 square feet and consist of
the following unit mix: 16 studio apartment units, 16 one bedroom units and 4
two bedroom units. The building is of masonry construction with concrete
exteriors. The Stanyan Property falls within the rent control ordinance of San
Francisco which covers most properties constructed prior to 1979.
2075 - 2079 MARKET STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1914/1996 Square Feet: 26,100
Units: 32 Percent Leased: 100.0%
Appraised Value: $4,270,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The 2075 - 2079 Market Street Property consists of one wood frame,
three story, 32 unit apartment and retail building, located in San Francisco,
CA. As of February 24, 1998, the 2075 - 2079 Market Street Property was 100.0%
leased.
The 2075 - 2079 Market Street Property was built in 1914 and renovated
in 1996. The 32 units comprising the 2075 - 2079 Market Street Property consist
of 32 studio apartment units and five retail spaces on the first floor totaling
11,700 square feet. The building is of wood frame construction with wood
exteriors. The 2075 - 2079 Market Street Property falls within the rent control
ordinance of San Francisco which covers most properties constructed prior to
1979.
1290 20TH AVENUE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1928/1997 Square Feet: 39,228
Units: 38 Percent Leased: 100.0%
Appraised Value: $3,700,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The 20th Avenue Property consists of one concrete, seven story, 38
unit apartment and retail building, located in San Francisco, CA. As of
February 24, 1998, the 20th Avenue Property was 100.0% leased.
The 20th Avenue Property was built in 1928 and renovated in 1997. The
38 units comprising the 20th Avenue Property average 1,006 square feet and
consist of the following unit mix: 26 studio apartment units, 12 one bedroom
units and one retail space on the first floor totaling 3,345 square feet. The
building is of concrete construction with stucco exteriors. The 20th Avenue
Property falls within the rent control ordinance of San Francisco which covers
most properties constructed prior to 1979.
III-4
<PAGE>
78 BUCHANAN STREEt
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1929/1996 Square Feet: 36,432
Units: 36 Percent Leased: 100.0%
Appraised Value: $3,400,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Buchanan Property consists of one steel frame, six story, 36 unit
apartment building, located in San Francisco, CA. As of February 24, 1998, the
Buchanan Property was 100.0% leased.
The Buchanan Property was built in 1929 and renovated in 1996. The 36
units comprising the Buchanan Property average 1,012 square feet and consist of
the following unit mix: 6 studio apartment units, and 30 one bedroom units. The
building is of steel frame construction with concrete block exteriors. The
Buchanan Property falls within the rent control ordinance of San Francisco
which covers most properties constructed prior to 1979.
2095 - 2099 MARKET STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Retail Location: San Francisco, CA
Year Built/Renovated: 1906/1985 Square Feet: 16,000
Units: NA Percent Leased: 100.0%
Appraised Value: $3,320,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The 2095 - 2099 Market Street Property consists of one wood, three
story, retail and office building, located in San Francisco, CA. As of February
24, 1998, the 2095 - 2099 Market Street Property was 100.0% leased to 4 retail
tenants, a bank and 5 office tenants.
The 2095 - 2099 Market Street Property was built in 1906, renovated in
1985. The building is of wood construction with siding exteriors. Approximately
14.7% of the space expires in 2000 and 43.8% of the space expires in 2002.
235 - 241 CHURCH STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1925/1996 Square Feet: 9,600
Units: 8 Percent Leased: 100.0%
Appraised Value: $1,790,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The 235 - 241 Church Street Property consists of one wood frame, three
story, 8 unit apartment and commercial building, located in San Francisco, CA.
As of February 24, 1998, the 235 - 241 Church Street Property was 100.0%
leased.
The 235 - 241 Church Street Property was built in 1925 and renovated
in 1996. The 8 one bedroom apartment units comprising the 235 - 241 Church
Street Property average 1200 square feet each. There are 2 retail spaces
totaling 2,400 square feet. The building is of wood frame construction with
wood exteriors. The 235 - 241 Church Street Property falls within the rent
control ordinance of San Francisco which covers most properties constructed
prior to 1979.
III-5
<PAGE>
1465 BURLINGAME AVENUE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Retail Location: Burlingame, CA
Year Built/Renovated: 1940/1997 Square Feet: 5,130
Units: NA Percent Leased: 100.0%
Appraised Value: $1,380,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Burlingame Property consists of one concrete, one story, retail
building, located in Burlingame, CA. As of February 24, 1998, the Burlingame
Property was 100.0% leased to 3 retail tenants. The building is of concrete
construction with stucco exteriors.
The Burlingame Property was built in 1940, renovated in 1997.
Approximately 83.8% of space expires in 2002.
252 - 258 CHURCH STREET
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Type: Multifamily Location: San Francisco, CA
Year Built/Renovated: 1908/1997 Square Feet: 6,650
Units: 5 Percent Leased: 100.0%
Appraised Value: $960,000 Percent Leased as of Date: 2/24/98
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The 252 - 258 Church Street Property consists of two wood frame, three
story buildings, 5 unit apartment complex, located in San Francisco, CA. As of
February 24, 1998, the 252 - 258 Church Street Property was 100.0% leased.
The 252 - 258 Church Street Property was built in 1908 and renovated
in 1997. The 5 units comprising the 252 - 258 Church Street Property average
1,330 square feet and consist of the following unit mix: 2 two bedroom units, 1
three bedroom unit and 2 four bedroom units. The building is of wood frame
construction with wood exteriors. The 252 - 258 Church Street Property falls
within the rent control ordinance of San Francisco which covers most properties
constructed prior to 1979.
MANAGEMENT
Skyline Realty, Inc., manages all the Lembi Properties and is an
affiliate of the Lembi Borrowers.
III-6
<PAGE>
LOAN NOS. 14 - 21 - HEALTH CARE CAPITAL PORTFOLIO LOANS AND PROPERTIES
FOUNTAIN VIEW NURSING HOME LOAN
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $8,117,519 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Springhill, LA
Fixed; Hyper-amortizing; Year Built/Renovated: 1964/1989
Balloon
Origination Date: 11/24/1997 Units: 153 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $10,200,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $744,592 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 93.2%
Underwritten Cash Flow: $932,993 Percent Leased as of Date: 12/31/97
Balance at ARD: $6,346,920
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
GREENEVILLE WEST HEALTH CARE CENTER
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $7,003,349 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Greeneville, TN
Fixed; Hyper-amortizing; Year Built/Renovated: 1980/1989
Balloon
Origination Date: 11/24/1997 Units: 144 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $8,800,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $642,393 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 94.5%
Underwritten Cash Flow: $822,719 Percent Leased as of Date: 12/31/97
Balance at ARD: $5,475,774
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
BAY ST. JOSEPH CARE CENTER
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $5,650,430 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Port St. Joe, FL
Fixed; Hyper-amortizing; Year Built: 1983
Balloon
Origination Date: 11/24/1997 Units: 120 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $7,100,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $518,294 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 92.4%
Underwritten Cash Flow: $1,144,053 Percent Leased as of Date: 12/31/97
Balance at ARD: $4,417,954
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
III-7
<PAGE>
HERITAGE MANOR OF ABBEVILLE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $5,411,679 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Abbeville, LA
Fixed; Hyper-amortizing; Year Built/Renovated: 1969/1995
Balloon
Origination Date: 11/24/1997 Units: 120 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $6,800,00
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $496,394 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 93.7%
Underwritten Cash Flow: $641,792 Percent Leased as of Date: 12/31/97
Balance at ARD: $4,231,280
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
PANOLA NURSING HOME
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $3,820,009 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Carthage, TX
Fixed; Hyper-amortizing; Year Built/Renovated: 1966/1971
Balloon
Origination Date: 11/24/1997 Units: 108 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $4,800,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $350,396 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 86.1%
Underwritten Cash Flow: $540,829 Percent Leased as of Date: 12/31/97
Balance at ARD: $2,986,786
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
JACKSON MANOR NURSING HOME
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $3,262,924 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Jonesboro, LA
Fixed; Hyper-amortizing; Year Built/Renovated: 1968/1977
Balloon
Origination Date: 11/24/1997 Units: 84 Beds
Anticipated
Repayment Date (ARD): 12/01/2012 Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2027 Appraised Value: $4,100,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $299,297 Balance at ARD LTV: 61.1%
DSCR: 1.50x Percent Leased: 87.1%
Underwritten Cash Flow: $495,659 Percent Leased as of Date: 12/31/97
Balance at ARD: $2,551,215
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
III-8
<PAGE>
WEST MESA HEALTH CARE CENTER
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $2,715,502 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Albuquerque, NM
Fixed; Balloon Year Built/Renovated: 1986
Origination Date: 11/24/1997 Units: 120 Beds
Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2002 Appraised Value: $4,500,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $261,907 Balance at Maturity LTV: 61.1%
DSCR: 1.50x Percent Leased: 94.5%
Underwritten Cash Flow: $425,498 Percent Leased as of Date: 12/31/97
Balance at Maturity: $2,537,070
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
PICKETT COUNTY NURSING HOME
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $2,142,251 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Byrdstown, TN
Fixed; Balloon Year Built/Renovated: 1982/1990
Origination Date: 11/24/97 Units: 63 Beds
Cut-Off Date Balance/Unit: $41,802
Maturity Date 12/01/2012 Appraised Value: $2,700,000
Mortgage Rate: 8.260% Current LTV: 77.8%
Annual Debt Service: $206,618 Balance at Maturity LTV: 61.1%
DSCR: 1.50x Percent Leased Occupancy: 98.0%
Underwritten Cash Flow: $264,544 Percent Leased as of Date: 12/31/97
Balance at Maturity: $1,396,067
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain information for the above cross-collateralized loans, such as "DSCR,"
"Cut-Off Date Balance/Unit," "Current LTV," and "Balance at Maturity LTV" is
presented on an aggregate-portfolio basis. Percent Leased refers to the number
of beds occupied on the "Percent Leased as of Date."
THE LOANS
The Health Care Capital Portfolio Loans are comprised of eight
individual loans all cross-collateralized with each other and more particularly
described below under the heading "The Properties". All of the Health Care
Capital Portfolio Loans were originated by RMF on November 24, 1997.
The Fountain View Nursing Home Loan ("Fountain View Loan") is secured
by a first mortgage on a 32,886 square foot, 153 bed skilled nursing facility
situated on 1.9 acres of land located in Springhill, LA (the "Fountain View
Property").
The Greeneville West Health Care Center Loan ("Greeneville Loan") is
secured by a first mortgage on a 31,481 square foot, 144 bed skilled nursing
facility situated on 5.2 acres of land located in Greeneville, TN (the
"Greeneville Property").
The Bay St. Joseph Care Center Loan ("St. Joseph Loan") is secured by
a first mortgage on a 39,728 square foot, 120 bed nursing home situated on 2.7
acres of land located in Port St. Joe, FL (the "St. Joseph Property").
III-9
<PAGE>
The Heritage Manor of Abbeville Loan ("Heritage Manor Loan") is
secured by a first mortgage on a 29,838 square foot, 120 bed nursing home
situated on 1.7 acres of land located in Abbeville, LA (the "Heritage Manor
Property").
The Panola Nursing Home Loan ("Panola Loan") is secured by a first
mortgage on a 32,930 square foot, 108 bed skilled nursing facility situated on
5.4 acres of land located in Carthage, TX (the "Panola Property").
The Jackson Manor Nursing Home ("Jackson Manor Loan") is secured by a
first mortgage on an 19,153 square foot, 84 bed skilled nursing facility
situated on 1.7 acres of land located in Jonesboro, LA (the "Jackson Manor
Property").
The West Mesa Health Care Center Loan ("West Mesa Loan") is secured by
a first leasehold mortgage on a 38,614 square foot, 120 bed skilled nursing
facility situated on 4.0 acres of land located in Albuquerque, NM (the "West
Mesa Property").
The Pickett County Nursing Home Loan ("Pickett Loan" and collectively,
with the Fountain Loan, the Greeneville Loan, the St. Joseph Loan, the Heritage
Loan, the Panola Loan, the Jackson Loan and the West Mesa Loan, the "Health
Care Capital Portfolio Loans") is secured by a first leasehold mortgage on a
21,950 square foot, 63 bed skilled nursing facility situated on 4.0 acres of
land located in Byrdstown, TN (the "Pickett Property"). The Mortgaged
Properties relating to the Health Care Capital Portfolio Loans are leased or
subleased to and managed by Sunrise Healthcare Corporation.
THE BORROWERS.
The borrower for the Fountain View Loan is HCC of Springhill, Inc., a
Louisiana corporation and special purpose entity.
The borrower for the Greeneville Loan is HCC of Tennessee, Inc., a
Tennessee corporation and special purpose entity.
The borrower for the St. Joseph Loan is HCC Gulf, Inc., a Georgia
corporation and special purpose entity.
The borrower for the Heritage Manor Loan is Health Care Capital of
Louisiana, Inc., a Georgia corporation and special purpose entity.
The borrower for the Panola Loan is HCC Enterprises of LA, Inc., a
Louisiana corporation and special purpose entity.
The borrower for the Jackson Manor Loan is Health Care Capital of
Louisiana, Inc., a Georgia corporation and special purpose entity.
The borrower for the West Mesa Loan is Health Care Capital of the
Southwest, Inc., a New Mexico corporation and special purpose entity.
The borrower for the Pickett Loan is Heritage Health Group, Inc., a
Tennessee corporation and special purpose entity.
All of the borrowers are subsidiaries of Health Care Capital, Inc., a
privately held, Atlanta based company formed in 1988 for the purpose of
acquiring existing nursing homes, managing those facilities, as well as
developing and constructing new nursing homes.
The principal of the borrowers under the group of Health Care Capital
Portfolio Loans is an indirect owner of approximately a 1% interest in RMF.
Such individual is not an officer or manager of RMF.
III-10
<PAGE>
SECURITY. All of the Health Care Capital Portfolio Loans are
cross-collateralized and are secured by a Mortgage, Assignments of Rents and
Leases, UCC Financing Statements and certain additional security documents. The
mortgages are first liens on fee or leasehold interests in the respective
properties. All of the Health Care Capital Portfolio Loans are non-recourse,
subject to certain limited exceptions.
PAYMENT TERMS. The Mortgage Rates are fixed at 8.260%. The Fountain
View Loan requires monthly payments of principal and interest of $62,049.30
until its maturity on December 1, 2012. The Greeneville Loan requires monthly
payments of principal and interest of $53,532.73 until its maturity on December
1, 2012. The St. Joseph Loan requires monthly payments of principal and
interest of $43,191.18 until its maturity on December 1, 2012. The Heritage
Manor Loan requires monthly payments of principal and interest of $41,366.20
until its maturity on December 1, 2012. The Panola Loan requires monthly
payments of principal and interest of $29,199.67 until its maturity on December
1, 2012. The Jackson Manor Loan requires monthly payments of principal and
interest of $24,941.38 until its maturity on December 1, 2012. The West Mesa
Loan requires monthly payments of principal and interest of $21,825.58 until
its maturity on December 1, 2002. The Pickett Loan requires monthly payments of
principal and interest of $17,218.14 until its maturity on December 1, 2012.
The Health Care Capital Portfolio Loan accrue interest computed on the basis of
the actual days elapsed in a 360-day year.
PREPAYMENT. Prior to December 1, 2004, the Fountain View borrower,
Greeneville borrower, St. Joseph borrower, Heritage Manor borrower, Jackson
Manor borrower, Panola borrower and Pickett borrower (collectively, the "Health
Care Capital Borrower") may not prepay the Health Care Capital Portfolio Loan
(the "Health Care Capital Portfolio Lock-out Period"). Upon the expiration of
the Health Care Capital Portfolio Lock-out Period, the Health Care Capital
Portfolio Loan may be defeased. The Health Care Capital Borrower may prepay
within one-hundred eighty (180) days prior to the applicable ARD or Maturity
Date without payment of any prepayment premium.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. Borrower has a one time
right of assumption provided (a) no default, (b) acceptable financial
condition, (c) no material change in operation of facility, (d) acceptable Loan
assumption agreement and (e) payment of a 1% assumption fee.
ESCROW/RESERVES. There are no escrows or reserves for any of the
Health Care Portfolio Loans, other than a letter of credit equal to ninety (90)
days of debt service to be used as additional security and debt service
shortfalls.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTIES
The Fountain View Property is a 32,886 square foot, 153-room skilled
nursing facility situated on a 1.9 acre site located in Springhill, LA. The
Fountain View Property was originally constructed in 1964 and consists of four,
single level buildings with a total area of 32,886 square feet. Additional
rooms were constructed in 1982 and 1989, as well other improvements, such as a
separate office building, a separate laundry building and small maintenance
building. The building's construction includes poured reinforced concrete slab
foundations, masonry framing and composition covered roofing. For the twelve
(12) months ending in December 1997, the payor mix consisted of Medicaid,
82.2%, Medicare, 8.0% and Private Pay, 9.8%. The Fountain View Property is
subleased to and managed by Sunrise Healthcare Corporation, the long term care
facility operator for Sun Healthcare Group, Inc. The lease expires on November
30, 2012 and contains five, five year extension options. Sun Healthcare Group,
Inc. has provided a lease guaranty for the loan as additional security and, in
lieu of a debt service reserve fund, has provided an irrevocable stand-by
letter of credit in the amount of ninety (90) days of lease payments.
The Greeneville Property is a 31,481 square foot, 144-bed skilled
nursing facility situated on a 5.23 acre site located in Greeneville, TN. The
Greeneville Property was originally constructed in 1980 and expanded in 1989
and includes one, single level building with a total area of 31,481 square
feet. Building construction includes
III-11
<PAGE>
a poured reinforced concrete slab foundation, wood framing and a pitched roof
with composition covering. The facility includes one large main dining room,
two activity rooms, a resident lounge and activities room, an employee lounge
and activities room, a laundry room, a physical therapy room, mechanical rooms
and a beauty and barbershop. For the twelve (12) months ending in December
1997, the payor mix consisted of Medicaid, 78.6%, Medicare, 11.2%, and Private
Pay, 10.2%. The Greeneville Property is subleased to and managed by Sunrise
Healthcare Corporation, the long term care facility operator for Sun Healthcare
Group, Inc. The lease expires on November 30, 2012 and contains five, five year
extension options. Sun Healthcare Group, Inc. provided a lease guaranty for the
Loan as additional security and, in lieu of a debt service reserve fund, has
agreed to provide an irrevocable standby letter of credit in the amount of
ninety (90) days of lease payments.
The St. Joseph Property is a 39,728 square foot, 120 bed skilled
nursing facility situated on a 2.7 acre site located in Port St. Joe, FL. The
St. Joseph Property was constructed in 1983 and the buildings construction
includes a poured concrete foundation with steel reinforcing and a masonry
frame with a stucco covering. The St. Joseph Property is approximately 97 mile
southwest of Tallahassee and 36 miles from the Panama City National Airport.
Access to Port St. Joe is provided by U.S. Highway 98 and State Route 71. For
the twelve (12) months ending in September 1997, the payor mix consisted of
82.7%, Medicaid, 6.5%, Private Pay, 10.2%, Medicare and 0.6%, other. The St.
Joseph Property is leased to and managed by Sunrise Healthcare Corporation, the
long term care facility operator for Sun Healthcare Group, Inc. The lease
expires on November 30, 2012 and contains five, five year extension options.
Sun Healthcare Group, Inc. provided a lease guaranty for the Loan as additional
security and, in lieu of a debt service reserve fund, has agreed to provide an
irrevocable standby letter of credit in the amount of ninety (90) days of lease
payments.
The Heritage Manor Property is a 29,838 square foot, 120 bed nursing
home situated on a 1.7 acre site located in Abbeville, LA. Constructed in 1969
and expanded in 1993 and 1995, the Heritage Manor Property includes a poured
concrete foundation with steel reinforcing and masonry frame. Amenities include
two dining rooms, a lobby and lounge area, recreation rooms, a courtyard and a
beauty and barber shop. For the twelve (12) months ending in September 1997,
the payor mix consisted of 86.1%, Medicaid, 10.5%, Private Pay and 3.4%,
Medicare. The Heritage Property is subleased to and managed by Sunrise
Healthcare Corporation, the long term care facility operator for Sun Healthcare
Group, Inc. The lease expires on November 30, 2012 and contains five, five year
extension options. Sun Healthcare Group, Inc. provided a lease guaranty for the
Loan as additional security and, in lieu of a debt service reserve fund, has
agreed to provide an irrevocable standby letter of credit in the amount of
ninety (90) days of lease payments.
The Panola Property is a 32,930 square foot, 108 bed skilled nursing
facility situated on 5.41 acres of land located in Carthage, TX. Constructed in
1966 and expanded in 1971, the Panola Property includes one, single level
building constructed of poured reinforced concrete slab foundation, masonry
framing, and a flat roof with a built up tar and gravel covering. The Panola
Property participates in the Medicaid reimbursement program and received
certification for ten Medicare Beds. For the twelve (12) months ending in
December 1997, the payor mix consisted of Medicaid, 69.7%, Medicare, 6.9% and
Private Pay, 23.4%. The Panola Property is subleased to and managed by Sunrise
Healthcare Corporation, the long term care facility operator for Sun Healthcare
Group, Inc. The lease expires on November 30, 2012 and contains five, five year
extension options. Sun Healthcare Group, Inc. has provided a lease guaranty for
the loan as additional security and, in lieu of a debt service reserve fund,
has provided an irrevocable stand by letter of credit in the amount of ninety
(90) days of lease payments.
The Jackson Manor Property is a 19,153 square foot, 84 bed skilled
nursing facility situated on a 1.71 acre site located in Jonesboro, LA.
Constructed in 1968 and expanded in 1977, the Jackson Manor Property includes
one single level building constructed with a poured reinforced concrete slab
foundation, masonry framing, and flat roof with a built up composition
covering. For the twelve (12) months ending in October 1997, the payor mix
consisted of Medicaid, 85.4%, Medicare (Part A), 9.1% and Private Pay, 5.5%.
The Jackson Manor Property is leased to and managed by Sunrise Healthcare
Corporation, the long term care facility operator for Sun Healthcare Group,
Inc. The lease expires on November 30, 2012 and contains five, five year
extension options. Sun Healthcare Group, Inc. provided a lease guaranty for the
loan as additional security and, in lieu of a debt service reserve fund, has
agreed to provide an irrevocable stand by letter of credit in the amount of
ninety (90) days of lease payments.
III-12
<PAGE>
The West Mesa Property is a 38,614 square foot, 120 bed skilled
nursing facility situated on a 4.0 acre site located in Albuquerque, NM.
Constructed in 1986, the West Mesa Property includes a poured reinforced
concrete slab foundation, steel and masonry framing and a flat and pitched roof
with built up composition and terra cotta covering. For the twelve (12) months
ending in December 1997, the payor mix consisted of Medicaid, 80.5%, Medicare,
3.2%, Private Pay and non insurance sources, 16.3%. The West Mesa Property is
subleased from Albuquerque Health Care, Ltd. (ground lessee) for $722,700 per
annum plus additional gross receipt taxes under a lease that expires December
2012. The West Mesa Property is subleased to and managed by Sunrise Healthcare
Corporation, the long term care facility operator for Sun Healthcare Group,
Inc. Sun Healthcare Group, Inc. has executed a lease that expires on November
30, 2012. Sun Healthcare Group, Inc. has provided a lease guaranty for the loan
as additional security and in lieu of a debt service reserve fund, has provided
an irrevocable stand by letter of credit in the amount of ninety (90) days of
lease payments.
The Pickett Property is a 21,950 square foot, 63 bed skilled nursing
facility situated on a 4.04 acre site located in Byrdstown, TN. The Pickett
Property was originally constructed in 1982 and expanded in 1990. Building
construction includes one, single level building with a reinforced concrete
slab foundation, concrete block framing, as well as a flat, metal deck roof
with a built up tar and gravel covering. For the twelve (12) months ending in
December 1997, the payor mix consisted of Medicaid, 84.6%, Medicare, 6.4%,
Private Pay, 7.6% and non insurance sources, 1.4%. The Pickett Property is
leased from Pickett County for $102,000 per annum under a lease that expires
May 23, 2025. The Pickett Property is subleased to and managed by Sunrise
Healthcare Corporation, the long term care facility operator for Sun Healthcare
Group, Inc. The lease expires on November 30, 2012 and contains five, five year
extension options. Sun Healthcare Group, Inc. has provided a lease guaranty for
the loan as additional security and, in lieu of a debt service reserve fund,
has provided an irrevocable stand by letter of credit in the amount of ninety
(90) days of lease payments.
MANAGEMENT
The Sunrise Healthcare Corporation manages each of the Health Care
Capital Portfolio properties. The Sunrise Healthcare Corporation is the long
term care facility operator for the Sun Healthcare Group, Inc., the largest
nursing home operator in the United Kingdom and the second largest provider of
therapy services in the United States.
III-13
<PAGE>
LOAN NO. 22 - BROADVIEW VILLAGE SQUARE LOAN AND PROPERTIES
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $26,481,230 Property Type: Retail
Loan Type: Principal and Interest; Location: Broadview, IL
Fixed; Hyper-amortizing; Year Built: 1994
Balloon
Origination Date: 6/29/1998 Square Feet: 353,787
Anticipated Repayment Date (ARD): 7/1/2008 Cut-Off Date Balance/SF: $74.85
Maturity Date: 7/01/2028 Appraised Value: $35,100,000
Mortgage Rate: 6.925% Current LTV: 75.4%
Annual Debt Service: $2,121,535 Balance at ARD LTV: 64.8%
Underwritten DSCR: 1.41x Percent Leased: 97.9%
Underwritten Cash Flow: $2,988,064 Percent Leased as of Date: 1/31/1998
Balance at ARD: $22,756,229
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Broadview Village Square Loan (the "Broadview Loan") is secured by
a first mortgage on a 353,787 square foot anchored retail center comprised of
seven buildings in Broadview, IL (the "Broadview Property"). The Broadview Loan
was originated by a participant in ContiTrade's commercial conduit program on
June 29, 1998.
Certain principals of the Broadview Borrower and Hiffman Shaffer
Associates ("Hiffman"), the manager of the Broadview Property, are principals
in the lender that originated the Mortgage Loan for ContiTrade's commercial
conduit program. However, the Mortgage Loan was re-underwritten prior to the
origination by ContiTrade.
THE BORROWER. The borrower is KM-TB, L.L.C., an Illinois limited
liability company (the "Broadview Borrower"). The Broadview Borrower is a
special purpose entity.
SECURITY. The Broadview Loan is secured by a Mortgage, Assignments of
Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on fee interests in the Broadview
Property. The Broadview Loan is non-recourse, subject to certain limited
exceptions.
MAJOR TENANTS. Super K-Mart, the major tenant, occupies 55.3% of the
Broadview Property and which lease expires on September 30, 2019.
PAYMENT TERMS. The mortgage rate is fixed at 6.925%. The Broadview
Loan requires monthly payments of principal and interest of $176,794.58 until
its Anticipated Repayment Date of July 1, 2008. If the Broadview Village Square
Loan is not repaid by July 1, 2008, a lockbox, pursuant to a Cash Management
Agreement, will be established to collect rents and the interest rate will be
8.925%. All excess cash flow will be used to make payment on all outstanding
amounts under the Broadview Village Square Loan (including interest, fees, and
property related expenses). The Broadview Loan accrues interest computed on the
basis of the actual days elapsed per month in a 360-day year.
PREPAYMENT. Prior to July 1, 2003, the Broadview Borrower may not
prepay the Broadview Loan (the "Broadview Lock-out Period"). Upon expiration of
the Broadview Lock-out Period, the Broadview Borrower may defease the Broadview
Loan. However, the Broadview Borrower may prepay the Broadview Loan in full
without payment of a penalty on or after January 1, 2008.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Broadview Borrower
is permitted (subject to the holder of the Mortgage Loan's consent), to
transfer its membership interest, provided (1) no change of control of
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<PAGE>
the Broadview Borrower results, (2) no corporate member of the Broadview
Borrower that is a single-purpose entity ceases to be a single-purpose entity,
(3) no dissolution of the Broadview Borrower results and (4) payment of a 1%
assumption fee is made. Transfers of membership interests in the Broadview
Borrower between members, or transfers to immediate family members of members
or to estate planning trusts are permitted without the consent of the holder of
the Mortgage Loan provided the above criteria is met.
ESCROW/RESERVES. There are no escrows or reserves for the Broadview
Village Square Loan.
SUBORDINATE/OTHER DEBT. Secured subordinate indebtedness and
encumbrances are prohibited, provided, however, that membership interests in
the Broadview Borrower are security for a subordinate loan made by the
participant in ContiTrade's commercial conduit program which made the Broadview
Loan. Such subordinate loan is in the original principal balance of $5,000,000,
bears interest at 11.625%, has a loan term of 120 months and an amortization
term of 360 months, is not secured by the Broadview Property and is not
included in the Mortgage Pool.
THE PROPERTY
The Broadview Property consists of a 353,787 square foot retail center
located in central Broadview, IL. The Broadview Property is part of Broadview
Village Square, a 727,583 square foot development which includes Target
Greatland, Home Depot Garden Center, McDonald's and other smaller tenants. The
immediate surrounding area is developed with primarily residential properties.
The Broadview Property is the largest and the newest retail development in
Broadview. All buildings are single story, equipped with public restrooms, wet
sprinkler systems and parking lots that accommodate 912 vehicles. The building
is constructed of steel framing, finished with masonry and precast concrete
panels held on concrete foundations with single ply ballasted roofs over metal
decks.
The Broadview Property is comprised of 7 separate structures, and was
97.9% leased as of January 31, 1998. The Broadview Property is situated on 33.7
acres. The Broadview Property's major tenant is Super K-Mart, which leases
55.3% of the property and such lease expires September 30, 2019. Contractual
lease expirations during the loan term for all tenants is as follows: 7,323
square feet (2.07%) in 1999, 29,289 square feet (8.28%) in 2000, 1,007 square
feet (0.29%) in 2001, 3,257 square feet (0.92%) in 2004, 4,275 square feet
(1.21%) in 2008 and 29,869 square feet (8.44%) in 2010. As of January 1, 1998,
the average base rental was $9.86 per square foot.
MANAGEMENT
Hiffman manages the Broadview Property. Hiffman is an affiliate of the
Broadview Borrower. Hiffman manages over 14 million square feet of commercial
property located throughout northern Illinois and Ohio. Hiffman has been in the
real estate development and management industry for over 15 years.
III-15
<PAGE>
LOAN NOS. 23 - 26 - THE COURVILLE CONSOLIDATION LOAN AND PROPERTIES
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $24,924,349 Property Type: Healthcare
Loan Type: Principal and Interest; Location: Various
Fixed; Balloon Year Built/Renovated Various
Origination Date: 4/30/1998 Units: 258 Beds
Maturity Date: 5/01/2008 Cut-Off Date Balance/Unit: $96,606
Mortgage Rate: 7.890% Appraised Value: $31,900,000
Annual Debt Service: $2,316,912 Current LTV: 78.1%
DSCR 1.52x Balance at Maturity LTV: 63.3%
Underwritten Cash Flow: $3,518,201 Percent Leased: Various
Balance at Maturity: $20,195,439 Percent as of Date: Various
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Courville Consolidation Loan ("Courville Loan") is secured by a
first mortgage on four healthcare facilities (collectively, the "Courville
Properties") more particularly described below under the heading "The
Properties." The Courville Loan was originated by RMF on April 30, 1998.
THE BORROWER. The borrowers are TCN Realty Limited Partnership, The
Courville at Nashua, Inc., Aynsley Place, Inc., The Courville at Manchester,
L.L.C., Pond Haven Associates Limited Partnership, Carlysle Place, Inc., and
The Villas at Nashua, L.L.C. (collectively, the "Courville Borrowers").
SECURITY. The Courville Loan is secured by Mortgages, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on the Courville Properties.
The Courville Loan is non-recourse and, subject to limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.890%. The Courville
Loan requires monthly payments of principal and interest of $193,075.96 until
its maturity on May 1, 2008, at which time all unpaid principal and accrued but
unpaid interest is due. The Courville Loan accrues interest computed on the
basis of the actual days elapsed in a 360-day year.
PREPAYMENT. Prior to May 1, 2001, the Courville Borrowers may not
prepay the Courville Loan (the "Courville Lock-out Period"). Upon the
expiration of the Courville Lock-out Period, the Courville Loan may be
defeased. The Courville Borrower may prepay within one-hundred eighty (180)
days prior to the Maturity Date without payment of any prepayment premium.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. Courville Borrowers have
a one time right of assumption provided, (a) no default, (b) acceptable
financial condition, (c) no material change in operation of facility, (d)
acceptable Loan assumption agreement and (e) payment of a 1% assumption fee.
ESCROW/RESERVES. There are no escrows or reserves, other than (a) a
construction holdback of $1,000,000 and (b) a 2-month debt service reserve to
be funded upon release of construction holdback.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
III-16
<PAGE>
THE PROPERTIES
The Courville Properties consist of the following four Healthcare
facilities:
THE COURVILLE AT NASHUA & VILLAS AT NASHUA
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Built: 1980 Location: Nashua, New Hampshire
Year Renovated: 1996 Square Feet: 37,540
Units: 102 Beds Occupancy: 94.4%
Appraised Value: $11,928,000 Occupancy as of Date: 12/31/97
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Courville at Nashua & Villas at Nashua ("Courville at Nashua") is
a 102-bed nursing facility situated on a 4.1 acre site located in Nashua, NH.
The Courville at Nashua was originally constructed in 1980 as a two-story
building with a modified split-wing design. In 1996, two additional
one-bedroom, single story units were added. The main rectangular two story
structure has business offices, dining rooms, kitchens, entrances, a beauty
shop, a dental office, a therapy room and other common room amenities. The
building's wings, spreading off the center of the rectangular portion, comprise
the resident's rooms with six rooms located on the ends of each of the wings.
AYNSLEY PLACE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Built: 1988 Location: Nashua, New Hampshire
Year Renovated: N/A Square Feet: 28,551
Units: 46 Beds Occupancy: 75.8%
Appraised Value: $9,072,000 Occupancy as of Date: 12/31/97
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Aynsley Place is a 46 bed assisted living facility situated on a
4.1 acre site located in Nashua, NH. Constructed in 1988, the Aynsley Place is
a three-story angled building with red brick exterior. The first floor consists
of business offices, dining room lounge areas, other common room amenities and
three units. The upper floors contain 11 units each with wide hallways and
large bright rooms.
CARLYSLE PLACE
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Built: 1988 Location: Bedford New Hampshire
Year Renovated: N/A Square Feet: 17,700
Units: 40 Beds Occupancy: 100.00%
Appraised Value: $5,500,000 Occupancy as of Date: 12/31/97
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Carlysle Place is a 40 bed assisted living facility situated on a
9.2 acre site located in Bedford, NH. Constructed in 1988, the Carlysle Place
consists of ten private units with one bed each and 15 semi-private units. Due
to the demand for private rooms, the facility has been operating with a bed
capacity of 36 to 37, charging individuals occupying semi-private rooms a
higher rate to offset the loss of use of one bed. To meet the increased demand
for private rooms, the borrower is adding a wing off the back of the facility
which will contain ten additional private rooms. The total cost for expansion
is approximately $1,000,000, which will result in potential gross annual
revenue increase of approximately $440,000.
III-17
<PAGE>
THE COURVILLE AT MANCHESTER
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year Built: 1995 Location: Manchester, New Hampshire
Year Renovated: N/A Square Feet: 40,829
Units: 70 Beds Occupancy: 92.8%
Appraised Value: $5,400,000 Occupancy as of Date: 12/31/97
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Courville at Manchester is a 70 bed nursing home facility situated
on a 1.1 acre site located in Manchester, NH. Improvements were constructed in
1995 and include reinforced concrete footings, stemwalls and slab foundation.
Exterior walls are constructed of wood frame with stucco and the interior
includes metal and wood studs with gypsum partitions. The Courville at
Manchester comprises three floors and contains a basement. The first floor
comprises a main lobby, private dining room, reception area, administration
offices, main kitchen and dining room, television room, activity room, library
and ten private resident rooms and patios off the north and south sides of the
floor. There are 32 beds on the second floor, and 28 beds on the third floor.
Both the second and third floor also contain small dining rooms, nurses'
stations and residents' rooms.
MANAGEMENT
Courville Companies, Inc. (the "Courville Companies") manages the
Courville Properties. The Courville Companies is an affiliate of each of the
Courville Borrowers. Courville Companies currently owns and operates multiple
senior housing and long-term care facilities in the central and southern New
Hampshire market and has been managing this type of property since 1980.
III-18
<PAGE>
LOANS NOS. 27 - 32 - THE WISCO PORTFOLIO LOANS AND PROPERTIES
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $23,675,216 Property Type: Hospitality
Loan Type: Principal and Interest; Location: Various
Fixed; Balloon Year Built/Renovated: Various
Origination Date: 3/20/1998 Units: 645
Maturity Date: 4/01/2008 Cut-Off Date Balance/Rm: $36,706
Mortgage Rate: 7.320% Appraised Value: $32,840,000
Annual Debt Service: $2,141,973 Current LTV: 72.1%
DSCR: 1.50x Balance at Maturity LTV: 55.7%
Underwritten Cash Flow: $3,203,387 Occupancy: Various
Balance at Maturity: $18,275,590 Occupancy as of Date: Various
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The WISCO Portfolio Loan ("WISCO Portfolio Loan") represents a single
note for $23,800,000 collateralized by six hospitality properties located in
Wisconsin (collectively, the "WISCO Properties") and more particularly below
under the heading "The Properties". The WISCO Portfolio Loan was originated by
Morgan Stanley Mortgage Capital Inc. on March 20, 1998.
THE BORROWER. The borrowers are WISCO Partners, L.L.P., a Wisconsin
limited liability partnership, WZ WISCO, Inc., a Wisconsin corporation, APP PRO
of Appleton, Inc., a Wisconsin corporation, OSH PRO Partners, L.L.P., a
Wisconsin limited liability partnership, MAD PRO of Madison, Inc., a Wisconsin
corporation, and WES PRO Partners, L.L.P., a Wisconsin limited liability
partnership (collectively "WISCO Borrowers"). The WISCO Borrowers are
controlled by Mr. William Zanetis and Mr. Walter Hickey, and are special
purpose entities.
SECURITY. The WISCO Portfolio Loan is Secured by a Combination
Mortgage, Security Agreement and Fixture Financing Statement, Assignment of
Rents and Leases, UCC Financing Statements and certain additional security
documents. All mortgages are first liens on fee interests in the respective
properties. The WISCO Portfolio Loan is non-recourse and subject to certain
limited exceptions.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.320%. The WISCO
Portfolio Loan requires monthly payments of principal and interest of
$178,497.75 until its maturity on April 1, 2008, at which time all unpaid
principal and accrued but unpaid interest is due. The WISCO Portfolio Loan
accrues interest computed on the basis of the actual days elapsed in a 360 day
year.
PREPAYMENT. Prior to April 1, 2002, the WISCO Borrowers may not prepay
the WISCO Portfolio Loan (the "WISCO Lock-Out Period"). Upon the expiration of
the WISCO Lock-Out Period, the WISCO Portfolio Loan may be prepaid with a
penalty equal to the greater of an amount calculated based on a yield
maintenance formula, or 1% of the amount so prepaid. The WISCO Borrowers may
prepay the WISCO Portfolio Loan in full, without payment of a penalty, ninety
(90) days prior to the Maturity Date.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The WISCO Borrowers have
a one time right of assumption provided, (1) prior written consent of the
Mortgagee, (2) at the Mortgagees reasonable sole discretion, (3) receipt of
rating agency approval together with such modifications to the loan documents,
(4) required legal opinions, and (5) the payment of a quarter percent (.25%)
assumption fee plus all expenses related to such transfer. The transfer by the
WISCO Borrowers of its interest in App Pro of Appleton, Inc. and Mad Pro of
Madison, Inc. to William P. Zanetis and Walter B.D. Hickey, Jr. shall not be
deemed an assumption or transfer of the WISCO Properties.
III-19
<PAGE>
ESCROW/RESERVES. There is a tax and insurance escrow which required
monthly deposits in an amount sufficient to pay taxes and insurance when due.
There is also a required capital expenditures (FF&E) escrow of $20,721 per
month, capped at $1,300,000.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTIES
The WISCO Portfolio consists of the following six Hospitality
Properties:
HOLIDAY INN - FOND DU LAC
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Fond du Lac, WI Year Built/Renovated: 1974/1994
Occupancy: 65.0% Units: 141 Rooms
Occupancy as of Date: 12/31/97 Appraised Value: $7,150,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Holiday Inn - Fond du Lac Property is a 141 room, two-story full
service hotel building located in Fond du Lac, WI. The building was originally
constructed in 1974 and was renovated and updated in 1976, 1987 and 1994. The
Holiday Inn - Fond du Lac Property is located within the southwest quadrant of
US Highway 41 and US Highway 151. The area is partially developed with a mix of
commercial, institutional and industrial uses. Farther south of the property is
the 202 acre Southwest Industrial Park.
The hotel maintains complete food and beverage operations including a
restaurant lounge and banquet and meeting facilities. The property consists of
5,558 square feet of banquet/meeting rooms, a 2,277 square foot dining room in
the restaurant, a 2,277 square foot lounge and bar area and a 2,337 square foot
kitchen. Other amenities include an indoor dome recreation area with a swimming
pool, whirlpool, sauna, covered patio and game area.
THE COMFORT SUITES - APPLETON
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Appleton, WI Year Built/Renovated: 1990
Occupancy: 64.7% Units: 130 Rooms
Occupancy as of Date: 11/30/97 Appraised Value: $7,030,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Comfort Suites - Appleton Property is a 130 room limited-service
hotel located in Appleton, WI. The Comfort Suites - Appleton Property is a two
and partial three-story wood-frame building which was completed in 1990. The
Comfort Suite - Appleton Property is located within a commercial area that is
anchored by Fox River Mall, a super-regional mall containing approximately 1.1
million square feet and 185 stores and shops. According to the appraiser, the
hotel is visible and accessible from U.S. Highway 41, the four lane highway
connecting Milwaukee to Green Bay, WI.
The Comfort Suites - Appleton Property offers in-suite amenities
including microwave, refrigerator, coffee maker, ironing board and iron and 16
of the suites contain whirlpool tubs. Common area amenities include a two-story
lobby with fireplace, lounge and bar area, breakfast area, meeting rooms, a
fitness room, and a 10,000 square foot Comfortdome indoor recreation area with
a swimming pool, whirlpool and sauna.
III-20
<PAGE>
THE COMFORT SUITES-MADISON
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Madison, WI Year Built/Renovated: 1995
Occupancy: 76.0% Units: 95 Rooms
Occupancy as of Date: 11/30/97 Appraised Value: $5,910,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Comfort Suites - Madison Property is a 95 room, two-story
limited-service hotel located in Madison, WI. The Building was constructed in
1995.
The Comfort Suites - Madison Property is located within a 400 acre
business park which is zoned for office/research and light manufacturing. The
Comfort Suites - Madison Property maintains a two story lobby with fireplace,
lounge and bar area, breakfast area, meeting rooms, a fitness room, and a 4,080
square foot indoor recreation area with swimming pool, whirlpool and sauna.
BUDGETEL - MADISON
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Madison, WI Year Built/Renovated: 1989
Occupancy: 73.7% Units: 130 Rooms
Occupancy as of Date: 11/01/97 Appraised Value: $5,700,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Budgetel - Madison Property is a 130 room, two story limited
service hotel building located in Madison, WI. The Budgetel - Madison Property
is located within the Old Sauk Trails, a 400 acre business park that is zoned
for office and research and light manufacturing.
The Budgetel - Madison Property contains a two-story lobby, lounge
area and bar, breakfast area, meeting rooms, a fitness room, and a 6,000 square
foot Budgetdome indoor recreation area with a swimming pool, whirlpool, sauna
and game area.
HOLIDAY INN EXPRESS - OSH KOSH
<TABLE>
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<S> <C> <C> <C>
Location: Osh Kosh, WI Year Built/Renovated: 1997
Occupancy: 52.3% Units: 70 Rooms
Occupancy as of Date: 3/31/98 Appraised Value: $3,740,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Holiday Inn Express - Osh Kosh Property is a 70 room, three-story
limited service hotel located in Osh Kosh, WI. The Holiday Inn Express - Osh
Kosh Property is located just south of Highway 21 and approximately one-quarter
mile west of Highway 41. The Holiday Inn Express - Osh Kosh Property is part of
a new mixed-use land development called Westowne Center with plans for a
250,000 square foot community shopping center immediately south of the
property.
The Holiday Inn Express - Osh Kosh Property maintains a lounge and
breakfast area, a meeting room, a fitness room, a fitness room, and an indoor
area with a swimming pool, whirlpool and sauna.
BUDGETEL - FOND DU LAC
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Fond du Lac, WI Year Built/Renovated: 1988/1994
Occupancy: 72.0% Units: 79 Rooms
Occupancy as of Date: 12/31/97 Appraised Value: $3,310,000
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Budgetel - Fond du Lac Property is a 79 room,, two-story limited
service hotel located in Fond du Lac, WI. The Budgetel - Fond du Lac Property
is located within the southwest quadrant of U.S. Highway 41 and U.S. Highway
151. The property is within an area with a mix of commercial, institutional and
industrial properties. Farther south of the property is the 202 acre Southwest
Industrial Park.
III-21
<PAGE>
MANAGEMENT
The WISCO Properties are managed by WISCO Partners Hotels, which is
owned by Mr. William Zanetis and Mr. Walter Hickey. Mr. Zanetis has completed
the Holiday Inn course for general managers. Mr. Zanetis has also managed two
Holiday Inns owned by his family.
III-22
<PAGE>
LOAN NO. 33 - ELLIOTT BAY OFFICE BUILDING LOAN AND PROPERTY
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-off Date Balance: $23,000,000 Property Type: Office
Loan Type: Interest Only (months 1-12); Location: Seattle, WA
Hyper-amortizing; Fixed; Year Built/Renovated: 1980
Balloon Square Feet: 218,086
Origination Date: 6/1/1998 Cut-Off Date Balance/SF: $105
Anticipated Repayment Date (ARD): 6/1/2008 Appraised Value: $31,300,000
Maturity Date: 6/1/2028 Current LTV: 73.5%
Mortgage Rate: 7.440% Balance at ARD LTV: 66.3%
Annual Debt Service: $1,918,505 Percent Leased: 98.3%
DSCR: 1.21x Percent Leased as of Date: 3/26/98
Underwritten Cash Flow $2,315,727
Balance at ARD: $20,753,242
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Elliott Bay Office Park Loan (the "Elliott Bay Office Park Loan")
is secured by a first mortgage on a five story, 218,086 square foot office
building located in Seattle, WA. (the "Elliott Bay Office Park Property"). The
Elliott Bay Office Park Loan was originated by Morgan Stanley Mortgage Capital
Inc. on June 1, 1998.
THE BORROWER. The borrower is Selig Real Estate Holdings Six, L.L.C.,
a Washington limited liability company (the "Elliott Bay Borrower"). The
Elliott Bay Borrower is a special purpose entity.
SECURITY. The Elliott Bay Office Park Loan is secured by a Deed of
Trust, Assignment of Rents and Leases, UCC Financing Statements and certain
additional security documents. The Mortgage is a first lien on a fee interest
in the Elliott Bay Office Park Property. The Elliott Bay Office Park Loan is
non-recourse and subject to certain limited exceptions.
MAJOR TENANTS. The major tenant at the Elliott Bay Office Park
Property is Holland America Line, a division of Carnival Corporation which
lease expires December 31, 2006. Certain easement agreements established the
rights and obligations of the tenants and the Elliott Bay Borrower.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.440%. The Elliott Bay
Office Park Loan requires monthly payments of interest of $142,600.00 only in
the first year and, thereafter, monthly payments of principal and interest of
$159,875.44 until its ARD of June 1, 2008, at which time the Elliott Bay Office
Park Loan may be paid in full, or will be repaid according to a
Hyper-amortization schedule, with a final scheduled maturity date of June 1,
2028. After the ARD, the Mortgage Rate will increase to the greater of (i) the
initial interest rate plus five percentage points (5.00%) or (ii) the six year
interpolated US Treasury rate plus five percentage points (5.00%) and excess
cash flow will be applied to the outstanding principal balance. The Elliott Bay
Office Park Loan accrues interest computed on the basis of the actual days
elapsed per month in a 360-day year.
PREPAYMENT. Prior to September 1, 2000, the Elliott Bay Borrower may
not prepay the Elliott Bay Office Park Loan (the "Elliott Bay Lock-out
Period"). Upon expiration of the Elliott Bay Lock-out Period, the Elliot Bay
Borrower may defease the Elliott Bay Office Park Loan in whole, but not in
part. However, the Elliott Bay Borrower may prepay the Elliot Bay Office Park
Loan in full without payment of a penalty, ninety (90) days prior to the ARD,
or thereafter.
TRANSFER OF PROPERTIES OR INTEREST IN BORROWER. The Elliott Bay
Borrower has a one-time right of assumption, provided (1) receipt of rating
agency approval, (2) a non-consolidated and enforceability opinion suitable to
the lender and to such other matters as lender may reasonably request in the
event of any transfer and (3) payment of a 1% assumption fee plus all expenses
related to such transfer.
III-23
<PAGE>
ESCROW/RESERVES. There is a tax and insurance reserve which requires
deposits in an amount sufficient to pay taxes and insurance when due. There is
a reserve for capital expenditures which is funded monthly in the amount of
$2,761. There is also a monthly Tl/LC escrow which is capped at $2,000,000 over
ten years.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Elliott Bay Office Park Property is a five story, 218,086 square
foot office building located in Seattle, Washington. The Elliott Bay Office
Park Property was 98.3% leased as of March 26, 1998 to 19 tenants.
Approximately 20.8% of the space is rented by Holland America Line , a
division of Carnival Corporation. Contractual lease expirations during the loan
term for all tenants is as follows: 15.892 square feet (7%) in 1999, 3,142
square feet (1%) in 2000, 17,348 square feet (8%) in 2001, 7,565 square feet
(3%) in 2003, 124,985 square feet (57%) in 2006 and 46,263 square feet (21%) in
2008 or later. As of April 10, 1998, average base rental was $16.43 per square
foot.
MANAGEMENT
Martin Selig Real Estate, is the property manager and is an affiliate
of the Elliott Bay Borrower.
III-24
<PAGE>
LOAN NO. 34 - THE CABLE BUILDING
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cut-Off Date Balance: $20,930,117 Property Type: Office and Retail
Loan Type: Principal and Interest; Location: New York, NY
Fixed; Balloon; Year Built/Renovated: 1894/1997
Hyper-amortizing
Origination Date: 4/20/1998 Square Feet: 207,544
Anticipated Repayment Date (ARD): Cut-Off Date Balance/SF: $101
5/1/2008
Maturity Date: 5/1/2023 Appraised Value: $28,000,000
Mortgage Rate: 7.350% Current LTV 74.8%
Annual Debt Service: $1,855,587 Balance at ARD LTV: 59.7%
Underwritten DSCR: 1.31 Percent Leased: 97.6%
Underwritten Cash Flow: $2,422,572 Percent Leased as of Date: 04/06/98
Balance at ARD: $16,723,057
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Cable Building Loan is secured by a first mortgage on a 207,544
square foot, 9 story office and retail building located in New York, NY ("The
Cable Building"). The Cable Building Loan was originated by ContiTrade on April
20, 1998.
THE BORROWER. The borrower is Cable Building Partners, LLC (the "Cable
Building Borrower"), a New York limited liability company whose managing member
is 611 Broadway Corp., a New York corporation. The principals of 611 Broadway
Corp. are Harry Feldman, and Jules Demchick.
SECURITY. The Cable Building Loan is secured by a Mortgage, Assignment
of Rents and Leases, UCC Financing Statements and certain additional security
documents. The mortgage is a first lien on a fee interest in the Cable
Building. The Cable Building Loan is non-recourse and subject to certain
limited exceptions.
MAJOR TENANTS. The major tenants at the Cable Building are the
Angelika Film Center, La Chateau, Eastern Mountain Sports and 31-32 Gourmet.
PAYMENT TERMS. The Mortgage Rate is fixed at 7.350%. The Cable
Building Loan requires monthly payments of principal and interest of
$154,632.26 until its ARD on May 1, 2008, at which time all unpaid principal
and accrued but unpaid interest is due. However, after the ARD, the Mortgage
Rate is 9.350% per annum. The Cable Building Loan accrues interest computed on
the basis of the actual days elapsed per month in a 360-day year.
PREPAYMENT. Prior to May 1, 2003, the Cable Building Borrower may not
prepay the Cable Building Loan (the "Cable Lock-out Period"). Upon expiration
of the Cable Lock-out Period, the Cable Building Borrower may defease the Cable
Building Loan. However, the Cable Building Borrower may prepay the Cable
Building Loan in full without payment of a penalty on or after November 1,
2007.
TRANSFER OF PROPERTY OR INTEREST IN BORROWER. The Cable Building
Borrower is permitted (subject to the holder of the Mortgage Loan's consent),
to transfer its membership interest, provided (1) no change of control of the
Cable Building Borrower results, (2) no corporate member of the Cable Building
Borrower that is a single-purpose entity ceases to be a single-purpose entity,
(3) no dissolution of the Cable Building Borrower results, and (4) payment of a
1% assumption fee is made. Transfers of membership interests in the Cable
Building Borrower between members, or transfers to immediate family members of
members or to estate planning trusts are permitted without the consent of the
holder of the Mortgage Loan provided the above criteria is met.
III-25
<PAGE>
ESCROW/RESERVES. There is a tax and insurance escrow that requires
deposits in an amount sufficient to pay taxes and insurance when due. There are
also escrows for capital expenditures.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Cable Building Property is a nine story, 207,544 square foot
mixed-use building located in New York, New York. The Cable Building Property
was 97.6% leased as of April 6, 1998. The building consists of masonry encased
cast iron columns, steel beams and masonry arches. Exterior walls consist of
brick masonry, cast iron and limestone. The building is served by three
passenger elevators and one freight elevator, as well as one elevator and
escalator between the basement and first floor theater areas. The building was
extensively renovated in the 1980's and significantly repaired and upgraded in
1997. The main lobby has a terrazzo floor surface, marble and painted plaster
walls and a painted plaster ceiling. Tenant spaces have varying finishes and
hardwood floors.
Approximately 8.15% of the space is leased by Angelika Film Center a
six screen movie theater. Contractual lease expiration during the loan term for
all tenants is as follows: 30,661 square feet (14.77%) in 1999, 22,526 square
feet (10.85%) in 2000, 27,940 square feet (13.46%) in 2001, 30,064 square feet
(14.49%) in 2002, 11,425 square feet (5.50%) in 2003, 1,870 square feet (0.91%)
in 2004, 880 square feet (0.42%) in 2005 and 8,350 square feet (4.02%) in 2008.
As of April 6, 1998, the average base rental was $23.32 per square foot.
MANAGEMENT
M.D. Carlisle Realty Corp. ("M.D. Carlisle") is the property manager.
The principals of the Cable Building Borrower own M.D. Carlisle.
III-26
<PAGE>
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<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
- - -------------------------------------------------------------------------------
MORGAN STANLEY [GRAPHIC OMITTED] August 13, 1998
Real Estate Debt Capital Markets
Mortgage/Asset Capital Markets
- - -------------------------------------------------------------------------------
CMBS NEW ISSUE
TERM SHEET
----------------
PRICING DATE: AUGUST 13, 1998
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
AS DEPOSITOR
CONTITRADE SERVICES L.L.C
MORGAN STANLEY MORTGAGE CAPITAL INC.
RED MOUNTAIN FUNDING, L.L.C.
AS SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
----------------------
MORGAN STANLEY DEAN WITTER DEUTSCHE BANK SECURITIES
AND SOLELY AS MEMBERS OF THE SELLING GROUP
CONTIFINANCIAL SERVICES CORPORATION SOUTHTRUST SECURITIES, INC.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
THIS PAGE INTENTIONALLY LET BLANK
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
RATING WEIGHTED EXPECTED FINAL
AMOUNT(1) SUBORDINATION (MOODY'S/ AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS ($MM) LEVELS S&P) LIFE(3) WINDOW(3)(4) DATE(3) RATE(5)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $231,000,000 29.75 Aaa/AAA 5.43 1 - 110 10/15/07 6.33%
- - -------------------------------------------------------------------------------------------------------------------
A-2 365,026,000 29.75 Aaa/AAA 9.63 110 - 118 06/15/08 6.60
- - -------------------------------------------------------------------------------------------------------------------
A-MF1 98,712,000 29.75 Aaa/AAA 9.55 110 - 118 06/15/08 6.52
- - -------------------------------------------------------------------------------------------------------------------
A-MF2 83,134,000 29.75 Aaa/AAA 8.92 78 - 118 06/15/08 6.53
- - -------------------------------------------------------------------------------------------------------------------
X(6) 1,107,291,368(2) ---- Aaa/AAA 9.66 ---- 07/15/23 Variable Rate(7)
- - -------------------------------------------------------------------------------------------------------------------
B 55,364,000 24.75 Aa2/AA 9.80 118 - 118 06/15/08 6.88
- - -------------------------------------------------------------------------------------------------------------------
C 60,901,000 19.25 A2/A 9.85 118 - 119 07/15/08 7.13
- - -------------------------------------------------------------------------------------------------------------------
D 60,901,000 13.75 Baa2/BBB 11.00 119 - 161 01/15/12 7.35
- - -------------------------------------------------------------------------------------------------------------------
E 19,378,000 12.00 Baa3/BBB- 14.00 161 - 172 12/15/12 7.35
- - -------------------------------------------------------------------------------------------------------------------
F(6) 22,146,000 10.00 Ba1/BB+ 14.31 172 - 174 02/15/13 7.35
- - -------------------------------------------------------------------------------------------------------------------
G(6) 33,218,000 7.00 Ba2/BB 14.57 174 - 176 04/15/13 7.35
- - -------------------------------------------------------------------------------------------------------------------
H(6) 11,073,000 6.00 Ba3/BB- 14.67 176 - 177 05/15/13 6.33
- - -------------------------------------------------------------------------------------------------------------------
J(6) 11,073,000 5.00 B1/B+ 14.74 177 - 179 07/15/13 6.33
- - -------------------------------------------------------------------------------------------------------------------
K(6) 19,378,000 3.25 B2/NR 16.47 179 - 216 08/15/16 6.33
- - -------------------------------------------------------------------------------------------------------------------
L(6) 11,073,000 2.25 B3/NR 18.68 216 - 233 01/15/18 6.33
- - -------------------------------------------------------------------------------------------------------------------
M(6) 5,536,000 1.75 Caa2/NR 19.53 233 - 235 03/15/18 6.33
- - -------------------------------------------------------------------------------------------------------------------
N(6) 19,378,368 0.00 NR/NR 20.84 235 - 299 07/15/23 6.33
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Class Q, Class R-1, Class R-II and Class R-III Certificates are not
represented in this table.
Note (1) In the case of each such Class, subject to a permitted
variance of plus or minus 5%.
(2) Class X Notional Amount is equal to the sum of all
Certificate Balances outstanding from time to time.
(3) Based on Maturity Assumptions described in the Prospectus
Supplement.
(4) Principal Window is the period (expressed in terms of
months and commencing with the month of the first
Distribution Date) during which distributions of
principal are expected to be made to the holders of each
designated Class in accordance with the Maturity
Assumptions.
(5) Other than the Class X, each Class of Certificates will
accrue interest generally at a fixed rate of interest
except in limited circumstances as described in the
Prospectus Supplement.
(6) To be offered privately.
(7) The Class X Notional Amount is equal to the sum of all
Certificate Balances outstanding from time to time. The
Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the weighted
average of the Class X Strip Rates for the respective
Principal Balance Certificates for such Distribution
Date. The Class X Strip Rate in respect of any Class of
Principal Balance Certificates will, in general, equal
the excess, if any, of the Weighted Average Net Rate over
the Pass-Through Rate applicable to such Class of
Principal Balance Certificates.
T-1
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
I. ISSUE CHARACTERISTICS
Issue Type: Public: Class A-1, A-2, A-MF1, A-MF2, B,
C, D and E Private (Rule 144A): Class X,
F, G, H, J, K, L, M and N
Securities Offered: $974,416,000 monthly pay, multi-class
sequential pay commercial mortgage REMIC
Pass-Through Certificates, including eight
fixed-rate principal and interest classes
(A-1, A-2, A-MF1, A-MF2, B, C, D and E).
Collateral: The collateral consists of a $1,107,291,368
pool of generally fixed-rate commercial and
multifamily Mortgage Loans.
Loan Groups: The Mortgage Loans comprise three separate
groups, Loan Group 1, Loan Group 2 and Loan
Group 3. Loan Group 2 consists of 35
Mortgage Loans, representing approximately
10.3% of the Initial Pool Balance, each of
which is a Multifamily Loan with a
remaining term to scheduled maturity or
Anticipated Repayment Date of 118 months or
less. Loan Group 3 consists of 29 Mortgage
Loans, representing approximately 8.6% of
the Initial Pool Balance, each of which is
a Multifamily L scheduled maturity or
Anticipated Repayment Date of 118 months or
less. Loan Group 1 will consist of the
remaining 316 Mortgage Loans, representing
approximately 81.1% of the Initial Pool
Balance.
Sellers: ContiTrade Services L.L.C. ("ContiTrade),
Morgan Stanley Mortgage Capital Inc.
("MSMC") and Red Mountain Funding, L.L.C.
("RMF")
Co-Lead Managers: Morgan Stanley & Co. Incorporated and
Deutsche Bank Securities Inc.
(Investment-grade classes only)
Master Servicer: AMRESCO Services, L.P.
Special Servicer: Lennar Partners, Inc.
Trustee: LaSalle National Bank
Pricing Date: August 13, 1998
Closing Date: On or about August 27, 1998
Distribution Dates: The 15th of each month, commencing
September 15, 1998
Minimum Denominations: $5,000 for Class A Certificates; $50,000
for all other publicly offered Certificates
Settlement Terms: DTC, Euroclear and Cedel, same day funds,
with accrued interest
T-2
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Legal/Regulatory Status: Class A-1, A-2, A-MF1, A-MF2 and X
Certificates are expected to be eligible
for exemptive relief under ERISA. No Class
of Certificates is SMMEA eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK
AND MAY NOT BE SUITABLE FOR ALL INVESTORS.
SEE THE "RISK FACTORS AND OTHER SPECIAL
CONSIDERATIONS" SECTION OF THE PROSPECTUS
SUPPLEMENT AND THE "RISK FACTORS" SECTION
OF THE PROSPECTUS.
T-3
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
II. STRUCTURAL CHARACTERISTICS
The Certificates (other than the Class X, Q and R Certificates) are fixed-rate,
monthly pay, multi-class, sequential pay REMIC Pass-Through Certificates. The
Class X Certificates are variable rate interest only REMIC Pass-Through
Certificates. All Classes of Certificates (other than the Classes A-MF1 and
A-MF2) derive their cash flows from the entire pool of Mortgage Loans.
[GRAPHIC OMITTED]
Note: The Mortgage Loans comprise three separate groups, Loan Group 1, Loan
Group 2 and Loan Group 3 (each a "Loan Group"). Loan Group 2 will
consist of 35 Mortgage Loans, representing approximately 10.3% of the
Initial Pool Balance, each of which is a Multifamily Loan and as of
the Cut-Off Date has a remaining term to scheduled maturity or ARD of
118 months or less. Loan Group 3 will consist of 29 Mortgage Loans,
representing approximately 8.6% of the Initial Pool Balance, each of
which is a Multifamily Loan and as of the Cut-Off Date has a remaining
term to scheduled maturity or ARD of 118 months or less. Loan Group 1
will consist of the remaining 316 Mortgage Loans representing
approximately 81.1% of the Initial Pool Balance. Balloon Payments and
unscheduled payments of principal on the Mortgage Loans in Loan Group
2 (the "A-MF1 Principal Amount") will be paid first to the Class A-MF1
Certificates. Balloon Payments and unscheduled payments of principal
on the Mortgage Loans in Loan Group 3 (the "A-MF2 Principal Amount")
will be paid first to the Class A-MF2 Certificates. All remaining
payments in respect of principal, including Balloon Payments and
unscheduled payments of principal on the Mortgage Loans in Loan Group
1 and scheduled payments (other than Balloon Payments) of principal on
all Mortgage Loans, will be paid sequentially to the Class A-1 and A-2
Certificates, pro rata to the Class A-MF1 and A-MF2 Certificates, and
sequentially to the remaining Classes of Certificates as described in
the Prospectus Supplement.
T-4
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Interest Distributions: Each Class of Certificates (other
than the Class Q and R Certificates)
will be entitled on each Distribution
Date to interest accrued at its
Pass-Through Rate on the outstanding
Certificate Balance or Notional
Amount of such Class, as applicable.
<TABLE>
<CAPTION>
<S> <C> <C>
Pass-Through Rates: Class A-1: 6.33%
Class A-2: 6.60%
Class A-MF1: 6.52%
Class A-MF2: 6.53%
Class B: 6.88%
Class C: 7.13%
Class D: 7.35%
Class E: 7.35%
Class F: 7.35%
Class G: 7.35%
Class H: 6.33%
Class J: 6.33%
Class K: 6.33%
Class L: 6.33%
Class M: 6.33%
Class N: 6.33%
Class X: See footnote 7 on page T-1.
</TABLE>
The Pass-Through Rate for each class
of Principal Balance Certificates for
any Distribution Date will not exceed
the Weighted Average Net Mortgage
Rate ("NWAC") for such Distribution
Date.
Principal Distributions: Principal (except for the A-MF1 and
A-MF2 Principal Distribution Amounts)
will be distributed on each
Distribution Date to the most senior
Class (i.e., the Class with the
earliest alphabetical/numerical Class
designation) of the Principal Balance
Certificates outstanding, until its
Certificate Balance is reduced to
zero (in sequential order except with
respect to the Class A-MF1 and Class
A-MF2 Certificates, which are paid
pro rata). If, due to losses, the
Certifi Class N Certificates are
reduced to zero or Appraisal
Reductions exceed the aggregate
Certificate Balance of the
Subordinate Certificates, payments of
principal to the Class A-1, A-2,
A-MF1 and A-MF2 Certificates will be
made on a pro rata basis.
T-5
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Prepayment Premium Allocation: Prepayment Premiums collected on the
Mortgage Loans during the related Due
Period will be distributed separately
from the Available Distribution
Amount from the respective Loan
Groups among the Class X Certificates
and the Principal Balance
Certificates (other than Classes F,
G, H, J, K, L, M and N) in the manner
and priority described in the
Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES -
Distributions of Prepayment
Premiums."
Credit Enhancement: Each Class of Certificates (other than
Classes A-1, A-2, A-MF1, A-MF2 and X)
will be subordinate to all other
Classes with an earlier alphabetical
Class designation.
Advancing: The Master Servicer, the Trustee, and
the Fiscal Agent (in that order) will
each be obligated to make P&I
Advances and Servicing Advances,
including delinquent property taxes
and insurance premiums, but only to
the extent that such Advances are
deemed recoverable.
Realized Losses and Expense Losses: Realized Losses and Expense Losses,
if any, will be allocated to the
Class N, Class M, Class L, Class K,
Class J, Class H, Class G, Class F,
Class E, Class D, Class C and Class B
Certificates, in that order, and then
to Classes A-1, A-2, A-MF1 and A-MF2,
and with respect to losses allocated
to interest, Class X Certificates,
pro rata, in each case reducing
amounts payable thereto. Any interest
shortfall of any Class of
Certificates will result in unpaid
interest for such Class which,
together with interest thereon
compounded monthly at one-twelfth the
applicable Pass-Through Rate for such
Class, will be payable in subsequent
periods, subject to available funds.
Prepayment Interest Shortfalls: For any Distribution date, to the
extent that aggregate Prepayment
Interest Shortfalls exceed the
aggregate Prepayment Interest
Excesses for the related Collection
Period, such amount will reduce the
aggregate Master Servicing Fee for
such Collection Period (such
reduction not to exceed 0.15% per
annum appied to all of the Mortgage
Loans). On such Distribution date,
any Prepayment Interest Shortfall not
offset in such manner will generally
be allocated among the respective
Classes of Certificates pro rata, inc
each case reducing interest otherwise
payable thereon. Any interest
shortfall of any Class of
Certificates will result in unpaid
interest for such Class which,
together with interest thereon
compounded monthly at one-twelfth the
applicable Pass-Through Rate for such
Class, will be payable in subsequent
periods, subject to available funds.
T-6
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Appraisal Reductions: An appraisal reduction generally will
be created in the amount, if any, by
which the Principal Balance of a
Specially Serviced Mortgage Loan
(plus other amounts overdue in
connection with such loan) exceeds
90% of the appraised value of the
related Mortgaged Property. The
Appraisal Reduction Amount will
reduce proportionately the amount of
P&I Advances for such Mortgage loan,
which reduction will result, in
general, in a reduction of interest
distributable to the Balance
Certificate outstanding.
An Appraisal Reduction will be
reduced to zero as of the date the
related Mortgage Loan has been
brought current for at least three
consecutive months.
Operating Adviser: The Operating Adviser, which may be
appointed by the Controlling Class,
will have the right to be notified by
the Special Servicer with respect to
certain actions regarding Specially
Serviced Mortgage Loans. Examples
include the right to make certain
modifications, foreclose, sell, bring
an REO Property into environmental
compliance or accept substitute or
additional collateral. In addition,
subject to satisfaction of certain
conditions, the Operating Adviser wi
Trustee to remove the Special
Servicer and appoint a successor
Special Servicer that must be
acceptable to each Rating Agency.
Healthcare Adviser: The Healthcare Adviser, which may be
appointed by the Controlling Class,
will provide the Master Servicer, the
Special Servicer and the Controlling
Class with advice with respect to
certain Healthcare Loans and
Healthcare Properties contributed by
RMF and ContiTrade. The initial
Healthcare Adviser will be Survey,
LLC, an entity specializing in
providing oversight management
services and consulting services to
lenders to long-term care facilities
in areas of regul effectiveness, an
affiliate of RMF. The Healthcare
Adviser may be removed at any time by
the written vote of the Controlling
Class.
Controlling Class: The Controlling Class will generally
be the most subordinate Class of
Certificates outstanding at any time
or, if the Certificate Balance of
such Class is less than 50% (or for
Class N, 20%) of the initial
Certificate Balance of such Class,
the next most subordinate Class of
Principal Balance Certificates.
T-7
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Special Servicer: In general, the Special Servicer has
the right to modify the terms of a
Specially Serviced Mortgage Loan if
it determines that such modification
would increase the net present value
of the proceeds to the Trust,
provided that the Special Servicer
generally may not extend the maturity
date of a Mortgage Loan beyond two
years prior to the Final Rated
Distribution Date, grant more than
three one-year extensions of the
maturity date of a Mortgage Loan
which has a belo Rate to a rate below
the market rate or defer interest due
in excess of 10% of the Scheduled
Principal Balance of such Mortgage
Loan.
Optional Termination: The Depositor, then the Master
Servicer, then the Special Servicer
and then the holder of a majority of
the R-I Certificates will have the
option to purchase, in whole but not
in part, the remaining assets of the
Trust on or after the Distribution
Date on which the aggregate
Certificate Balance of all Classes of
Certificates then outstanding is less
than or equal to 1% of the Initial
Pool Balance. Such purchase price
will generally be at a price equal to
the unpa Balance of the Mortgage
Loans, plus accrued and unpaid
interest and unreimbursed Advances.
Reports to
Certificateholders: The Trustee will prepare and deliver
monthly Certificateholder Reports.
The Special Servicer will prepare and
deliver to the Trustee a monthly
Special Servicer Report summarizing
the status of each Specially Serviced
Mortgage Loan. The Master Servicer
and the Special Servicer will prepare
and deliver to the Trustee an annual
report setting forth, among other
things, the debt service coverage
ratio for each Mortgage Loan, as
available. Each of the reports will
be av report containing information
regarding the Mortgage Loans will be
available electronically.
T-8
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
III. ORIGINATORS ContiTrade Services L.L.C.
The Mortgage Pool includes 259
Mortgage Loans, representing
approximately 54.7% of the Initial
Pool Balance, originated by
ContiTrade. ContiTrade was organized
under the laws of the State of
Delaware on June 1, 1995 and is an
indirect wholly-owned subsidiary of
ContiFinancial Corporation, a
Delaware corporation. ContiFinancial
Corporation is a majority-owned
subsidiary of Continental Grain
Company. ContiTrade is also an
affiliate of ContiFinancial Services
Corpo ContiFinancial Corporation
engages in the consumer and
commercial finance business by
originating and servicing home equity
mortgage loans, providing financing
and asset securitization expertise to
originators of a broad range of
loans, leases and receivables, and
acquiring and selling commercial and
home equity mortgage loans.
ContiTrade was organized, among other
things, for the purposes of acquiring
and selling mortgage assets. Through
its commercial and multi , ContiTrade
purchases commercial mortgage loans
from its select correspondent
network, then pools loans for
securitization. Each of the Mortgage
Loans sold to the Depositor by
ContiTrade was originated by or
acquired from one of the participants
in ContiTrade's ContiMAP(R) conduit
program or purchased in the secondary
market in accordance with ContiMAP(R)
guidelines. The principal executive
offices of ContiTrade are located at
277 Park Avenue, New York, New York
10172. Its telephone number is (212)
207-2800
Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 83
Mortgage Loans, representing
approximately 29.4% of the Initial
Pool Balance, either acquired or
originated by or on behalf of Morgan
Stanley Mortgage Capital Inc.
("MSMC"). MSMC is a subsidiary of
Morgan Stanley & Co. Incorporated
that was formed to originate and
purchase mortgage loans secured by
commercial and multifamily real
estate. The principal executive
offices of MSMC are located at 1585
Broadway, New York, NY 10036. Its
telephone number is (212) 761-4700.
T-9
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
Red Mountain Funding L.L.C.
The Mortgage Pool includes 38
Mortgage Loans, representing
approximately 15.9% of the Initial
Pool Balance, originated or acquired
by RMF. RMF is a limited liability
company organized under the laws of
the State of Delaware in 1997. It is
owned by ContiTrade, Health Care
Capital Finance, L.L.C. ("HCCF"),
based in Atlanta, Georgia and Survey,
L.L.C. ("Survey LLC"). RMF was
created to originate and purchase,
aggregate and warehouse commercial
mortgage loans for se only to fund
loans, RMF works in conjunction with
PRN Mortgage Capital, L.L.C. ("PRN"),
which operates as RMF's exclusive
underwriting agent for healthcare
loans. PRN is an Alabama, limited
liability company, which operates as
a commercial mortgage bank
specializing in lending to the
long-term care and senior housing
industry by placing loans with
various outside funding sources. RMF
also purchases multifamily and
commercial mortgage loans from
SouthTrust Capital are located at 420
North 20th Street, 9th floor,
Birmingham, Alabama 35203. Its
telephone number is (205) 254-5771.
T-10
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
IV. COLLATERAL DESCRIPTION
Summary: The Mortgage Pool consists of a
$1,107,291,368 pool of 380 generally
fixed-rate, first lien, mortgage
loans secured by first liens on
commercial and multifamily properties
located throughout 39 states. As of
the Cut-Off Date, the Mortgage Loans
have a weighted average mortgage rate
of 7.602% and a weighted average
remaining term to maturity of 134
months. See the Appendices to the
Prospectus Supplement for more
detailed collateral information.
T-11
<PAGE>
$974,416,000
(APPROXIMATE)
MORGAN STANLEY CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
<TABLE>
<CAPTION>
PROPERTY SUMMARY
- - --------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED
INITIAL POOL WEIGHTED AVERAGE AVERAGE
AGGREGATE BALANCE AS AVERAGE REMAINING DEBT SERVICE WEIGHTED
NUMBER BALANCE AS OF OF CUT-OFF MORTGAGE TERM TO COVERAGE AVERAGE LOAN
PROPERTY TYPE OF LOANS CUT-OFF DATE ($) DATE (%) RATE (%) MATURITY (MOS.) RATIO (X) TO VALUE (%)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily 78 255,883,955 23.11 7.303 129 1.35 73.8
- - --------------------------------------------------------------------------------------------------------------------------
Retail 94 248,855,698 22.47 7.449 148 1.34 72.0
- - --------------------------------------------------------------------------------------------------------------------------
Hospitality 41 135,409,194 12.23 7.815 129 1.50 68.1
- - --------------------------------------------------------------------------------------------------------------------------
Healthcare 37 125,629,939 11.35 8.080 151 1.52 75.7
- - --------------------------------------------------------------------------------------------------------------------------
Office 40 121,464,206 10.97 7.706 122 1.37 65.0
- - --------------------------------------------------------------------------------------------------------------------------
Industrial 32 87,012,374 7.86 7.763 116 1.32 68.9
- - --------------------------------------------------------------------------------------------------------------------------
Mixed Use 21 80,691,006 7.29 7.402 116 1.38 70.2
- - --------------------------------------------------------------------------------------------------------------------------
Self Storage 16 25,011,017 2.26 7.844 151 1.39 67.0
- - --------------------------------------------------------------------------------------------------------------------------
Mobile Home Park 13 18,868,494 1.70 7.440 118 1.51 77.1
- - --------------------------------------------------------------------------------------------------------------------------
Other 8 8,465,484 0.76 8.997 232 1.66 68.9
- - --------------------------------------------------------------------------------------------------------------------------
TOTAL: 380 1,107,291,368 100.00 7.602 134 1.39 71.2
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
WA 4.8% OR 1.5% NV 0.4% CA 22.0% UT 0.1%
AZ 0.9% CO 0.6% NM 0.4% KS 0.3% TX 7.9%
MN 0.1% IA 0.3% MO 0.4% AR 0.2% LA 2.8%
WI 3.9% IL 3.5% MS 0.2% MI 0.0% IN 0.5%
KY 0.7% TN 2.0% AL 0.5% GA 4.7% NY 7.2%
PA 2.7% VA 2.0% NC 1.5% SC 0.7% FL 10.7%
VT 0.2% NH 3.0% ME 0.3% MA 2.9% CT 0.3%
NJ 5.9% MD 0.9% OH 2.8%
Note: 0.2% of Aggregate Balance as of Cut-Off Date is located in Alaska
T-12
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
WAC:
WAMM:
Number Of Pages
---------------
Table Of Contents
Total Pages Included In This Package
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
------------------------------------------------------------------------------
Information is available for this issue from the following sources
------------------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (312) 904-2200
ASAP #:
Monthly Data File Name:
==============================================================================
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
WAC:
WAMM:
<TABLE>
<CAPTION>
=================================================================================================
Original Opening Principal Principal
Class Face Value (1) Balance Payment Adj. or Loss
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00
=================================================================================================
</TABLE>
(Restubbed from Above Table)
<TABLE>
<CAPTION>
========================================================================================
Negative Closing Interest Interest Pass-Through
Amortization Balance Payment Adjustment Rate (2)
Per $1,000 Per $1,000 Per $1,000 Per $1,000 Next Rate (3)
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00
========================================================================================
=======================================
Total P&I Payment 0.00
=======================================
</TABLE>
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60674-4107 Other Related Information
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Servicer / Pool Information
Beginning Scheduled Unscheduled Realized Ending Scheduled Prepayment Interest
Balance Principal Principal Losses Balance Interest Shortfall Excess
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Beginning Ending Gross W/Avg Months Prepayment Disposition
Loan Count Loan Count Servicing Fees to Maturity Penalties Fees
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Current Cumulative
Unpaid Unpaid
Class Interest Interest
----------------------------------------------------------------------
<S> <C> <C>
-----------------------------------------------------------------------
Total
-----------------------------------------------------------------------
</TABLE>
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60674-4107 Other Related Information
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
P&I Advances made by: Beginning Current Ending
Unreimbursed Period Reimbursed Unreimbursed
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Servicer
Trustee
Fiscal Agent
- - ----------------------------------------------------------------------------------------------------------
Total P&I Advances
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
Summary of Expenses:
Current Period Servicing Fees
Current Period Trustee Fees
Current Period Special Servicing Fees
Principal Recovery Fees
Other Servicing Compensation - Interest on Advances
Total
Net Aggregate PPIS Allocable to the Bonds
Trust Fund Expenses
Current Realized Losses on Mortgage Loans
Cumulative Realized Losses on Mortgage Loans
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60674-4107 Other Related Information
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
REO PROPERTY SOLD OF DISPOSED OF DURING THE RELATED COLLECTION PERIOD
Portion Final
Realized Included in Recovery
Loan Loss Sale Other Available Determination
Number Attributable Proceeds Proceeds Funds Date
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1
2
3
==========================================================================================================
Totals
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
REO PROPERTY INCLUDED IN THE TRUST
Most Aggregate Aggregate Portion
Recent Amount Amount Included in
Loan Appraisal of Net of Other Available
Number Valuation Income Revenues Funds
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1
2
3
==========================================================================================================
Totals
==========================================================================================================
</TABLE>
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60674-4107 Other Related Information
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
MORTGAGED PROPERTIES THAT BECAME REO DURING THE PRECEDING CALENDAR MONTH
Unpaid
Debt Principal
Service Stated Balance
Loan Property Coverage Principal as of REO
Number City State Type Ratio Balance Date
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
=========================================================================================================================
Totals
=========================================================================================================================
</TABLE>
------------------------------------------------------------------
Appraisal Reduction Amounts
Loan Current Total
Number Period Reduction
------------------------------------------------------------------
1
2
3
==================================================================
Totals 0.00
==================================================================
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
===================================================================================================
Distribution Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure/Bankruptcy
======================================================================================
Date # Balance # Balance # Balance # Balance
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
08/17/98 0 0 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
</TABLE>
(Restubbed from Above Table)
<TABLE>
<CAPTION>
======================================================================================
REO Modifications Prepayments Curr Weighted Avg.
======================================================================================
# Balance # Balance # Balance Coupon Remit
======================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
</TABLE>
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency
Aging Category
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
Delinquent Loan Detail
=================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
================================================================
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but (less than) one month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
=================================================================
** Outstanding P&I Advances include the current period P&I Advance
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603 Pool Total
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
Distribution of Principal Balances
- - --------------------------------------------------------------------
(2) Current Scheduled Number (2) Scheduled Based on
Balances of Loans Balance Balance
====================================================================
<S> <C> <C> <C>
$0 to $500,000
$500,000 to $1,000,000
$1,000,000 to $1,500,000
$1,500,000 to $2,000,000
$2,000,000 to $2,500,000
$2,500,000 to $3,000,000
$3,000,000 to $3,500,000
$3,500,000 to $4,000,000
$4,000,000 to $5,000,000
$5,000,000 to $6,000,000
$6,000,000 to $7,000,000
$7,000,000 to $8,000,000
$8,000,000 to $9,000,000
$9,000,000 to $10,000,000
$10,000,000 to $11,000,000
$11,000,000 to $12,000,000
$12,000,000 to $13,000,000
$13,000,000 to $14,000,000
$14,000,000 to $15,000,000
$15,000,000 & Above
- - --------------------------------------------------------------------
Total 0 0 0.00%
- - --------------------------------------------------------------------
Average Scheduled Balance is 0
Maximum Scheduled Balance is 0
Minimum Scheduled Balance is 0
</TABLE>
<TABLE>
<CAPTION>
Distribution of Property Types
------------------------------------------------------
Number (2) Scheduled Based on
Property Types of Loans Balance Balance
======================================================
<S> <C> <C> <C>
------------------------------------------------------
Total 0 0 0.00%
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Distribution of Mortgage Interest Rates
------------------------------------------------------
Current Mortgage Number (2) Scheduled Based on
Interest Rate of Loans Balance Balance
======================================================
<S> <C> <C> <C>
7.000% or less
7.000% to 7.125%
7.125% to 7.375%
7.375% to 7.625%
7.625% to 7.875%
7.875% to 8.125%
8.125% to 8.375%
8.375% to 8.625%
8.625% to 8.875%
8.875% to 9.125%
9.125% to 9.375%
9.375% to 9.625%
9.625% to 9.875%
9.875% to 10.125%
10.125% & Above
------------------------------------------------------
Total 0 0 0.00%
------------------------------------------------------
W/Avg Mortgage Interest Rate is 0.0000%
Minimum Mortgage Interest Rate is 0.0000%
Maximum Mortgage Interest Rate is 0.0000%
</TABLE>
<TABLE>
<CAPTION>
Geographic Distribution
- - -----------------------------------------------------------
Number (2) Scheduled Based on
Geographic Location of Loans Balance Balance
===========================================================
<S> <C> <C> <C>
--------------------------------------------------------
Total 0 0 0.00%
--------------------------------------------------------
</TABLE>
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603 Pool Total
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
LOAN SEASONING
- - --------------------------------------------------------------------
Number (2) Scheduled Based on
Number of Years of Loans Balance Balance
====================================================================
<S> <C> <C> <C>
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
</TABLE>
Weighted Average Seasoning is 0.0
<TABLE>
<CAPTION>
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
- - ------------------------------------------------------
Fully Amortizing Number (2) Scheduled Based on '
Mortgage Loans of Loans Balance Balance
======================================================
<S> <C> <C> <C>
60 months or less
61 to 120 months
121 to 180 months
181 to 240 months
241 to 360 months
- - ------------------------------------------------------
Total 0 0 0.00%
- - ------------------------------------------------------
</TABLE>
Weighted Average Months to Maturity is 0
<TABLE>
<CAPTION>
DISTRIBUTION OF DSCR
- - -----------------------------------------------------------
Debt Service Number (2) Scheduled Based on
Coverage Ratio(1) of Loans Balance Balance
===========================================================
<S> <C>
0.500 or less
0.500 to 0.625
0.625 to 0.750
0.750 to 0.875
0.875 to 1.000
1.000 to 1.125
1.125 to 1.250
1.250 to 1.375
1.375 to 1.500
1.500 to 1.625
1.625 to 1.750
1.750 to 1.875
1.875 to 2.125
2.125 & above
Unknown
- - -----------------------------------------------------------
Total 0 0 0.00%
- - -----------------------------------------------------------
</TABLE>
Weighted Average Debt Service Coverage Ratio is 0.000
<TABLE>
<CAPTION>
DISTRIBUTION OF AMORTIZATION TYPE
- - --------------------------------------------------------------------
Number (2) Scheduled Based on
Amortization Type of Loans Balance Balance
====================================================================
<S> <C> <C> <C>
- - --------------------------------------------------------------------
Total 0 0 0.00%
- - --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
------------------------------------------------------
Balloon Number (2) Scheduled Based on
Mortgage Loans of Loans Balance Balance
======================================================
<S> <C> <C> <C>
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 240 months
------------------------------------------------------
Total 0 0 0.00%
------------------------------------------------------
</TABLE>
Weighted Average Months to Maturity is 0
<TABLE>
<CAPTION>
NOI AGING
- - -----------------------------------------------------------
Number (2) Scheduled Based on
NOI Date of Loans Balance Balance
===========================================================
<S> <C> <C> <C>
1 year or less
1 to 2 years
2 Years or More
Unknown
- - -----------------------------------------------------------
Total 0 0 0.00%
- - -----------------------------------------------------------
</TABLE>
(1) Debt Service Coverage Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures became available from
borrowers on an asset level. Neither the Trustee, Servicer, Special
Servicer or Underwriter makes any representation as to the accuracy of the
data provided by the borrower for this calculation.
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603 Pool Total
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
Distribution of Maximum Rates
- - --------------------------------------------------------------------
Number (2) Scheduled Based on
Maximum Rates of Loans Balance Balance
====================================================================
<S> <C> <C> <C>
No Maximum
0.01% to 12.00%
12.01% to 12.50%
12.51% to 13.00%
13.01% to 13.50%
13.51% to 14.00%
14.01% to 14.50%
14.51% to 15.00%
15.01% to 15.50%
15.51% to 16.00%
16.01% to 16.50%
16.51% to% 17.00%
17.01% to% 17.50%
Fixed Rate Mortgage
- - --------------------------------------------------------------------
0 0 0.00%
- - --------------------------------------------------------------------
</TABLE>
Weighted Average for Mtge with a Maximum Rate is 13.49%
<TABLE>
<CAPTION>
Distribution of Indices of Mortgage Loans
- - -----------------------------------------------------------------------------
Number (2) Scheduled Based on
Indices of Loans Balance Balance
=============================================================================
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------
Total 0 0 0.00%
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF MINIMUM RATES
- - -----------------------------------------------------------
Number (2) Scheduled Based on
Minimum Rates (1) of Loans Balance Balance
===========================================================
<S> <C> <C> <C>
No Minimum
0.010% to 3.000%
3.010% to 3.500%
3.510% to 4.000%
4.010% to 4.500%
4.510% to 5.000%
5.010% to 5.500%
5.510% to 6.000%
6.010% to 6.500%
6.510% to 7.000%
7.010% to 7.500%
7.510% to 8.000%
8.010% to 8.500%
8.510% to 99.000%
Fixed Rate Mortgage
- - -----------------------------------------------------------
0 0 0.00%
- - -----------------------------------------------------------
</TABLE>
Weighted Average for Mtge with a Minimum Rate is 0.00%
<TABLE>
<CAPTION>
DISTRIBUTION OF PAYMENT ADJUSTMENT
- - --------------------------------------------------------------------
Interest Adjustment Number (2) Scheduled Based on
Frequency Loans Balance Balance
====================================================================
<S> <C> <C> <C>
- - --------------------------------------------------------------------
Total 0 0 0.00%
- - --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTION OF MORTGAGE LOAN MARGINS
------------------------------------------------------
Mortgage Number (2) Scheduled Based on
Loan Margins Loans Balance Balance
------------------------------------------------------
<S> <C> <C> <C>
No Margin
0.000% to 0.000%
0.010% to 1.000%
0.010% to 1.500%
0.510% to 2.000%
2.010% to 2.500%
2.510% to 3.000%
3.010% to 3.500%
3.510% to 3.500%
4.010% to 4.500%
4.510% & Above
Fixed Rate Mortgage
------------------------------------------------------
Total 0 0 0.00%
------------------------------------------------------
</TABLE>
Weighted Average for Mtge with a Margin is 0.00%
(1) For adjustable mortgage loans where a minimum rate
does not exist the gross margin was used.
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF INTEREST ADJUSTMENT
- - ------------------------------------------------------------------------------
Payment Adjustment Number (2) Scheduled Based on
Frequency Loans Balance Balance
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------
0 0 0.00%
- - ------------------------------------------------------------------------------
</TABLE>
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
SPECIALLY SERVICED LOAN DETAIL
========================================================================================================================
Beginning Specially
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code (1) Comments
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
========================================================================================================================
</TABLE>
(1)Legend :
1) Request for waiver of Prepayment Penalty
2) Payment default
3) Request for Loan Modification or Workout
4) Loan with Borrower Bankruptcy
5) Loan in Process of Foreclosure
6) Loan now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
APPENDIX A
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
<TABLE>
<CAPTION>
MODIFIED LOAN DETAIL
===========================================================================================================================
Disclosure Modification Modification
Control # Date Description
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
==========================================================================================================================
</TABLE>
Appendix B
<PAGE>
ABN AMRO Morgan Stanley Capital I Inc.
LaSalle National Bank Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Statement Date: 08/17/98
Payment Date: 08/17/98
Prior Payment: NA
Record Date: 07/31/98
REALIZED LOSS DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Date Control # Date Value Balance Proceeds Sched Principal Expenses * Proceeds Sched. Balance Loss
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Current Total 0.00 0.00 0.00 0.00 0.00
Cumulative 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
</TABLE>
APPENDIX C
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc..
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
MORGAN STANLEY CAPITAL I INC.
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus
(the "Offered Certificates") will be offered from time to time in one or more
series. Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") consisting of one or more segregated pools of various types of
multifamily or commercial mortgage loans (the "Mortgage Loans"), mortgage
participations, mortgage pass-through certificates, mortgage-backed securities
evidencing interests therein or secured thereby (the "MBS"), certain direct
obligations of the United States, agencies thereof or agencies created thereby
(the "Government Securities") or a combination of Mortgage Loans, MBS and/or
Government Securities (with respect to any series, collectively, "Assets"). If
so specified in the related Prospectus Supplement, some or all of the Mortgage
Loans will include assignments of the leases of the related Mortgaged
Properties (as defined herein) and/or assignments of the rental payments due
from the lessees under such leases (each type of assignment, a "Lease
Assignment"). A significant or the sole source of payments on certain
Commercial Loans (as defined herein) and, therefore, of distributions on
certain series of Certificates, will be such rent payments. The Mortgage Loans
and MBS are collectively referred to herein as the "Mortgage Assets." If so
specified in the related Prospectus Supplement, the Trust Fund for a series of
Certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, or any combination thereof
(with respect to any series, collectively, "Credit Support"), and currency or
interest rate exchange agreements and other financial assets, or any
combination thereof (with respect to any series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds," "Description of the
Certificates" and "Description of Credit Support."
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing 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 sequentially, based on specified payment
schedules or other methodologies; and/or (vii) provide for distributions based
on a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, to the extent of available funds,
in each case as described in the related Prospectus Supplement. Any such
classes may include classes of Offered Certificates. See "Description of the
Certificates."
(cover continued on next page)
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 OR THE RELATED
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Investors should consider, among other things, certain risks set forth
under the caption "Risk Factors" herein and in the related Prospectus
Supplement.
Prior to issuance there will have been no market for the Certificates
of any series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. 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.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.
MORGAN STANLEY & CO. INCORPORATED
AUGUST 3, 1998
<PAGE>
Principal and interest with respect to Certificates will be
distributable monthly, quarterly, semi-annually or at such other intervals and
on the dates specified in the related Prospectus Supplement. Distributions on
the Certificates of any series will be made only from the assets of the related
Trust Fund.
The Certificates of each series will not represent an obligation of or
interest in the Depositor, Morgan Stanley & Co. Incorporated, any Master
Servicer, any Sub-Servicer, any Special Servicer or any of their respective
affiliates, except to the limited extent described herein and in the related
Prospectus Supplement. Neither the Certificates nor any assets in the related
Trust Fund will be guaranteed or insured by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the
related Prospectus Supplement. The assets in each Trust Fund will be held in
trust for the benefit of the holders of the related series of Certificates
pursuant to a Pooling and Servicing Agreement or a Trust Agreement, as more
fully described herein.
The yield on each class of Certificates of a series will be affected
by, among other things, the rate of payment of principal (including
prepayments, repurchase and defaults) on the Mortgage Assets in the related
Trust Fund and the timing of receipt of such payments as described under the
caption "Yield Considerations" herein and in the related Prospectus Supplement.
A Trust Fund may be subject to early termination under the circumstances
described herein and in the related Prospectus Supplement.
Prospective investors should review the information appearing under
the caption "Risk Factors" herein and such information as may be set forth
under the caption "Risk Factors" in the related Prospectus Supplement before
purchasing any Offered Certificate.
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" for federal income tax
purposes. See also "Certain Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all
dealers effecting transactions in the Offered Certificates covered by such
Prospectus Supplement, whether or not participating in the distribution
thereof, may be required to deliver such Prospectus Supplement and this
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus and Prospectus Supplement when acting as underwriters and with
respect to their unsold allotments or subscriptions. PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement
relating to the Offered Certificates of each series will, among other things,
set forth with respect to such Certificates, as appropriate: (i) a description
of the class or classes of Certificates, the payment provisions with respect to
each such class and the Pass-Through Rate or method of determining the
Pass-Through Rate with respect to each such class; (ii) the aggregate principal
amount and distribution dates relating to such series and, if applicable, the
initial and final scheduled distribution dates for each class; (iii)
information as to the assets comprising the Trust Fund, including the general
characteristics of the assets included therein, including the Mortgage Assets
and any Credit Support and Cash Flow Agreements (with respect to the
Certificates of any series, the "Trust Assets"); (iv) the circumstances, if
any, under which the Trust Fund may be subject to early termination; (v)
additional information with respect to the method of distribution of such
Certificates; (vi) whether one or more REMIC elections will be made and
designation of the regular interests and residual interests; (vii) the
aggregate original percentage ownership interest in the Trust Fund to be
evidenced by each class of Certificates; (viii) information as to any Master
Servicer, any Sub-Servicer, any Special Servicer (or provision for the
appointment thereof) and the Trustee, as applicable; (ix) information as to the
nature and extent of subordination with respect to any class of Certificates
that is subordinate in right of payment to any other class; and (x) whether
such Certificates will be initially issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to
-2-
<PAGE>
the Offered Certificates. This Prospectus and the Prospectus Supplement
relating to each series of Certificates 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, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661; and New York Regional Office,
Seven World Trade Center, New York, New York 10048.
To the extent described in the related Prospectus Supplement, some or
all of the Mortgage Loans may be secured by an assignment of the lessors'
(i.e., the related mortgagors') rights in one or more leases (each, a "Lease")
of the related Mortgaged Property. Unless otherwise specified in the related
Prospectus Supplement, no series of Certificates will represent interests in or
obligations of any lessee (each, a "Lessee") under a Lease. If indicated,
however, in the Prospectus Supplement for a given series, a significant or the
sole source of payments on the Mortgage Loans in such series, and, therefore,
of distributions on such Certificates, will be rental payments due from the
Lessees under the Leases. Under such circumstances, prospective investors in
the related series of Certificates may wish to consider publicly available
information, if any, concerning the Lessees. Reference should be made to the
related Prospectus Supplement for information concerning the Lessees and
whether any such Lessees are subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, as amended.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and any
Prospectus Supplement with respect hereto do not constitute an offer to sell or
a solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus will
be amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders
of Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. Unless and until definitive Certificates are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. Such reports may be
available to holders of interests in the Certificates (the
"Certificateholders") upon request to their respective DTC participants. See
"Description of the Certificates--Reports to Certificateholders" and
"Description of the Agreements--Evidence as to Compliance." The Depositor will
file or cause to be filed with the Commission such periodic reports with
respect to each Trust Fund as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
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, 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).
Requests to the Depositor should be directed in writing to Morgan Stanley
Capital I Inc., c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th
Floor, New York, New York 10036, Attention: John E. Westerfield, or by
telephone at (212) 761-4700. The Depositor has determined that its financial
statements are not material to the offering of any Offered Certificates.
-3-
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION.........................................................2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................3
SUMMARY OF PROSPECTUS.........................................................5
RISK FACTORS.................................................................13
DESCRIPTION OF THE TRUST FUNDS...............................................19
USE OF PROCEEDS..............................................................26
YIELD CONSIDERATIONS.........................................................26
THE DEPOSITOR................................................................29
DESCRIPTION OF THE CERTIFICATES..............................................29
DESCRIPTION OF THE AGREEMENTS................................................37
DESCRIPTION OF CREDIT SUPPORT................................................54
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES...................56
CERTAIN FEDERAL INCOME TAX CONSEQUENCES......................................71
STATE TAX CONSIDERATIONS.....................................................97
CERTAIN ERISA CONSIDERATIONS.................................................97
LEGAL INVESTMENT.............................................................99
PLAN OF DISTRIBUTION........................................................101
LEGAL MATTERS...............................................................102
FINANCIAL INFORMATION.......................................................102
RATING......................................................................102
INDEX OF PRINCIPAL DEFINITIONS..............................................103
-4-
<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 such series. An Index of
Principal Definitions is included at the end of this Prospectus.
Title of Certificates............... Mortgage Pass-Through Certificates,
issuable in series (the "Certificates").
Depositor........................... Morgan Stanley Capital I Inc., a
wholly-owned subsidiary of Morgan Stanley
Group Inc. See "The Depositor."
Master Servicer..................... The master servicer (the "Master
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named in the
related Prospectus Supplement. See
"Description of the
Agreements--Collection and Other
Servicing Procedures."
Special Servicer.................... The special servicer (the "Special
Servicer"), if any, for each series of
Certificates, which may be an affiliate
of the Depositor, will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will
be described, in the related Prospectus
Supplement. See "Description of the
Agreements--Special Servicers."
Trustee............................. The trustee (the "Trustee") for each
series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Agreements--The
Trustee."
The Trust Assets.................... Each series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in a Trust Fund
consisting primarily of:
(a) Mortgage Assets........ The Mortgage Assets with respect to each
series of Certificates will consist of a
pool of multifamily and/or commercial
mortgage loans (collectively, the
"Mortgage Loans") and mortgage
participations, mortgage pass-through
certificates or other mortgage-backed
securities evidencing interests in or
secured by Mortgage Loans (collectively,
the "MBS") or a combination of Mortgage
Loans and MBS. The Mortgage Loans will
not be guaranteed or insured by the
Depositor or any of its affiliates or,
unless otherwise provided in the
Prospectus Supplement, by any
governmental agency or instrumentality or
other person. As more specifically
described herein, the Mortgage Loans will
be secured by first or junior liens on,
or security interests in, properties
consisting of (i) residential properties
consisting of five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii) office
buildings, shopping centers, retail
stores, hotels or motels, nursing homes,
hospitals or other health-care related
facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities or
self-storage facilities, industrial
plants, congregate care facilities, mixed
use or other types of commercial
properties (the
-5-
<PAGE>
"Commercial Properties"). The term
"Mortgaged Properties" shall refer to
Multifamily Properties or Commercial
Properties, or both.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the
related Mortgaged Properties. Unless
otherwise specified in the related
Prospectus Supplement, a significant or
the sole source of payments on certain
Commercial Loans (as defined herein) will
be the rental payments due under the
related Leases. In certain circumstances,
with respect to Commercial Properties,
the material terms and conditions of the
related Leases may be set forth in the
related Prospectus Supplement. See
"Description of the Trust Funds--Mortgage
Loans--Leases" and "Risk Factors--Limited
Assets" herein.
The Mortgaged Properties may be located
in any one of the fifty states, the
District of Columbia or the Commonwealth
of Puerto Rico. The Prospectus Supplement
will indicate additional jurisdictions,
if any, in which the Mortgaged Properties
may be located. Unless otherwise provided
in the related Prospectus Supplement, all
Mortgage Loans will have individual
principal balances at origination of not
less than $25,000 and original terms to
maturity of not more than 40 years. All
Mortgage Loans will have been originated
by persons other than the Depositor, and
all Mortgage Assets will have been
purchased, either directly or indirectly,
by the Depositor on or before the date of
initial issuance of the related series of
Certificates. The related Prospectus
Supplement will indicate if any such
persons are affiliates of the Depositor.
Each Mortgage Loan 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 from an
adjustable to a fixed Mortgage Rate, or
from a fixed to an adjustable Mortgage
Rate, from time to time at the
mortgagor's election, in each case as
described in the related Prospectus
Supplement. Adjustable Mortgage Rates on
the Mortgage Loans in a Trust Fund may be
based on one or more indices. Each
Mortgage Loan may provide for scheduled
payments to maturity, payments that
adjust from time to time to accommodate
changes in the Mortgage Rate or to
reflect the occurrence of certain events,
and may provide for negative amortization
or accelerated amortization, in each case
as described in the related Prospectus
Supplement. Each Mortgage Loan may be
fully amortizing or require a balloon
payment due on its stated maturity date,
in each case as described in the related
Prospectus Supplement. Each Mortgage Loan
may contain prohibitions on prepayment or
require payment of a premium or a yield
maintenance penalty in connection with a
prepayment, in each case as described in
the related Prospectus Supplement. The
Mortgage Loans 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. See "Description of the Trust
Funds--Assets."
-6-
<PAGE>
(b) Government Securities.. If so provided in the related Prospectus
Supplement, the Trust Fund may include,
in addition to Mortgage Assets, certain
direct obligations of the United States,
agencies thereof or agencies created
thereby which provide for payment of
interest and/or principal (collectively,
"Government Securities").
(c) Collection Accounts.... Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders into
which the person or persons designated in
the related Prospectus Supplement will,
to the extent described herein and in
such Prospectus Supplement, deposit all
payments and collections received or
advanced with respect to the Mortgage
Assets and other assets in the Trust
Fund. Such an account may be maintained
as an interest bearing or a non-interest
bearing account, and funds held therein
may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the
Agreements--Certificate Account and Other
Collection Accounts."
(d) Credit Support......... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on
the Mortgage Assets in the related Trust
Fund may be provided to one or more
classes of Certificates of the related
series in the form of subordination of
one or more other classes of Certificates
of such series, which other classes may
include one or more classes of Offered
Certificates, or by one or more other
types of credit support, such as a letter
of credit, insurance policy, guarantee,
reserve fund or another type of credit
support, or a combination thereof (any
such coverage with respect to the
Certificates of any series, "Credit
Support"). The amount and types of
coverage, the identification of the
entity providing the coverage (if
applicable) and related information with
respect to each type of Credit Support,
if any, will be described in the
Prospectus Supplement for a series of
Certificates. The Prospectus Supplement
for any series of Certificates evidencing
an interest in a Trust Fund that includes
MBS will describe any similar forms of
credit support that are provided by or
with respect to, or are included as part
of the trust fund evidenced by or
providing security for, such MBS. See
"Risk Factors--Credit Support
Limitations" and "Description of Credit
Support."
(e) Cash Flow Agreements... If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant
to which moneys held in the funds and
accounts established for the related
series will be invested at a specified
rate. The Trust Fund may also include
certain other agreements, such as
interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects
of interest rate or currency exchange
rate fluctuations on the Assets or on one
or more classes of Certificates.
(Currency exchange agreements might be
included in the Trust Fund if some or all
of the Mortgage Assets (such as Mortgage
Loans secured by Mortgaged Properties
located outside the United States) were
denominated in a non-United States
currency.) The principal terms of any
such guaranteed
-7-
<PAGE>
investment contract or other agreement
(any such agreement, a "Cash Flow
Agreement"), including, without
limitation, provisions relating to the
timing, manner and amount of payments
thereunder and provisions relating to the
termination thereof, will be described in
the Prospectus Supplement for the related
series. In addition, the related
Prospectus Supplement will provide
certain information with respect to the
obligor under any such Cash Flow
Agreement. The Prospectus Supplement for
any series of Certificates evidencing an
interest in a Trust Fund that includes
MBS will describe any cash flow
agreements that are included as part of
the trust fund evidenced by or providing
security for such MBS. See "Description
of the Trust Funds--Cash Flow
Agreements." Description of Certificates.
Distributions on Certificates....... Each series of Certificates evidencing an
interest in a Trust Fund that includes
Mortgage Loans as part of its assets will
be issued pursuant to a pooling and
servicing agreement, and each series of
Certificates evidencing an interest in a
Trust Fund that does not include Mortgage
Loans will be issued pursuant to a trust
agreement. Pooling and servicing
agreements and trust agreements are
referred to herein as the "Agreements."
Each series of Certificates will include
one or more classes. Each series of
Certificates (including any class or
classes of Certificates of such series
not offered hereby) will represent in the
aggregate the entire beneficial ownership
interest in the Trust Fund. Each class of
Certificates (other than certain Stripped
Interest Certificates, as defined below)
will have a stated principal amount (a
"Certificate Balance") and (other than
certain Stripped Principal Certificates,
as defined below), will accrue interest
thereon based on a fixed, variable or
adjustable interest rate (a "Pass-Through
Rate"). The related Prospectus Supplement
will specify the Certificate Balance, if
any, and the Pass-Through Rate for each
class of Certificates or, in the case of
a variable or adjustable Pass-Through
Rate, the method for determining the
Pass-Through Rate.
Each series of Certificates will consist
of one or more classes of Certificates
that may (i) provide for the accrual of
interest thereon based on fixed, variable
or adjustable rates; (ii) be senior
(collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate
Certificates") to one or more other
classes of Certificates in respect of
certain distributions on the
Certificates; (iii) be entitled to
principal distributions, with
disproportionately low, nominal or no
interest distributions (collectively,
"Stripped Principal Certificates"); (iv)
be entitled to interest distributions,
with disproportionately low, nominal or
no principal distributions (collectively,
"Stripped Interest Certificates"); (v)
provide for distributions of accrued
interest thereon commencing only
following the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates of
such series (collectively, "Accrual
Certificates"); (vi) provide for
distributions of principal sequentially,
based on specified payment schedules or
other methodologies; and/or (vii) provide
for distributions based on a combination
of two or more components thereof with
one or more of the characteristics
described in this paragraph, including a
Stripped Principal Certificate component
and a Stripped Interest Certificate
component, to the extent of available
funds, in each case as described in the
related Prospectus Supplement.
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Any such classes may include classes of
Offered Certificates. With respect to
Certificates with two or more components,
references herein to Certificate Balance,
notional amount and Pass-Through Rate
refer to the principal balance, if any,
notional amount, if any, and the
Pass-Through Rate, if any, for any such
component.
The Certificates will not be guaranteed
or insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person,
unless otherwise provided in the related
Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description
of the Certificates."
(a) Interest............... Interest on each class of Offered
Certificates (other than Stripped
Principal Certificates and certain
classes of Stripped Interest
Certificates) of each series will accrue
at the applicable Pass-Through Rate on
the outstanding Certificate Balance
thereof 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 with
respect to interest on Stripped Interest
Certificates may be made on each
Distribution Date on the basis of a
notional amount 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, prepayment
interest shortfalls, and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Average Life of Certificates;
Prepayments; Yields," "Yield
Considerations" and "Description of the
Certificates--Distributions of Interest
on the Certificates."
(b) Principal.............. The Certificates of each series initially
will have an aggregate Certificate
Balance no greater than the outstanding
principal balance of the Assets as of,
unless the related Prospectus Supplement
provides otherwise, the close of business
on the first day of the month of
formation of the related Trust Fund (the
"Cut-off Date"), after application of
scheduled payments due on or before such
date, whether or not received. The
Certificate Balance of a Certificate
outstanding from time to time represents
the maximum amount that the holder
thereof is then entitled to receive in
respect of principal from future cash
flow on the assets in the related Trust
Fund. Unless otherwise provided in the
related Prospectus Supplement,
distributions of principal will be made
on each Distribution Date to the class or
classes of Certificates entitled thereto
until the Certificate Balances of such
Certificates have been reduced to zero.
Unless otherwise specified in the related
Prospectus Supplement, distributions of
principal of any class of Certificates
will be made on a pro rata basis among
all of the Certificates of such class or
by random selection, as described in the
related Prospectus Supplement or
otherwise established by the related
Trustee. Stripped Interest Certificates
with no Certificate Balance will not
receive distributions in respect of
principal. See "Description of the
Certificates--Distributions of Principal
of the Certificates."
Advances............................ Unless otherwise provided in the related
Prospectus Supplement, the Master
Servicer will be obligated as part of its
servicing responsibilities to make
certain advances that in its good faith
judgment it deems recoverable with
respect to delinquent scheduled
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<PAGE>
payments on the Whole Loans in such Trust
Fund. Neither the Depositor nor any of
its affiliates will have any
responsibility to make such advances.
Advances made by a Master Servicer are
reimbursable generally from subsequent
recoveries in respect of such Whole Loans
and otherwise to the extent described
herein and in the related Prospectus
Supplement. If and to the extent provided
in the Prospectus Supplement for any
series, the Master Servicer will be
entitled to receive interest on its
outstanding advances, payable from
amounts in the related Trust Fund. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes MBS will
describe any corresponding advancing
obligation of any person in connection
with such MBS. See "Description of the
Certificates--Advances in Respect of
Delinquencies."
Termination......................... If so specified in the related Prospectus
Supplement, a series of Certificates may
be subject to optional early termination
through the repurchase of the Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner set forth
therein. If so provided in the related
Prospectus Supplement, upon the reduction
of the Certificate Balance of a specified
class or classes of Certificates by a
specified percentage or amount or on and
after a date specified in such Prospectus
Supplement, the party specified therein
will solicit bids for the purchase of all
of the Assets of the Trust Fund, or of a
sufficient portion of such Assets to
retire such class or classes, or purchase
such Assets at a price set forth in the
related Prospectus Supplement. In
addition, if so provided in the related
Prospectus Supplement, certain classes of
Certificates may be purchased subject to
similar conditions. See "Description of
the Certificates--Termination."
Registration of Certificates........ If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
registered in the name of Cede & Co., as
the nominee of DTC. No person acquiring
an interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event
that definitive certificates are issued
under the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates."
Tax Status of the Certificates...... The Certificates of each series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") and
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund treated as
a REMIC under Sections 860A through 860G
of the Code, or (ii) interests ("Grantor
Trust Certificates") in a Trust Fund
treated as a grantor trust under
applicable provisions of the Code.
(a) REMIC.................. REMIC Regular Certificates generally will
be treated as debt obligations of the
applicable REMIC for federal income tax
purposes. Certain REMIC Regular
Certificates may be issued with original
issue discount for federal income tax
purposes. See "Certain Federal Income Tax
Consequences" in the Prospectus
Supplement.
A portion (or, in certain cases, all) of
the income from REMIC
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<PAGE>
Residual Certificates (i) may not be
offset by any losses from other
activities of the holder of such REMIC
Residual Certificates, (ii) may be
treated as unrelated business taxable
income for holders of REMIC Residual
Certificates that are subject to tax on
unrelated business taxable income (as
defined in Section 511 of the Code), and
(iii) may be subject to foreign
withholding rules. See "Certain Federal
Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Residual
Certificates".
The Offered Certificates will be treated
as (i) assets described in section
7701(a)(19)(C) of the Internal Revenue
Code of 1986, as amended (the "Code") and
(ii) "real estate assets" within the
meaning of section 856(c)(4)(A) of the
Code, in each case to the extent
described herein and in the Prospectus.
See "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
(b) Grantor Trust.......... If no election is made to treat the Trust
Fund relating to a Series of Certificates
as a real estate mortgage investment
conduit ("REMIC"), the Trust Fund will be
classified as a grantor trust and not as
an association taxable as a corporation
for federal income tax purposes, and
therefore holders of Certificates will be
treated as the owners of undivided pro
rata interests in the Mortgage Pool or
pool of securities and any other assets
held by the Trust Fund.
Investors are advised to consult their
tax advisors and to review "Certain
Federal Income Tax Consequences" herein
and in the related Prospectus Supplement.
ERISA Considerations................ A fiduciary of an employee benefit plan or
other retirement plan or arrangement,
including an individual retirement
account or annuity or a Keogh plan, and
any collective investment fund or
insurance company general or separate
account in which such plans, accounts,
annuities or arrangements are invested,
that is subject to Title I of the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section
4975 of the Code should carefully review
with its legal advisors whether the
purchase or holding of Offered
Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA
or Section 4975 of the Code. See "Certain
ERISA Considerations" herein and in the
related Prospectus Supplement. To the
extent specified in the related
Prospectus Supplement, certain classes of
Certificates may not be transferred
unless the Trustee and the Depositor are
furnished with a letter of
representations or an opinion of counsel
to the effect that such transfer will not
result in a violation of the prohibited
transaction provisions of ERISA and the
Code, will not cause the assets of the
Trust to be deemed "plan assets" for
purposes of ERISA and the Code and will
not subject the Trustee, the Depositor or
the Master Servicer to additional
obligations. See "Certain ERISA
Considerations" herein and in the related
Prospectus Supplement.
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<PAGE>
Legal Investment.................... The related Prospectus Supplement will
specify whether any class or classes of
the Offered Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended.
Investors whose investment authority is
subject to legal restrictions should
consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal
Investment" herein and in the related
Prospectus Supplement.
Rating.............................. At the date of issuance, as to each
series, 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.
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<PAGE>
RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates
of any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of
Certificates by a holder in any secondary market that may develop may be at a
discount from 100% of their original principal balance or from their purchase
price. Furthermore, secondary market purchasers may look only hereto, to the
related Prospectus Supplement and to the reports to Certificateholders
delivered pursuant to the related Agreement as described herein under the
heading "Description of the Certificates--Reports to Certificateholders",
"--Book-Entry Registration and Definitive Certificates" and "Description of the
Agreements--Evidence as to Compliance" for information concerning the
Certificates. Except to the extent described herein and in the related
Prospectus Supplement, Certificateholders will have no redemption rights and
the Certificates are subject to early retirement only under certain specified
circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination". Morgan Stanley & Co.
Incorporated currently expects to make a secondary market in the Offered
Certificates, but has no obligation to do so.
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of
the Depositor, the Master Servicer, or any of their affiliates. The only
obligations with respect to the Certificates or the Assets will be the
obligations (if any) of the Warrantying Party (as defined herein) pursuant to
certain limited representations and warranties made with respect to the
Mortgage Loans, the Master Servicer's, any Special Servicer's and any
Sub-Servicer's servicing obligations under the related Pooling and Servicing
Agreement (including the limited obligation to make certain advances in the
event of delinquencies on the Mortgage Loans, but only to the extent deemed
recoverable). Since certain representations and warranties with respect to the
Mortgage Assets may have been made and/or assigned in connection with transfers
of such Mortgage Assets prior to the Closing Date, the rights of the Trustee
and the Certificateholders with respect to such representations or warranties
will be limited to their rights as an assignee thereof. Unless otherwise
specified in the related Prospectus Supplement, none of the Depositor, the
Master Servicer or any affiliate thereof will have any obligation with respect
to representations or warranties made by any other entity. Unless otherwise
specified in the related Prospectus Supplement, neither the Certificates nor
the underlying Mortgage Assets will be guaranteed or insured by any
governmental agency or instrumentality, or by the Depositor, the Master
Servicer, any Special Servicer, any Sub-Servicer or any of their affiliates.
Proceeds of the assets included in the related Trust Fund for each series of
Certificates (including the Assets and any form of credit enhancement) will be
the sole source of payments on the Certificates, and there will be no recourse
to the Depositor or any other entity in the event that such proceeds are
insufficient or otherwise unavailable to make all payments provided for under
the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a
series of Certificates will not have any claim against or security interest in
the Trust Funds for any other series. If the related Trust Fund is insufficient
to make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Certificate Account and any accounts
maintained as Credit Support, may be withdrawn under certain conditions, as
described in the related Prospectus Supplement. In the event of such
withdrawal, such amounts will not be available for future payment of principal
of or interest on the Certificates. If so provided in the Prospectus Supplement
for a series of Certificates consisting of one or more classes of Subordinate
Certificates, on any Distribution Date in respect of which losses or shortfalls
in
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<PAGE>
collections on the Assets have been incurred, the amount of such losses or
shortfalls will be borne first by one or more classes of the Subordinate
Certificates, and, thereafter, by the remaining classes of Certificates in the
priority and manner and subject to the limitations specified in such Prospectus
Supplement.
AVERAGE LIFE OF CERTIFICATES; PREPAYMENTS; YIELDS
Prepayments (including those caused by defaults) on the Mortgage
Assets in any Trust Fund generally will result in a faster rate of principal
payments on one or more classes of the related Certificates than if payments on
such Mortgage Assets were made as scheduled. Thus, the prepayment experience on
the Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans varies
between pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. There can be no
assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund
or that the rate of payments will conform to any model described herein or in
any Prospectus Supplement. If prevailing interest rates fall significantly
below the applicable mortgage interest rates, principal prepayments are likely
to be higher than if prevailing rates remain at or above the rates borne by the
Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund.
As a result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A series of Certificates may include one
or more classes of Certificates with priorities of payment and, as a result,
yields on other classes of Certificates, including classes of Offered
Certificates, of such series may be more sensitive to prepayments on Mortgage
Assets. A series of Certificates may include one or more classes offered at a
significant premium or discount. Yields on such classes of Certificates will be
sensitive, and in some cases extremely sensitive, to prepayments on Mortgage
Assets and, where the amount of interest payable with respect to a class is
disproportionately high, as compared to the amount of principal, as with
certain classes of Stripped Interest Certificates, a holder might, in some
prepayment scenarios, fail to recoup its original investment. A series of
Certificates may include one or more classes of Certificates, including classes
of Offered Certificates, that provide for distribution of principal thereof
from amounts attributable to interest accrued but not currently distributable
on one or more classes of Accrual Certificates and, as a result, yields on such
Certificates will be sensitive to (a) the provisions of such Accrual
Certificates relating to the timing of distributions of interest thereon and
(b) if such Accrual Certificates accrue interest at a variable or adjustable
Pass-Through Rate, changes in such rate. See "Yield Considerations" herein and,
if applicable, in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets 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
series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Certificate at a significant premium might fail to recoup its
initial investment under certain prepayment scenarios. Each Prospectus
Supplement will identify any payment to which holders of Offered Certificates
of the related series are entitled that is not covered by the applicable
rating.
The amount, type and nature of credit support, if any, established
with respect to a series of Certificates will be determined on the basis of
criteria established by each Rating Agency rating classes of such series. Such
criteria are sometimes based upon an actuarial analysis of the behavior of
mortgage loans in a larger group. Such analysis is often the basis upon which
each Rating Agency determines the amount of credit support required with
respect to each such class. There can be no assurance that the historical data
supporting any such actuarial analysis will accurately reflect future
experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Assets. No assurance can be given
that values of any Mortgaged Properties have remained or will remain at their
levels on the respective dates of origination of the related Mortgage Loans.
Moreover, there is no assurance that appreciation of real estate values
generally will limit loss experiences on the Mortgaged Properties. If the
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commercial or multifamily residential real estate markets should experience an
overall decline in property values such that the outstanding principal balances
of the Mortgage Loans underlying or comprising the Mortgage Assets in a
particular Trust Fund and any secondary financing on the related Mortgaged
Properties become equal to or greater than the value of the Mortgaged
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced by institutional lenders. In addition,
adverse economic conditions (which may or may not affect real property values)
may affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Mortgage Loans and, accordingly, the rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by the Credit Support, if any,
described in the related Prospectus Supplement, such losses will be borne, at
least in part, by the holders of one or more classes of the Certificates of the
related series. See "Description of Credit Support" and "Rating."
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. See "Description of the Trust Funds--Assets." The ability of a
mortgagor to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than
any independent income or assets of the mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a mortgagor to repay a
single family loan typically is dependent primarily upon the mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of
an income-producing property will likely affect both the performance of the
related loan as well as the liquidation value of such property, whereas a
decline in the income of a mortgagor on a single family property will likely
affect the performance of the related loan but may not affect the liquidation
value of such property. Moreover, a decline in the value of a Mortgaged
Property will increase the risk of loss particularly with respect to any
related junior Mortgage Loan. See "--Junior Mortgage Loans."
The performance of a mortgage loan secured by an income-producing
property leased by the mortgagor to tenants as well as the liquidation value of
such property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants or,
if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion 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 which, in the event of
mortgagor default, recourse may be had only against the specific property and
such other assets, if any, as have been pledged to secure the related Mortgage
Loan. With respect to those Mortgage Loans that provide for recourse against
the mortgagor and its assets generally, there can be no assurance that such
recourse will ensure a recovery in respect of a defaulted Mortgage Loan greater
than the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of single
family loans both because the Mortgage Assets in a Trust Fund will generally
consist of a smaller number of loans than would a single family pool of
comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund
may consist of only a limited number of Mortgage Loans and/or relate to Leases
to only a single Lessee or a limited number of Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a
series of Certificates may be described in the related Prospectus Supplement.
See also "Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
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RISKS ASSOCIATED WITH COMMERCIAL LOANS AND LEASES
If so described in the related Prospectus Supplement, each mortgagor
under a Commercial Loan may be an entity created by the owner or purchaser of
the related Commercial Property solely to own or purchase such property, in
part to isolate the property from the debts and liabilities of such owner or
purchaser. Unless otherwise specified, each such Commercial Loan will represent
a nonrecourse obligation of the related mortgagor secured by the lien of the
related Mortgage and the related Lease Assignments. Whether or not such loans
are recourse or nonrecourse obligations, it is not expected that the mortgagors
will have any significant assets other than the Commercial Properties and the
related Leases, which will be pledged to the Trustee under the related
Agreement. Therefore, the payment of amounts due on any such Commercial Loans,
and, consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the
Lessees. Such rental payments will, in turn, depend on continued occupancy by,
and/or the creditworthiness of, such Lessees, which in either case may be
adversely affected by a general economic downturn or an adverse change in their
financial condition. Moreover, to the extent a Commercial Property was designed
for the needs of a specific type of tenant (e.g., a nursing home, hospital,
hotel or motel), the value of such property in the event of a default by the
Lessee or the early termination of such Lease may be adversely affected because
of difficulty in re-leasing the property to a suitable substitute lessee or, if
re-leasing to such a substitute is not possible, because of the cost of
altering the property for another more marketable use. As a result, without the
benefit of the Lessee's continued support of the Commercial Property, and
absent significant amortization of the Commercial Loan, if such loan is
foreclosed on and the Commercial Property liquidated following a lease default,
the net proceeds might be insufficient to cover the outstanding principal and
interest owing on such loan, thereby increasing the risk that holders of the
Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and,
thus, will require substantial principal payments (i.e., balloon payments) at
their stated maturity. Mortgage Loans with balloon payments involve a greater
degree of risk because the ability of a mortgagor to make a balloon payment
typically will depend upon its ability either to timely refinance the loan or
to timely sell the related Mortgaged Property. The ability of a mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the level of available mortgage interest rates at the time of sale or
refinancing, the mortgagor's equity in the related Mortgaged Property, the
financial condition and operating history of the mortgagor and the related
Mortgaged Property, tax laws, rent control laws (with respect to certain
Multifamily Properties and mobile home parks), reimbursement rates (with
respect to certain hospitals, nursing homes and convalescent homes),
renewability of operating licenses, prevailing general economic conditions and
the availability of credit for commercial or multifamily real properties, as
the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain
of the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties."
OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to
maximize recoveries on defaulted Whole Loans, a Master Servicer, a Sub-Servicer
or a Special Servicer will be permitted (within prescribed parameters) to
extend and modify Whole Loans that are in default or as to which a payment
default is imminent, including in particular with respect to balloon payments.
In addition, a Master Servicer, a Sub-Servicer or a Special Servicer
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<PAGE>
may receive a workout fee based on receipts from or proceeds of such Whole
Loans. While any such entity generally will be required to determine that any
such extension or modification is reasonably likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that such flexibility with respect to extensions or modifications or payment of
a workout fee will increase the present value of receipts from or proceeds of
Whole Loans that are in default or as to which a payment default is imminent.
Additionally, if so specified in the related Prospectus Supplement, certain of
the Mortgage Loans included in the Mortgage Pool for a Series may have been
subject to workouts or similar arrangements following periods of delinquency
and default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may entail
risks of loss from delinquency and foreclosure that are greater than those of
single family mortgage loans. The mortgagor's sophistication and form of
organization may increase the likelihood of protracted litigation or bankruptcy
in default situations.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe
any Credit Support in the related Trust Fund, which may include letters of
credit, insurance policies, guarantees, reserve funds or other types of credit
support, or combinations thereof. Use of Credit Support will be subject to the
conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Credit Support may not cover all potential losses or
risks; for example, Credit Support may or may not cover fraud or negligence by
a mortgage loan originator or other parties.
A series of Certificates may include one or more classes of
Subordinate Certificates (which may include Offered Certificates), if so
provided in the related Prospectus Supplement. Although subordination is
intended to reduce the risk to holders of Senior Certificates of delinquent
distributions or ultimate losses, the amount of subordination will be limited
and may decline under certain circumstances. In addition, if principal payments
on one or more classes of Certificates of a series are made in a specified
order of priority, any limits with respect to the aggregate amount of claims
under any related Credit Support may be exhausted before the principal of the
lower priority classes of Certificates of such series has been repaid. As a
result, the impact of significant losses and shortfalls on the Assets may fall
primarily upon those classes of Certificates having a lower priority of
payment. Moreover, if a form of Credit Support covers more than one series of
Certificates (each, a "Covered Trus ), holders of Certificates evidencing an
interest in a Covered Trust will be subject to the risk that such Credit
Support will be exhausted by the claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more
classes of Offered Certificates, including the subordination of one or more
classes of Certificates, will be determined on the basis of criteria
established by each Rating Agency rating such classes of Certificates based on
an assumed level of defaults, delinquencies, other losses or other factors.
There can, however, be no assurance that the loss experience on the related
Mortgage Assets will not exceed such assumed levels. See " --Limited Nature of
Ratings," "Description of the Certificates" and "Description of Credit
Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to
periodic reduction in accordance with a schedule or formula. The Master
Servicer will generally be permitted to reduce, terminate or substitute all or
a portion of the credit enhancement for any series of Certificates, if the
applicable Rating Agency indicates that the then-current rating thereof will
not be adversely affected. The rating of any series of Certificates by any
applicable Rating Agency may be lowered following the initial issuance thereof
as a result of the downgrading of the obligations of any applicable credit
support provider, or as a result of losses on the related Mortgage Assets
substantially in excess of the levels contemplated by such Rating Agency at the
time of its initial rating analysis. None of the Depositor, the Master Servicer
or any of their affiliates will have any obligation to replace or supplement
any credit enhancement, or to take any other action to maintain any rating of
any series of Certificates. Subordination of the Subordinate Certificates;
Effect of Losses on the Assets
The rights of Subordinate Certificateholders to receive distributions
to which they would otherwise be entitled with respect to the Assets will be
subordinate to the rights of the Master Servicer (to the extent that the
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Master Servicer is paid its servicing fee, including any unpaid servicing fees
with respect to one or more prior Due Periods, and is reimbursed for certain
unreimbursed advances and unreimbursed liquidation expenses) and the Senior
Certificateholders to the extent described herein. As a result of the
foregoing, investors must be prepared to bear the risk that they may be subject
to delays in payment and may not recover their initial investments in the
Subordinate Certificates. See "Description of the Certificates--General" and
"--Allocation of Losses and Shortfalls."
The yields on the Subordinate Certificates may be extremely sensitive
to the loss experience of the Assets and the timing of any such losses. If the
actual rate and amount of losses experienced by the Assets exceed the rate and
amount of such losses assumed by an investor, the yields to maturity on the
Subordinate Certificates may be lower than anticipated.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender
to accelerate the maturity of the Mortgage Loan if the mortgagor sells,
transfers or conveys the related Mortgaged Property or its interest in the
Mortgaged Property. Mortgages may also include a debt-acceleration clause,
which permits the lender to accelerate the debt upon a monetary or non-monetary
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.
If so specified in the related Prospectus Supplement, the Mortgage
Loans will be secured by an assignment of leases and rents pursuant to which
the mortgagor typically assigns its right, title and interest as landlord under
the leases on the related Mortgaged Property and the income derived therefrom
to the lender as further security for the related Mortgage Loan, while
retaining a license to collect rents for so long as there is no default. In the
event the mortgagor defaults, the license terminates and the lender is entitled
to collect rents. Such assignments are typically not perfected as security
interests prior to actual possession of the cash flows. 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 mortgagor, the lender's ability to collect the rents may be
adversely affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents." Environmental Risks
Real property pledged as security for a mortgage loan may be subject
to certain environmental risks. Under the laws of certain states, contamination
of a 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 the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of
hazardous substances that require remedy at a property, if agents or employees
of the lender have become sufficiently involved in the operations of the
mortgagor, regardless of whether or not the environmental damage or threat was
caused by a prior owner. A lender also risks such liability on foreclosure of
the mortgage. Unless otherwise specified in the related Prospectus Supplement,
each Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Sub-Servicer or the Special Servicer, acting on behalf of the
Trust Fund, may acquire title to a Mortgaged Property securing a Mortgage Loan
or take over its operation unless the Master Servicer has previously
determined, based upon a report prepared by a person who regularly conducts
environmental audits, that: (i) the Mortgaged Property is in compliance with
applicable environmental laws, and there are no circumstances present at the
Mortgaged Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation; or (ii) if the
Mortgaged Property is not so in compliance or such circumstances are so
present, then it would be in the best economic interest of the Trust Fund to
acquire title to the Mortgaged Property and further to take such actions as
would be
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necessary and appropriate to effect such compliance and/or respond to such
circumstances. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Environmental Legislation."
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans
and transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Except as provided in the Prospectus Supplement, REMIC Residual
Certificates, if offered hereunder, are anticipated to have "phantom income"
associated with them. That is, taxable income is anticipated to be allocated to
the REMIC Residual Certificates in the early years of the existence of the
related REMIC, even if the REMIC Residual Certificates receive no distributions
from the related REMIC, with a corresponding amount of losses allocated to the
REMIC Residual Certificates in later years. Accordingly, the present value of
the tax detriments associated with the REMIC Residual Certificates may
significantly exceed the present value of the tax benefits related thereto, and
the REMIC Residual Certificates may have a negative "value." Moreover, the
REMIC Residual Certificates will in effect be allocated an amount of gross
income equal to the non-interest expenses of the REMIC, but such expenses will
be deductible by holders of the REMIC Residual Certificates that are
individuals only as itemized deductions (and be subject to all the limitations
applicable to itemized deductions). Accordingly, investment in the REMIC
Residual Certificates will generally not be suitable for individuals or for
certain pass-through entities, such as partnerships or S corporations, that
have individuals as partners or shareholders. In addition, REMIC Residual
Certificates are subject to certain restrictions on transfer. Finally,
prospective purchasers of a REMIC Residual Certificate should be aware that
recently issued final regulations provide restrictions on the ability to
mark-to-market certain "negative value" REMIC residual interests. See "Certain
Federal Income Tax Consequences--REMICs."
CONTROL
Under certain circumstances, the consent or approval of the holders of
a specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or a similar means of allocating decision-making under
the related Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders of such series to, certain actions,
including directing the Special Servicer or the Master Servicer with respect to
actions to be taken with respect to certain Mortgage Loans and REO Properties
and amending the related Agreement in certain circumstances. See "Description
of the Agreements--Events of Default," "--Rights Upon Event of Default,"
"--Amendment" and "--List of Certificateholders."
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of
the Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will
not be recognized by the Trustee as "Certificateholders" (as that term is to be
used in the related Agreement). Hence, until such time, Certificateholders will
be able to exercise the rights of Certificateholders only indirectly through
DTC and its participating organizations. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund (the "Assets") will include (i)
multifamily and/or commercial mortgage loans (the "Mortgage Loans"),
(ii) mortgage participations, pass-through certificates or other
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mortgage-backed securities evidencing interests in or secured by one or more
Mortgage Loans or other similar participations, certificates or securities
("MBS"), (iii) direct obligations of the United States, agencies thereof or
agencies created thereby which are not subject to redemption prior to maturity
at the option of the issuer and are (a) interest-bearing securities, (b)
non-interest-bearing securities, (c) originally interest-bearing securities
from which coupons representing the right to payment of interest have been
removed, or (d) interest-bearing securities from which the right to payment of
principal has been removed (the "Government Securities"), or (iv) a combination
of Mortgage Loans, MBS and Government Securities. As used herein, "Mortgage
Loans" refers to both whole Mortgage Loans and Mortgage Loans underlying MBS.
Mortgage Loans that secure, or interests in which are evidenced by, MBS are
herein sometimes referred to as Underlying Mortgage Loans. Mortgage Loans that
are not Underlying Mortgage Loans are sometimes referred to as "Whole Loans."
Any mortgage participations, pass-through certificates or other asset-backed
certificates in which an MBS evidences an interest or which secure an MBS are
sometimes referred to herein also as MBS or as "Underlying MBS." Mortgage Loans
and MBS are sometimes referred to herein as "Mortgage Assets." The Mortgage
Assets will not be guaranteed or insured by Morgan Stanley Capital I Inc. (the
"Depositor") or any of its affiliates or, unless otherwise provided in the
Prospectus Supplement, by any governmental agency or instrumentality or by any
other person. Each 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 (an "Asset Seller"), which may be an affiliate of the
Depositor and, with respect to Mortgage Assets, which prior holder may or may
not be the originator of such Mortgage Loan or the issuer of such MBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Depositor. If specified in the related
Prospectus Supplement, the assets of a Trust Fund will consist of certificates
representing beneficial ownership interests in another trust fund that contains
the Assets.
MORTGAGE LOANS
GENERAL
The Mortgage Loans will be secured by liens on, or security interests
in, Mortgaged Properties consisting of (i) residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise,
mid-rise or garden apartment buildings ("Multifamily Properties" and the
related loans, "Multifamily Loans") or (ii) office buildings, shopping centers,
retail stores, hotels or motels, nursing homes, hospitals or other health
care-related facilities, mobile home parks, warehouse facilities,
mini-warehouse facilities or self-storage facilities, industrial plants,
congregate care facilities, mixed use or other types of commercial properties
("Commercial Properties" and the related loans, "Commercial Loans") located,
unless otherwise specified in the related Prospectus Supplement, in any one of
the fifty states, the District of Columbia or the Commonwealth of Puerto Rico.
To the extent specified in the related Prospectus Supplement, the Mortgage
Loans will be secured by first or junior mortgages or deeds of trust or other
similar security instruments creating a first or junior lien on Mortgaged
Property. Multifamily Property may include mixed commercial and residential
structures and may include apartment buildings owned by private cooperative
housing corporations ("Cooperatives"). The Mortgaged Properties may include
leasehold interests in properties, the title to which is held by third party
lessors. Unless otherwise specified in the Prospectus Supplement, the term of
any such leasehold will exceed the term of the related mortgage note by at
least five years. Each Mortgage Loan will have been originated by a person (the
"Originator") other than the Depositor. The related Prospectus Supplement will
indicate if any Originator is an affiliate of the Depositor. The Mortgage Loans
will be evidenced by promissory notes (the "Mortgage Notes") secured by
mortgages or deeds of trust (the "Mortgages") creating a lien on the Mortgaged
Properties. Mortgage Loans will generally also be secured by an assignment of
leases and rents and/or operating or other cash flow guarantees relating to the
Mortgage Loan.
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LEASES
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or
a portion of such properties. Pursuant to a Lease Assignment, the related
mortgagor may assign its rights, title and interest as lessor under each Lease
and the income derived therefrom to the related mortgagee, while retaining a
license to collect the rents for so long as there is no default. If the
mortgagor defaults, the license terminates and the mortgagee or its agent is
entitled to collect the rents from the related Lessee or Lessees for
application to the monetary obligations of the mortgagor. State law may limit
or restrict the enforcement of the Lease Assignments by a mortgagee until it
takes possession of the related Mortgaged Property and/or a receiver is
appointed. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents." Alternatively, to the extent specified in the
related Prospectus Supplement, the mortgagor and the mortgagee may agree that
payments under Leases are to be made directly to the Master Servicer.
To the extent described in the related Prospectus Supplement, the
Leases may require the Lessees to pay rent that is sufficient in the aggregate
to cover all scheduled payments of principal and interest on the related
Mortgage Loans and, in certain cases, their pro rata share of the operating
expenses, insurance premiums and real estate taxes associated with the
Mortgaged Properties. Certain of the Leases may require the mortgagor to bear
costs associated with structural repairs and/or the maintenance of the exterior
or other portions of the Mortgaged Property or provide for certain limits on
the aggregate amount of operating expenses, insurance premiums, taxes and other
expenses that the Lessees are required to pay. If so specified in the related
Prospectus Supplement, under certain circumstances the Lessees may be permitted
to set off their rental obligations against the obligations of the mortgagors
under the Leases. In those cases where payments under the Leases (net of any
operating expenses payable by the mortgagors) are insufficient to pay all of
the scheduled principal and interest on the related Mortgage Loans, the
mortgagors must rely on other income or sources (including security deposits)
generated by the related Mortgaged Property to make payments on the related
Mortgage Loan. To the extent specified in the related Prospectus Supplement,
some Commercial Properties may be leased entirely to one Lessee. In such cases,
absent the availability of other funds, the mortgagor must rely entirely on
rent paid by such Lessee in order for the mortgagor to pay all of the scheduled
principal and interest on the related Commercial Loan. To the extent specified
in the related Prospectus Supplement, certain of the Leases may expire prior to
the stated maturity of the related Mortgage Loan. In such cases, upon
expiration of the Leases the mortgagors will have to look to alternative
sources of income, including rent payment by any new Lessees or proceeds from
the sale or refinancing of the Mortgaged Property, to cover the payments of
principal and interest due on such Mortgage Loans unless the Lease is renewed.
As specified in the related Prospectus Supplement, certain of the Leases may
provide that upon the occurrence of a casualty affecting a Mortgaged Property,
the Lessee will have the right to terminate its Lease, unless the mortgagor, as
lessor, is able to cause the Mortgaged Property to be restored within a
specified period of time. Certain Leases may provide that it is the lessor's
responsibility, while other Leases provide that it is the Lessee's
responsibility, to restore the Mortgaged Property after a casualty to its
original condition. Certain Leases may provide a right of termination to the
related Lessee if a taking of a material or specified percentage of the leased
space in the Mortgaged Property occurs, or if the ingress or egress to the
leased space has been materially impaired.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. Unless otherwise specified in the
Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which
means that, absent special facts, the mortgagee may look only to the Net
Operating Income from the property for repayment of the mortgage debt, and not
to any other of the mortgagor's assets, in the event of the mortgagor's
default. Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important measure of the risk of
default on such a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at
any given time is the ratio of the Net Operating Income for a twelve-month
period to the annualized scheduled payments on the Mortgage Loan. "Net
Operating Income"
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means, for any given period, unless otherwise specified in the related
Prospectus Supplement, the total operating revenues derived from a Mortgaged
Property during such period, minus the total operating expenses incurred in
respect of such Mortgaged Property during such period other than (i) non-cash
items such as depreciation and amortization, (ii) capital expenditures and
(iii) debt service on loans secured by the Mortgaged Property. The Net
Operating Income of a Mortgaged Property will fluctuate over time and may be
sufficient or insufficient to cover debt service on the related Mortgage Loan
at any given time.
As the primary component of Net Operating Income, rental income (as
well as maintenance payments from tenant-stockholders of a Cooperative) is
subject to the vagaries of the applicable real estate market and/or business
climate. Properties typically leased, occupied or used on a short-term basis,
such as health care-related facilities, hotels and motels, and mini-warehouse
and self-storage facilities, tend to be affected more rapidly by changes in
market or business conditions than do properties leased, occupied or used for
longer periods, such as (typically) warehouses, retail stores, office buildings
and industrial plants. Commercial Loans may be secured by owner-occupied
Mortgaged Properties or Mortgaged Properties leased to a single tenant.
Accordingly, a decline in the financial condition of the mortgagor or single
tenant, as applicable, may have a disproportionately greater effect on the Net
Operating Income from such Mortgaged Properties than would be the case with
respect to Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses, including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
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 mortgagor, is responsible for payment of some or all of
these expenses; however, because leases are subject to default risks as well
when a tenant's income is insufficient to cover its rent and operating
expenses, the existence of such "net of expense" provisions will only temper,
not eliminate, the impact of expense increases on the performance of the
related Mortgage Loan. See "--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage
Loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of such Balloon Mortgage Loans could be
significant even though the related Debt Service Coverage Ratio is high.
The liquidation value of any Mortgaged Property may be adversely
affected by risks generally incident to interests in real property, including
declines in rental or occupancy rates. Lenders generally use the Loan-to-Value
Ratio of a mortgage loan as a measure of risk of loss if a property must be
liquidated upon a default by the mortgagor.
Appraised values of income-producing properties may be 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 presents analytical challenges. It is often difficult to find truly
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comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and create significantly different results, or
where a high Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio
(or vice versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the Multifamily
and Commercial Loans, or that, for any of such Mortgage Loans, they are
complete or relevant. See "Risk Factors--Risks Associated with Mortgage Loans
and Mortgaged Properties," "--Balloon Payments," "--Junior Mortgage Loans,"
"--Obligor Default" and "--Mortgagor Type." Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance of
the Mortgage Loan to the Value of the related Mortgaged Property. The "Value"
of a Mortgaged Property, other than with respect to Refinance Loans, is
generally the lesser of (a) the appraised value determined in an appraisal
obtained by the originator at origination of such loan and (b) the sales price
for such property. "Refinance Loans" are loans made to refinance existing
loans. Unless otherwise set forth in the related Prospectus Supplement, the
Value of the Mortgaged Property securing a Refinance Loan is the appraised
value thereof determined in an appraisal obtained at the time of origination of
the Refinance Loan. The Value of a Mortgaged Property as of the date of initial
issuance of the related series of Certificates may be less than the value at
origination and will fluctuate from time to time based upon changes in economic
conditions and the real estate market.
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable
Cut-off Date, (ii) the type of property securing the Mortgage Loans (e.g.,
Multifamily Property or Commercial Property and the type of property in each
such category), (iii) the weighted average (by principal balance) of the
original and remaining terms to maturity of the Mortgage Loans, (iv) the
earliest and latest origination date and maturity date of the Mortgage Loans,
(v) the weighted average (by principal balance) of the Loan-to-Value Ratios at
origination of the Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage
Rates and the weighted average Mortgage Rate borne by the Mortgage Loans, (vii)
the state or states in which most of the Mortgaged Properties are located,
(viii) information with respect to the prepayment provisions, if any, of the
Mortgage Loans, (ix) the weighted average Retained Interest, if any, (x) with
respect to Mortgage Loans with adjustable Mortgage Rates ("ARM Loans"), the
index, the frequency of the adjustment dates, the highest, lowest and weighted
average note margin and pass-through margin, and the maximum Mortgage Rate or
monthly payment variation at the time of any adjustment thereof and over the
life of the ARM Loan and the frequency of such monthly payment adjustments,
(xi) the Debt Service Coverage Ratio either at origination or as of a more
recent date (or both) and (xii) information regarding the payment
characteristics of the Mortgage Loans, including without limitation balloon
payment and other amortization provisions. The related Prospectus Supplement
will also contain certain information available to the Depositor with respect
to the provisions of leases and the nature of tenants of the Mortgaged
Properties and other information referred to in a general manner under
"--Mortgage Loans--Default and Loss Considerations with Respect to the Mortgage
Loans" above. If specific information respecting the Mortgage Loans is not
known to the Depositor at the time Certificates are initially offered, more
general information of the nature described above will be provided in the
Prospectus Supplement, and specific information will be set forth in a report
which will be available to purchasers of the related Certificates at or before
the initial issuance thereof and will be filed as part of a Current Report on
Form 8-K with the Securities and Exchange Commission within fifteen days after
such initial issuance.
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PAYMENT PROVISIONS OF THE MORTGAGE LOANS
Unless otherwise specified in the related Prospectus Supplement, all
of the Mortgage Loans will (i) have individual principal balances at
origination of not less than $25,000, (ii) have original terms to maturity of
not more than 40 years and (iii) provide for payments of principal, interest or
both, on due dates that occur monthly, quarterly or semi-annually or at such
other interval as is specified in the related Prospectus Supplement. Each
Mortgage Loan 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 from an adjustable to
a fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from
time to time pursuant to an election or as otherwise specified on the related
Mortgage Note, in each case as described in the related Prospectus Supplement.
Each Mortgage Loan may provide for scheduled payments to maturity or payments
that adjust from time to time to accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and may provide for negative
amortization or accelerated amortization, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may be fully amortizing or
require a balloon payment due on its stated maturity date, in each case as
described in the related Prospectus Supplement. Each Mortgage Loan may contain
prohibitions on prepayment (a "Lock-out Period" and the date of expiration
thereof, a "Lock-out Date") or require payment of a premium or a yield
maintenance penalty (a "Prepayment Premium") in connection with a prepayment,
in each case as described in the related Prospectus Supplement. In the event
that holders of any class or classes of Offered Certificates will be entitled
to all or a portion of any Prepayment Premiums collected in respect of Mortgage
Loans, the related Prospectus Supplement will specify the method or methods by
which any such amounts will be allocated. A Mortgage Loan may also contain
provisions entitling the mortgagee to a share of profits realized from the
operation or disposition of the Mortgaged Property ("Equity Participations"),
as described in the related Prospectus Supplement. In the event that holders of
any class or classes of Offered Certificates will be entitled to all or a
portion of an Equity Participation, the related Prospectus Supplement will
specify the terms and provisions of the Equity Participation and the method or
methods by which distributions in respect thereof will be allocated among such
Certificates.
MBS
Any MBS will have been issued pursuant to a participation and
servicing agreement, a pooling and servicing agreement, a trust agreement, an
indenture or similar agreement (an "MBS Agreement"). A seller (the "MBS
Issuer") and/or servicer (the "MBS Servicer") of the underlying Mortgage Loans
(or Underlying MBS) will have entered into the MBS Agreement with a trustee or
a custodian under the MBS Agreement (the "MBS Trustee"), if any, or with the
original purchaser of the interest in the underlying Mortgage Loans or MBS
evidenced by the MBS.
Distributions of any principal or interest, as applicable, will be
made on MBS on the dates specified in the related Prospectus Supplement. The
MBS may be issued in one or more classes with characteristics similar to the
classes of Certificates described in this Prospectus. Any principal or interest
distributions will be made on the MBS by the MBS Trustee or the MBS Servicer.
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. Enhancement in
the form of reserve funds, subordination or other forms of credit support
similar to that described for the Certificates under "Description of Credit
Support" may be provided with respect to the MBS. The type, characteristics and
amount of such credit support, if any, will be a function of certain
characteristics of the Mortgage Loans or Underlying MBS evidenced by or
securing such MBS and other factors and generally will have been established
for the MBS on the basis of requirements of either any Rating Agency that may
have assigned a rating to the MBS or the initial purchasers of the MBS.
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that include MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, and type of the MBS to be included in
the Trust Fund, (ii) the original and remaining term to stated maturity of the
MBS, if applicable, (iii) whether such MBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or bond
rate of the MBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the MBS, including, but not limited to,
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any priorities, payment schedules and subordination features, (vi) the MBS
Issuer, MBS Servicer and MBS Trustee, as applicable, (vii) certain
characteristics of the credit support, if any, such as subordination, reserve
funds, insurance policies, letters of credit or guarantees relating to the
related Underlying Mortgage Loans, the Underlying MBS or directly to such MBS,
(viii) the terms on which the related Underlying Mortgage Loans or Underlying
MBS for such MBS or the MBS may, or are required to, be purchased prior to
their maturity, (ix) the terms on which Mortgage Loans or Underlying MBS may be
substituted for those originally underlying the MBS, (x) the servicing fees
payable under the MBS Agreement, (xi) the type of information in respect of the
Underlying Mortgage Loans described under "--Mortgage Loans--Mortgage Loan
Information in Prospectus Supplements" above, and the type of information in
respect of the Underlying MBS described in this paragraph, (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS and (xiii) whether the MBS is in
certificated form, book-entry form or held through a depository such as The
Depository Trust Company or the Participants Trust Company.
GOVERNMENT SECURITIES
The Prospectus Supplement for a series of Certificates evidencing
interests in Assets of a Trust Fund that include Government Securities will
specify, to the extent available, (i) the aggregate approximate initial and
outstanding principal amounts or notional amounts, as applicable, and types of
the Government Securities to be included in the Trust Fund, (ii) the original
and remaining terms to stated maturity of the Government Securities, (iii)
whether such Government Securities are entitled only to interest payments, only
to principal payments or to both, (iv) the interest rates of the Government
Securities or the formula to determine such rates, if any, (v) the applicable
payment provisions for the Government Securities and (vi) to what extent, if
any, the obligation evidenced thereby is backed by the full faith and credit of
the United States. Accounts
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or persons
designated in the related Prospectus Supplement will, to the extent described
herein and in such Prospectus Supplement deposit all payments and collections
received or advanced with respect to the Assets and other assets in the Trust
Fund. Such an account may be maintained as an interest bearing or a
non-interest bearing account, and funds held therein may be held as cash or
invested in certain short-term, investment grade obligations, in each case as
described in the related Prospectus Supplement. See "Description of the
Agreement--Certificate Account and Other Collection Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Assets in the related
Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee, reserve fund or
another type of credit support, or a combination thereof (any such coverage
with respect to the Certificates of any series, "Credit Support"). The amount
and types of coverage, the identification of the entity providing the coverage
(if applicable) and related information with respect to each type of Credit
Support, if any, will be described in the Prospectus Supplement for a series of
Certificates. See "Risk Factors--Credit Support Limitations" and "Description
of Credit Support."
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund
may include guaranteed investment contracts pursuant to which moneys held in
the funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on the Assets
or on one or more classes of Certificates. (Currency exchange agreements might
be included in the Trust Fund if some or all of the Mortgage Assets (such as
Mortgage Loans secured by Mortgaged Properties located outside the United
States) were denominated in a non-United States currency.) The principal terms
of any such guaranteed investment
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contract or other agreement (any such agreement, a "Cash Flow Agreement"),
including, without limitation, provisions relating to the timing, manner and
amount of payments thereunder and provisions relating to the termination
thereof, will be described in the Prospectus Supplement for the related series.
In addition, the related Prospectus Supplement will provide certain information
with respect to the obligor under any such Cash Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by the Depositor to the purchase of Assets and to pay for certain
expenses incurred in connection with such purchase of Assets and sale of
Certificates. 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 Assets acquired by the Depositor,
prevailing interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by
the Certificateholder, the Pass-Through Rate of the Certificate, the receipt
and timing of receipt of distributions on the Certificate and the weighted
average life of the Assets in the related Trust Fund (which may be affected by
prepayments, defaults, liquidations or repurchases). See "Risk Factors."
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Assets in the related Trust Fund. The Prospectus Supplement
with respect to any series of Certificates will specify the Pass-Through Rate
for each class of such Certificates or, in the case of 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 Asset on the Pass-Through Rate of one
or more classes of Certificates; and whether the distributions of interest on
the Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement. The effective yield to
maturity to each holder of Certificates entitled to payments of interest will
be below that otherwise produced by the applicable Pass-Through Rate and
purchase price of such Certificate because, while interest may accrue on each
Asset during a certain period, the distribution of such interest will be made
on a day which may be several days, weeks or months following the period of
accrual. Timing of Payment of Interest
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. As indicated above under "--Pass-Through Rate," if the
Interest Accrual Period ends on a date other than a Distribution Date for the
related series, the yield realized by the holders of such Certificates may be
lower than the yield that would result if the Interest Accrual Period ended on
such Distribution Date. In addition, if so specified in the related Prospectus
Supplement, interest accrued for an Interest Accrual Period for one or more
classes of Certificates may be calculated on the assumption that distributions
of principal (and additions to the Certificate Balance of Accrual Certificates)
and allocations of losses on the Assets may be made on the first day of the
Interest Accrual Period for a Distribution Date and not on such Distribution
Date. Such method would produce a lower effective yield than if interest were
calculated on the basis of the actual principal amount outstanding during an
Interest Accrual Period. The Interest Accrual Period for any class of Offered
Certificates will be described in the related Prospectus Supplement.
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PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate
of principal payments on the Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). Such payments may be directly dependent upon the
payments on Leases underlying such Mortgage Loans. The rate at which principal
prepayments occur on the Mortgage Loans will be affected by a variety of
factors, including, without limitation, the terms of the Mortgage Loans, the
level of prevailing interest rates, the availability of mortgage credit and
economic, demographic, geographic, tax, legal and other factors. In general,
however, if prevailing interest rates fall significantly below the Mortgage
Rates on the Mortgage Loans comprising or underlying the Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher
principal prepayments than if prevailing rates remain at or above the rates
borne by such Mortgage Loans. In this regard, it should be noted that certain
Assets may consist of Mortgage Loans with different Mortgage Rates and the
stated pass-through or pay-through interest rate of certain MBS may be a number
of percentage points higher or lower than certain of the underlying Mortgage
Loans. The rate of principal payments on some or all of the classes of
Certificates of a series will correspond to the rate of principal payments on
the Assets in the related Trust Fund and is likely to be affected by the
existence of Lock-out Periods and Prepayment Premium provisions of the Mortgage
Loans underlying or comprising such Assets, and by the extent to which the
servicer of any such Mortgage Loan is able to enforce such provisions. Mortgage
Loans with a Lock-out Period or a Prepayment Premium provision, to the extent
enforceable, generally would be expected to experience a lower rate of
principal prepayments than otherwise identical Mortgage Loans without such
provisions, with shorter Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Assets, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that
is slower than that actually experienced on the Assets, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a series of Certificates, the effect on yield
on one or more classes of the Certificates of such series of prepayments of the
Assets in the related Trust Fund may be mitigated or exacerbated by any
provisions for sequential or selective distribution of principal to such
classes.
When a full prepayment is made on a Mortgage Loan, the mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for
the number of days in the month actually elapsed up to the date of the
prepayment. Unless otherwise specified in the related Prospectus Supplement,
the effect of prepayments in full will be to reduce the amount of interest paid
in the following month to holders of Certificates entitled to payments of
interest because interest on the principal amount of any Mortgage Loan so
prepaid will be paid only to the date of prepayment rather than for a full
month. Unless otherwise specified in the related Prospectus Supplement, a
partial prepayment of principal is applied so as to reduce the outstanding
principal balance of the related Mortgage Loan as of the Due Date in the month
in which such partial prepayment is received. As a result, unless otherwise
specified in the related Prospectus Supplement, the effect of a partial
prepayment on a Mortgage Loan will be to reduce the amount of interest passed
through to holders of Certificates in the month following the receipt of such
partial prepayment by an amount equal to one month's interest at the applicable
Pass-Through Rate on the prepaid amount.
The timing of changes in the rate of principal payments on the
Mortgage Assets may significantly affect an investor's actual yield to
maturity, even if the average rate of distributions of principal is consistent
with an investor's expectation. In general, the earlier a principal payment is
received on the Mortgage Assets and distributed on a Certificate, the greater
the effect on such investor's yield to maturity. The effect on an investor's
yield of principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
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PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
Certificates may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related series.
If so provided in the Prospectus Supplement for a series of
Certificates, one or more classes of Certificates may have a final scheduled
Distribution Date, which is the date on or prior to which the Certificate
Balance thereof is scheduled to be reduced to zero, calculated on the basis of
the assumptions applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayme " includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be
affected by the varying maturities of the Mortgage Loans comprising or
underlying the MBS. If any Mortgage Loans comprising or underlying the Assets
in a particular Trust Fund have actual terms to maturity of less than those
assumed in calculating final scheduled Distribution Dates for the classes of
Certificates of the related series, one or more classes of such Certificates
may be fully paid prior to their respective final scheduled Distribution Dates,
even in the absence of prepayments. Accordingly, the prepayment experience of
the Assets will, to some extent, be a function of the mix of Mortgage Rates and
maturities of the Mortgage Loans comprising or underlying such Assets. See
"Description of the Trust Funds."
Prepayments on loans are also commonly measured relative to a
prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model. CPR represents a constant assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of loans for
the life of such loans.
Neither CPR 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 pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family loans. Thus, it
is likely that prepayment of any Mortgage Loans comprising or underlying the
Mortgage Assets for any series will not conform to any particular level of CPR.
The Depositor is not aware of any meaningful publicly available
prepayment statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates
will contain tables, if applicable, setting forth the projected weighted
average life of each class of Offered Certificates of such series and the
percentage of the initial Certificate Balance of each such class that would be
outstanding on specified Distribution Dates based on the assumptions stated in
such Prospectus Supplement, including assumptions that prepayments on the
Mortgage Loans comprising or underlying the related Assets are made at rates
corresponding to various percentages of CPR or at such other rates specified in
such Prospectus Supplement. Such tables and assumptions are intended to
illustrate the sensitivity of weighted average life of the Certificates to
various prepayment rates and will not be intended to predict or to provide
information that will enable investors to predict the actual weighted average
life of the Certificates. It is unlikely that prepayment of any Mortgage Loans
comprising or underlying the Mortgage Assets for any series will conform to any
particular level of CPR or any other rate specified in the related Prospectus
Supplement.
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OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE ASSET
A number of Mortgage Loans may have balloon payments due at maturity,
and because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may, to the extent and under the circumstances set forth in the
related Prospectus Supplement, be permitted 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 will tend
to extend the weighted average life of the Certificates, thereby lengthening
the period of time elapsed from the date of issuance of a Certificate until it
is retired.
FORECLOSURES AND PAYMENT PLANS
The number of foreclosures and the principal amount of the Mortgage
Loans comprising or underlying the Mortgage Assets 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 life of the
Mortgage Loans comprising or underlying the Mortgage Assets and that of the
related series of Certificates. Servicing decisions made with respect to the
Mortgage Loans, including the use of payment plans prior to a demand for
acceleration and the restructuring of Mortgage Loans in bankruptcy proceedings,
may also have an effect upon the payment patterns of particular Mortgage Loans
and thus the weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of
or the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of the
Mortgage Loans comprising or underlying the Assets may include "due-on-sale"
clauses or "due-on-encumbrance" clauses that allow the holder of the Mortgage
Loans to demand payment in full of the remaining principal balance of the
Mortgage Loans upon sale or certain other transfers of or the creation of
encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will be required to exercise (or
waive its right to exercise) any such right that the Trustee may have as
mortgagee to accelerate payment of the Whole Loan in a manner consistent with
the Servicing Standard. See "Certain Legal Aspects of the Mortgage Loans and
the Leases--Due-on-Sale and Due-on-Encumbrance" and "Description of the
Agreements--Due-on-Sale and Due-on-Encumbrance Provisions."
THE DEPOSITOR
Morgan Stanley Capital I Inc., the Depositor, is a direct wholly-owned
subsidiary of Morgan Stanley Group Inc. and was incorporated in the State of
Delaware on January 28, 1985. The principal executive offices of the Depositor
are located at 1585 Broadway, 37th Floor, New York, New York 10036. Its
telephone number is (212) 761-4700.
The Depositor does not have, nor is it expected in the future to have,
any significant assets.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any class of Certificates
not offered hereby) will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Agreement. Each series of
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Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iv) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Certificates"); (v) provide for distributions
of accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other classes of Certificates of
such series (collectively, "Accrual Certificates"); (vi) provide for payments
of principal sequentially, based on specified payment schedules, from only a
portion of the Assets in such Trust Fund or based on specified calculations, to
the extent of available funds, in each case as described in the related
Prospectus Supplement; and/or (vii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component. Any such
classes may include classes of Offered Certificates.
Each class of Offered Certificates of a series will be issued in
minimum denominations corresponding to the Certificate Balances or, in case of
Stripped Interest Certificates, notional amounts or percentage interests
specified in the related Prospectus Supplement. The transfer of any Offered
Certificates may be registered and such Certificates may be exchanged without
the payment of any service charge payable in connection with such registration
of transfer or exchange, but the Depositor or the Trustee or any agent thereof
may require payment of a sum sufficient to cover any tax or other governmental
charge. One or more classes of Certificates of a series may be issued in
definitive form ("Definitive Certificates") or in book-entry form ("Book-Entry
Certificates"), as provided in the related Prospectus Supplement. See "Risk
Factors--Book-Entry Registration" and "Description of the
Certificates--Book-Entry Registration and Definitive Certificates." Definitive
Certificates will be exchangeable for other Certificates of the same class and
series of a like aggregate Certificate Balance, notional amount or percentage
interest but of different authorized denominations. See "Risk Factors--Limited
Liquidity" and "Limited Assets."
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such series
and such Distribution Date. Except as otherwise specified in the related
Prospectus Supplement, distributions (other than the final distribution) will
be made to the persons in whose names the Certificates are registered at the
close of business on the last business day of the month preceding the month in
which the Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date"). 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 or by random selection, as described in the related Prospectus Supplement
or otherwise established by the related Trustee. 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 so notified the Trustee or other person
required to make such payments no later than the date specified in the related
Prospectus Supplement (and, if so provided in the related Prospectus
Supplement, holds Certificates in the requisite amount specified therein), or
by check mailed to the address of the person entitled thereto as it appears on
the Certificate Register; provided, however, that the final distribution in
retirement of the Certificates (whether Definitive Certificates or Book-Entry
Certificates) will be made only upon presentation and surrender of the
Certificates at the location specified in the notice to Certificateholders of
such final distribution.
AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each series on each
Distribution Date will be made from the Available Distribution Amount described
below, in accordance with the terms described in the related Prospectus
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Supplement. Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date equals the sum of
the following amounts:
(i) the total amount of all cash on deposit in the related Certificate
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Due Period (unless the related Prospectus
Supplement provides otherwise, a "Due Period" with respect to any Distribution
Date will commence on the second day of the month in which the immediately
preceding Distribution Date occurs, or the day after the Cut-off Date in the
case of the first Due Period, and will end on the first day of the month of the
related Distribution Date),
(b) unless the related Prospectus Supplement provides otherwise, all
prepayments, together with related payments of the interest thereon and related
Prepayment Premiums, Liquidation Proceeds, Insurance Proceeds and other
unscheduled recoveries received subsequent to the related Due Period, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, an Asset Seller, a Sub-Servicer, a
Special Servicer, the Master Servicer or any other entity as specified in the
related Prospectus Supplement or that are payable in respect of certain
expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Certificate Account, including
any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer or any other entity as
specified in the related Prospectus Supplement with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so
provides, amounts paid by a Master Servicer or any other entity as specified in
the related Prospectus Supplement with respect to interest shortfalls resulting
from prepayments during the related Prepayment Period; and (v) unless the
related Prospectus Supplement provides otherwise, to the extent not on deposit
in the related Certificate Account as of the corresponding Determination Date,
any amounts collected under, from or in respect of any Credit Support with
respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
Distributions of Interest on the Certificates
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which will be a fixed, variable or adjustable rate at which interest will
accrue on such class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or component or, in the case of a variable or adjustable Pass-Through Rate, the
method for determining the Pass-Through Rate. Unless otherwise specified in the
related Prospectus Supplement, interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class
will be made on each Distribution Date (other than any 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 any class of Stripped Principal
Certificates that are not entitled to any distributions of interest) based on
the Accrued Certificate Interest for such class and such Distribution Date,
subject to the sufficiency of the portion of the Available Distribution Amount
allocable to such class on such Distribution Date. Prior to the time interest
is distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates and each Distribution Date (other than certain classes of
Stripped Interest Certificates),
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"Accrued Certificate Interest" will be equal to interest accrued for a
specified period on the outstanding Certificate Balance thereof immediately
prior to the Distribution Date, at the applicable Pass-Through Rate, reduced as
described below. Unless otherwise provided in the Prospectus Supplement,
Accrued Certificate Interest on Stripped Interest Certificates will be equal to
interest accrued for a specified period on the outstanding notional amount
thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Certificates will be
described in the related Prospectus Supplement. Reference to notional amount is
solely for convenience in certain calculations and does not represent the right
to receive any distributions of principal. Unless otherwise provided in the
related Prospectus Supplement, the Accrued Certificate Interest on a series of
Certificates will be reduced in the event of prepayment interest shortfalls,
which are shortfalls in collections of interest for a full accrual period
resulting from prepayments prior to the due date in such accrual period on the
Mortgage Loans comprising or underlying the Mortgage Assets in the Trust Fund
for such series. The particular manner in which such shortfalls are to be
allocated among some or all of the classes of Certificates of that series will
be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance
of) a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Loans comprising or underlying 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 the Mortgage Loans
comprising or underlying the Mortgage Assets in the related Trust Fund will
result in a corresponding increase in the Certificate Balance of such class.
See "Risk Factors--Average Life of Certificates; Prepayments; Yields" and Yield
Considerations."
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain classes of
Stripped Interest Certificates, will have a "Certificate Balance" which, at any
time, will equal the then maximum amount that the holder will be entitled to
receive in respect of principal out of the future cash flow on the Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a Certificate will be reduced to the extent of distributions of
principal thereon from time to time and, if and to the extent so provided in
the related Prospectus Supplement, by the amount of losses incurred in respect
of the related Assets, may be increased in respect of deferred interest on the
related Mortgage Loans to the extent provided in the related Prospectus
Supplement and, in the case of Accrual Certificates prior to the Distribution
Date on which distributions of interest are required to commence, will be
increased by any related Accrued Certificate Interest. Unless otherwise
provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of Certificates of a series will not be
greater than the outstanding aggregate principal balance of the related Assets
as of the applicable Cut-off Date. The initial aggregate Certificate Balance of
a series and each class thereof will be specified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
distributions of principal will be made on each Distribution Date to the class
or classes of Certificates entitled thereto in accordance with the provisions
described in such Prospectus Supplement until the Certificate Balance of such
class has been reduced to zero. Stripped Interest Certificates with no
Certificate Balance are not entitled to any distributions of principal.
COMPONENTS
To the extent specified in the related Prospectus Supplement,
distribution on a class of Certificates may be based on a combination of two or
more different components as described under "--General" above. To such extent,
the descriptions set forth under "--Distributions of Interests on the
Certificates" and "--Distributions of Principal of the Certificates" above also
relate to components of such a class of Certificates. In such case, reference
in such sections to Certificate Balance and Pass-Through Rate refer to the
principal balance, if any, of any such component and the Pass-Through Rate, if
any, on any such component, respectively. Distributions on the Certificates of
Prepayment Premiums or in Respect of Equity Participations
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If so provided in the related Prospectus Supplement, Prepayment
Premiums or payments in respect of Equity Participations that are collected on
the Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections
on the Mortgage Assets have been incurred, the amount of such losses or
shortfalls will be borne first by a class of Subordinate Certificates in the
priority and manner and subject to the limitations specified in such Prospectus
Supplement. See "Description of Credit Support" for a description of the types
of protection that may be included in a Trust Fund against losses and
shortfalls on Mortgage Assets comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or another entity described therein will be required as part of
its servicing responsibilities to advance on or before each Distribution Date
its own funds or funds held in the Certificate Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount
equal to the aggregate of payments of principal (other than any balloon
payments) and interest (net of related servicing fees and Retained Interest)
that were due on the Whole Loans in such Trust Fund during the related Due
Period and were delinquent on the related Determination Date, subject to the
Master Servicer's (or another entity's) good faith determination that such
advances will be reimbursable from Related Proceeds (as defined below). In the
case of a series of Certificates that includes one or more classes of
Subordinate Certificates and if so provided in the related Prospectus
Supplement, the Master Servicer's (or another entity's) advance obligation may
be limited only to the portion of such delinquencies necessary to make the
required distributions on one or more classes of Senior Certificates and/or may
be subject to the Master Servicer's (or another entity's) good faith
determination that such advances will be reimbursable not only from Related
Proceeds but also from collections on other Assets otherwise distributable on
one or more classes of such Subordinate Certificates. See "Description of
Credit Support."
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. Unless
otherwise provided in the related Prospectus Supplement, advances of the Master
Servicer's (or another entity's) funds will be reimbursable only out of related
recoveries on the Mortgage Loans (including amounts received under any form of
Credit Support) respecting which such advances were made (as to any Mortgage
Loan, "Related Proceeds") and, if so provided in the Prospectus Supplement, out
of any amounts otherwise distributable on one or more classes of Subordinate
Certificates of such series; provided, however, that any such advance will be
reimbursable from any amounts in the Certificate Account prior to any
distributions being made on the Certificates to the extent that the Master
Servicer (or such other entity) shall determine in good faith that such advance
(a " Nonrecoverable Advance") is not ultimately recoverable from Related
Proceeds or, if applicable, from collections on other Assets otherwise
distributable on such Subordinate Certificates. If advances have been made by
the Master Servicer from excess funds in the Certificate Account, the Master
Servicer is required to replace such funds in the Certificate Account on any
future Distribution Date to the extent that funds in the Certificate Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date. If so specified in the related Prospectus
Supplement, the obligations of the Master Servicer (or another entity) to make
advances may be secured by a cash advance reserve fund, a surety bond, a letter
of credit or another form of limited guaranty. 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,
the Master Servicer (or another entity) will be entitled to receive interest at
the rate specified therein on its outstanding advances and will be entitled to
pay itself such interest periodically from general collections on the Assets
prior to any payment to
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Certificateholders or as otherwise provided in the related Agreement and
described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS. Reports to
Certificateholders
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement, will
forward or cause to be forwarded to each such holder, to the Depositor and to
such other parties as may be specified in the related Agreement, a statement
setting forth, in each case to the extent applicable and available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of
such class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment
Premiums and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer and any Sub-Servicer) and such other customary information as
any such Master Servicer or the Trustee deems necessary or desirable, or that a
Certificateholder reasonably requests, to enable Certificateholders to prepare
their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business on
such Distribution Date;
(vi) the aggregate principal balance of the Assets at the close of
business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in
respect of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are delinquent
and (d) foreclosure proceedings have been commenced; (viii) with respect to
each Whole Loan that is delinquent two or more months, (a) the loan number
thereof, (b) the unpaid balance thereof, (c) whether the delinquency is in
respect of any balloon payment, (d) the aggregate amount of unreimbursed
servicing expenses and unreimbursed advances in respect thereof, (e) if
applicable, the aggregate amount of any interest accrued and payable on related
servicing expenses and related advances assuming such Mortgage Loan is
subsequently liquidated through foreclosure, (f) whether a notice of
acceleration has been sent to the mortgagor and, if so, the date of such
notice, (g) whether foreclosure proceedings have been commenced and, if so, the
date so commenced and (h) if such Mortgage Loan is more than three months
delinquent and foreclosure has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related Due
Period (other than by payment in full), (a) the loan number thereof, (b) the
manner in which it was liquidated and (c) the aggregate amount of liquidation
proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or reimbursable to
the Master Servicer (or any other entity) in respect of such Mortgage Loan and
(b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
loan number of the related Mortgage Loan and (b) the date of acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a) the
book value, (b) the principal balance of the related Mortgage Loan immediately
following such Distribution Date (calculated as if such Mortgage Loan were
still outstanding taking
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into account certain limited modifications to the terms thereof specified in
the Agreement), (c) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (d) if applicable, the aggregate
amount of interest accrued and payable on related servicing expenses and
related advances;
(xiii) with respect to any such REO Property sold during the related
Due Period (a) the loan number of the related Mortgage Loan, (b) the aggregate
amount of sale proceeds, (c) the portion of such sales proceeds payable or
reimbursable to the Master Servicer or a Special Servicer in respect of such
REO Property or the related Mortgage Loan and (d) the amount of any loss to
Certificateholders in respect of the related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the
case may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to the
allocation of any loss and increase in the Certificate Balance of a class of
Accrual Certificates in the event that Accrued Certificate Interest has been
added to such balance;
(xv) the aggregate amount of principal prepayments made during the
related Due Period;
(xvi) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xvii) the amount remaining in the reserve fund, if any, as of the
close of business on such Distribution Date;
(xviii) the aggregate unpaid Accrued Certificate Interest, if any, on
each class of Certificates at the close of business on such Distribution Date;
(xix) in the case of Certificates with a variable Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, and, if available,
the immediately succeeding Distribution Date, as calculated in accordance with
the method specified in the related Prospectus Supplement;
(xx) in the case of Certificates with an adjustable Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to such Distribution Date
and the immediately succeeding Distribution Date as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xxi) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the close
of business on such Distribution Date; and
(xxii) the aggregate amount of payments by the mortgagors of (a)
default interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof. In
addition, in the case of information furnished pursuant to subclauses (i),
(ii), (xiv), (xviii) and (xix) above, such amounts shall also be provided with
respect to each component, if any, of a class of Certificates. The Master
Servicer or the Trustee, as specified in the related Prospectus Supplement,
will forward or cause to be forwarded to each holder, to the Depositor and to
such other parties as may be specified in the Agreement, a copy of any
statements or reports received by the Master Servicer or the Trustee, as
applicable, with respect to any MBS. The Prospectus Supplement for each series
of Offered Certificates will describe any additional information to be included
in reports to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar
year, the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee
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shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Master Servicer or the Trustee
pursuant to any requirements of the Code as are from time to time in force. See
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
TERMINATION
The obligations created by the Agreement for each series of
Certificates will terminate upon the payment to Certificateholders of that
series of all amounts held in the Certificate Account or by the Master
Servicer, if any, or the Trustee and required to be paid to them pursuant to
such Agreement following the earlier of (i) the final payment or other
liquidation of the last Asset subject thereto or the disposition of all
property acquired upon foreclosure of any Whole Loan subject thereto and (ii)
the purchase of all of the assets of the Trust Fund by the party entitled to
effect such termination, under the circumstances and in the manner set forth in
the related Prospectus Supplement. In no event, however, will the trust created
by the Agreement continue beyond the date specified in the related Prospectus
Supplement. Written notice of termination of the Agreement will be given to
each Certificateholder, and the final distribution will be made only upon
presentation and surrender of the Certificates at the location to be specified
in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by the party specified
therein, under the circumstances and in the manner set forth therein. If so
provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, the party specified therein will solicit bids
for the purchase of all assets of the Trust Fund, or of a sufficient portion of
such assets to retire such class or classes or purchase such class or classes
at a price set forth in the related Prospectus Supplement, in each case, under
the circumstances and in the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more
classes of the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its participating organizations ("Participants") and facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes in their accounts, thereby eliminating
the need for physical movement of certificates. Participants include Morgan
Stanley & Co. Incorporated, securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). Unless otherwise provided in the related
Prospectus Supplement, investors that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Book-Entry Certificates may do so only through
Participants and Indirect Participants. In addition, such investors
("Certificate Owners") will receive all distributions on the Book-Entry
Certificates through DTC and its Participants. Under a book-entry format,
Certificate Owners will receive payments after the related Distribution Date
because, while payments are required to be forwarded to Cede & Co., as nominee
for DTC ("Cede"), on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or Certificate Owners. Unless otherwise provided in the related
Prospectus Supplement, the only "Certificateholder" (as such term is used in
the Agreement) will be Cede, as nominee of DTC, and the Certificate Owners will
not be recognized by the Trustee as Certificateholders under the Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Agreement only indirectly through the
Participants who in turn will exercise their rights through DTC.
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Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry
Certificates and is required to receive and transmit distributions of principal
of and interest on the Book-Entry Certificates. Participants and Indirect
Participants with which Certificate Owners have accounts with respect to the
Book-Entry Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge its interest in the 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 the Book-Entry Certificates, may be limited due
to the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted
to be taken by a Certificateholder under an Agreement only at the direction of
one or more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
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.
Upon the occurrence of either of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants of
the availability through DTC of Definitive Certificates for the Certificate
Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration, the
Trustee will issue (or cause to be issued) to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled,
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer
appointed as of the date of the Pooling and Servicing Agreement and the
Trustee. The Certificates of each series evidencing interests in a Trust Fund
not including Whole Loans will be issued pursuant to a Trust Agreement between
the Depositor and a Trustee. Any Master Servicer, any such Special Servicer and
the Trustee with respect to any series of Certificates will be named in the
related Prospectus Supplement. In lieu of appointing a Master Servicer, a
servicer may be appointed pursuant to the Pooling and Servicing Agreement for
any Trust Fund. Such servicer will service all or a significant number of Whole
Loans directly without a Sub-Servicer. Unless otherwise specified in the
related Prospectus Supplement, the obligations of any such servicer shall be
commensurate with those of the Master Servicer described herein. References in
this prospectus to Master Servicer and its rights and obligations, unless
otherwise specified in the related Prospectus Supplement, shall be deemed to
also be references to any servicer servicing Whole Loans directly. A manager or
administrator may be appointed pursuant to the Trust Agreement for any Trust
Fund to administer such Trust Fund. The provisions of each Agreement will vary
depending upon the nature of the Certificates to be issued thereunder and the
nature of the related Trust Fund. 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. Any Trust Agreement will generally conform to the form of
Pooling and Servicing Agreement filed herewith, but will not contain provisions
with respect to the servicing and maintenance of Whole Loans. The following
summaries describe certain provisions that may appear in each Agreement. The
Prospectus Supplement for a series of Certificates will describe any provision
of the Agreement relating to such series that materially differs from the
description thereof contained in this Prospectus. The summaries 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 Agreement for each Trust Fund and
the description of such provisions in the related Prospectus Supplement. As
used herein with respect to any series, the term "Certificate" refers to all of
the Certificates of that series, whether or not offered
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hereby and by the related Prospectus Supplement, unless the context otherwise
requires. The Depositor will provide a copy of the Agreement (without exhibits)
relating to any series of Certificates without charge upon written request of a
holder of a Certificate of such series addressed to Morgan Stanley Capital I
Inc., c/o Morgan Stanley & Co. Incorporated, 1585 Broadway, 37th Floor, New
York, New York 10036, Attention: John E. Westerfield.
ASSIGNMENT OF ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor
will assign (or cause to be assigned) to the designated Trustee the Assets to
be included in the related Trust Fund, together with all principal and interest
to be received on or with respect to such Assets after the Cut-off Date, other
than principal and interest due on or before the Cut-off Date and other than
any Retained Interest. The Trustee will, concurrently with such assignment,
deliver the Certificates to the Depositor in exchange for the Assets and the
other assets comprising the Trust Fund for such series. Each Mortgage Asset
will be identified in a schedule appearing as an exhibit to the related
Agreement. Unless otherwise provided in the related Prospectus Supplement, such
schedule will include detailed information (i) in respect of each Whole Loan
included in the related Trust Fund, including without limitation, the address
of the related Mortgaged Property and type of such property, the Mortgage Rate
and, if applicable, the applicable index, margin, adjustment date and any rate
cap information, the original and remaining term to maturity, the original and
outstanding principal balance and balloon payment, if any, the Value,
Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date
indicated and payment and prepayment provisions, if applicable, and (ii) in
respect of each MBS included in the related Trust Fund, including without
limitation, the MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or
bond rate or formula for determining such rate, the issue date and original and
remaining term to maturity, if applicable, the original and outstanding
principal amount and payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause
to be delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which unless otherwise specified in the related
Prospectus Supplement will include the original Mortgage Note endorsed, without
recourse, in blank or to the order of the Trustee, the original Mortgage (or a
certified copy thereof) with evidence of recording indicated thereon and an
assignment of the Mortgage to the Trustee in recordable form. 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 to the
Trustee or the custodian a copy or a duplicate original of the Mortgage Note,
together with an affidavit certifying that the original thereof has been lost
or destroyed. With respect to such Mortgage Loans, the Trustee (or its nominee)
may not be able to enforce the Mortgage Note against the related borrower.
Unless otherwise specified in the related Prospectus Supplement, the Asset
Seller will be required to agree to repurchase, or substitute for, each such
Mortgage Loan that is subsequently in default if the enforcement thereof or of
the related Mortgage is materially adversely affected by the absence of the
original Mortgage Note. Unless otherwise provided in the related Prospectus
Supplement, the related Agreement will require the Depositor or another party
specified therein to promptly cause each such assignment of Mortgage to be
recorded in the appropriate public office for real property records, except in
the State of California or in other states where, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in the related Whole Loan against the claim of any
subsequent transferee or any successor to or creditor of the Depositor, the
Master Servicer, the relevant Asset Seller or any other prior holder of the
Whole Loan.
The Trustee (or a custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Asset Seller. If the Asset Seller cannot cure the omission
or defect within a specified number of days after receipt of such notice, then
unless otherwise specified in the related Prospectus Supplement, the Asset
Seller will be obligated, within a specified number of days of receipt of such
notice, to repurchase the related Whole Loan from the Trustee at the Purchase
Price or substitute for such Mortgage Loan. There can be no assurance that an
Asset Seller will fulfill this repurchase or substitution obligation, and
neither the Master Servicer nor the Depositor will be obligated to
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repurchase or substitute for such Mortgage Loan if the Asset Seller defaults on
its obligation. Unless otherwise specified in the related Prospectus
Supplement, this repurchase or substitution obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or a
material defect in, a constituent document. To the extent specified in the
related Prospectus Supplement, in lieu of curing any omission or defect in the
Asset or repurchasing or substituting for such Asset, the Asset Seller may
agree to cover any losses suffered by the Trust Fund as a result of such breach
or defect.
If so provided in the related Prospectus Supplement, the Depositor
will, as to some or all of the Mortgage Loans, assign or cause to be assigned
to the Trustee the related Lease Assignments. In certain cases, the Trustee, or
Master Servicer, as applicable, may collect all moneys under the related Leases
and distribute amounts, if any, required under the Lease for the payment of
maintenance, insurance and taxes, to the extent specified in the related Lease
agreement. The Trustee, or if so specified in the Prospectus Supplement, the
Master Servicer, as agent for the Trustee, may hold the Lease in trust for the
benefit of the Certificateholders.
With respect to each Government Security or MBS in certificated form,
the Depositor will deliver or cause to be delivered to the Trustee (or the
custodian) the original certificate or other definitive evidence of such
Government Security or MBS, as applicable, together with bond power or other
instruments, certifications or documents required to transfer fully such
Government Security or MBS, as applicable, to the Trustee for the benefit of
the Certificateholders. With respect to each Government Security or MBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
Government Security or MBS to be registered directly or on the books of such
clearing corporation or of a financial intermediary in the name of the Trustee
for the benefit of the Certificateholders. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause any MBS and Government Securities
in certificated form not registered in the name of the Trustee to be
re-registered, with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign certain
representations and warranties, as of a specified date (the person making such
representations and warranties, the "Warrantying Party") covering, by way of
example, the following types of matters: (i) the accuracy of the information
set forth for such Whole Loan on the schedule of Assets appearing as an exhibit
to the related Agreement; (ii) the existence of title insurance insuring the
lien priority of the Whole Loan; (iii) the authority of the Warrantying Party
to sell the Whole Loan; (iv) the payment status of the Whole Loan and the
status of payments of taxes, assessments and other charges affecting the
related Mortgaged Property; (v) the existence of customary provisions in the
related Mortgage Note and Mortgage to permit realization against the Mortgaged
Property of the benefit of the security of the Mortgage; and (vi) the existence
of hazard and extended perils insurance coverage on the Mortgaged Property.
Any Warrantying Party, if other than the Depositor, shall be an Asset
Seller or an affiliate thereof or such other person acceptable to the Depositor
and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may
have been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warrantying
Party will be obligated to reimburse the Trust Fund for losses caused by any
such breach or either cure such breach or repurchase or replace the affected
Whole Loan as described below. Since the representations and warranties may not
address events that may occur following the date as of which they were made,
the Warrantying Party will have a reimbursement, cure, repurchase or
substitution obligation in connection with a breach of such a representation
and warranty only if the relevant event that causes such breach occurs prior to
such date. Such party would have no such obligations if the relevant event that
causes such breach occurs after such date.
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Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warrantying Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that
materially and adversely affects the value of such Whole Loan or the interests
therein of the Certificateholders. If such Warrantying Party cannot cure such
breach within a specified period following the date on which such party was
notified of such breach, then such Warrantying Party will be obligated to
repurchase such Whole Loan from the Trustee within a specified period from the
date on which the Warrantying Party was notified of such breach, at the
Purchase Price therefor. As to any Whole Loan, unless otherwise specified in
the related Prospectus Supplement, the "Purchase Price" is equal to the sum of
the unpaid principal balance thereof, plus unpaid accrued interest thereon at
the Mortgage Rate from the date as to which interest was last paid to the due
date in the Due Period in which the relevant purchase is to occur, plus certain
servicing expenses that are reimbursable to the Master Servicer. If so provided
in the Prospectus Supplement for a series, a Warrantying Party, rather than
repurchase a Whole Loan as to which a breach has occurred, will have the
option, within a specified period after initial issuance of such series of
Certificates, to cause the removal of such Whole Loan from the Trust Fund and
substitute in its place one or more other Whole Loans, in accordance with the
standards described in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a series, a Warrantying Party, rather than repurchase
or substitute a Whole Loan as to which a breach has occurred, will have the
option to reimburse the Trust Fund or the Certificateholders for any losses
caused by such breach. Unless otherwise specified in the related Prospectus
Supplement, this reimbursement, repurchase or substitution obligation will
constitute the sole remedy available to holders of Certificates or the Trustee
for a breach of representation by a Warrantying Party.
Neither the Depositor (except to the extent that it is the Warrantying
Party) nor the Master Servicer will be obligated to purchase or substitute for
a Whole Loan if a Warrantying Party defaults on its obligation to do so, and no
assurance can be given that Warrantying Parties will carry out such obligations
with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warrantying Party will, with respect to a Trust Fund that includes Government
Securities or MBS, make or assign certain representations or warranties, as of
a specified date, with respect to such Government Securities or MBS, covering
(i) the accuracy of the information set forth therefor on the schedule of
Assets appearing as an exhibit to the related Agreement and (ii) the authority
of the Warrantying Party to sell such Assets. The related Prospectus Supplement
will describe the remedies for a breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. A breach of any such representation
of the Master Servicer which materially and adversely affects the interests of
the Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to the Master Servicer by the Trustee
or the Depositor, or to the Master Servicer, the Depositor and the Trustee by
the holders of Certificates evidencing not less than 25% of the Voting Rights
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. See
"Events of Default" and "Rights Upon Event of Default."
CERTIFICATE ACCOUNT AND OTHER COLLECTION ACCOUNTS
GENERAL
The Master Servicer and/or the Trustee will, as to each Trust Fund,
establish and maintain or cause to be established and maintained one or more
separate accounts for the collection of payments on the related Assets
(collectively, the "Certificate Account"), which must be either (i) an account
or accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") (to the limits established by the FDIC) and the uninsured deposits in
which are otherwise secured such that the Certificateholders have a claim with
respect to the funds in the Certificate Account or a perfected first priority
security interest against any collateral securing such funds that is superior
to the claims of any other depositors or general creditors of the institution
with which the Certificate Account is maintained or (ii) otherwise maintained
with a bank or trust company, and in a manner, satisfactory to the Rating
Agency or
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Agencies rating any class of Certificates of such series. The collateral
eligible to secure amounts in the Certificate Account is limited to United
States government securities and other investment grade obligations specified
in the Agreement ("Permitted Investments"). A Certificate Account may be
maintained as an interest bearing or a non-interest bearing account and the
funds held therein may be invested pending each succeeding Distribution Date in
certain short-term Permitted Investments. Unless otherwise provided in the
related Prospectus Supplement, any interest or other income earned on funds in
the Certificate Account will be paid to a Master Servicer or its designee as
additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
DEPOSITS
A Master Servicer or the Trustee will deposit or cause to be deposited
in the Certificate Account for one or more Trust Funds on a daily basis, unless
otherwise provided in the related Agreement, the following payments and
collections received, or advances made, by the Master Servicer or the Trustee
or on its behalf subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date, and exclusive of any amounts representing a Retained
Interest):
(i) all payments on account of principal, including principal
prepayments, on the Assets;
(ii) all payments on account of interest on the Assets, including any
default interest collected, in each case net of any portion thereof retained by
a Master Servicer, a Sub-Servicer or a Special Servicer as its servicing
compensation and net of any Retained Interest;
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such proceeds
are not applied to the restoration of the property or released to the mortgagor
in accordance with the normal servicing procedures of a Master Servicer or the
related Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) and all proceeds of rental interruption policies,
if any, insuring against losses arising from the failure of Lessees under a
Lease to make timely rental payments because of certain casualty events
(collectively, "Insurance Proceeds") and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans in the
Trust Fund, by foreclosure or otherwise ("Liquidation Proceeds"), together with
the net proceeds on a monthly basis with respect to any Mortgaged Properties
acquired for the benefit of Certificateholders by foreclosure or by deed in
lieu of foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as described
under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts representing Prepayment Premiums;
(vii) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
(viii) all proceeds of any Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Seller or any other specified person as described under "Assignment of Assets;
Repurchases" and "Representations and Warranties; Repurchases," all proceeds of
any defaulted Mortgage Loan purchased as described under "Realization Upon
Defaulted Whole Loans," and all proceeds of any Asset purchased as described
under "Description of the Certificates Termination" (also, "Liquidation
Proceeds");
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(ix) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Whole Loans in the Trust Fund as
described under "Description of the Agreements Retained Interest; Servicing
Compensation and Payment of Expenses";
(x) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums or
Equity Participations on the Mortgage Assets;
(xi) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy described
under "Hazard Insurance Policies";
(xii) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit of
the Master Servicer or the Trustee, as the case may be, of funds held in the
Certificate Account; and
(xiii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
WITHDRAWALS
A Master Servicer or the Trustee may, from time to time, unless
otherwise provided in the related Agreement and described in the related
Prospectus Supplement, make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced
as described under "Description of the Certificates Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer as late collections of
interest (net of related servicing fees and Retained Interest) on and principal
of the particular Whole Loans with respect to which the advances were made or
out of amounts drawn under any form of Credit Support with respect to such
Whole Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned
and certain unreimbursed servicing expenses incurred with respect to Whole
Loans and properties acquired in respect thereof, such reimbursement to be made
out of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Whole Loans and properties, and net income
collected on the particular properties, with respect to which such fees were
earned or such expenses were incurred or out of amounts drawn under any form of
Credit Support with respect to such Whole Loans and properties;
(iv) to reimburse a Master Servicer for any advances described in
clause (ii) above and any servicing expenses described in clause (iii) above
which, in the Master Servicer's good faith judgment, will not be recoverable
from the amounts described in clauses (ii) and (iii), respectively, such
reimbursement to be made from amounts collected on other Assets or, if and to
the extent so provided by the related Agreement and described in the related
Prospectus Supplement, just from that portion of amounts collected on other
Assets that is otherwise distributable on one or more classes of Subordinate
Certificates, if any, remain outstanding, and otherwise any outstanding class
of Certificates, of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the advances described
in clause (ii) above and the servicing expenses described in clause (iii) above
while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment, clean-up
or remediation of hazardous wastes, substances and materials on, Mortgaged
Properties securing defaulted Whole Loans as described under "Realization Upon
Defaulted Whole Loans";
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(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be, for
certain expenses, costs and liabilities incurred thereby, as and to the extent
described under "Certain Matters Regarding a Master Servicer and the
Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under "Certain
Matters Regarding the Trustee";
(x) unless otherwise provided in the related Prospectus Supplement, to
pay a Master Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Certificate Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master Servicer as
recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the
proper operation, management and maintenance of any Mortgaged Property acquired
for the benefit of Certificateholders by foreclosure or by deed in lieu of
foreclosure or otherwise, such payments to be made out of income received on
such property;
(xiii) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to the
extent described under "Certain Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xiv) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a defaulted
Whole Loan or a property acquired in respect thereof in connection with the
liquidation of such Whole Loan or property;
(xv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders, provided that such payment shall not constitute a waiver
with respect to the obligation of the Warrantying Party to remedy any breach of
representation or warranty under the Agreement;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Asset after its
removal from the Trust Fund whether by reason of purchase or substitution as
contemplated by "Assignment of Assets; Repurchase" and "Representations and
Warranties; Repurchases" or otherwise;
(xviii) to make any other withdrawals permitted by the related
Agreement and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the
termination of the Trust Fund.
OTHER COLLECTION ACCOUNTS
Notwithstanding the foregoing, if so specified in the related
Prospectus Supplement, the Agreement for any series of Certificates may provide
for the establishment and maintenance of a separate collection account into
which the Master Servicer or any related Sub-Servicer or Special Servicer will
deposit on a daily basis the amounts described under "--Deposits" above for one
or more series of Certificates. Any amounts on deposit in any such collection
account will be withdrawn therefrom and deposited into the appropriate
Certificate Account by a time specified in the related Prospectus Supplement.
To the extent specified in the related Prospectus Supplement, any
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amounts which could be withdrawn from the Certificate Account as described
under "--Withdrawals" above, may also be withdrawn from any such collection
account. The Prospectus Supplement will set forth any restrictions with respect
to any such collection account, including investment restrictions and any
restrictions with respect to financial institutions with which any such
collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans
and held for its own account, provided such procedures are consistent with (i)
the terms of the related Agreement and any related hazard, business
interruption, rental interruption or general liability insurance policy or
instrument of Credit Support included in the related Trust Fund described
herein or under "Description of Credit Support," (ii) applicable law and (iii)
the general servicing standard specified in the related Prospectus Supplement
or, if no such standard is so specified, its normal servicing practices (in
either case, the "Servicing Standard"). In connection therewith, the Master
Servicer will be permitted in its discretion to waive any late payment charge
or penalty interest in respect of a late Whole Loan payment.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or causing
the mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business
interruption and general liability insurance policies (and, if applicable,
rental interruption policies) as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder; maintaining escrow or
impoundment accounts of mortgagors for payment of taxes, insurance and other
items required to be paid by any mortgagor pursuant to the Whole Loan;
processing assumptions or substitutions in those cases where the Master
Servicer has determined not to enforce any applicable due-on-sale clause;
attempting to cure delinquencies; supervising foreclosures; inspecting and
managing Mortgaged Properties under certain circumstances; and maintaining
accounting records relating to the Whole Loans. Unless otherwise specified in
the related Prospectus Supplement, the Master Servicer will be responsible for
filing and settling claims in respect of particular Whole Loans under any
applicable instrument of Credit Support. See "Description of Credit Support."
The Master Servicer may agree to modify, waive or amend any term of
any Whole Loan in a manner consistent with the Servicing Standard so long as
the modification, waiver or amendment will not (i) affect the amount or timing
of any scheduled payments of principal or interest on the Whole Loan or (ii) in
its judgment, materially impair the security for the Whole Loan or reduce the
likelihood of timely payment of amounts due thereon. The Master Servicer also
may agree to any modification, waiver or amendment that would so affect or
impair the payments on, or the security for, a Whole Loan if, unless otherwise
provided in the related Prospectus Supplement, (i) in its judgment, a material
default on the Whole Loan has occurred or a payment default is imminent and
(ii) in its judgment, such modification, waiver or amendment is reasonably
likely to produce a greater recovery with respect to the Whole Loan on a
present value basis than would liquidation. The Master Servicer is required to
notify the Trustee in the event of any modification, waiver or amendment of any
Whole Loan.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Whole Loans to third-party servicers (each, a "Sub-Servicer"), but such
Master Servicer will remain obligated under the related Agreement. Each
sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must be consistent with the terms of the related
Agreement and must provide that, if for any reason the Master Servicer for the
related series of Certificates is no longer acting in such capacity, the
Trustee or any successor Master Servicer may assume the Master Servicer's
rights and obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Agreement is sufficient to pay such fees. However, a
Sub-Servicer may be entitled to a Retained Interest in certain Whole Loans.
Each Sub-Servicer will be reimbursed by the Master Servicer for certain
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expenditures which it makes, generally to the same extent the Master Servicer
would be reimbursed under an Agreement. See "Retained Interest, Servicing
Compensation and Payment of Expenses."
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, a
special servicer (the "Special Servicer") may be appointed. The related
Prospectus Supplement will describe the rights, obligations and compensation of
a Special Servicer. The Master Servicer will only be responsible for the duties
and obligations of a Special Servicer to the extent set forth in the Prospectus
Supplement.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such mortgagor's ability to make
timely payment of taxes and to pay for necessary maintenance of the related
Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged Property, initiate corrective action
in cooperation with the mortgagor if cure is likely, inspect the Mortgaged
Property and take such other actions as are consistent with the Servicing
Standard. A significant period of time may elapse before the Master Servicer is
able to assess the success of such corrective action or the need for additional
initiatives.
The time within which the Master Servicer makes the initial
determination of appropriate action, evaluates the success of corrective
action, develops additional initiatives, institutes foreclosure proceedings and
actually forecloses (or takes a deed to a Mortgaged Property in lieu of
foreclosure) on behalf of the Certificateholders, may vary considerably
depending on the particular Whole Loan, the Mortgaged Property, the mortgagor,
the presence of an acceptable party to assume the Whole Loan and the laws of
the jurisdiction in which the Mortgaged Property is located. Under federal
bankruptcy law, the Master Servicer in certain cases may not be permitted to
accelerate a Whole Loan or to foreclose on a Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of the Mortgage--Loans
and the Leases."
Any Agreement relating to a Trust Fund that includes Whole Loans may
grant to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under "Representations and Warranties; Repurchases."
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer may offer to sell any defaulted Whole Loan described in the
preceding paragraph and not otherwise purchased by any person having a right of
first refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a
greater recovery on a present value basis than would liquidation through
foreclosure or similar proceeding. The related Agreement will provide that any
such offering be made in a commercially reasonable manner for a specified
period and that the Master Servicer accept the highest cash bid received from
any person (including itself, an affiliate of the Master Servicer or any
Certificateholder) that constitutes a fair price for such defaulted Whole Loan.
In the absence of any bid determined in accordance with the related Agreement
to be fair, the Master Servicer shall proceed with respect to such defaulted
Mortgage Loan as described below. Any bid in an amount at least equal to the
Purchase Price described under "Representations and Warranties; Repurchases"
will in all cases be deemed fair.
The Master Servicer, on behalf of the Trustee, may at any time
institute foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to a
Mortgaged Property securing a Whole Loan by operation of law or otherwise, if
such action is consistent with the
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Servicing Standard and a default on such Whole Loan has occurred or, in the
Master Servicer's judgment, is imminent. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer may not acquire title to any
related Mortgaged Property or take any other action that would cause the
Trustee, for the benefit 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 Master Servicer has previously
determined, based on a report prepared by a person who regularly conducts
environmental audits (which report will be an expense of the Trust Fund), that
either:
(i) the Mortgaged Property is in compliance with applicable
environmental laws, and there are no circumstances present at the Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and further to take
such actions as would be necessary and appropriate to effect such compliance
and/or respond to such circumstances (the cost of which actions will be an
expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if
title to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC
election has been made, the Master Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund subsequent to such period will not result in the imposition of a tax on
the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the
Code at any time that any Certificate is outstanding. Subject to the foregoing,
the Master Servicer will be required to (i) solicit bids for any Mortgaged
Property so acquired in such a manner as will be reasonably likely to realize a
fair price for such property and (ii) accept the first (and, if multiple bids
are contemporaneously received, the highest) cash bid received from any person
that constitutes a fair price.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
The limitations imposed by the related Agreement and the REMIC
provisions of the Code (if a REMIC election has been made with respect to the
related Trust Fund) on the operations and ownership of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of the Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Whole Loan. If the proceeds of any liquidation of the property securing the
defaulted Whole Loan are less than the outstanding principal balance of the
defaulted Whole Loan plus interest accrued thereon at the Mortgage Rate plus
the aggregate amount of expenses incurred by the Master Servicer in connection
with such proceedings and which are reimbursable under the Agreement, the Trust
Fund will realize a loss in the amount of such difference. The Master Servicer
will be entitled to withdraw or cause to be withdrawn from the Certificate
Account out of the Liquidation Proceeds recovered on any defaulted Whole Loan,
prior to the distribution of such Liquidation Proceeds to Certificateholders,
amounts representing its normal servicing compensation on the Whole Loan,
unreimbursed
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servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged property to a condition sufficient to permit recovery under
the related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be
recoverable by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of
itself, the Trustee and the Certificateholders, will present claims to the
obligor under each instrument of Credit Support, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Certificate Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "Hazard Insurance Policies" and "Description of
Credit Support."
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, such coverage
will be in general in an amount equal to the lesser of the principal balance
owing on such Whole Loan and the amount necessary to fully compensate for any
damage or loss to the improvements on the Mortgaged Property on a replacement
cost basis, but in either case not less than the amount necessary to avoid the
application of any co-insurance clause contained in the hazard insurance
policy. The ability of the Master Servicer to assure that hazard insurance
proceeds are appropriately applied may be dependent upon its being named as an
additional insured under any hazard insurance policy and under any other
insurance policy referred to below, or upon the extent to which information in
this regard is furnished by mortgagors. All amounts collected by the Master
Servicer under any such policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property or released to the mortgagor in
accordance with the Master Servicer's normal servicing procedures, subject to
the terms and conditions of the related Mortgage and Mortgage Note) will be
deposited in the Certificate Account. The Agreement will provide that the
Master Servicer may satisfy its obligation to cause each mortgagor to maintain
such a hazard insurance policy by the Master Servicer's maintaining a blanket
policy insuring against hazard losses on the Whole Loans. If such blanket
policy contains a deductible clause, the Master Servicer will be required to
deposit in the Certificate Account all sums that would have been deposited
therein but for such 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 relating to the Whole Loans 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, the basic terms thereof are dictated by respective state laws, and
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 uninsured risks.
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The hazard insurance policies covering the Mortgaged Properties
securing the Whole Loans will typically contain a co-insurance clause that in
effect requires the 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
clause generally provides 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.
Each Agreement for a Trust Fund that includes Whole Loans will require
the Master Servicer to cause the mortgagor on each Whole Loan, or, in certain
cases, the related Lessee, to maintain all such other insurance coverage with
respect to the related Mortgaged Property as is consistent with the terms of
the related Mortgage and the Servicing Standard, which insurance may typically
include flood insurance (if the related Mortgaged Property was located at the
time of origination in a federally designated flood area).
In addition, to the extent required by the related Mortgage, the
Master Servicer may require the mortgagor or related Lessee to maintain other
forms of insurance including, but not limited to, loss of rent endorsements,
business interruption insurance and comprehensive public liability insurance,
and the related Agreement may require the Master Servicer, Sub-Servicer or
Special Servicer to maintain public liability insurance with respect to any REO
Properties. Any cost incurred by the Master Servicer in maintaining any such
insurance policy will be added to the amount owing under the Mortgage Loan
where the terms of the Mortgage Loan so permit; provided, however, that the
addition of such cost will not be taken into account for purposes of
calculating the distribution to be made to Certificateholders. Such costs may
be recovered by the Master Servicer, Sub-Servicer or Special Servicer, as the
case may be, from the Collection Account, with interest thereon, as provided by
the Agreement.
Under the terms of the Whole Loans, mortgagors will generally be
required to present claims to insurers under hazard insurance policies
maintained on the related Mortgaged Properties. The Master Servicer, on behalf
of the Trustee and Certificateholders, is obligated to present or cause to be
presented claims under any blanket insurance policy insuring against hazard
losses on Mortgaged Properties securing the Whole Loans. However, the ability
of the Master Servicer to present or cause to be presented such claims is
dependent upon the extent to which information in this regard is furnished to
the Master Servicer by mortgagors.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related Prospectus Supplement, the Master
Servicer or the mortgagors will maintain rental interruption insurance policies
in full force and effect with respect to some or all of the Leases. Although
the terms of such policies vary to some degree, a rental interruption insurance
policy typically provides that, to the extent that a Lessee fails to make
timely rental payments under the related Lease due to a casualty event, such
losses will be reimbursed to the insured. If so specified in the related
Prospectus Supplement, the Master Servicer will be required to pay from its
servicing compensation the premiums on the rental interruption policy on a
timely basis. If so specified in the Prospectus Supplement, if such rental
interruption policy is canceled or terminated for any reason (other than the
exhaustion of total policy coverage), the Master Servicer will exercise its
best reasonable efforts to obtain from another insurer a replacement policy
comparable to the rental interruption policy with a total coverage that is
equal to the then existing coverage of the terminated rental interruption
policy; provided that if the cost of any such replacement policy is greater
than the cost of the terminated rental interruption policy, the amount of
coverage under the replacement policy will, unless otherwise specified in the
related Prospectus Supplement, be reduced to a level such that the applicable
premium does not exceed, by a percentage that may be set forth in the related
Prospectus Supplement, the cost of the rental interruption policy that was
replaced. Any amounts collected by the Master Servicer under the rental
interruption policy in the nature of insurance proceeds will be deposited in
the Certificate Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will require that the Master Servicer and any Special Servicer obtain
and maintain in effect a fidelity bond or similar form of insurance
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coverage (which may provide blanket coverage) or any combination thereof
insuring against loss occasioned by fraud, theft or other intentional
misconduct of the officers, employees and agents of the Master Servicer or the
Special Servicer, as applicable. The related Agreement will allow the Master
Servicer and any Special Servicer to self-insure against loss occasioned by the
errors and omissions of the officers, employees and agents of the Master
Servicer or the Special Servicer so long as certain criteria set forth in the
Agreement are met.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent
of the mortgagee to any sale or other transfer of the related Mortgaged
Property, or due-on-sale clauses entitling the mortgagee to accelerate payment
of the Whole Loan upon any sale or other transfer of the related Mortgaged
Property. Certain of the Whole Loans may contain clauses requiring the consent
of the mortgagee to the creation of any other lien or encumbrance on the
Mortgaged Property or due-on-encumbrance clauses entitling the mortgagee to
accelerate payment of the Whole 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, on behalf of the Trust
Fund, will exercise any right the Trustee may have as mortgagee to accelerate
payment of any such Whole Loan or to withhold its consent to any transfer or
further encumbrance in a manner consistent with the Servicing Standard. Unless
otherwise specified in the related Prospectus Supplement, any fee collected by
or on behalf of the Master Servicer for entering into an assumption agreement
will be retained by or on behalf of the Master Servicer as additional servicing
compensation. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Due-on-Sale and Due-on-Encumbrance."
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Assets, and, if so, the
initial owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in an Asset represents a specified portion of
the interest payable thereon. The Retained Interest will be deducted from
mortgagor payments as received and will not be part of the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer's and a Sub-Servicer's primary servicing compensation with
respect to a series of Certificates will come from the periodic payment to it
of a portion of the interest payment on each Asset. Since any Retained Interest
and a Master Servicer's primary compensation are percentages of the principal
balance of each Asset, such amounts will decrease in accordance with the
amortization of the Assets. The Prospectus Supplement with respect to a series
of Certificates evidencing interests in a Trust Fund that includes Whole Loans
may provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification
fees, late payment charges or Prepayment Premiums collected from mortgagors and
any interest or other income which may be earned on funds held in the
Certificate Account or any account established by a Sub-Servicer pursuant to
the Agreement.
The Master Servicer may, to the extent provided in the related
Prospectus Supplement, pay from its servicing compensation certain expenses
incurred in connection with its servicing and managing of the Assets,
including, without limitation, payment of the fees and disbursements of the
Trustee and independent accountants, payment of expenses incurred in connection
with distributions and reports to Certificateholders, and payment of any other
expenses described in the related Prospectus Supplement. Certain other
expenses, including certain expenses relating to defaults and liquidations on
the Whole Loans and, to the extent so provided in the related Prospectus
Supplement, interest thereon at the rate specified therein, and the fees of any
Special Servicer, may be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the
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examination by such firm conducted substantially in compliance with either the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for the Federal Home Loan Mortgage Corporation
("FHLMC"), the servicing by or on behalf of the Master Servicer of mortgage
loans under pooling and servicing agreements substantially similar to each
other (including the related Agreement) was conducted in compliance with the
terms of such agreements except for any significant exceptions or errors in
records that, in the opinion of the firm, either the Audit Program for
Mortgages serviced for FHLMC, or paragraph 4 of the Uniform Single Attestation
Program for Mortgage Bankers, requires it to report. In rendering its statement
such firm may rely, as to matters relating to the direct servicing of mortgage
loans by Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC
(rendered within one year of such statement) of firms of independent public
accountants with respect to the related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on
or before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies
of such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders without charge upon written request to the
Master Servicer at the address set forth in the related Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The Master Servicer, if any, or a servicer for substantially all the
Whole Loans under each Agreement will be named in the related Prospectus
Supplement. The entity serving as Master Servicer (or as such servicer) may be
an affiliate of the Depositor and may have other normal business relationships
with the Depositor or the Depositor's affiliates. Reference herein to the
Master Servicer shall be deemed to be to the servicer of substantially all of
the Whole Loans, if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement 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, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer at the
date of the Agreement. No such resignation will become effective until the
Trustee or a successor servicer has assumed the Master Servicer's obligations
and duties under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation, warranty or covenant made in such
Agreement, or against any liability specifically imposed thereby, or against
any liability which 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 obligations and duties
thereunder. Unless otherwise specified in the related Prospectus Supplement,
each Agreement will further provide that any Master Servicer, the Depositor and
any director, officer, employee or agent of a Master Servicer or the Depositor
will be entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Agreement or the Certificates; provided, however,
that such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a
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representation, warranty or covenant made in such Agreement; (iii) incurred by
reason of misfeasance, bad faith or gross negligence in the performance of
obligations or duties thereunder, or by reason of reckless disregard of such
obligations or duties; (iv) incurred in connection with any violation of any
state or federal securities law; or (v) imposed by any taxing authority if such
loss, liability or expense is not specifically reimbursable pursuant to the
terms of the related Agreement. In addition, each Agreement will provide that
neither any Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. Any such Master Servicer or the
Depositor may, however, in its discretion undertake any such action which it
may deem necessary or desirable with respect to the Agreement and the rights
and duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Certificateholders, and the Master Servicer or the Depositor, as the case may
be, will be entitled to be reimbursed therefor and to charge the Certificate
Account.
Any person into which the Master Servicer or the Depositor may be
merged or consolidated, or any person resulting from any merger or
consolidation to which the Master Servicer or the Depositor is a party, or any
person succeeding to the business of the Master Servicer or the Depositor, will
be the successor of the Master Servicer or the Depositor, as the case may be,
under the related Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a
Trust Fund that includes Whole Loans, Events of Default under the related
Agreement will include (i) any failure by the Master Servicer to distribute or
cause to be distributed to Certificateholders, or to remit to the Trustee for
distribution to Certificateholders, any required payment; (ii) any failure by
the Master Servicer duly to observe or perform in any material respect any of
its other covenants or obligations under the Agreement which continues
unremedied for thirty days after written notice of such failure has been given
to the Master Servicer by the Trustee or the Depositor, or to the Master
Servicer, the Depositor and the Trustee by the holders of Certificates
evidencing not less than 25% of the Voting Rights; (iii) any breach of a
representation or warranty made by the Master Servicer under the Agreement
which materially and adversely affects the interests of Certificateholders and
which continues unremedied for thirty days after written notice of such breach
has been given to the Master Servicer by the Trustee or the Depositor, or to
the Master Servicer, the Depositor and the Trustee by the holders of
Certificates evidencing not less than 25% of the Voting Rights; and (iv)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by or on behalf of the
Master Servicer indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default (other than to shorten
cure periods or eliminate notice requirements) will be specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Trustee shall, not later than the later of 60 days after the
occurrence of any event which constitutes or, with notice or lapse of time or
both, would constitute an Event of Default and five days after certain officers
of the Trustee become aware of the occurrence of such an event, transmit by
mail to the Depositor and all Certificateholders of the applicable series
notice of such occurrence, unless such default shall have been cured or waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied,
the Depositor or the Trustee may, and at the direction of holders of
Certificates evidencing not less than 51% of the Voting Rights, the Trustee
shall, terminate all of the rights and obligations of the Master Servicer under
the Agreement and in and to the Mortgage Loans (other than as a
Certificateholder or as the owner of any Retained Interest), whereupon the
Trustee will succeed to all of the responsibilities, duties and liabilities of
the Master Servicer under the Agreement (except that if the Trustee is
prohibited by law from obligating itself to make advances regarding delinquent
mortgage loans, or if the related Prospectus Supplement so specifies, then 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, in the event that the Trustee is unwilling or unable so
to act, it may or, at the written request of the holders of Certificates
entitled to at least 51% of the Voting Rights, it shall appoint, or
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petition a court of competent jurisdiction for the appointment of, a loan
servicing institution acceptable to the Rating Agency with a net worth at the
time of such appointment of at least $15,000,000 to act as successor to the
Master Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may agree
upon the servicing compensation to be paid, which in no event may be greater
than the compensation payable to the Master Servicer under the Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however,
that an Event of Default involving a failure to distribute a required payment
to Certificateholders described in clause (i) under "Events of Default" may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless the holders of
Certificates evidencing not less than 25% of the Voting Rights 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 has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of the
trusts or powers vested in it by any Agreement or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the holders of Certificates covered by such 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
Each Agreement may be amended by the parties thereto without the
consent of any of the holders of Certificates covered by the Agreement, (i) to
cure any ambiguity, (ii) to correct, modify or supplement any provision therein
which may be inconsistent with any other provision therein, (iii) to make any
other provisions with respect to matters or questions arising under the
Agreement which are not inconsistent with the provisions thereof, or (iv) to
comply with any requirements imposed by the Code; provided that such amendment
(other than an amendment for the purpose specified in clause (iv) above) will
not (as evidenced by an opinion of counsel to such effect) adversely affect in
any material respect the interests of any holder of Certificates covered by the
Agreement. Unless otherwise specified in the related Prospectus Supplement,
each Agreement may also be amended by the Depositor, the Master Servicer, if
any, and the Trustee, with the consent of the holders of Certificates affected
thereby evidencing not less than 51% of the Voting Rights, for any purpose;
provided, however, that unless otherwise specified in the related Prospectus
Supplement, no such amendment may (i) reduce in any manner the amount of or
delay the timing of, payments received or advanced on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the holder
of such Certificate, (ii) adversely affect in any material respect the
interests of the holders of any class of Certificates in a manner other than as
described in (i), without the consent of the holders of all Certificates of
such class or (iii) modify the provisions of such Agreement described in this
paragraph without the consent of the holders of all Certificates covered by
such Agreement then outstanding. However, with respect to any series of
Certificates as to which a REMIC election is to be made, the Trustee will not
consent to any amendment of the Agreement unless it shall first have received
an opinion of counsel to the effect that such amendment will not result in the
imposition of a tax on the related Trust Fund or cause the related Trust Fund
to fail to qualify as a REMIC at any time that the related Certificates are
outstanding.
THE TRUSTEE
The Trustee under each Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company serving as Trustee may have a banking
relationship with the Depositor and its affiliates and with any Master Servicer
and its affiliates.
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DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of any Agreement, the Certificates or any Asset or related document
and is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any
Special Servicer in respect of the Certificates or the Assets, or deposited
into or withdrawn from the Certificate Account or any other account by or on
behalf of the Master Servicer or any Special Servicer. If no Event of Default
has occurred and is continuing, the Trustee is required to perform only those
duties specifically required under the related Agreement. However, upon receipt
of the various certificates, reports or other instruments required to be
furnished to it, the Trustee is required to examine such documents and to
determine whether they conform to the requirements of the Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in settlement)
incurred in connection with the Trustee's (i) enforcing its rights and remedies
and protecting the interests, and enforcing the rights and remedies, of the
Certificateholders during the continuance of an Event of Default, (ii)
defending or prosecuting any legal action in respect of the related Agreement
or series of Certificates, (iii) being the mortgagee of record with respect to
the Mortgage Loans in a Trust Fund and the owner of record with respect to any
Mortgaged Property acquired in respect thereof for the benefit of
Certificateholders, or (iv) acting or refraining from acting in good faith at
the direction of the holders of the related series of Certificates entitled to
not less than 25% (or such higher percentage as is specified in the related
Agreement with respect to any particular matter) of the Voting Rights for such
series; provided, however, that such indemnification will not extend to any
loss, liability or expense that constitutes a specific liability of the Trustee
pursuant to the related Agreement, or to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence on the part
of the Trustee in the performance of its obligations and duties thereunder, or
by reason of its reckless disregard of such obligations or duties, or as may
arise from a breach of any representation, warranty or covenant of the Trustee
made therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties
under an Agreement by giving written notice thereof to the Depositor, the
Master Servicer, if any, and all Certificateholders. Upon receiving such notice
of resignation, the Depositor is required promptly to appoint a successor
trustee acceptable to the Master Servicer, if any. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as
such under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee acceptable to the Master
Servicer, if any. Holders of the Certificates of any series entitled to at
least 51% of the Voting Rights for such series may at any time remove the
Trustee without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee shall not become effective until acceptance of appointment by
the successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Assets. Credit Support
may be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, guarantees, the establishment of one or
more reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee repayment of the entire Certificate
Balance of the Certificates and interest thereon. If losses or shortfalls occur
that exceed the amount covered by Credit Support or that are not covered by
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers more than one series
of Certificates (each, a "Covered Trust"), holders of Certificates evidencing
interests in any of such Covered Trusts will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) 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 (d) the material provisions
relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor under
any instrument of Credit Support, including (i) a brief description of its
principal business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to
do business, (iii) if applicable, the identity of regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policyholders' surplus, if applicable,
as of the date specified in the Prospectus Supplement. 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 Subordinate Certificates to receive distributions of principal and
interest from the Certificate Account on any Distribution Date will be
subordinated to such rights of the holders of Senior Certificates. If so
provided in the related Prospectus Supplement, the subordination of a class may
apply only in the event of (or may be limited to) certain types of losses or
shortfalls. The related Prospectus Supplement will set forth information
concerning the amount of subordination of a class or classes of Subordinate
Certificates in a series, the circumstances in which such subordination will be
applicable and the manner, if any, in which the amount of subordination will be
effected.
CROSS-SUPPORT PROVISIONS
If the Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one group
of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
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INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a series of
Certificates, the Whole Loans in the related Trust Fund will be covered for
various default risks by insurance policies or guarantees. A copy of any such
material instrument for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof will be covered by one or more letters of credit,
issued by a bank or financial institution specified in such Prospectus
Supplement (the "L/C Bank"). Under a letter of credit, the L/C Bank will be
obligated to honor draws thereunder in an aggregate fixed dollar amount, net of
unreimbursed payments thereunder, generally equal to a percentage specified in
the related Prospectus Supplement of the aggregate principal balance of the
Mortgage Assets on the related Cut-off Date or of the initial aggregate
Certificate Balance of one or more classes of Certificates. If so specified in
the related Prospectus Supplement, the letter of credit may permit draws in the
event of only certain types of losses and shortfalls. The amount available
under the letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder and may otherwise be reduced as described in
the related Prospectus Supplement. The obligations of the L/C Bank under the
letter of credit for each series of Certificates will expire at the earlier of
the date specified in the related Prospectus Supplement or the termination of
the Trust Fund. A copy of any such letter of credit for a series will be filed
with the Commission as an exhibit to a Current Report on Form 8-K to be filed
within 15 days of issuance of the Certificates of the related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof will be covered by insurance policies and/or surety
bonds provided by one or more insurance companies or sureties. Such instruments
may cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or
determined in the manner specified in the related Prospectus Supplement. A copy
of any such instrument for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed with the Commission within
15 days of issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of
Certificates, deficiencies in amounts otherwise payable on such Certificates or
certain classes thereof will be covered 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 so specified in such Prospectus
Supplement. The reserve funds for a series may also be funded over time by
depositing therein a specified amount of the distributions received on the
related Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the
related Prospectus Supplement, reserve funds may be established to provide
limited protection against only 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 and will not be available for further application to the
Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
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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. 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.
Additional information concerning any Reserve Fund will be set forth
in the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund may
be applied to make distributions to Certificateholders and use of investment
earnings from the Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of
Certificates, the MBS in the related Trust Fund and/or the Mortgage Loans
underlying such MBS 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 THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state, nor
to encompass the laws of all states in which the security for the Mortgage
Loans is situated. The summaries are qualified in their entirety by reference
to the applicable federal and state laws governing the Mortgage Loans. See
"Description of the Trust Funds--Assets."
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, security deeds or deeds to secure debt, depending
upon the prevailing practice and law in the state in which the Mortgaged
Property is located. Mortgages, deeds of trust and deeds to secure debt are
herein collectively referred to as "mortgages." Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the
instrument in the appropriate public recording office. However, recording does
not generally establish priority over governmental claims for real estate taxes
and assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance
of real property between two parties--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
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes
the trustor under a deed of trust and a grantor under a security deed or a deed
to secure debt. Under a deed of trust, the mortgagor grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale as
security for the indebtedness evidenced by the related note. A deed to secure
debt typically has two parties. By executing a deed to secure debt, the grantor
conveys title to, as opposed to merely creating a lien upon, the subject
property to the grantee until such time as the underlying debt is repaid,
generally with a power of sale as security for the indebtedness evidenced by
the related mortgage note. In case the mortgagor under a mortgage 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
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agreement for the benefit of the mortgagor. At origination of a mortgage loan
involving a land trust, the mortgagor executes a separate undertaking to make
payments on the mortgage note. The mortgagee's authority under a mortgage, the
trustee's authority under a deed of trust and the grantee's authority under a
deed to secure debt are governed by the express provisions of the mortgage, the
law of the state in which the real property is located, certain federal laws
(including, without limitation, the Soldiers' and Sailors' Civil Relief Act of
1940) and, in some cases, in deed of trust transactions, the directions of the
beneficiary.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed
or deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property such
as a tenant's interest in a lease of land or improvements, or both, and the
leasehold estate created by such lease. An instrument covering an interest in
real property other than the fee estate requires special provisions in the
instrument creating such interest or in the mortgage, deed of trust, security
deed or deed to secure debt, to protect the mortgagee against termination of
such interest before the mortgage, deed of trust, security deed or deed to
secure debt is paid. Unless otherwise specified in the Prospectus Supplement,
the Depositor or the Asset Seller will make certain representations and
warranties in the Agreement with respect to the Mortgage Loans which are
secured by an interest in a leasehold estate. Such representation and
warranties will be set forth in the Prospectus Supplement if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the mortgagor typically assigns its right, title and interest as lessor under
each lease and the income derived therefrom to the mortgagee, while retaining a
license to collect the rents for so long as there is no default under the
mortgage loan documentation. The manner of perfecting the mortgagee's interest
in rents may depend on whether the mortgagor's assignment was absolute or one
granted as security for the loan. Failure to properly perfect the mortgagee's
interest in rents may result in the loss of substantial pool of funds, which
could otherwise serve as a source of repayment for such loan. If the mortgagor
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 revenues are considered
accounts receivable under the UCC; generally these revenues are either assigned
by the mortgagor, which remains entitled to collect such revenues absent a
default, or pledged by the mortgagor, as security for the loan. In general, the
lender must file financing statements in order to perfect its security interest
in the revenues and must file continuation statements, generally every five
years, to maintain perfection of such security interest. Even if the lender's
security interest in room revenues is perfected under the UCC, the lender will
generally be required to commence a foreclosure or otherwise take possession of
the property in order to collect the room revenues after a default.
Even after a foreclosure, the potential rent payments from the
property may be less than the periodic payments that had been due under the
mortgage. For instance, the net income that would otherwise be generated from
the property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or
as the result of excessive maintenance, repair or other obligations which a
lender succeeds to as landlord.
Lenders that actually take possession of the property, however, may
incur potentially substantial risks attendant to being a mortgagee in
possession. Such risks include liability for environmental clean-up costs and
other risks inherent in property ownership. See "Environmental Legislation"
below.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
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real property law and, hence, would not be subject to the lien of a mortgage.
Such property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest therein, the lender
generally must file UCC financing statements and, to maintain perfection of
such security interest, file continuation statements generally every five
years.
FORECLOSURE
GENERAL
Foreclosure is a legal procedure that allows the mortgagee to recover
its mortgage debt by enforcing its rights and available legal remedies under
the mortgage. If the mortgagor defaults in payment or performance of its
obligations under the note or mortgage, the mortgagee has the right to
institute foreclosure proceedings to sell the mortgaged property at public
auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage
vary from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
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 LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is 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 and expensive actions to determine
the cause of the mortgagor's default and the likelihood that the mortgagor 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 mortgagors who are suffering
from a temporary financial disability. In other cases, courts have limited the
right of the lender to foreclose if the default under the mortgage is not
monetary, e.g., the mortgagor failed to maintain the mortgaged property
adequately or the mortgagor executed a junior mortgage on the mortgaged
property. The exercise by the court of its equity powers will depend on the
individual circumstances of each case presented to it. Finally, some courts
have been faced with the issue of whether federal or state constitutional
provisions reflecting due process concerns for adequate notice require that a
mortgagor 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 afford constitutional
protections to the mortgagor.
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 require several years to complete. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of
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the parties' intent, if a court determines that the sale was for less than fair
consideration and such sale occurred while the mortgagor was insolvent (or the
mortgagor was rendered insolvent as a result of such sale) and within one year
(or within the state statute of limitations if the trustee in bankruptcy elects
to proceed under state fraudulent conveyance law) of the filing of bankruptcy.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale pursuant to the power of sale granted in the deed
of trust. A power of sale is typically granted in a deed of trust. It may also
be contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such
sale, the trustee under a deed of trust must record a notice of default and
notice of sale and send a copy to the mortgagor 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
mortgagor 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 acceleration) plus the expenses incurred in
enforcing the obligation. In other states, the mortgagor 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,
the procedure for public sale, the parties entitled to notice, the method of
giving notice and the applicable time periods are governed by state law and
vary among the states. Foreclosure of a deed to secure debt is also generally
accomplished by a non-judicial sale similar to that required by a deed of
trust, except that the lender or its agent, rather than a trustee, is typically
empowered to perform the sale in accordance with the terms of the deed to
secure debt and applicable law.
PUBLIC SALE
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. For these reasons, it is common for the lender to
purchase the mortgaged property for an amount equal to or less than the
underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. 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 costs of management and operation of
those mortgaged properties which are hotels, motels, restaurants, nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's and
the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale 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, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at certain types of properties be cleaned up before a property
may be resold. In addition, a lender may be responsible under federal or state
law for the cost of cleaning up a mortgaged property that is environmentally
contaminated. See
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"Environmental Legislation." Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be
recovered by a lender.
A junior mortgagee may not foreclose on the property securing the
junior mortgage unless it forecloses subject to senior mortgages and any other
prior liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required to
pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans, if any, that are junior
mortgage loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in satisfaction
of the indebtedness secured by the mortgage under which the sale was conducted.
Any proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by such holders.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Trustee on
behalf of the Certificateholders, the Master Servicer or any related
Sub-servicer or the Special Servicer, on behalf of such holders, will be
required to sell the Mortgaged Property prior to the close of the third
calendar year following the year of acquisition of such Mortgaged Property by
the Trust Fund, unless (i) the Internal Revenue Service grants an extension of
time to sell such property (an "REO Extension") or (ii) it obtains an opinion
of counsel generally to the effect that the holding of the property beyond the
close of the third calendar year after its acquisition will not result in the
imposition of a tax on the Trust Fund or cause any REMIC created pursuant to
the Pooling and Servicing Agreement to fail to qualify as a REMIC under the
Code. Subject to the foregoing, the Master Servicer or any related Sub-servicer
or the Special Servicer will generally be required to solicit bids for any
Mortgaged Property so acquired in such a manner as will be reasonably likely to
realize a fair price for such property. The Master Servicer or any related
Sub-servicer or the Special Servicer may retain an independent contractor to
operate and manage any REO Property; however, the retention of an independent
contractor will not relieve the Master Servicer or any related Sub-servicer or
the Special Servicer of its obligations with respect to such REO Property.
In general, the Master Servicer or any related Sub-servicer or the
Special Servicer or an independent contractor employed by the Master Servicer
or any related Sub-servicer or the Special Servicer at the expense of the Trust
Fund will be obligated to operate and manage any Mortgaged Property acquired as
REO Property in a manner that would, to the extent commercially feasible,
maximize the Trust Fund's net after-tax proceeds from such property. After the
Master Servicer or any related Sub-servicer or the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Master
Servicer or any related Sub-servicer or the Special Servicer could determine
(particularly in the case of an REO Property that is a hospitality or
residential health care facility) that it would not be commercially feasible to
manage and operate such property in a manner that would avoid the imposition of
a tax on "net income from foreclosure property," within the meaning of Section
857(b) (4) (B) of the Code (an "REO Tax") at the highest marginal corporate tax
rate (currently 35%). 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.
Any REO Tax imposed on the Trust Fund's income from an REO Property would
reduce the amount available for distribution to Certificateholders.
Certificateholders are advised to consult their tax advisors regarding the
possible imposition of REO Taxes in connection with the operation of commercial
REO Properties by REMICs. See "Certain Federal Income Tax Consequences" herein
and "Certain Federal Income Tax Consequences-REMICs" in the Prospectus.
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RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption." The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been
sold in accordance with a properly conducted foreclosure and foreclosure sale,
those having an interest which is subordinate to that of the foreclosing
mortgagee have an equity of redemption and may redeem the property by paying
the entire debt with interest. In addition, in some states, when a foreclosure
action has been commenced, the redeeming party must pay certain costs of such
action. 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 cut off and terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale price.
In other states, redemption may be authorized if the former mortgagor 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. The
exercise of a right of redemption would defeat the title of any purchaser from
a foreclosure sale or sale under a deed of trust. 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.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. Unless otherwise provided in the
related Prospectus Supplement, with respect to a series of Certificates for
which an election is made to qualify the Trust Fund or a part thereof as a
REMIC, the Agreement will permit foreclosed property to be held beyond the
close of the third calendar year following the year of acquisition if the
Internal Revenue Service grants an extension of time within which to sell such
property or independent counsel renders an opinion to the effect that holding
such property for such additional period is permissible under the REMIC
Provisions.
ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to
which recourse may be had only against the specific property securing the
related Mortgage Loan and a personal money judgment may not be obtained against
the mortgagor. Even if a mortgage loan by its terms provides for recourse to
the mortgagor, some states impose prohibitions or limitations on such recourse.
For example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the
option of bringing a personal action against the mortgagor on the debt without
first exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
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LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease.
Leasehold mortgages are subject to certain risks not associated with mortgage
loans secured by the fee estate of the mortgagor. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in
its obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground leases
that secure Mortgage Loans may not contain some of these protective provisions,
and mortgages may not contain the other protections discussed in the next
paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any defaults
by the mortgagor; the right to cure such defaults, with adequate cure periods;
if a default is not susceptible of cure by the leasehold mortgagee, the right
to acquire the leasehold estate through foreclosure or otherwise; the ability
of the ground lease to be assigned to and by the leasehold mortgagee or
purchaser at a foreclosure sale and for the concomitant release of the ground
lessee's liabilities thereunder; and the right of the leasehold mortgagee to
enter into a new ground lease with the ground lessor on the same terms and
conditions as the old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground
lessor's bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title
11 of the United States Code) (the "Bankruptcy Code"), although the
enforceability of such clause has not been established. Without the protections
described above, a leasehold mortgagee may lose the collateral securing its
leasehold mortgage. In addition, terms and conditions of a leasehold mortgage
are subject to the terms and conditions of the ground lease. Although certain
rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation will be governed
by the provisions of the ground lease.
BANKRUPTCY LAWS
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) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
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 for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. In many
jurisdictions, the outstanding amount of the loan secured by the real property
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, which reduction may result from a reduction
in the rate of interest and/or the alteration of the repayment schedule (with
or without affecting the unpaid principal balance of the loan), and/or an
extension (or reduction) of the final maturity date. Some courts with federal
bankruptcy jurisdiction have approved plans, based on the particular facts of
the reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been
entered in state court (provided no sale of the property had yet occurred)
prior to the filing of the debtor's petition. This may be done even if the full
amount due under the original loan is never repaid.
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Federal bankruptcy law provides generally that rights and obligation
under an unexpired lease of the debtor/lessee may not be terminated or modified
at any time after the commencement of a case under the Bankruptcy Code solely
on the basis of a provision in the lease to such effect or because of certain
other similar events. This prohibition on so-called "ipso facto clauses" could
limit the ability of the Trustee for a series of Certificates to exercise
certain contractual remedies with respect to the Leases. In addition, Section
362 of the Bankruptcy Code operates as an automatic stay of, among other
things, any act to obtain possession of property from a debtor's estate, which
may delay a Trustee's exercise of such remedies for a related series of
Certificates in the event that a related Lessee or a related mortgagor becomes
the subject of a proceeding under the Bankruptcy Code. For example, a mortgagee
would be stayed from enforcing a Lease Assignment by a mortgagor related to a
Mortgaged Property if the related mortgagor was in a bankruptcy proceeding. The
legal proceedings necessary to resolve the issues could be time-consuming and
might result in significant delays in the receipt of the assigned rents.
Similarly, the filing of a petition in bankruptcy by or on behalf of a Lessee
of a Mortgaged Property would result in a stay 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.
Rents and other proceeds of a Mortgage Loan may also escape an assignment
thereof if the assignment is not fully perfected under state law prior to
commencement of the bankruptcy proceeding. See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the 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, however, as the lessor may be forced to continue under the lease
with a lessee that is a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, such rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to such
lease, such as the mortgagor, as lessor under a Lease, would have only an
unsecured claim against the debtor for damages resulting from such breach,
which could adversely affect the security for the related Mortgage Loan. In
addition, pursuant to Section 502(b) (6) of the Bankruptcy Code, a lessor's
damages for lease rejection in respect of future rent installments are limited
to the rent reserved by the lease, without acceleration, for the greater of one
year or 15%, not to exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative,
the lessee may remain in possession of the leasehold for the balance of such
term and for any renewal or extension of such term that is enforceable by the
lessee under applicable nonbankruptcy law. The Bankruptcy Code provides that if
a lessee elects to remain in possession after such a rejection of a lease, the
lessee may offset against rents reserved under the lease for the balance of the
term after the date of rejection of the lease, and any such renewal or
extension thereof, any damages occurring after such date caused by the
nonperformance of any obligation of the lessor under the lease after such date.
To the extent provided in the related Prospectus Supplement, the Lessee will
agree under certain Leases to pay all amounts owing thereunder to the Master
Servicer without offset. To the extent that such a contractual obligation
remains enforceable against the Lessee, the Lessee would not be able to avail
itself of the rights of offset generally afforded to lessees of real property
under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be
taken seeking the recovery, as a preferential transfer or on other grounds, of
any payments made by the mortgagor, or made directly by the related Lessee,
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general
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principles of equity may also provide a mortgagor with means to halt a
foreclosure proceeding or sale and to force a restructuring of a mortgage loan
on terms a lender would not otherwise accept. Moreover, the laws of certain
states also give priority to certain tax liens over the lien of a mortgage or
deed of trust. Under the Bankruptcy Code, if the court finds that actions of
the mortgagee have been unreasonable, the lien of the related mortgage may be
subordinated to the claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain
of the Mortgagors may be partnerships. The laws governing limited partnerships
in certain states provide that the commencement of a case under the Bankruptcy
Code with respect to a general partner will cause a person to cease to be a
general partner of the limited partnership, unless otherwise provided in
writing in the limited partnership agreement. This provision may be construed
as an "ipso facto" clause and, in the event of the general partner's
bankruptcy, may not be enforceable. To the extent described in the related
Prospectus Supplement, certain limited partnership agreements of the Mortgagors
may provide that the commencement of a case under the Bankruptcy Code with
respect to the related general partner constitutes an event of withdrawal
(assuming the enforceability of the clause is not challenged in bankruptcy
proceedings or, if challenged, is upheld) that might trigger the dissolution of
the limited partnership, the winding up of its affairs and the distribution of
its assets, unless (i) at the time there was at least one other general partner
and the written provisions of the limited partnership permit the business of
the limited partnership to be carried on by the remaining general partner and
that general partner does so or (ii) the written provisions of the limited
partnership agreement permit the limited partner to agree within a specified
time frame (often 60 days) after such withdrawal to continue the business of
the limited partnership and to the appointment of one or more general partners
and the limited partners do so. In addition, the laws governing general
partnerships in certain states provide that the commencement of a case under
the Bankruptcy Code or state bankruptcy laws with respect to a general partner
of such partnerships triggers the dissolution of such partnership, the winding
up of its affairs and the distribution of its assets. Such state laws, however,
may not be enforceable or effective in a bankruptcy case. The dissolution of a
Mortgagor, the winding up of its affairs and the distribution of its assets
could result in an acceleration of its payment obligation under a related
Mortgage Loan, which may reduce the yield on the related series of Certificates
in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that
is a partnership may provide the opportunity for a trustee in bankruptcy for
such general partner, such general partner as a debtor-in-possession, or a
creditor of such general partner to obtain an order from a court consolidating
the assets and liabilities of the general partner with those of the Mortgagor
pursuant to the doctrines of substantive consolidation or piercing the
corporate veil. In such a case, the respective Mortgaged Property, for example,
would become property of the estate of such bankrupt general partner. Not only
would the Mortgaged Property be available to satisfy the claims of creditors of
such general partner, but an automatic stay would apply to any attempt by the
Trustee to exercise remedies with respect to such Mortgaged Property. However,
such an occurrence should not affect the Trustee's status as a secured creditor
with respect to the Mortgagor or its security interest in the Mortgaged
Property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
To the extent specified in the related Prospectus Supplement, some of
the Mortgage Loans for a series will be secured by junior mortgages or deeds of
trust which are subordinated to senior mortgages or deeds of trust held by
other lenders or institutional investors. The rights of the Trust Fund (and
therefore the related Certificateholders), as beneficiary under a junior deed
of trust or as mortgagee under a junior mortgage, are subordinate to those of
the mortgagee or beneficiary under the senior mortgage or deed of trust,
including the prior rights of the senior mortgagee or beneficiary to receive
rents, hazard insurance and condemnation proceeds and to cause the Mortgaged
Property securing the Mortgage Loan to be sold upon default of the Mortgagor or
trustor, thereby extinguishing the junior mortgagee's or junior beneficiary's
lien unless the Master Servicer or Special Servicer, as applicable, asserts its
subordinate interest in a Mortgaged Property in foreclosure litigation or
satisfies the defaulted senior loan. As discussed more fully below, in many
states a junior mortgagee or beneficiary may satisfy a defaulted senior loan in
full, or may cure such default and bring the senior loan current, in either
event adding the amounts expended to the balance due on the junior loan. Absent
a provision in the senior mortgage, no notice of default is required to be
given to the junior mortgagee unless otherwise required by law.
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The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under the senior mortgage or deed of trust will have the prior
right to collect any insurance proceeds payable under the hazard insurance
policy and any award of damages in connection with the condemnation and to
apply the same to the indebtedness secured by the senior mortgage or deed of
trust. Proceeds in excess of the amount of senior mortgage indebtedness will,
in most cases, be applied to the indebtedness of a junior mortgage or trust
deed. The laws of certain states may limit the ability of mortgagees or
beneficiaries to apply the proceeds of hazard insurance and partial
condemnation awards to the secured indebtedness. In such states, the mortgagor
or trustor must be allowed to use the proceeds of hazard insurance to repair
the damage unless the security of the mortgagee or beneficiary has been
impaired. Similarly, in certain states, the mortgagee or beneficiary is
entitled to the award for a partial condemnation of the real property security
only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional
lenders typically contains a "future advance" clause, which provides in
essence, that additional amounts advanced to or on behalf of the mortgagor or
trustor by the mortgagee or beneficiary are to be secured by the mortgage or
deed of trust. While such a clause is valid under the laws of most states, the
priority of any advance made under the clause depends, in some states, on
whether the advance was an "obligatory" or "optional" advance. If the mortgagee
or beneficiary is obligated to advance the additional amounts, the advance may
be entitled to receive the same priority as amounts initially made under the
mortgage or deed of trust, notwithstanding that there may be intervening junior
mortgages or deeds of trust and other liens between the date of recording of
the mortgage or deed of trust and the date of the future advance, and
notwithstanding that the mortgagee or beneficiary had actual knowledge of such
intervening junior mortgages or deeds of trust and other liens at the time of
the advance. Where the mortgagee or beneficiary is not obligated to advance the
additional amounts and has actual knowledge of the intervening junior mortgages
or deeds of trust and other liens, the advance may be subordinated to such
intervening junior mortgages or deeds of trust and other liens. Priority of
advances under a "future advance" clause rests, in many other states, on state
law giving priority to all advances made under the loan agreement up to a
"credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed
of trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior to
the mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to
perform any of these obligations, the mortgagee or beneficiary is given the
right under the mortgage or deed of trust to perform the obligation itself, at
its election, with the mortgagor or trustor agreeing to reimburse the mortgagee
or beneficiary on behalf of the mortgagor or trustor. All sums so expended by
the mortgagee or beneficiary become part of the indebtedness secured by the
mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional
lenders typically requires the mortgagor or trustor to obtain the consent of
the mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute a lease unless the mortgagee or beneficiary executes a
written agreement with the tenant not to disturb the tenant's possession of its
premises in the event of a foreclosure. A senior mortgagee or beneficiary may
refuse to consent to matters approved by a junior mortgagee or beneficiary with
the result that the value of the security for the junior mortgage or deed of
trust is diminished. For example, a senior mortgagee or beneficiary may decide
not to approve the lease or to refuse to grant a tenant a non-disturbance
agreement. If, as a result, the lease is not executed, the value of the
mortgaged property may be diminished.
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ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to
unforeseen environmental liabilities. Of particular concern may be those
Mortgaged Properties which are, or have been, the site of manufacturing,
industrial or disposal activity. Such environmental liabilities may give rise
to (i) a diminution in value of property securing any Mortgage Loan, (ii)
limitation on the ability to foreclose against such property or (iii) in
certain circumstances, as more fully described below, liability for clean-up
costs or other remedial actions, which liability could exceed the value of the
principal balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of many states, contamination on a property may give
rise to a lien on the property for cleanup costs. In several states, such a
lien has priority over all existing liens (a "superlien") including those of
existing mortgages; in these states, the lien of a mortgage contemplated by
this transaction may lose its priority to such a superlien.
The presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect the market value of the
property, as well as the owner's ability to sell or use the real estate or to
borrow using the real estate as collateral. In addition, certain environmental
laws and common law principles govern the responsibility for the removal,
encapsulation or disturbance of asbestos containing materials ("ACMs") when
these ACMs are in poor condition or when a property with ACMs is undergoing
repair, renovation or demolition. Such laws could also be used to impose
liability upon owners and operators of real properties for release of ACMs into
the air that cause personal injury or other damage. In addition to cleanup and
natural resource damages actions brought by federal, state, and local agencies
and private parties, the presence of hazardous substances on a property may
lead to claims of personal injury, property damage, or other claims by private
plaintiffs.
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), and under the law of certain
states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a Mortgaged Property may
become liable in some circumstances either to the government or to private
parties for cleanup costs, even if the lender does not cause or contribute to
the contamination. Liability under some federal or state statutes may not be
limited to the original or unamortized principal balance of a loan or to the
value of the property securing a loan. CERCLA imposes strict, as well as joint
and several, liability on several classes of potentially responsible parties,
including current owners and operators of the property, regardless of whether
they caused or contributed to the contamination. Many states have laws similar
to CERCLA.
Lenders may be held liable under CERCLA as owners or operators.
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 exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such an
encroachment on the actual management of a facility or property, so as to
render the secured creditor exemption unavailable to the lender has been a
matter of judicial interpretation of the statutory language, and court
decisions have historically been inconsistent.
This scope of the secured creditor exemption has been clarified by the
enactment of the Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Asset Conservation Act"), which was signed into
law by President Clinton on September 30, 1996, and which lists permissible
actions that may be undertaken by a lender holding security in a contaminated
facility without exceeding the bounds of the secured creditor exemption,
subject to certain conditions and limitations. The Asset Conservation Act
provides that in order to be deemed to have participated in the management of a
secured property, a lender must actually participate in the operational affairs
of the property or the borrower. The Asset Conservation Act also provides
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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. The protections
afforded lenders under the Asset Conversion Act are subject to terms and
conditions that have not been clarified by the courts.
The secured creditor exemption does not protect a lender from
liability under CERCLA in cases where the lender arranges for disposal of
hazardous substances or for transportation of hazardous substances. In
addition, the secured creditor exemption does not govern liability for cleanup
costs under federal laws other than CERCLA. CERCLA's jurisdiction extends to
the investigation and remediation of releases of "hazardous substances." The
definition of "hazardous substances" under CERCLA specifically excludes
petroleum products. Therefore, a federal statute of particular significance is
Subtitle I of the Resource Conservation and Recovery Act ("RCRA"), which
governs the operation and management of underground petroleum storage tanks.
Under the Asset Conservation Act, the holders of security interests in
underground storage tanks or properties containing such tanks are accorded
protections similar to the protections accorded to lenders under CERCLA. It
should be noted, however, that liability for cleanup of petroleum contamination
may be governed by state law, which may not provide for any specific protection
for secured creditors.
In a few states, transfer of some types of properties is conditioned
upon clean up 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 cleanup 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 uninsurable liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
If a lender is or becomes liable, it may bring an action for
contribution against the owner or operator who created the environmental
hazard, but that person or entity may be bankrupt or otherwise judgment proof.
It is possible that cleanup costs could become a liability of the Trust Fund
and occasion a loss to Certificateholders in certain circumstances described
above if such remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warrantying Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a "Phase I Assessment" as
described in and meeting the requirements of the then current version of
Chapter 5 of the Federal National Mortgage Association ("FNMA") Multifamily
Guide has been received and reviewed. In addition, unless otherwise provided in
the related Prospectus Supplement, the related Agreement will provide that the
Master Servicer, acting on behalf of the Trustee, may not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits, that: (i) such Mortgaged Property is in
compliance with applicable environmental laws, and there are no circumstances
present at the Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, wastes, or petroleum based
materials for which investigation, testing, monitoring, containment, clean-up
or remediation could be required under any federal, state or local law or
regulation; or (ii) if such Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic interest of
the Trust Fund to acquire title to the Mortgaged Property and further to take
such actions as would be necessary and appropriate to effect such compliance
and/or respond to such circumstances. This requirement effectively precludes
enforcement of the security for the related Mortgage Note until a satisfactory
environmental inquiry is undertaken or any required remedial action is provided
for, reducing the likelihood that a given Trust Fund will become liable for any
condition or circumstance that may give rise to any environmental claim (an
"Environmental Hazard Condition") affecting a Mortgaged Property, but making it
more difficult to realize on the security for the Mortgage Loan. However, there
can be no assurance that any environmental assessment obtained by the Master
Servicer or a Special Servicer, as the case may be, will detect all possible
Environmental Hazard Conditions or that the other requirements of the
Agreement, even if fully
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observed by the Master Servicer or Special Servicer, as the case may be, will
in fact insulate a given Trust Fund from liability for Environmental Hazard
Conditions. See "Description of the Agreements--Realization Upon Defaulted
Whole Loans."
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental assessments
have been conducted with respect to the Mortgaged Properties relating to the
Mortgage Loans included in the Mortgage Pool for a Series, and it is likely
that any environmental assessments which would have been conducted with respect
to any of the Mortgaged Properties would have been conducted at the time of the
origination of the related Mortgage Loans and not thereafter. If specified in
the related Prospectus Supplement, a Warrantying Party will represent and
warrant that, as of the date of initial issuance of the Certificates of a
Series or as of another specified date, no related Mortgaged Property is
affected by a Disqualifying Condition (as defined below). In the event that,
following a default in payment on a Mortgage Loan that continues for 60 days,
(i) the environmental inquiry conducted by the Master Servicer or Special
Servicer, as the case may be, prior to any foreclosure indicates the presence
of a Disqualifying Condition that arose prior to the date of initial issuance
of the Certificates of a Series and (ii) the Master Servicer or the Special
Servicer certify that it has acted in compliance with the Servicing Standard
and has not, by any action, created, caused or contributed to a Disqualifying
Condition the Warrantying Party, at its option, will reimburse the Trust Fund,
cure such Disqualifying Condition or repurchase or substitute the affected
Whole Loan, as described under "Description of the Agreements--Representations
and Warranties; Repurchases." No such person will however, be responsible for
any Disqualifying Condition which may arise on a Mortgaged Property after the
date of initial issuance of the Certificates of the related Series, whether due
to actions of the Mortgagor, the Master Servicer, the Special Servicer or any
other person. It may not always be possible to determine whether a
Disqualifying Condition arose prior or subsequent to the date of the initial
issuance of the Certificates of a Series.
A "Disqualifying Condition" is defined generally as a condition,
existing as a result of, or arising from, the presence of Hazardous Materials
(as defined below) on a Mortgaged Property, such that the Mortgage Loan secured
by the affected Mortgaged Property would be ineligible, solely by reason of
such condition, for purchase by FNMA under the relevant provisions of FNMA's
Multifamily Seller/Servicer Guide in effect as of the date of initial issuance
of the Certificates of such series, including a condition that would constitute
a material violation of applicable federal state or local law in effect as of
their date of initial issuance of the Certificates of such series.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants, chemicals,
wastes or substances, including, without limitation, those so identified
pursuant to CERCLA and RCRA, and specifically including, asbestos and asbestos
containing materials, polychlorinated biphenyls, radon gas, petroleum and
petroleum products, urea formaldehyde and any substances classified as being
"in inventory," "usable work in process" or similar classification which would,
if classified as unusable, be included in the foregoing definition.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the related Mortgaged Property. Certain of these clauses
may provide that, upon an attempted breach thereof by the mortgagor of an
otherwise non-recourse loan, the mortgagor becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject
of legislation or litigation in many states and, in some cases, the
enforceability of these clauses was limited or denied. However, with respect to
certain loans the Garn-St Germain Depository Institutions Act of 1982 preempts
state constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms subject to certain limited exceptions. Unless otherwise
provided in the related Prospectus Supplement, a Master Servicer, on behalf of
the Trust Fund, will determine whether to exercise any right the Trustee may
have as mortgagee to accelerate payment of any such Mortgage Loan or to
withhold its consent to any transfer or further encumbrance in a manner
consistent with the Servicing Standard.
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In addition, under federal bankruptcy laws, due-on-sale clauses may
not be enforceable in bankruptcy proceedings and may, under certain
circumstances, be eliminated in any modified mortgage resulting from such
bankruptcy proceeding.
SUBORDINATE FINANCING
Where a mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and
the senior loan does not, a mortgagor may be more likely to repay sums due on
the junior loan than those on the senior 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
mortgagor 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 mortgagor is
additionally burdened. Third, if the mortgagor 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, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid prior
to maturity or prohibit such prepayment for a specified period. In certain
states, there are or may be specific limitations upon the late charges which a
lender may collect from a mortgagor for delinquent payments. Certain states
also limit the amounts that a lender may collect from a mortgagor as an
additional charge if the loan is prepaid. The enforceability, under the laws of
a number of states of provisions providing for prepayment fees or penalties
upon, or prohibition of, an involuntary prepayment is unclear, and no assurance
can be given that, at the time a Prepayment Premium is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
make such payment, or the provisions of any such prohibition, will be
enforceable under applicable state law. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher Mortgage
Rates, may increase the likelihood of refinancing or other early retirements of
the Mortgage Loans.
ACCELERATION ON DEFAULT
Unless otherwise specified in the related prospectus Supplement, some
of the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the Mortgagor. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose 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.
Furthermore, in some states, the mortgagor may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), provides that state
usury limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980. The
statute 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
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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.
The Depositor has been advised by counsel that a court interpreting
Title V would hold that residential first mortgage loans that are originated on
or after January 1, 1980 are subject to federal preemption. Therefore, in a
state that has not taken the requisite action to reject application of Title V
or to adopt a provision limiting discount points or other charges prior to
origination of such mortgage loans, any such limitation under such state's
usury law would not apply to such mortgage loans
In any state in which application of Title V has been expressly
rejected or a provision limiting discount points or other charges is adopted,
no Mortgage Loan originated after the date of such state action will 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 shall 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
mortgagor's counsel has rendered an opinion that such choice of law provision
would be given effect.
Statutes differ in their provisions as to the consequences of a
usurious loan. One group of statutes requires the lender to forfeit the
interest due above the applicable limit or impose a specified penalty. Under
this statutory scheme, the mortgagor may cancel the recorded mortgage or deed
of trust upon paying its debt with lawful interest, and the lender may
foreclose, but only for the debt plus lawful interest. A second group of
statutes is more severe. A violation of this type of usury law results in the
invalidation of the transaction, thereby permitting the mortgagor to cancel the
recorded mortgage or deed of trust without any payment or prohibiting the
lender from foreclosing.
CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
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 Mortgage Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan. Mortgages on
Mortgaged Properties which are owned by the Mortgagor under a condominium form
of ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged Properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator, and the transferability of the hotel's
operating, liquor and other licenses to the entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, Mortgaged Properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
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 Mortgagor 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 Mortgagor as owner of 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
Mortgagor of
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complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the Mortgagor 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 mortgagor who enters military service
after the origination of such mortgagor's Mortgage Loan (including a mortgagor
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 mortgagor's active duty status,
unless a court orders otherwise upon application of the lender. The Relief Act
applies to mortgagors 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
mortgagors 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 that may be affected by the Relief Act.
Application of the Relief Act would adversely affect, for an indeterminate
period of time, the ability of any servicer to collect full amounts of interest
on certain of the Mortgage Loans. Any shortfalls in interest collections
resulting from the application of the Relief Act would result in a reduction of
the amounts distributable to the holders of the related series of Certificates,
and would not be covered by advances or, unless otherwise specified in the
related Prospectus Supplement, any form of Credit Support provided in
connection with such Certificates. In addition, the Relief Act imposes
limitations that would impair the ability of the servicer to foreclose on an
affected Mortgage Loan during the mortgagor's period of active duty status,
and, under certain circumstances, during an additional three month period
thereafter. Thus, in the event that such a Mortgage Loan goes into default,
there may be delays and losses occasioned thereby.
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Cadwalader, Wickersham & Taft, Sidley & Austin or
Latham & Watkins or Brown & Wood LLP or such other counsel as may be specified
in the related Prospectus Supplement, counsel to the Depositor. This summary is
based on laws, regulations, including the REMIC regulations promulgated by the
Treasury Department (the "REMIC Regulations"), rulings and decisions now in
effect or (with respect to regulations) proposed, all of which are subject to
change either prospectively or retroactively. This summary does not address the
federal income tax consequences of an investment in Certificates applicable to
all categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should
consult their tax advisors regarding the federal, state, local and any other
tax consequences to them of the purchase, ownership and disposition of
Certificates.
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GENERAL
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC
election will be made.
GRANTOR TRUST FUNDS
If a REMIC election is not made, Sidley & Austin or Latham & Watkins
or Brown & Wood LLP or Cadwalader, Wickersham & Taft or such other counsel as
may be specified in the related Prospectus Supplement will deliver its opinion
that the Trust Fund will not be classified as an association taxable as a
corporation and that each such Trust Fund will be classified as a grantor trust
under subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code.
In this case, owners of Certificates will be treated for federal income tax
purposes as owners of a portion of the Trust Fund's assets as described below.
A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of
Grantor Trust Certificates. In this case, each Grantor Trust Certificateholder
will be treated as the owner of a pro rata undivided interest in the interest
and principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata undivided
interest in each of the Mortgage Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with respect to any
Mortgage Asset because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Mortgage Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Master Servicer. Under Code Sections 162
or 212 each Grantor Trust Certificateholder will be entitled to deduct its pro
rata share of servicing fees, prepayment fees, assumption fees, any loss
recognized upon an assumption and late payment charges retained by the Master
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust Fund. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses as itemized deductions only to the extent such expenses plus all other
Code Section 212 expenses exceed two percent of its adjusted gross income. In
addition, the amount of itemized deductions otherwise allowable for the taxable
year for an individual whose adjusted gross income exceeds the applicable
amount under Code Section 68(b) (which amount will be adjusted for inflation)
will be reduced by the lesser of (i) 3% of the excess of adjusted gross income
over the applicable amount and (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. In general, a Grantor Trust
Certificateholder using the cash method of accounting must take into account
its pro rata share of income as and deductions as and when collected by or paid
to the Master Servicer or, with respect to original issue discount or certain
other income items for which the Certificateholder has made an election, as
such amounts are accrued by the Trust Fund on a constant interest basis, and
will be entitled to claim its pro rata share of deductions (subject to the
foregoing limitations) when such amounts are paid or such Certificateholder
would otherwise be entitled to claim such deductions had it held the Mortgage
Assets directly. A Grantor Trust Certificateholder using an accrual method of
accounting must take into account its pro rata share of income as payment
becomes due or is made to the Master Servicer, whichever is earlier and may
deduct its pro rata share of expense items (subject to the foregoing
limitations) when such amounts are paid or such Certificateholder otherwise
would be entitled to claim such deductions had it held the Mortgage Assets
directly. If the servicing fees paid to the Master Servicer are deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as an ownership interest retained by the Master Servicer (or any
person to whom the Master Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Mortgage Assets.
The Mortgage Assets would then be subject to the "coupon stripping" rules of
the Code discussed below.
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Unless otherwise specified in the related Prospectus Supplement or
otherwise provided below, as to each Series of Certificates, counsel to the
Depositor will have advised the Depositor that:
(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a) (19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is . . .
residential property" within the meaning of Code Section 7701(a) (19) (C) (v),
to the extent that the Mortgage Assets represented by that Grantor Trust
Certificate are of a type described in such Code section;
(ii) a Grantor Trust Certificate owned by a real estate investment
trust representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section 856(c) (4)
(A), and interest income on the Mortgage Assets will be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c) (3) (B), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code section;
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in real
property" within the meaning of Code Section 860G(a) (3) and
(iv) a Grantor Trust Certificate owned by a financial asset
securitization investment trust will represent "permitted assets" with the
meaning of Code Section 860L(c).
The Small Business Job Protection Act of 1996, as part of the repeal
of the bad debt reserve method for thrift institutions, repealed the
application of Code Section 593(d) to any taxable year beginning after December
31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of
Government Securities that constitute "stripped bonds" or "stripped coupons" as
those terms are defined in section 1286 of the Code, and, as a result, such
assets would be subject to the stripped bond provisions of the Code. Under
these rules, such Government Securities are treated as having original issue
discount based on the purchase price and the stated redemption price at
maturity of each Security. As such, Grantor Trust Certificateholders would be
required to include in income their pro rata share of the original issue
discount on each Government Security recognized in any given year on an
economic accrual basis even if the Grantor Trust Certificateholder is a cash
method taxpayer. Accordingly, the sum of the income includible to the Grantor
Trust Certificateholder in any taxable year may exceed amounts actually
received during such year.
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Mortgage Asset
based on each Mortgage Asset's relative fair market value, so that such
holder's undivided interest in each Mortgage Asset will have its own tax basis.
A Grantor Trust Certificateholder that acquires an interest in Mortgage Assets
at a premium may elect to amortize such premium under a constant interest
method, provided that the underlying mortgage loans with respect to such
Mortgage Assets were originated after September 27, 1985. Premium allocable to
mortgage loans originated on or before September 27, 1985 should be allocated
among the principal payments on such mortgage loans and allowed as an ordinary
deduction as principal payments are made. Amortizable bond premium will be
treated as an offset to interest income on such Grantor Trust Certificate. The
basis for such Grantor Trust Certificate will be reduced to the extent that
amortizable premium is applied to offset interest payments. It is not clear
whether a reasonable prepayment assumption should be used in computing
amortization of premium allowable under Code Section 171. A Certificateholder
that makes this election for a Mortgage Asset or any other debt instrument that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a Grantor Trust Certificate representing
an interest in a Mortgage Asset or Mortgage Loan acquired at a premium should
recognize a loss if a Mortgage Loan (or an underlying mortgage loan with
respect to a Mortgage Asset) prepays in full, equal to the difference between
the portion of the prepaid principal amount of such Mortgage Loan (or
underlying mortgage loan) that is allocable to the Certificate and the portion
of the adjusted basis of the Certificate that is allocable to such Mortgage
Loan (or underlying mortgage loan). If a reasonable prepayment
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assumption is used to amortize such premium, it appears that such a loss would
be available, if at all, only if prepayments have occurred at a rate faster
than the reasonable assumed prepayment rate. It is not clear whether any other
adjustments would be required to reflect differences between an assumed
prepayment rate and the actual rate of prepayments.
On December 30, 1997, the Internal Revenue Service (the "IRS") issued
final regulations (the "Amortizable Bond Premium Regulations") dealing with
amortizable bond premium. These regulations, which generally are effective for
bonds issued or acquired on or after March 2, 1998 (or, for holders making an
election for the taxable year that includes March 2, 1998 or any subsequent
taxable year, shall apply to bonds held on or after the first day of the
taxable year of the election). The Amortizable Bond Premium Regulations
specifically do not apply to prepayable debt instruments or any pool of debt
instruments the yield on which may be affected by prepayments, such as the
Trust Fund, which are subject to Section 1272(a) (6) of the Code. Absent
further guidance from the IRS and unless otherwise specified in the related
Prospectus Supplement, the Trustee will account for amortizable bond premium in
the manner described above. Prospective purchasers should consult their tax
advisors regarding amortizable bond premium and the Amortizable Bond Premium
Regulations.
Original Issue Discount. The IRS has stated in published rulings that,
in circumstances similar to those described herein, the special rules of the
Code relating to original issue discount ("OID") (currently Code Sections 1271
through 1273 and 1275) and Treasury regulations issued on January 27, 1994,
under such Sections (the "OID Regulations"), will be applicable to a Grantor
Trust Certificateholder's interest in those Mortgage Assets meeting the
conditions necessary for these sections to apply. Rules regarding periodic
inclusion of OID income are applicable to mortgages of corporations originated
after May 27, 1969, mortgages of noncorporate mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of individuals
originated after March 2, 1984. Such OID could arise by the financing of points
or other charges by the originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points are not currently
deductible under applicable Code provisions or are not for services provided by
the lender. OID generally must be reported as ordinary gross income as it
accrues under a constant interest method. See "--Multiple Classes of Grantor
Trust Certificates--Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest in
a Mortgage Asset is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Mortgage Asset allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount either on the
basis of a constant interest rate or according to one of the following methods.
If a Grantor Trust Certificate is issued with OID, the amount of market
discount that accrues during any accrual period would be equal to the product
of (i) the total remaining market discount and (ii) a fraction, the numerator
of which is the OID accruing during the period and the denominator of which is
the total remaining OID at the beginning of the accrual period. For Grantor
Trust Certificates issued without OID, the amount of market discount that
accrues
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during a period is equal to the product of (i) the total remaining market
discount and (ii) a fraction, the numerator of which is the amount of stated
interest paid during the accrual period and the denominator of which is the
total amount of stated interest remaining to be paid at the beginning of the
accrual period. For purposes of calculating market discount under any of the
above methods in the case of instruments (such as the Grantor Trust
Certificates) that provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments, the same prepayment
assumption applicable to calculating the accrual of OID will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a Grantor
Trust Certificate purchased at a discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also 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 such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to have
made an election to include in income currently market discount with respect to
all other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired
at a premium will 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 "--Premium" herein. The election to
accrue interest, discount and premium on a constant yield method with respect
to a Certificate is irrevocable without consent of the IRS.
Anti-Abuse Rule. The IRS can apply or depart from the rules contained
in the OID Regulations as necessary or appropriate to achieve a reasonable
result where a principal purpose in structuring a Mortgage Asset, Mortgage Loan
or Grantor Trust Certificate or applying the otherwise applicable rules is to
achieve a result that is unreasonable in light of the purposes of the
applicable statutes (which generally are intended to achieve the clear
reflection of income for both issuers and holders of debt instruments).
B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. STRIPPED BONDS AND STRIPPED COUPONS
Pursuant to Code Section 1286, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments results
in the creation of "stripped bonds" with respect to principal payments and
"stripped coupons" with respect to interest payments. For purposes of Code
Sections 1271 through 1288, Code Section 1286 treats a stripped bond or a
stripped coupon as an obligation issued on the date that such stripped interest
is created. If a Trust Fund is created with two classes of Grantor Trust
Certificates, one class of Grantor Trust Certificates may represent the right
to principal and interest, or principal only, on all or a portion of the
Mortgage Assets (the "Stripped Bond Certificates"), while the second class of
Grantor Trust Certificates may represent the right to some or all of the
interest on such portion (the "Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess
servicing") will be treated under the stripped bond rules. If the excess
servicing fee is less than 100 basis points (i.e., 1% interest on the Mortgage
Asset principal balance) or the Certificates are initially sold with a de
minimis discount (assuming no prepayment assumption is required), any non-de
minimis discount arising from a subsequent transfer of the Certificates should
be treated as market discount. The IRS appears to require that reasonable
servicing fees be calculated on a
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Mortgage Asset by Mortgage Asset basis, which could result in some Mortgage
Assets being treated as having more than 100 basis points of interest stripped
off. See "--Non-REMIC Certificates" and "Multiple Classes of Grantor Trust
Certificates--Stripped Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate generally
should be treated as an interest in Mortgage Assets issued on the day such
Certificate is purchased for purposes of calculating any OID. Generally, if the
discount on a Mortgage Asset is larger than a de minimis amount (as calculated
for purposes of the OID rules) a purchaser of such a Certificate will be
required to accrue the discount under the OID rules of the Code. See
"--Non-REMIC Certificates" and "--Single Class of Grantor Trust
Certificates--Original Issue Discount" herein. However, a purchaser of a
Stripped Bond Certificate will be required to account for any discount on the
Mortgage Assets as market discount rather than OID if either (i) the amount of
OID with respect to the Mortgage Assets is treated as zero under the OID de
minimis rule when the Certificate was stripped or (ii) no more than 100 basis
points (including any amount of servicing fees in excess of reasonable
servicing fees) is stripped off of the Trust Fund s Mortgage Assets. Pursuant
to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of Stripped
Bond Certificates using an inconsistent method of accounting must change their
method of accounting and request the consent of the IRS to the change in their
accounting method on a statement attached to their first timely tax return
filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is
substantially uncertain. The Code could be read literally to require that OID
computations be made for each payment from each Mortgage Asset. Unless
otherwise specified in the related prospectus supplement, all payments from a
Mortgage Asset underlying a Stripped Coupon Certificate will be treated as a
single installment obligation subject to the OID rules of the Code, in which
case, all payments from such Mortgage Asset would be included in the Mortgage
Asset's stated redemption price at maturity for purposes of calculating income
on such Certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of
Mortgage Assets will give rise to a loss to the holder of a Stripped Bond
Certificate purchased at a premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account in
computing yield with respect to such Grantor Trust Certificate, it appears that
no loss will be available as a result of any particular prepayment unless
prepayments occur at a rate sufficiently faster than the assumed prepayment
rate so that the Certificateholder will not recover its investment. However, if
such Certificate is treated as an interest in discrete Mortgage Assets, or if
no prepayment assumption is used, then when a Mortgage Asset is prepaid, the
holder of such Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of such Certificate that is allocable to
such Mortgage Asset.
Holders of Stripped Bond Certificates and Stripped Coupon Certificates
are urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type that
make up the Trust Fund. With respect to these Code sections, no specific legal
authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Assets. While Code Section 1286 treats a stripped
obligation as a separate obligation for purposes of the Code provisions
addressing OID, it is not clear whether such characterization would apply with
regard to these other Code sections. Although the issue is not free from doubt,
each class of Grantor Trust Certificates, unless otherwise specified in the
related Prospectus Supplement, should be considered to represent "real estate
assets" within the meaning of Code Section 856(c) (4) (A) and "loans . . .
secured by, an interest in real property which is . . . residential real
property" within the meaning of Code Section 7701(a) (19) (C) (v), and interest
income attributable to Grantor Trust Certificates should be considered to
represent "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c) (3) (B), provided that in each case
the underlying Mortgage Assets and interest on such Mortgage Assets qualify for
such treatment. Prospective purchasers to which such characterization of an
investment in Certificates is material should consult their own tax advisors
regarding the characterization of the Grantor Trust Certificates and the income
therefrom. Grantor Trust Certificates will be "obligation[s] . . . which
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[are] principally secured by an interest in real property" within the meaning
of Code Section 860G(a) (3) (A) and "permitted assets" within the meaning of
Code Section 860L(c).
2. GRANTOR TRUST CERTIFICATES REPRESENTING INTERESTS IN
LOANS OTHER THAN ARM LOANS
The original issue discount rules of Code Sections 1271 through 1275
will be applicable to a Certificateholder's interest in those Mortgage Assets
as to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated after
July 1, 1982, and mortgages of individuals originated after March 2, 1984.
Under the OID Regulations, such original issue discount could arise by the
charging of points by the originator of the mortgage in an amount greater than
the statutory de minimis exception, including a payment of points that is
currently deductible by the borrower under applicable Code provisions, or under
certain circumstances, by the presence of "teaser" rates on the Mortgage
Assets. OID on each Grantor Trust Certificate must be included in the owner's
ordinary income for federal income tax purposes as it accrues, in accordance
with a constant interest method that takes into account the compounding of
interest, in advance of receipt of the cash attributable to such income. The
amount of OID required to be included in an owner's income in any taxable year
with respect to a Grantor Trust Certificate representing an interest in
Mortgage Assets other than Mortgage Assets with interest rates that adjust
periodically ("ARM Loans") likely will be computed as described below under "
- - --Accrual of Original Issue Discount." The following discussion is based in
part on the OID Regulations and in part on the provisions of the Tax Reform Act
of 1986 (the "1986 Act"). The OID Regulations generally are effective for debt
instruments issued on or after April 4, 1994, but may be relied upon as
authority with respect to debt instruments, such as the Grantor Trust
Certificates, issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issue date of the Mortgage Assets should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date such
Certificates are acquired. The holder of a Certificate should be aware,
however, that neither the proposed OID Regulations nor the OID Regulations
adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of a
Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain loan origination fees. The stated
redemption price at maturity of a Mortgage Asset is the sum of all payments to
be made on such Mortgage Asset other than payments that are treated as
qualified stated interest payments. The accrual of this OID, as described below
under "--Accrual of Original Issue Discount," will, unless otherwise specified
in the related Prospectus Supplement, utilize the original yield to maturity of
the Grantor Trust Certificate calculated based on a reasonable assumed
prepayment rate for the mortgage loans underlying the Grantor Trust
Certificates (the "Prepayment Assumption") on the issue date of such Grantor
Trust Certificate, and will take into account events that occur during the
calculation period. The Prepayment Assumption will be determined in the manner
prescribed by regulations that have not yet been issued. In the absence of such
regulations, the Prepayment Assumption used will be the prepayment assumption
that is used in determining the offering price of such Certificate. No
representation is made that any Certificate will prepay at the Prepayment
Assumption or at any other rate. The prepayment assumption contained in the
Code literally only applies to debt instruments collateralized by other debt
instruments that are subject to prepayment rather than direct ownership
interests in such debt instruments, such as the Certificates represent.
However, no other legal authority provides guidance with regard to the proper
method for accruing OID on obligations that are subject to prepayment, and,
until further guidance is issued, the Master Servicer intends to calculate and
report OID under the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of purchase but excluding
the date of disposition. In
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the case of an original owner, the daily portions of OID with respect to each
component generally will be determined as set forth under the OID Regulations.
A calculation will be made by the Master Servicer or such other entity
specified in the related Prospectus Supplement of the portion of OID that
accrues during each successive monthly accrual period (or shorter period from
the date of original issue) that ends on the day in the calendar year
corresponding to each of the Distribution Dates on the Grantor Trust
Certificates (or the day prior to each such date). This will be done, in the
case of each full month accrual period, by (i) adding (a) the present value at
the end of the accrual period (determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price at maturity received during such accrual period, and
(ii) subtracting from that total the "adjusted issue price" of the respective
component at the beginning of such accrual period. The adjusted issue price of
a Grantor Trust Certificate at the beginning of the first accrual period is its
issue price; the adjusted issue price of a Grantor Trust Certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period reduced by the amount of any payment other
than a payment of qualified stated interest made at the end of or during that
accrual period. The OID accruing during such accrual period will then be
divided by the number of days in the period to determine the daily portion of
OID for each day in the period. With respect to an initial accrual period
shorter than a full monthly accrual period, the daily portions of OID must be
determined according to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of
an obligation is reduced when the obligation is acquired after its initial
issuance at a price greater than the sum of the original issue price and the
previously accrued original issue discount, less prior payments of principal.
Accordingly, if such Mortgage Assets acquired by a Certificateholder are
purchased at a price equal to the then unpaid principal amount of such Mortgage
Asset, no original issue discount attributable to the difference between the
issue price and the original principal amount of such Mortgage Asset (i.e.
points) will be includible by such holder. Other original issue discount on the
Mortgage Assets (e.g., that arising from a "teaser" rate) would still need to
be accrued.
3. GRANTOR TRUST CERTIFICATES REPRESENTING INTERESTS IN
ARM LOANS
The OID Regulations do not address the treatment of instruments, such
as the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance under the Code's coupon stripping
rules with respect to such instruments. In the absence of any authority, the
Master Servicer will report OID on Grantor Trust Certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it believes is
consistent with the rules described above under the heading "--Grantor Trust
Certificates Representing Interests in Loans Other Than ARM Loans" and with the
OID Regulations. In general, application of these rules may require inclusion
of income on a Stripped ARM Obligation in advance of the receipt of cash
attributable to such income. Further, the addition of interest deferred by
reason of negative amortization ("Deferred Interest") to the principal balance
of an ARM Loan may require the inclusion of such amount in the income of the
Grantor Trust Certificateholder when such amount accrues. Furthermore, the
addition of Deferred Interest to the Grantor Trust Certificate's principal
balance will result in additional income (including possibly OID income) to the
Grantor Trust Certificateholder over the remaining life of such Grantor Trust
Certificates.
Because the treatment of Stripped ARM Obligations is uncertain,
investors are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the seller's purchase price for the Grantor
Trust Certificate, increased by the OID included in the seller's gross income
with respect to the Grantor Trust Certificate, and reduced by
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principal payments on the Grantor Trust Certificate previously received by the
seller. Such gain or loss will be capital gain or loss to an owner for which a
Grantor Trust Certificate is a "capital asset" within the meaning of Code
Section 1221, and will be long-term or short-term depending on whether the
Grantor Trust Certificate has been owned for the long-term capital gain holding
period (currently more than one year). Lower capital gains rates generally will
apply to individuals who hold Grantor Trust Certificates for more than 18
months.
It is possible that capital gain realized by holders of one or more
classes of Grantor Trust Certificates could be considered gain realized upon
the disposition of property that was part of a "conversion transaction." A sale
of a Grantor Trust Certificate will be part of a conversion transaction if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract
to sell the Grantor Trust Certificate substantially contemporaneously with
acquiring the Grantor Trust Certificate, (ii) the Grantor Trust Certificate is
part of a straddle, (iii) the Grantor Trust Certificate is marketed or sold as
producing capital gain, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of
a Grantor Trust Certificate is part of a conversion transaction, all or any
portion of the gain realized upon the sale or other disposition would be
treated as ordinary income instead of capital gain.
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Code Section 582(c) (1), so that gain or loss recognized from
the sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
D. NON-U.S. PERSONS
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July 18,
1984, interest or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined
below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner
that is not a U.S. Person will be subject to federal income tax, collected by
withholding, at a rate of 30% or such lower rate as may be provided for
interest by an applicable tax treaty, unless such income is effectively
connected with a U.S. trade or business of such owner or beneficial owner.
Accrued OID recognized by the owner on the sale or exchange of such a Grantor
Trust Certificate also will be subject to federal income tax at the same rate.
Generally, such payments would not be subject to withholding to the extent that
a Grantor Trust Certificate evidences ownership in Mortgage Assets issued after
July 18, 1984, by natural persons if such Grantor Trust Certificateholder
complies with certain identification requirements (including delivery of a
statement, signed by the Grantor Trust Certificateholder under penalties of
perjury, certifying that such Grantor Trust Certificateholder is not a U.S.
Person and providing the name and address of such Grantor Trust
Certificateholder). To the extent payments to Grantor Trust Certificateholders
that are not U.S. Persons are payments of "contingent interest" on the
underlying Mortgage Assets, or such Grantor Trust Certificateholder is
ineligible for the exemption described in the preceding sentence, the 30%
withholding tax will apply unless such withholding taxes are reduced or
eliminated by an applicable tax treaty and such holder meets the eligibility
and certification requirements necessary to obtain the benefits of such treaty.
Additional restrictions apply to Mortgage Assets where the mortgagor is not a
natural person in order to qualify for the exemption from withholding. If
capital gain derived from the sale, retirement or other disposition of a
Grantor Trust Certificate is effectively connected with a U.S. trade or
business of a Grantor Trust Certificateholder that is not a U.S. Person, such
Certificateholder will be taxed on the net gain under the graduated U.S.
federal income tax rates applicable to U.S. Persons (and, with respect to
Grantor Trust Certificates held by or on behalf of corporations, also may be
subject to branch profits tax). In addition, if the Trust Fund acquires a
United States real property interest through foreclosure, deed in lieu of
foreclosure or otherwise on a Mortgage Asset secured by such an interest (which
for this purpose includes real property located in the United States and the
Virgin Islands), a Grantor Trust Certificateholder that is not a U.S. Person
will potentially be subject to federal income tax on any gain attributable to
such real property interest that is allocable to such holder. Non-U.S. Persons
should consult their tax advisors regarding the application to them of the
foregoing rules.
As used herein, a "U.S. Person" means a citizen or resident of the
United States, a corporation or a partnership organized in or under the laws of
the United States or any political subdivision thereof (other than a
partnership that is not treated as a U.S. Person under any applicable Treasury
regulations), an estate the income of
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which from sources outside the United States is includible in gross income for
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States or a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more U.S. Persons have the authority to control all
substantial decisions of the trust. In addition, certain trusts treated as U.S.
Persons before August 20, 1996 may elect to continue to be so treated to the
extent provided in regulations.
E. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer will furnish or make available, within a
reasonable time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder,
beneficial owner, financial intermediary or other recipient of a payment on
behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that such
person has not reported all interest and dividend income required to be shown
on its federal income tax return, 31% backup withholding may be required with
respect to any payments to registered owners who are not "exempt recipients."
In addition, upon the sale of a Grantor Trust Certificate to (or through) a
broker, the broker must withhold 31% of the entire purchase price, unless
either (i) the broker determines that the seller is a corporation or other
exempt recipient, or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Person, certifies that
such seller is a Non-U.S. Person, and certain other conditions are met. Such as
sale must also be reported by the broker to the IRS, unless either (a) the
broker determines that the seller is an exempt recipient or (b) the seller
certifies its non-U.S. Person status (and certain other conditions are met).
Certification of the registered owner's non-U.S. Person status normally would
be made on IRS Form W-8 under penalties of perjury, although in certain cases
it may be possible to submit other documentary evidence. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued new regulations
(the "New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
REMICS
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however "--Taxation of Owners of REMIC Residual Certificates" and
"--Prohibited Transactions" below), if a Trust Fund with respect to which a
REMIC election is made fails to comply with one or more of the ongoing
requirements of the Code for REMIC status during any taxable year, including
the implementation of restrictions on the purchase and transfer of the residual
interests in a REMIC as described below under "Taxation of Owners of REMIC
Residual Certificates," the Code provides that a Trust Fund will not be treated
as a REMIC for such year and thereafter. In that event, such entity may be
taxable as a separate corporation, and the related Certificates (the "REMIC
Certificates") may not be accorded the status or given the tax treatment
described below. While the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of the
status of a trust fund as a REMIC, 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 REMIC's income for the period in
which the requirements for such status are not satisfied. With respect to each
Trust Fund that elects REMIC status, Sidley & Austin or Latham & Watkins or
Brown & Wood LLP or Cadwalader, Wickersham & Taft or such other counsel as may
be specified in the related Prospectus Supplement will deliver its opinion
generally to the effect that, under then existing law and assuming compliance
with all provisions of the related Pooling and Servicing Agreement, such Trust
Fund will qualify as a REMIC, and the related Certificates will be considered
to be regular interests ("REMIC Regular Certificates") or a sole class of
residual interests ("REMIC Residual Certificates") in the REMIC. The related
Prospectus
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Supplement for each Series of Certificates will indicate whether the Trust Fund
will make a REMIC election and whether a class of Certificates will be treated
as a regular or residual interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation and any "regular interest"
in another REMIC) that is principally secured by an interest in real property
and that is transferred to the REMIC within a prescribed time period in
exchange for regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a
REMIC election is made, (i) Certificates held by a thrift institution taxed as
a "domestic building and loan association" will constitute assets described in
Code Section 7701(a) (19) (C); (ii) Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
Code Section 856(c) (4) (A); and (iii) interest on Certificates held by a real
estate investment trust will be considered " interest on obligations secured by
mortgages on real property" within the meaning of Code Section 856(c) (3) (B).
If less than 95% of the REMIC's assets are assets qualifying under any of the
foregoing Code sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets.
Tiered REMIC Structures. For certain Series of Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs (respectively, the "Subsidiary REMIC" and the "Master
REMIC") for federal income tax purposes. Upon the issuance of any such Series
of Certificates, Sidley & Austin or Latham & Watkins or Brown & Wood LLP or
Cadwalader, Wickersham & Taft or such other counsel as may be specified in the
related Prospectus Supplement, counsel to the Depositor, will deliver its
opinion generally to the effect that, assuming compliance with all provisions
of the related Agreement, the Master REMIC as well as any Subsidiary REMIC will
each qualify as a REMIC, and the REMIC Certificates issued by the Master REMIC
and the Subsidiary REMIC or REMICs, respectively, will be considered to
evidence ownership of regular interests ("REMIC Regular Certificates") or
residual interests ("REMIC Residual Certificates") in the related REMIC within
the meaning of the REMIC provisions.
Other than the residual interest in a Subsidiary REMIC, only REMIC
Certificates issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC or REMICs and the Master REMIC will be treated as one REMIC
solely for purposes of determining whether the REMIC Certificates will be (i)
"real estate assets" within the meaning of Section 856(c) (4) (A) of the Code;
(ii) "loans secured by an interest in real property" under Section 7701(a) (19)
(C) of the Code; and (iii) whether the income on such Certificates is interest
described in Section 856(c) (3) (B) of the Code.
A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC or
its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates
may be issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular
Certificate and its "issue price." Holders of any class of Certificates issued
with OID will be required to include such OID in gross income for federal
income tax purposes as it accrues, in accordance with a constant interest
method based on the compounding of interest as it accrues rather than in
accordance with receipt of the interest payments. The following discussion is
based in part on the OID Regulations and in part on the provisions of the Tax
Reform Act of 1986 (the "1986 Act"). Holders of REMIC Regular Certificates (the
"REMIC Regular Certificateholders") should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273
and 1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated
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reinvestment rate, if any, relating to the REMIC Regular Certificates and
prescribe a method for adjusting the amount and rate of accrual of such
discount where the actual prepayment rate differs from the Prepayment
Assumption. Under the Code, the Prepayment Assumption must be determined in the
manner prescribed by regulations, which regulations have not yet been issued.
The legislative history of the 1986 Act (the "Legislative History") provides,
however, that Congress intended the regulations to require that the Prepayment
Assumption be the prepayment assumption that is used in determining the initial
offering price of such REMIC Regular Certificates. The Prospectus Supplement
for each Series of REMIC Regular Certificates will specify the Prepayment
Assumption to be used for the purpose of determining the amount and rate of
accrual of OID. No representation is made that the REMIC Regular Certificates
will prepay at the Prepayment Assumption or at any other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The issue price
of a REMIC Regular Certificate is the first price at which a substantial amount
of REMIC Regular Certificates of that class are first sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of REMIC Regular Certificates is sold
for cash on or prior to the date of their initial issuance (the "Closing
Date"), the issue price for such class will be treated as the fair market value
of such class on the Closing Date. The issue price of a REMIC Regular
Certificate also includes the amount paid by an initial Certificateholder for
accrued interest that relates to a period prior to the issue date of the REMIC
Regular Certificate. The stated redemption price at maturity of a REMIC Regular
Certificate includes the original principal amount of the REMIC Regular
Certificate, but generally will not include distributions of interest if such
distributions constitute "qualified stated interest." Qualified stated interest
generally means interest payable at a single fixed rate or qualified variable
rate (as described below) provided that such interest payments are
unconditionally payable at intervals of one year or less during the entire term
of the REMIC Regular Certificate. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of the interval
between payments. Distributions of interest on REMIC Regular Certificates with
respect to which Deferred Interest will accrue will not constitute qualified
stated interest payments, and the stated redemption price at maturity of such
REMIC Regular Certificates includes all distributions of interest as well as
principal thereon.
Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is longer than the interval between
subsequent Distribution Dates, the greater of any original issue discount
(disregarding the rate in the first period) and any interest foregone during
the first period is treated as the amount by which the stated redemption price
at maturity of the Certificate exceeds its issue price for purposes of the de
minimis rule described below. The OID Regulations suggest that all interest on
a long first period REMIC Regular Certificate that is issued with non-de
minimis OID, as determined under the foregoing rule, will be treated as OID.
Where the interval between the issue date and the first Distribution Date on a
REMIC Regular Certificate is shorter than the interval between subsequent
Distribution Dates, interest due on the first Distribution Date in excess of
the amount that accrued during the first period would be added to the
Certificates, stated redemption price at maturity. REMIC Regular
Certificateholders should consult their own tax advisors to determine the issue
price and stated redemption price at maturity of a REMIC Regular Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included in
the stated redemption price at maturity of the REMIC Regular Certificate and
the denominator of which is the stated redemption price at maturity of the
REMIC Regular Certificate. Although currently unclear, it appears that the
schedule of such distributions should be determined in accordance with the
Prepayment Assumption. The Prepayment Assumption with respect to a Series of
REMIC Regular Certificates will be set forth in the related Prospectus
Supplement. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the REMIC
Regular Certificate is held as
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a capital asset. However, accrual method holders may elect to accrue all de
minimis OID as well as market discount under a constant interest method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such REMIC Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such REMIC Regular Certificates is the sum of all payments to be
made on such REMIC Regular Certificates determined under the Prepayment
Assumption, with the result that such REMIC Regular Certificates would be
issued with OID. The calculation of income in this manner could result in
negative original issue discount (which delays future accruals of OID rather
than being immediately deductible) when prepayments on the Mortgage Assets
exceed those estimated under the Prepayment Assumption. The IRS might contend,
however, that certain contingent payment rules contained in final regulations
issued on June 11, 1996, with respect to original issue discount, should apply
to such Certificates. Although such rules are not applicable to instruments
governed by Code Section 1272(a) (6), they represent the only guidance
regarding the current views of the IRS with respect to contingent payment
instruments. These proposed regulations, if applicable, generally would require
holders of Regular Interest Certificates to take the payments considered
contingent interest payments into income on a yield to maturity basis in
accordance with a schedule of projected payments provided by the Depositor and
to make annual adjustments to income to account for the difference between
actual payments received and projected payment amounts accrued. In the
alternative, the IRS could assert that the stated redemption price at maturity
of such REMIC Regular Certificates should be limited to their principal amount
(subject to the discussion below under "--Accrued Interest Certificates"), so
that such REMIC Regular Certificates would be considered for federal income tax
purposes to be issued at a premium. If such a position were to prevail, the
rules described below under "--Taxation of Owners of REMIC Regular
Certificates--Premium" would apply. It is unclear when a loss may be claimed
for any unrecovered basis for a Super-Premium Certificate. It is possible that
a holder of a Super-Premium Certificate may only claim a loss when its
remaining basis exceeds the maximum amount of future payments, assuming no
further prepayments or when the final payment is received with respect to such
Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular Certificate
generally should not be treated as a Super-Premium Certificate and the rules
described below under "--REMIC Regular Certificates--Premium" should apply.
However, it is possible that holders of REMIC Regular Certificates issued at a
premium, even if the premium is less than 25% of such Certificate's actual
principal balance, will be required to amortize the premium under an original
issue discount method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
Generally, a REMIC Regular Certificateholder must include in gross
income the "daily portions," as determined below, of the OID that accrues on a
REMIC Regular Certificate for each day a Certificateholder holds the REMIC
Regular Certificate, including the purchase date but excluding the disposition
date. In the case of an original holder of a REMIC Regular Certificate, a
calculation will be made of the portion of the OID that accrues during each
successive period ("an accrual period") that ends on the day in the calendar
year corresponding to a Distribution Date (or if Distribution Dates are on the
first day or first business day of the immediately preceding month, interest
may be treated as payable on the last day of the immediately preceding month)
and begins on the day after the end of the immediately preceding accrual period
(or on the issue date in the case of the first accrual period). This will be
done, in the case of each full accrual period, by (i) adding (a) the present
value at the end of the accrual period (determined by using as a discount
factor the original yield to maturity of the REMIC Regular Certificates as
calculated under the Prepayment Assumption) of all remaining payments to be
received on the REMIC Regular Certificates under the Prepayment Assumption and
(b) any payments included in the stated redemption price at maturity received
during such accrual period, and (ii) subtracting from that total the adjusted
issue price of the REMIC Regular Certificates at the beginning of such accrual
period. The adjusted issue price of a REMIC Regular Certificate at the
beginning of the first accrual period is its issue price; the adjusted issue
price of a REMIC Regular Certificate at the beginning of a subsequent accrual
period is the adjusted issue price at the
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beginning of the immediately preceding accrual period plus the amount of OID
allocable to that accrual period and reduced by the amount of any payment other
than a payment of qualified stated interest made at the end of or during that
accrual period. The OID accrued during an accrual period will then be divided
by the number of days in the period to determine the daily portion of OID for
each day in the accrual period. The calculation of OID under the method
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in a given accrual period to reflect the fact that
prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID
who purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular Certificate.
In computing the daily portions of OID for such a purchaser (as well as an
initial purchaser that purchases at a price higher than the adjusted issue
price but less than the stated redemption price at maturity), however, the
daily portion is reduced by the amount that would be the daily portion for such
day (computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price paid
by such holder for that REMIC Regular Certificate exceeds the following amount:
(a) the sum of the issue price plus the aggregate amount of OID that would have
been includible in the gross income of an original REMIC Regular
Certificateholder (who purchased the REMIC Regular Certificate at its issue
price), less (b) any prior payments included in the stated redemption price at
maturity, and the denominator of which is the sum of the daily portions for
that REMIC Regular Certificate for all days beginning on the date after the
purchase date and ending on the maturity date computed under the Prepayment
Assumption. A holder who pays an acquisition premium instead may elect to
accrue OID by treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates
may provide for interest based on a variable rate. Interest based on a variable
rate will constitute qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at least annually, (ii)
the issue price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and one or more
"qualified floating rates," one "qualified inverse floating rate," or a
combination of "qualified floating rates "--that do not operate in a manner
that significantly accelerates or defers interest payments on such REMIC
Regular Certificates.
The amount of OID with respect to a REMIC Regular Certificate bearing
a variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
Although unclear at present, the Depositor intends to treat interest
on a REMIC Regular Certificate that is a weighted average of the net interest
rates on Mortgage Loans as qualified stated interest. In such case, the
weighted average rate used to compute the initial pass-through rate on the
REMIC Regular Certificates will be deemed to be the index in effect through the
life of the REMIC Regular Certificates. It is possible, however, that the IRS
may treat some or all of the interest on REMIC Regular Certificates with a
weighted average rate as taxable under the rules relating to obligations
providing for contingent payments. Such treatment may effect the timing of
income accruals on such REMIC Regular Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market discount or original issue discount) and premium in income as
interest, based on a constant yield method. If such an election were to be made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will 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
"--REMIC Regular Certificates--Premium" herein. The election to accrue
interest, discount and premium on a constant yield method with respect to a
Certificate is irrevocable without the consent of the IRS.
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Market Discount. A purchaser of a REMIC Regular Certificate may also
be subject to the market discount provisions of Code Sections 1276 through
1278. Under these provisions and the OID Regulations, "market discount" equals
the excess, if any, of (i) the REMIC Regular Certificate's stated principal
amount or, in the case of a REMIC Regular Certificate with OID, the adjusted
issue price (determined for this purpose as if the purchaser had purchased such
REMIC Regular Certificate from an original holder) over (ii) the price for such
REMIC Regular Certificate paid by the purchaser. A Certificateholder that
purchases a REMIC Regular Certificate at a market discount will recognize
income upon receipt of each distribution representing amounts included in such
certificate's stated redemption price at maturity. In particular, under Section
1276 of the Code such a holder generally will be required to allocate each such
distribution 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.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular Certificate
is less than 0.25% of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's weighted average
maturity remaining after the date of purchase. If market discount on a REMIC
Regular Certificate is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
REMIC Regular Certificate, and gain equal to such allocated amount will be
recognized when the corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of accrued market discount for purposes of
determining the tax treatment of subsequent principal payments or dispositions
of the market discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued 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, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods. For
REMIC Regular Certificates issued with OID, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount and (ii) a fraction, the numerator of which is the OID accruing
during the period and the denominator of which is the total remaining OID at
the beginning of the period. For REMIC Regular Certificates issued without OID,
the amount of market discount that accrues during a period is equal to the
product of (a) the total remaining market discount and (b) a fraction, the
numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the period. For purposes of
calculating market discount under any of the above methods in the case of
instruments (such as the REMIC Regular Certificates) that provide for payments
that may be accelerated by reason of prepayments of other obligations securing
such instruments, the same Prepayment Assumption applicable to calculating the
accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also 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 such Certificate purchased with market discount. For these purposes,
the de minimis rule referred to above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in
which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market
discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
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Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will
be considered to have purchased the REMIC Regular Certificate at a premium and
may elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter. It is
not clear whether the Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for this purpose.
However, the Legislative History states that the same rules that apply to
accrual of market discount (which rules require use of a Prepayment Assumption
in accruing market discount with respect to REMIC Regular Certificates without
regard to whether such Certificates have OID) will also apply in amortizing
bond premium under Code Section 171. The Code provides that amortizable bond
premium will be allocated among the interest payments on such REMIC Regular
Certificates and will be applied as an offset against such interest payment. On
June 27, 1996, the IRS published in the Federal Register proposed regulations
on the amortization of bond premium. The foregoing discussion is based in part
on such proposed regulations. On December 30, 1997, the IRS issued the
Amortizable Bond Premium Regulations, which generally are effective for bonds
acquired on or after March 2, 1998 or, for holders making an election to
amortize bond premium as described above for the taxable year that includes
March 2, 1998 or any subsequent taxable year, will apply to bonds held on or
after the first day of the taxable year in which the election is made. Neither
the proposed regulations nor the final regulations, by their express terms,
apply to prepayable securities described in Section 1272(a) (6) of the Code,
such as the REMIC Regular Certificates. Certificateholders should consult their
tax advisors regarding the possibility of making an election to amortize any
such bond premium.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such Certificates
prior to the time distributions of cash with respect to such Deferred Interest
are made. It is unclear, under the OID Regulations, whether any of the interest
on such Certificates will constitute qualified stated interest or whether all
or a portion of the interest payable on such Certificates must be included in
the stated redemption price at maturity of the Certificates and accounted for
as OID (which could accelerate such inclusion). Interest on REMIC Regular
Certificates must in any event be accounted for under an accrual method by the
holders of such Certificates and, therefore, applying the latter analysis may
result only in a slight difference in the timing of the inclusion in income of
interest on such REMIC Regular Certificates.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal to
the difference between the amount realized on the sale, exchange, redemption,
or retirement and the seller's adjusted basis in the REMIC Regular Certificate.
Such adjusted basis generally will equal the cost of the REMIC Regular
Certificate to the seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular Certificate, and
reduced (but not below zero) by payments included in the stated redemption
price at maturity previously received by the seller and by any amortized
premium. Similarly, a holder who receives a payment that is part of the stated
redemption price at maturity of a REMIC Regular Certificate will recognize gain
equal to the excess, if any, of the amount of the payment over an allocable
portion of the holder's adjusted basis in the REMIC Regular Certificate. A
REMIC Regular Certificateholder who receives a final payment that is less than
the holder's adjusted basis in the REMIC Regular Certificate will generally
recognize a loss. Except as provided in the following paragraph and as provided
under "--Market Discount" above, any such gain or loss will be capital gain or
loss, provided that the REMIC Regular Certificate is held as a "capital asset"
(generally, property held for investment) within the meaning of Code Section
1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to the
extent that such gain does not exceed the excess, if any, of (i) the amount
that would have been includible in such holder's income with respect to the
REMIC Regular Certificate had income accrued thereon at a rate equal to 110% of
the AFR as defined in Code Section 1274(d) determined as of the date of
purchase of such REMIC Regular Certificate, over (ii) the amount actually
includible in such holder's income. Gain from the sale or other disposition of
a REMIC Regular Certificate that might otherwise be
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capita gain will be treated as ordinary income if the REMIC Regular Certificate
is held as part of a "conversion transaction" as defined in Code section
1258(c), up to the amount of interest that would have accrued on the REMIC
Regular Certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable federal rate under Code section 1274(d) in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition of
property that was held as part of such transaction, or if the REMIC Regular
Certificate is held as part of a straddle. Potential investors should consult
their tax advisors with respect to tax consequences of ownership and
disposition of an investment in REMIC Regular Certificates in their particular
circumstances.
It is possible that capital gain realized by holders of one or more
classes of REMIC Regular Certificates could be considered gain realized upon
the disposition of property that was part of a "conversion transaction." A sale
of a REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract
to sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued. If the sale or other disposition of
a REMIC Regular Certificate is part of a conversion transaction, all or a
portion of the gain realized upon the sale or other disposition of the REMIC
Regular Certificate would be treated as ordinary income instead of capital
gain.
The Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c) (1), so that gain or loss recognized from the
sale of a REMIC Regular Certificate by a bank or a thrift institution to which
such section applies will be ordinary income or loss.
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 necessary to compute the accrual of any market discount that may
arise upon secondary trading of REMIC Regular Certificates. Because exact
computation of the accrual of market discount on a constant yield method would
require information relating to the holder's purchase price which the REMIC may
not have, it appears that the information reports will only provide information
pertaining to the appropriate proportionate method of accruing market discount.
The Taxpayer Relief Act of 1997 (the "Act") reduces the maximum rates
on long-term capital gains recognized on capital assets held by individual
taxpayers for more than eighteen months as of the date of disposition (and
would further reduce the maximum rates on such gains in the year 2001 and
thereafter for certain individual taxpayers who meet specified conditions). The
capital gains rate for capital assets held by individual taxpayers for more
than twelve months but not more than eighteen months was not changed by the
Act. The Act does not change the capital gains rates for corporations.
Prospective investors should consult their own tax advisors concerning these
tax law changes.
Accrued Interest Certificates. Certain of the REMIC Regular
Certificates ("Payment Lag Certificates") may provide for payments of interest
based on a period that corresponds to the interval between Distribution Dates
but that ends prior to each such Distribution Date. The period between the
Closing Date for Payment Lag Certificates and their first Distribution Date may
or may not exceed such interval. Purchasers of Payment Lag Certificates for
which the period between the Closing Date and the first Distribution Date does
not exceed such interval could pay upon purchase of the REMIC Regular
Certificates accrued interest in excess of the accrued interest that would be
paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to interest that has accrued
prior to the issue date ("pre-issuance accrued interest") and the REMIC Regular
Certificate provides for a payment of stated interest on the first payment date
(and the first payment date is within one year of the issue date) that equals
or exceeds the amount of the pre-issuance accrued interest, then the REMIC
Regular Certificate's issue price may be computed by subtracting from the issue
price the amount of pre-issuance accrued interest, rather than as an amount
payable on the REMIC Regular Certificate. However, it is unclear under this
method how the OID Regulations treat interest on Payment Lag Certificates.
Therefore, in the case of a Payment Lag Certificate, the Trust Fund intends to
include accrued interest in the issue price and report interest
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payments made on the first Distribution Date as interest to the extent such
payments represent interest for the number of days that the Certificateholder
has held such Payment Lag Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will
be allocated as a separate item to those REMIC Regular Certificateholders that
are "pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of
these rules on an investment in the REMIC Regular Certificates. See
"Pass-Through of Non-Interest Expenses of the REMIC" under "Taxation of Owners
of REMIC Residual Certificates" below.
Effects of Defaults, Delinquencies and Losses. Certain Series of
Certificates may contain one or more classes of Subordinated Certificates, and
in the event there are defaults or delinquencies on the Mortgage Assets,
amounts that would otherwise be distributed on the Subordinated Certificates
may instead be distributed on the Senior Certificates. Subordinated
Certificateholders nevertheless will be required to report income with respect
to such Certificates under an accrual method without giving effect to delays
and reductions in distributions on such Subordinated Certificates attributable
to defaults and delinquencies on the Mortgage Assets, except to the extent that
it can be established that such amounts are uncollectible. As a result, the
amount of income reported by a Subordinated Certificateholder in any period
could significantly exceed the amount of cash distributed to such holder in
that period. The holder will eventually be allowed a loss (or will be allowed
to report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinated Certificate is reduced as a result of
defaults and delinquencies on the Mortgage Assets.
Although not entirely clear, it appears that holders of REMIC Regular
Certificates that are corporations should in general be allowed to deduct as an
ordinary loss any loss sustained during the taxable year on account of any such
Certificates becoming wholly or partially worthless, and that, in general,
holders of Certificates that are not corporations should be allowed to deduct
as a short-term capital loss any loss sustained during the taxable year on
account of any such Certificates becoming wholly worthless. Potential investors
and holders of the Certificates are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such Certificates, including any loss resulting from the
failure to recover previously accrued interest or discount income. Special loss
rules are applicable to banks and thrift institutions, including rules
regarding reserves for bad debts. Such taxpayers are advised to consult their
tax advisors regarding the treatment of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any
payment with respect to accrued OID) on the REMIC Regular Certificates to a
REMIC Regular Certificateholder who is not a U.S. Person and is not engaged in
a trade or business within the United States will not be subject to federal
withholding tax if (i) such REMIC Regular Certificateholder does not actually
or constructively own 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder is a foreign person and
providing the name and address of such REMIC Regular Certificateholder). If a
REMIC Regular Certificateholder is not exempt from withholding, distributions
of interest to such holder, including distributions in respect of accrued OID,
may be subject to a 30% withholding tax, subject to reduction under any
applicable tax treaty. If the interest on a REMIC Regular Certificate is
effectively connected with the conduct by the Non-U.S. REMIC Regular
Certificateholder of a trade or business within the United States, then the
Non-U.S. REMIC Regular Certificateholder will be subject to U.S. income tax at
regular graduated rates. Such a Non-U.S. REMIC Regular Certificateholder also
may be subject to the branch profits tax.
Further, a REMIC Regular Certificate will not be included in the
estate of a non-resident alien individual that does not actually or
constructively own 10% or more of the combined voting power of all classes of
equity in
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the Issuer and will not be subject to United States estate taxes. However,
Certificateholders who are non-resident alien individuals should consult their
tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates, and
holders of REMIC Residual Certificates (the "REMIC Residual Certificateholder")
and persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so. In addition, the IRS may assert
that non-U.S Persons that own directly or indirectly, a greater than 10%
interest in any Mortgagor, and foreign corporations that are "controlled
foreign corporations" as to the United States of which such a Mortgagor is a
"United States shareholder" within the meaning of Section 951(b) of the Code,
are subject to United States withholding tax on interest distributed to them to
the extent of interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. 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 the income of which 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 or a trust
as to which (i) a court in the United States is able to exercise primary
supervision over its administration and (ii) one or more U.S. Persons have the
right to control all substantial decisions of the trust.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at any
time during such year, such information as may be deemed necessary or desirable
to assist REMIC Regular Certificateholders in preparing their federal income
tax returns, or to enable holders to make such information available to
beneficial owners or financial intermediaries that hold such REMIC Regular
Certificates on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be required with respect to any payments
with respect to any payments to registered owners who are not "exempt
recipients." In addition, upon the sale of a REMIC Regular Certificate to (or
through) a broker, the broker must withhold 31% of the entire purchase price,
unless either (i) the broker determines that the seller is a corporation or
other exempt recipient, or (ii) the seller provides, in the required manner,
certain identifying information and, in the case of a non-U.S. Person,
certifies that such seller is a Non-U.S. Person, and certain other conditions
are met. Such as sale must also be reported by the broker to the IRS, unless
either (a) the broker determines that the seller is an exempt recipient or (b)
the seller certifies its non-U.S. Person status (and certain other conditions
are met). Certification of the registered owner's non-U.S. Person status
normally would be made on IRS Form W-8 under penalties of perjury, although in
certain cases it may be possible to submit other documentary evidence. Any
amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against such recipient's federal income tax liability.
On October 6, 1997, the Treasury Department issued the New
Regulations, which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other transactions.
See "--Prohibited Transactions and Other Taxes" below. Instead, each original
holder of a REMIC Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of the REMIC for
each day during the taxable year on which such holder owns any REMIC Residual
Certificates. The taxable income of the REMIC for each day will be determined
by allocating the taxable income of the REMIC for each calendar quarter ratably
to each day in the quarter. Such a holder's share of the taxable
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income of the REMIC for each day will be based on the portion of the
outstanding REMIC Residual Certificates that such holder owns on that day. The
taxable income of the REMIC will be determined under an accrual method and will
be taxable to the holders of REMIC Residual Certificates without regard to the
timing or amounts of cash distributions by the REMIC. Ordinary income derived
from REMIC Residual Certificates will be "portfolio income" for purposes of the
taxation of taxpayers subject to the limitations on the deductibility of
"passive losses." As residual interests, the REMIC Residual Certificates will
be subject to tax rules, described below, that differ from those that would
apply if the REMIC Residual Certificates were treated for federal income tax
purposes as direct ownership interests in the Certificates or as debt
instruments issued by the REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom income"). This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying Mortgage
Assets and certain other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce the after-tax
yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder or
cause the REMIC Residual Certificate to have negative "value." Investors should
consult their own tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment on the
after-tax yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder
owns such REMIC Residual Certificate. Those daily amounts generally would equal
the amounts that would have been reported for the same days by an original
REMIC Residual Certificateholder, as described above. The Legislative History
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent holder of a REMIC Residual Certificate that
purchased such REMIC Residual Certificate at a price greater than (or less
than) the adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder. See "--Sale or Exchange
of REMIC Residual Certificates" below. It is not clear, however, whether such
adjustments will in fact be permitted or required and, if so, how they would be
made. The REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and OID on the REMIC Regular Certificates and, except as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC
taxable income is generally determined in the same manner as the taxable income
of an individual using the accrual method of accounting, except that (i) the
limitations on deductibility of investment interest expense and expenses for
the production of income do not apply, (ii) all bad loans will be deductible as
business bad debts, and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC's gross income
includes interest, original issue discount income, and market discount income,
if any, on the Mortgage Loans, reduced by amortization of any premium on the
Mortgage Loans, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized losses
to the REMIC Regular Certificates. Note that the timing of cancellation of
indebtedness income recognized by REMIC Residual Certificateholders resulting
from defaults and delinquencies on Mortgage Assets may differ from the time of
the actual loss on the Mortgage Asset. The REMIC's deductions include interest
and original issue discount expense on the REMIC Regular Certificates,
servicing fees on the Mortgage Loans, other administrative expenses of the
REMIC and realized losses on the Mortgage Loans. The requirement that REMIC
Residual Certificateholders report their pro rata share of taxable income or
net loss of the REMIC will continue until there are no Certificates of any
class of the related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a
class of Certificates is not sold initially, its fair market value). Such
aggregate basis will be allocated among the Mortgage Assets and other assets of
the REMIC in proportion to their respective fair market value. A Mortgage Asset
will be deemed to have been acquired with discount or premium to the extent
that the REMIC's
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basis therein is less than or greater than its principal balance, respectively.
Any such discount (whether market discount or OID) 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 OID on the REMIC Regular Certificates. The REMIC may elect
under Code Section 171 to amortize any premium on the Mortgage Assets. Premium
on any Mortgage Asset to which such election applies would be amortized under a
constant yield method. It is not clear whether the yield of a Mortgage Asset
would be calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, such an election would not
apply to the yield with respect to any underlying mortgage loan originated on
or before September 27, 1985. Instead, premium with respect to such a mortgage
loan would be allocated among the principal payments thereon and would be
deductible by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the
REMIC Regular Certificates. The amount and method of accrual of OID will be
calculated for this purpose in the same manner as described above with respect
to REMIC Regular Certificates except that the 0.25% per annum de minimis rule
and adjustments for subsequent holders described therein will not apply.
A REMIC Residual Certificateholder will not be permitted to amortize
the cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular Certificates
in determining the REMIC's initial basis in its assets. See "--Sale or Exchange
of REMIC Residual Certificates" below. For a discussion of possible adjustments
to income of a subsequent holder of a REMIC Residual Certificate to reflect any
difference between the actual cost of such REMIC Residual Certificate to such
holder and the adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder, see "--Allocation of the
Income of the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any
calendar quarter in which its deductions exceed its gross income. Such net loss
would be allocated among the REMIC Residual Certificateholders in the same
manner as the REMIC's taxable income. The net loss allocable to any REMIC
Residual Certificate will not be deductible by the holder to the extent that
such net loss exceeds such holder's adjusted basis in such REMIC Residual
Certificate. Any net loss that is not currently deductible by reason of this
limitation may only be used by such REMIC Residual Certificateholder to offset
its share of the REMIC's taxable income in future periods (but not otherwise).
The ability of REMIC Residual Certificateholders that are individuals or
closely held corporations to deduct net losses may be subject to additional
limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS has finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked to market. The Mark-to-Market
Regulations replaced the temporary regulations which allowed a Residual
Certificate to be marked to market provided that it was not a "negative value"
residual interest and did not have the same economic effect as a "negative
value" residual interest.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule,
all of the fees and expenses of a REMIC will be taken into account by holders
of the REMIC Residual Certificates. In the case of a single class REMIC,
however, the expenses and a matching amount of additional income will be
allocated, under temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a daily basis
in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In general terms, a single class REMIC is one
that either (i) would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single class REMIC rules. Unless otherwise
stated in the applicable Prospectus Supplement, the expenses of the REMIC will
be allocated to holders of the related REMIC Residual Certificates in their
entirety and not to holders of the related REMIC Regular Certificates.
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In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in
a REMIC Regular Certificate or a REMIC Residual Certificate directly or through
a pass-through interest holder that is required to pass miscellaneous itemized
deductions through to its owners or beneficiaries (e.g. a partnership, an S
corporation or a grantor trust), such expenses will be deductible under Code
Section 67 only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a certain amount (the "Applicable Amount") will be reduced by the
lesser of (i) 3% of the excess of the individual's adjusted gross income over
the Applicable Amount or (ii) 80% of the amount of itemized deductions
otherwise allowable for the taxable year. The amount of additional taxable
income recognized by REMIC Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holders' alternative minimum taxable income. The REMIC is required to report to
each pass-through interest holder and to the IRS such holde s allocable share,
if any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. Accordingly, investment in REMIC Residual Certificates will in general
not be suitable for individuals or for certain pass-through entities, such as
partnerships and S corporations, that have individuals as partners or
shareholders.
Excess Inclusions. A portion of the income on a REMIC Residual
Certificate (referred to in the Code as an "excess inclusion") for any calendar
quarter will be subject to federal income tax in all events. Thus, for example,
an excess inclusion (i) may not, except as described below, be offset by any
unrelated losses, deductions or loss carryovers of a REMIC Residual
Certificateholder; (ii) will be treated as "unrelated business taxable income"
within the meaning of Code Section 512 if the REMIC Residual Certificateholder
is a pension fund or any other organization that is subject to tax only on its
unrelated business taxable income (see "--Tax-Exempt Investors" below); and
(iii) is not eligible for any reduction in the rate of withholding tax in the
case of a REMIC Residual Certificateholder that is a foreign investor. See
"--Non-U.S. Persons" below.
Except as discussed in the following paragraph, with respect to any
REMIC Residual Certificateholder, the excess inclusions for any calendar
quarter is the excess, if any, of (i) the income of such REMIC Residual
Certificateholder for that calendar quarter from its REMIC Residual Certificate
over (ii) the sum of the "daily accruals" (as defined below) for all days
during the calendar quarter on which the REMIC Residual Certificateholder holds
such REMIC Residual Certificate. For this purpose, the daily accruals with
respect to a REMIC Residual Certificate are determined by allocating to each
day in the calendar quarter its ratable portion of the product of the "adjusted
issue price" (as defined below) of the REMIC Residual Certificate at the
beginning of the calendar quarter and 120 percent of the "Federal long-term
rate" in effect at the time the REMIC Residual Certificate is issued. For this
purpose, the "adjusted issue price" of a REMIC Residual Certificate at the
beginning of any calendar quarter equals the issue price of the REMIC Residual
Certificate, increased by the amount of daily accruals for all prior quarters,
and decreased (but not below zero) by the aggregate amount of payments made on
the REMIC Residual Certificate before the beginning of such quarter. The
"federal long-term 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.
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 Code Section 857(b) (2),
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. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the
special rule permitting Section 593 institutions ("thrift institutions") to use
net operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant value"
within the meaning of the REMIC
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Regulations, effective for taxable years beginning after December 31, 1995,
except with respect to residual certificates continuously held by a thrift
institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum taxable
income for such residual holder is determined without regard to the special
rule that taxable income cannot be less than excess inclusions. Second, the
amount of any alternative minimum tax net operating loss deductions must be
computed without regard to any excess inclusions. Third, a residual holder's
alternative minimum taxable income for a tax year cannot be less than excess
inclusions for the year. The effect of this last statutory amendment is to
prevent the use of nonrefundable tax credits to reduce a taxpayer's income tax
below its tentative minimum tax computed only on excess inclusions. These rules
are effective for tax years beginning after December 31, 1986, unless a
residual holder elects to have such rules apply only to tax years beginning
after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a
REMIC Residual Certificateholder will be treated as a non-taxable return of
capital to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the sale of the
REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or
exchange and its adjusted basis in the REMIC Residual Certificate (except that
the recognition of loss may be limited under the "wash sale" rules described
below). A holder's adjusted basis in a REMIC Residual Certificate generally
equals the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder, increased by the taxable income of the REMIC that was
included in the income of such REMIC Residual Certificateholder with respect to
such REMIC Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such REMIC Residual
Certificateholder with respect to such REMIC Residual Certificate and by the
distributions received thereon by such REMIC Residual Certificateholder. In
general, any such gain or loss will be capital gain or loss provided the REMIC
Residual Certificate is held as a capital asset. However, REMIC Residual
Certificates will be "evidences of indebtedness" within the meaning of Code
Section 582(c) (1), so that gain or loss recognized from sale of a REMIC
Residual Certificate by a bank or thrift institution to which such section
applies would be ordinary income or loss. In addition, a transfer of a REMIC
Residual Certificate that is a "noneconomic residual interest" may be subject
to different rules. See "--Tax Related Restrictions on Transfers of REMIC
Residual Certificates--Noneconomic REMIC Residual Certificates" below.
Except as 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 REMIC Residual Certificate, any residual
interest in another REMIC or similar interest in a "taxable mortgage pool" (as
defined in Code Section 7701(i) ) 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 Code Section 1091. In that event, any loss
realized by the REMIC Residual Certificateholder on the sale will not be
deductible, but, instead, will increase such REMIC Residual Certificateholder's
adjusted basis in the newly acquired asset.
The Act reduces the maximum rates on long-term capital gains
recognized on capital assets held by individual taxpayers for more than
eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). The capital gains rate for
capital assets held by individual taxpayers for more than twelve months but not
more than eighteen months was not changed by the Act. The Act does not change
the capital gains rates for corporations. Prospective investors should consult
their own tax advisors concerning these tax law changes.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income
derived from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction
means the disposition of a Mortgage Asset, the receipt of income from a source
other than a Mortgage
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Asset 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 Assets for temporary investment pending distribution on the
Certificates. It is not anticipated that the Trust Fund for any Series of
Certificates will engage in any prohibited transactions in which it would
recognize a material amount of net income.
In addition, certain contributions to a Trust Fund as to which an
election has been made to treat such Trust Fund as a REMIC made after the day
on which such Trust Fund issues all of its interests could result in the
imposition of a tax on the Trust Fund equal to 100% of the value of the
contributed property (the "Contributions Tax"). No Trust Fund for any Series of
Certificates will accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to
treat such Trust Fund as a REMIC may also be 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 income for a real estate investment
trust.
Where 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 a REMIC relating to any Series of Certificates arises out of
or results from (i) a breach of the related Servicer's, Trustee's or
Depositor's obligations, as the case may be, under the related Agreement for
such Series, such tax will be borne by such Servicer, Trustee or Depositor, as
the case may be, out of its own funds or (ii) the Depositor's obligation to
repurchase a Mortgage Loan, such tax will be borne by the Depositor. In the
event that such Servicer, Trustee or Depositor, as the case may be, fails to
pay or is not required to pay any such tax as provided above, such tax will be
payable out of the Trust Fund for such Series and will result in a reduction in
amounts available to be distributed to the Certificateholders of such Series.
LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a) (4) (A) (i), which may be accomplished by designating
in the REMIC's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC will not be subject to any Prohibited
Transaction Tax, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash (other than the amounts retained to meet
claims) to holders of Regular and REMIC Residual Certificates within the 90-day
period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in
the REMIC Residual Certificate exceeds the amount of cash distributed to such
REMIC Residual Certificateholder in final liquidation of its interest, then it
would appear that the REMIC Residual Certificateholder would be entitled to a
loss equal to the amount of such excess. It is unclear whether such a loss, if
allowed, will be a capital loss or an ordinary loss.
ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code,
the REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will be
furnished quarterly to each REMIC Residual Certificateholder who held a REMIC
Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on
its return consistently with their treatment on the REMIC's return, unless the
REMIC Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency resulting
from a failure to comply with the consistency requirement without instituting
an administrative proceeding at the REMIC level. The REMIC does not intend to
register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the 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
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for another person may be required to furnish the REMIC, in a manner to be
provided in Treasury regulations, with the name and address of such person and
other information.
TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners
of REMIC Residual Certificates--Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30% (or lower
treaty rate) United States withholding tax. Amounts distributed to holders of
REMIC Residual Certificates should qualify as "portfolio interest," subject to
the conditions described in "--Taxation of Owners of REMIC Regular
Certificates" above, but only to the extent that the underlying mortgage loans
were originated after July 18, 1984. Furthermore, the rate of withholding on
any income on a REMIC Residual Certificate that is excess inclusion income will
not be subject to reduction under any applicable tax treaties. See "--Taxation
of Owners of REMIC Residual Certificates--Excess Inclusions" above. If the
portfolio interest exemption is unavailable, such amount will be subject to
United States withholding tax when paid or otherwise distributed (or when the
REMIC Residual Certificate is disposed of) under rules similar to those for
withholding upon disposition of debt instruments that have OID. The Code,
however, grants the Treasury Department authority to issue regulations
requiring that those amounts be taken into account earlier than otherwise
provided where necessary to prevent avoidance of tax (for example, where the
REMIC Residual Certificates do not have significant value). See "--Taxation of
Owners of REMIC Residual Certificates--Excess Inclusions" above. If the amounts
paid to REMIC Residual Certificateholders that are not U.S. Persons are
effectively connected with their conduct of a trade or business within the
United States, the 30% (or lower treaty rate) withholding will not apply.
Instead, the amounts paid to such non-U.S. Person will be subject to U.S.
federal income taxation at regular graduated rates. For special restrictions on
the transfer of REMIC Residual Certificates, see "--Tax-Related Restrictions on
Transfers of REMIC Residual Certificates" below
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC
unless there are reasonable arrangements designed to ensure that residual
interests in such entity are not held by "disqualified organizations" (as
defined below). Further, a tax is imposed on the transfer of a residual
interest in a REMIC to a "disqualified organization." The amount of the tax
equals the product of (A) an amount (as determined under the REMIC Regulations)
equal to the present value of the total anticipated "excess inclusions" with
respect to such interest for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The tax is imposed
on the transferor unless the transfer is through an agent (including a broker
or other middleman) for a disqualified organization, in which event the tax is
imposed on the agent. The person otherwise liable for the tax shall be relieved
of liability for the tax if the transferee furnished to such person an
affidavit that the transferee is not a disqualified organization and, at the
time of the transfer, such person does not have actual knowledge that the
affidavit is false. A "disqualified organization" means (A) the United States,
any State, possession or political subdivision thereof, any foreign government,
any international organization or any agency or instrumentality of any of the
foregoing (provided that such term does not include an instrumentality if all
its activities are subject to tax and, except for FHLMC, a majority of its
board of directors is not selected by any such governmental agency), (B) any
organization (other than certain farmers' cooperatives) generally exempt from
federal income taxes unless
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such organization is subject to the tax on "unrelated business taxable income"
and (C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding
a residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity, provided that all partners of an "electing large
partnership" as defined in Section 775 of the Code, are deemed to be
disqualified organizations. The amount of the tax is equal to the product of
(A) the amount of excess inclusions for the taxable year allocable to the
interest held by the disqualified organization and (B) the highest marginal
federal income tax rate applicable to corporations. The pass-through entity
otherwise liable for the tax, for any period during which the disqualified
organization is the record holder of an interest in such entity, will be
relieved of liability for the tax if such record holder furnishes to such
entity an affidavit that such record holder is not a disqualified organization
and, for such period, the pass-through entity does not have actual knowledge
that the affidavit is false. For this purpose, a "pass-through entity" means
(i) a regulated investment company, real estate investment trust or common
trust fund, (ii) a partnership, trust or estate and (iii) certain cooperatives.
Except as may be provided in Treasury regulations not yet issued, any person
holding an interest in a pass-through entity as a nominee for another will,
with respect to such interest, be treated as a pass-through entity. Electing
large partnerships (generally, non-service partnerships with 100 or more
members electing to be subject to simplified IRS reporting provisions under
Code sections 771 through 777) will be taxable on excess inclusion income as if
all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that
no record or beneficial ownership interest in a REMIC Residual Certificate may
be purchased, transferred or sold, directly or indirectly, without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate
as a nominee or agent for a disqualified organization and (ii) a covenant by
the proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations
disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC
Residual Certificate to a "U.S. Person," as defined above, unless no
significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A Noneconomic REMIC Residual Certificate is
any REMIC Residual Certificate (including a REMIC Residual Certificate with a
positive value at issuance) unless, at the time of transfer, taking into
account the Prepayment Assumption and any required or permitted clean up calls
or required liquidation provided for in the REMIC's organizational documents,
(i) the present value of the expected future distributions on the REMIC
Residual Certificate at least equals the product of the present value of the
anticipated excess inclusions and the highest corporate income tax rate in
effect for the year in which the transfer occurs and (ii) the transferor
reasonably expects that the transferee will receive distributions from the
REMIC at or after the time at which taxes accrue on the anticipated excess
inclusions in an amount sufficient to satisfy the accrued taxes. A significant
purpose to impede the assessment or collection of tax exists if the transferor,
at the time of the transfer, either knew or should have known that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC. A transferor is presumed not to have such
knowledge if (i) the transferor conducted a reasonable investigation of the
transferee and (ii) the transferee acknowledges to the transferor that the
residual interest may generate tax liabilities in excess of the cash flow and
the transferee represents that it intends to pay such taxes associated with the
residual interest as they become due. If a transfer of a Noneconomic REMIC
Residual Certificate is disregarded, the transferor would continue to be
treated as the owner of the REMIC Residual Certificate and would continue to be
subject to tax on its allocable portion of the net income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of
a REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule appears
to apply to a transferee who is not a U.S. Person unless such transferee's
income in respect of the REMIC Residual Certificate is effectively connected
with the conduct of a United Sates trade or business. A REMIC Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expect that the REMIC will distribute to
the transferee amounts that will equal at least 30
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percent of each excess inclusion, and that such amounts will be distributed at
or after the time the excess inclusion accrues and not later than the end of
the calendar year following the year of accrual. If the non-U.S. Person
transfers the REMIC Residual Certificate to a U.S. Person, the transfer will be
disregarded, and the foreign transferor will continue to be treated as the
owner, if the transfer has the effect of allowing the transferor to avoid tax
on accrued excess inclusions. The provisions in the REMIC Regulations regarding
transfers of REMIC Residual Certificates that have tax avoidance potential to
foreign persons are effective for all transfers after June 30, 1992. The
Pooling and Servicing Agreement will provide that no record or beneficial
ownership interest in a REMIC Residual Certificate may be transferred, directly
or indirectly, to a non-U.S. Person unless such person provides the Trustee
with a duly completed IRS Form 4224 and the Trustee consents to such transfer
in writing.
Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Certain Federal Income Tax Consequences," potential investors should consider
the state income tax consequences of the acquisition, ownership, and
disposition of the Offered Certificates. State income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state. Therefore,
potential investors should consult their own tax advisors with respect to the
various tax consequences of investments in the Offered Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain restrictions on employee benefit plans
subject thereto ("ERISA Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such ERISA Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below,
subject to other applicable federal, state or local law. However, any such
governmental or church plan which is qualified under Section 401(a) of the Code
and exempt from taxation under Section 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
PROHIBITED TRANSACTIONS
GENERAL
Section 406 of ERISA prohibits parties in interest with respect to an
ERISA Plan from engaging in certain transactions involving such Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. In some cases, a civil penalty may be assessed on non-exempt
prohibited transactions pursuant to Section 502(i) of ERISA. Section 4975 of
the Code imposes certain excise taxes on similar transactions between employee
benefit plans and certain other retirement plans and arrangements, subject
thereto including individual retirement accounts or annuities and Keogh plans
and disqualified persons with respect to such plans and arrangements (together
with ERISA Plans, "Plans").
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The United States Department of Labor ("Labor") has issued a
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what
constitutes the assets of a Plan. This regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships,
trusts and certain other entities in which a Plan makes an "equity investment"
will be deemed for purposes of ERISA and Section 4975 of the Code to be assets
of the Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold
plan assets by reason of a Plan's investment in a Certificate; such plan assets
would include an undivided interest in the Mortgage Loans and any other assets
held by the Trust. In such an event, the Depositor, the Master Servicer, any
Sub-Servicer, the Trustee, any insurer of the Mortgage Assets and other
persons, in providing services with respect to the assets of the Trust, may
become fiduciaries subject to the fiduciary responsibility provisions of Title
I of ERISA, or may otherwise become parties in interest or disqualified
persons, with respect to such Plan. In addition, transactions involving such
assets could constitute or result in prohibited transactions under Section 406
of ERISA or Section 4975 of the Code unless such transactions are subject to a
statutory or administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts the
assets of an entity from plan assets status as long as the aggregate equity
investment in such entity by plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own at least 25% of the value of any class of equity interest
(excluding equity interests held by persons who have discretionary authority or
control with respect to the assets of the entity (or held by affiliates of such
persons)). "Benefit plan investors" are defined as Plans as well as employee
benefit plans not subject to Title I of ERISA (e.g., governmental plans and
foreign plans) and entities whose underlying assets include plan assets by
reason of plan investment in such entities. The 25% limitation must be met with
respect to each class of equity interests, regardless of the portion of total
equity value represented by such class, on an ongoing basis.
AVAILABILITY OF UNDERWRITER'S EXEMPTION FOR CERTIFICATES
Labor has granted to Morgan Stanley & Co. Incorporated Prohibited
Transaction Exemption 90-24, Exemption Application No. D-8019, 55 Fed. Reg.
20548 (1990) (the "Exemption") which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition,
sale and holding by Plans of certain certificates representing an undivided
interest in certain asset-backed pass-through trusts, with respect to which
Morgan Stanley & Co. Incorporated or any of its affiliates is the sole
underwriter or the manager or co-manager of the underwriting syndicate; and (2)
the servicing, operation and management of such asset-backed pass-through
trusts, provided that the general conditions and certain other conditions set
forth in the Exemption are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets
forth the following general conditions which must be satisfied before a
transaction involving the acquisition, sale and holding of the Certificates or
a transaction in connection with the servicing, operation and management of the
Trust may be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms
(including the price for such Certificates) that are at least as favorable to
the investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust with respect to the right to receive payment in the
event of default or delinquencies in the underlying assets of the Trust;
(3) The Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic rating
categories from any of Duff & Phelps Credit Rating Co., Fitch Investors
Service, L.P., Moody's Investors Service, Inc. and Standard & Poor's Ratings
Services;
(4) The Trustee is not an affiliate of the Depositor, any Underwriter,
the Master Servicer, any insurer of the Mortgage Assets, any borrower whose
obligations under one or more Mortgage Loans constitute
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more than 5% of the aggregate unamortized principal balance of the assets in
the Trust, or any of their respective affiliates (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of the Certificates represents not more than
reasonable compensation for underwriting such Certificates; the sum of all
payments made to and retained by the Asset Seller pursuant to the sale of the
Mortgage Loans to the Trust represents not more than the fair market value of
such Mortgage Loans; the sum of all payments made to and retained by the Master
Servicer represent not more than reasonable compensation for the Master
Servicer's services under the Pooling Agreement and reimbursement of the Master
Servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited investor"
as defined in Rule 501(a) (1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended. Before purchasing a
Certificate in reliance on the Exemption, a fiduciary of a Plan should itself
confirm (a) that the Certificates constitute "certificates" for purposes of the
Exemption and (b) that the general conditions and other requirements set forth
in the Exemption would be satisfied
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Certificates 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. Among other things, before purchasing any
Certificates, a fiduciary of a Plan should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions. In
this regard, purchasers that are insurance companies should determine the
extent to which Prohibited Transaction Class Exemption 95-60 (for certain
transactions involving insurance company general accounts) may be available.
The Prospectus Supplement with respect to a series of Certificates may contain
additional information regarding the application of the Exemption, Prohibited
Transaction Class Exemption 83-1 (for certain transactions involving mortgage
pool investment trusts), or any other exemption, with respect to the
Certificates offered thereby.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Generally, only those classes of
Offered Certificates that (i) are rated in one of the two highest rating
categories by one or more Rating Agencies and (ii) are part of a series
representing interests in a Trust Fund consisting of Mortgage Loans or MBS,
provided that such Mortgage Loans (or the Mortgage Loans underlying the MBS)
are secured by first liens on Mortgaged Property and were originated by certain
types of originators as specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA (the "SMMEA Certificates"). As "mortgage
related securities," the SMMEA Certificates will constitute legal investments
for persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, depository institutions,
insurance companies, trustees and pension funds) created pursuant to or
existing under the laws of the United States or of any state (including the
District of Columbia and Puerto Rico) whose authorized investments are subject
to state regulation 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 such
entities. Pursuant to SMMEA, a number of states enacted legislation, on or
before the October 3, 1991 cutoff established by SMMEA for such enactments,
limiting to varying extents the ability of certain entities (in particular,
insurance companies) to invest in mortgage related securities, in most cases by
requiring the affected investors to rely solely upon existing state law, and
not SMMEA. Pursuant to Section 347 of the Riegle Community Development and
Regulatory Improvement Act of 1994, which amended the definition of "mortgage
related security" (effective December 31, 1996) to include, in relevant part,
Offered Certificates satisfying the rating, first lien and qualified originator
requirements for "mortgage related securities," but representing interests in a
Trust Fund consisting, in whole or in part, of first liens on one or more
parcels of real estate upon which are located one or more commercial
structures, states were
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authorized to enact legislation, on or before September 23, 2001, specifically
referring to Section 347 and prohibiting or restricting the purchase, holding
or investment by state-regulated entities in such types of Offered
Certificates. Accordingly, investors affected by such legislation, when and if
enacted, will be authorized to invest in SMMEA Certificates only to the extent
provided in such legislation.
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 in "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. ss. 24 (Seventh), subject in each case to
such regulations as the applicable federal regulatory authority may prescribe.
In this connection, the Office of the Comptroller of the Currency (the "OCC")
has 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
in 12 C.F.R. ss. 1.5 concerning and soundness" and retention of credit
information), certain "Type IV securities," defined in 12 C.F.R. ss. 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. The National Credit Union
Association (the "NCUA") has adopted rules, codified at 12 C.F.R. Part 703,
which permit federal credit unions to invest in "mortgage related securities"
under certain limited circumstances, other than stripped mortgage related
securities, residual interests in mortgage related securities, and commercial
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. ss. 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement")
of the Federal Financial Institutions Examination Council (the "FFIEC"), which
has been adopted by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the OCC and the Office of Thrift
Supervision, effective May 26, 1998, and by the NCUA, effective October 1,
1998. The 1998 Policy Statement sets forth general guidelines which depository
institutions must follow in managing risks (including market, credit,
liquidity, operational (transaction), and legal risks) applicable to all
securities (including mortgage pass-through securities and mortgage-derivative
products) used for investment purposes. Until October 1, 1998, federal credit
unions will still be subject to the FFIEC's now-superseded "Supervisory Policy
Statement on Securities Activities" dated January 28, 1992, as adopted by the
NCUA with certain modifications, which prohibited depository institutions from
investing in certain "high-risk mortgage securities," except under limited
circumstances, and set forth certain investment practices deemed to be
unsuitable for regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed to be unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
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, provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Offered Certificates
issued in book-entry form, provisions which may restrict or prohibit
investments in securities which are issued in book-entry form.
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If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. 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, may be subject to significant interpretive uncertainties.
Except as to the status of certain classes of Offered Certificates
identified in the Prospectus Supplement for a series as "mortgage related
securities" under SMMEA, no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase any Offered Certificates under
applicable legal investment restrictions. The uncertainties described above
(and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the Offered Certificates)
may adversely affect the liquidity of the 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 own legal advisors
in determining whether and to what extent the Offered Certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions, and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related Prospectus Supplement, the Offered Certificates will
be distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Morgan Stanley & Co. Incorporated
("Morgan Stanley") acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed
to be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters
may receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the
Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Morgan Stanley acting as agent or in some
cases as principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If Morgan Stanley acts as agent in the sale of
Offered Certificates, Morgan Stanley will receive a selling commission with
respect to such Offered Certificates, depending on market conditions, expressed
as a percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that Morgan Stanley elects to purchase Offered Certificates as
principal, Morgan Stanley may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of Offered
Certificates of such series.
The Depositor will indemnify Morgan Stanley and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments Morgan Stanley and any underwriters
may be required to make in respect thereof.
In the ordinary course of business, Morgan Stanley and the Depositor
may engage in various securities and financing transactions, including
repurchase agreements to provide interim financing of the Depositor's mortgage
loans pending the sale of such mortgage loans or interests therein, including
the Certificates.
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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 of 1933 in connection
with reoffers and sales by them of Offered Certificates. Certificateholders
should consult with their legal advisors in this regard prior to any such
reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment-grade class may be initially retained by the Depositor, and
may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Sidley & Austin, New York, New York or Latham & Watkins, New York, New York
or Cadwalader, Wickersham & Taft, New York, New York or Brown & Wood LLP, New
York, New York or such other counsel as may be specified in the related
Prospectus Supplement.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood
of receipt by certificateholders of all distributions on the underlying
mortgage loans. These ratings address the structural, legal and issuer-related
aspects associated with such certificates, the nature of the underlying
mortgage loans 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 mortgagors or of the degree by which
such prepayments might differ from those originally anticipated. As a result,
certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might fail
to recoup their initial investments.
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.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
1
<S> <C>
1986 Act.....................................................................................................77, 81
1998 Policy Statement...........................................................................................100
A
Accrual Certificates..........................................................................................8, 30
Accrued Certificate Interest.....................................................................................32
Act..............................................................................................................87
ADA..............................................................................................................70
Agreements........................................................................................................8
Amortizable Bond Premium Regulations.............................................................................74
Applicable Amount................................................................................................92
ARM Loans....................................................................................................23, 77
Asset Conservation Act...........................................................................................66
Asset Seller.....................................................................................................20
Assets...........................................................................................................19
Available Distribution Amount....................................................................................31
B
Balloon Mortgage Loans...........................................................................................16
Bankruptcy Code..................................................................................................62
Benefit plan investors...........................................................................................98
Book-Entry Certificates..........................................................................................30
C
Cash Flow Agreement...........................................................................................8, 26
Cede..........................................................................................................3, 36
CERCLA.......................................................................................................18, 66
Certificate......................................................................................................37
Certificate Account..............................................................................................40
Certificate Balance...........................................................................................8, 32
Certificate Owners...............................................................................................36
Certificateholder................................................................................................36
Certificateholders............................................................................................3, 19
Certificates......................................................................................................5
Closing Date.....................................................................................................82
Code.............................................................................................................11
Commercial Loans.................................................................................................20
Commercial Properties.........................................................................................6, 20
Commission........................................................................................................2
Contributions Tax................................................................................................94
Cooperatives.....................................................................................................20
Covered Trust................................................................................................17, 54
CPR..............................................................................................................28
Credit Support................................................................................................7, 25
Crime Control Act................................................................................................71
Cut-off Date......................................................................................................9
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D
Debt Service Coverage Ratio......................................................................................21
Deferred Interest................................................................................................78
Definitive Certificates......................................................................................30, 37
Depositor........................................................................................................20
Determination Date...............................................................................................30
Distribution Date.................................................................................................9
DTC...........................................................................................................3, 36
Due Period.......................................................................................................31
E
Environmental Hazard Condition...................................................................................67
Equity Participations............................................................................................24
ERISA........................................................................................................11, 97
ERISA Plans......................................................................................................97
Exchange Act......................................................................................................3
Exemption........................................................................................................98
F
FDIC.............................................................................................................40
FFIEC...........................................................................................................100
FHLMC............................................................................................................50
FNMA.............................................................................................................67
G
Government Securities.........................................................................................7, 20
Grantor Trust Certificates.......................................................................................10
H
Hazardous Materials..............................................................................................68
I
Indirect Participants............................................................................................36
Insurance Proceeds...............................................................................................41
IRS..............................................................................................................74
L
L/C Bank.........................................................................................................55
Labor............................................................................................................98
Lease..........................................................................................................3, 6
Legislative History..............................................................................................82
Lessee.........................................................................................................3, 6
Liquidation Proceeds.............................................................................................41
Lock-out Date....................................................................................................24
Lock-out Period..................................................................................................24
M
Mark-to-Market Regulations.......................................................................................91
Master Servicer...................................................................................................5
MBS...........................................................................................................5, 20
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MBS Agreement....................................................................................................24
MBS Issuer.......................................................................................................24
MBS Servicer.....................................................................................................24
MBS Trustee......................................................................................................24
Morgan Stanley..................................................................................................101
Mortgage Assets..................................................................................................20
Mortgage Loans............................................................................................5, 19, 20
Mortgage Notes...................................................................................................20
Mortgage Rate.................................................................................................6, 24
Mortgaged Properties..............................................................................................6
Mortgages........................................................................................................20
Multifamily Loans................................................................................................20
Multifamily Properties........................................................................................5, 20
N
NCUA............................................................................................................100
Net income from foreclosure property.............................................................................94
Net Operating Income.............................................................................................21
New Regulations..................................................................................................80
Nonrecoverable Advance...........................................................................................33
O
OCC.............................................................................................................100
OID..........................................................................................................72, 74
OID Regulations..................................................................................................74
Originator.......................................................................................................20
P
Participants.....................................................................................................36
Pass-Through Rate.............................................................................................8, 31
Payment Lag Certificates.........................................................................................87
Permitted Investments............................................................................................41
Phase I Assessment...............................................................................................67
Plans............................................................................................................97
Prepayment Assumption............................................................................................77
Prepayment Premium...............................................................................................24
Prohibited Transactions Tax......................................................................................93
Purchase Price...................................................................................................40
R
Rating Agency....................................................................................................12
RCRA.............................................................................................................67
Record Date......................................................................................................30
Refinance Loans..................................................................................................23
Related Proceeds.................................................................................................33
Relief Act.......................................................................................................71
REMIC............................................................................................................11
REMIC Certificates...............................................................................................80
REMIC Regular Certificateholders.................................................................................81
REMIC Regular Certificates...................................................................................10, 80
REMIC Regulations................................................................................................71
REMIC Residual Certificateholder.................................................................................89
-105-
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REMIC Residual Certificates..............................................................................10, 80, 81
REO Extension....................................................................................................60
Restricted Group.................................................................................................99
Retained Interest................................................................................................49
RICO.............................................................................................................71
S
Senior Certificates...........................................................................................8, 30
Servicing Standard...............................................................................................44
SMMEA............................................................................................................99
SMMEA Certificates...............................................................................................99
Special Servicer..............................................................................................5, 45
Stripped ARM Obligations.........................................................................................78
Stripped Bond Certificates.......................................................................................75
Stripped Coupon Certificates.....................................................................................75
Stripped Interest Certificates................................................................................8, 30
Stripped Principal Certificates...............................................................................8, 30
Subordinate Certificates......................................................................................8, 30
Sub-Servicer.....................................................................................................44
Sub-Servicing Agreement..........................................................................................44
Super-Premium Certificates.......................................................................................83
T
Title V..........................................................................................................69
Trust Assets......................................................................................................2
Trustee...........................................................................................................5
U
U.S. Person..................................................................................................79, 89
UCC..............................................................................................................36
Underlying MBS...................................................................................................20
V
Value............................................................................................................23
Voting Rights....................................................................................................19
W
Warrantying Party................................................................................................39
Whole Loans......................................................................................................20
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