<PAGE>
FILED PURSUANT TO RULE 424 (b)(5)
REGISTRATION NO. 333-46102
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 6, 2000
$260,000,000
(Approximate)
[LOGO OF GREENPOINT CREDIT]
Seller and Servicer
Manufactured Housing Contract Trust
Pass-Through Certificates, Series 2000-7,
Issuer
The securities issuer is offering the following two classes of certificates:
<TABLE>
<CAPTION>
Underwriting
Certificate Pass-Through Price to Discounts and Proceeds to
Class Balance Rate Public Commissions Seller
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A-1 $160,000,000 LIBOR + 0.29% 100.000% 0.275% 99.725%
A-2 100,000,000 AUCTION 100.000% 0.275% 99.725%
Total $260,000,000 $260,000,000 $715,000 $259,285,000
</TABLE>
. The approximate certificate balance of the offered certificates may vary by
plus or minus 5%.
. The securities issuer will also issue the Class R Certificates which are
not being offered by this prospectus supplement.
. The initial pass-through rate for the Class A-2 Certificates will be set by
the broker-dealer no later than December 20, 2000, and will not exceed the
maximum auction rate set forth in this prospectus supplement in Annex II.
The pass-through rate for the Class A-2 Certificates will be recalculated
monthly beginning in January 2001 pursuant to the auction procedures set
forth in this prospectus supplement in Annex II and Annex III.
. The pass-through rates on the offered certificates will be capped at the
weighted average of the net contract rates of the contracts. See
"Description of the Certificates--Pass-Through Rates and Last Scheduled
Distribution Dates" in this prospectus supplement.
The required monthly payments of interest and scheduled principal are
unconditionally and irrevocably guaranteed to the holders of the offered
certificates by
[MBIA LOGO]
See "MBIA Insurance Corporation" and "Description of the Certificates--
Certificate Insurance Policy" in this prospectus supplement.
Consider carefully the risk factors beginning on page S-10 in this prospectus
supplement and page 4 in the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the offered certificates or
determined that this prospectus supplement or the prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
Underwriter
Credit Suisse First Boston
Prospectus Supplement dated December 18, 2000
<PAGE>
Important Notice About Information Presented In This Prospectus
Supplement and the Accompanying Prospectus
You should rely only on the information contained in this document or to
which we have referred you in this prospectus supplement. We have not authorized
anyone to provide you with information that is different. This document may only
be used where it is legal to sell these securities.
We provide information to you about the offered certificates in two separate
documents that progressively provide more detail:
. the accompanying prospectus, which provides general information, some of
which may not apply to your series of certificates, and
. this prospectus supplement, which describes the specific terms of your
series of certificates.
We have defined certain significant terms in the "Glossary" found on page
S-63 of this prospectus supplement. Capitalized terms used in this prospectus
supplement but not defined in this prospectus supplement shall have the meanings
assigned to them in the accompanying prospectus.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
S-2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Summary Information.................................. S-4
Risk Factors......................................... S-10
The Contract Pool.................................... S-16
The Seller and Servicer.............................. S-25
Delinquency and Loan Loss/Repossession Experience.. S-26
GreenPoint Credit Management's
Discussion and Analysis of
Delinquency, Repossession and
Loan Loss Experience............................... S-27
GreenPoint Bank...................................... S-28
General............................................ S-28
Financial Information.............................. S-28
Where You Can Obtain Additional
Information About GreenPoint Bank.................. S-29
MBIA Insurance Corporation........................... S-29
MBIA............................................... S-29
MBIA Financial Information......................... S-29
Where You Can Obtain
Additional Information About MBIA.................. S-30
Financial Strength Ratings of MBIA................. S-30
Prepayment and Yield Considerations.................. S-31
Weighted Average Life of the Certificates.......... S-33
Assumptions........................................ S-34
Description of the Certificates...................... S-38
General............................................ S-38
Pass-Through Rates and Last
Scheduled Distribution Dates....................... S-38
Conveyance of Contracts............................ S-39
Payments on the Contracts; the Payment Account..... S-42
Distributions...................................... S-43
Interest Distributions............................. S-43
Principal Distributions............................ S-44
Priority of Distributions.......................... S-44
Losses on Liquidated Contracts..................... S-45
The Letter of Credit............................... S-46
Certificate Insurance Policy....................... S-46
Advances........................................... S-47
Reports to Certificateholders...................... S-47
Optional Termination and
Termination Auction............................ S-48
Termination of the Agreement....................... S-49
Collection and Other Servicing Procedures.......... S-50
Servicing Compensation; Certain
Other Matters Regarding the
Servicer....................................... S-50
Rights Upon an Event of Default.................... S-50
The Trustee........................................ S-51
The Auction Agent.................................. S-52
Registration of the Offered Certificates........... S-52
Federal Income Tax Consequences...................... S-56
ERISA Considerations................................. S-58
General............................................ S-58
Class A Certificates............................... S-58
Ratings.............................................. S-60
Legal Investment..................................... S-61
Method of Distribution............................... S-61
Use of Proceeds...................................... S-62
Legal Matters........................................ S-62
Experts.............................................. S-62
Glossary............................................. S-63
Annex I Global Clearance, Settlement
and Tax Documentation Procedures................... I-1
Annex II Auction Procedures........................ II-1
Annex III Settlement Procedures..................... III-1
</TABLE>
S-3
<PAGE>
Summary Information
The following summary highlights selected information from this prospectus
supplement. It does not contain all of the information that you need to
consider in making your investment decision. To understand the terms of the
offered certificates, read carefully this entire prospectus supplement and the
accompanying prospectus.
This summary provides an overview of certain calculations, cash flows and other
information to aid your understanding and is qualified by the full description
of these calculations, cash flows and other information in this prospectus
supplement and the accompanying prospectus.
What the Offered Certificates Represent
The offered certificates represent an ownership interest in a trust fund. The
trust fund will contain a contract pool, which will consist of manufactured
housing installment sales contracts, installment loan agreements and certain
other assets, as described under "Description of the Certificates--General" in
this prospectus supplement.
The offered certificates only represent interests in the assets of the trust
fund. All payments to certificateholders will come only from the amounts
received in connection with those assets.
Information About the Contract Pool
The contract pool will consist of approximately 5,226 contracts with an
aggregate scheduled principal balance as of November 30, 2000 of approximately
$259,999,597.68 which will be conveyed to the trust fund on the closing date.
Each contract was either originated or purchased by GreenPoint Credit, LLC.
For a further description of the contracts, see "The Contract Pool" in this
prospectus supplement.
The Offered Certificates
GreenPoint Credit, LLC will deposit the contracts into the trust fund. The
trust fund has been created for the purpose of issuing the Manufactured Housing
Contract Trust Pass-Through Certificates, Series 2000-7. The approximate
initial certificate balance, pass-through rate and last scheduled distribution
date of each class of offered certificates will be as follows:
<TABLE>
<CAPTION>
Initial
Certificate Pass-Through Rate Last Scheduled
Class Balance Rate Distribution Date
----- ----------- ----------------- ---------------------
<S> <C> <C> <C>
A-1... $160,000,000 LIBOR + 0.29% June 17, 2022
A-2... $100,000,000 AUCTION November 17, 2031
</TABLE>
. The approximate initial certificate balance of the offered certificates may
vary by plus or minus 5%.
. The initial pass-through rate for the Class A-2 Certificates will be set by
the broker-dealer no later than December 20, 2000, and will not exceed the
maximum auction rate set forth in this prospectus supplement in Annex II.
The pass-through rate for the Class A-2 Certificates will be recalculated
monthly beginning in January 2001 pursuant to the auction procedures set
forth in this prospectus supplement in Annex II and Annex III.
. The pass-through rates on the offered certificates will be capped at the
weighted average of the net contract rates of the contracts. See
"Description of the Certificates--Pass-Through Rates and Last Scheduled
Distribution Dates" in this prospectus supplement.
S-4
<PAGE>
. If, on any distribution date, the pass-through rate for the Class A-1
certificates or Class A-2 certificates is capped at the weighted average of
the net contract rates of the contracts, holders of that class will be
entitled to receive, on subsequent distribution dates, the applicable
carryover amount as described in "Description of the Certificates--Priority
of Distributions" in this prospectus supplement to the extent that funds
are available therefor. However, any funds resulting from a draw under the
certificate insurance policy described in this prospectus supplement shall
not be available to pay any carryover amount. See "Description of the
Certificates--Priority of Distributions" in this prospectus supplement.
The trust fund will also issue one or more Class R Certificates which will not
be sold to the public. The Class R Certificates are not being offered by this
prospectus supplement, are subordinated to the offered certificates and provide
some limited credit support for the offered certificates.
Denominations
The Class A-1 Certificates are offered in minimum denominations of $50,000 each
and multiples of $1 in excess thereof. The Class A-2 Certificates are offered
in minimum denominations of $25,000 each and integral multiples of $25,000 in
excess thereof.
The Letter of Credit
GreenPoint Bank will provide a letter of credit to protect certificateholders
against certain losses. As described in more detail in this prospectus
supplement, if funds in the certificate account are insufficient to distribute
interest or scheduled principal to certificateholders on any distribution date,
GreenPoint Bank may be required to make a payment into the certificate account
to cover the shortfall pursuant to a draw on the letter of credit.
The letter of credit will be issued in an amount as determined by MBIA Insurance
Corporation, and may be amended, replaced, substituted, reduced or cancelled at
any time by mutual agreement of MBIA Insurance Corporation and GreenPoint Bank,
without the consent of certificateholders, the seller, the servicer or the
trustee.
See "GreenPoint Bank," and "Description of the Certificates--The Letter of
Credit" in this prospectus supplement.
The Certificate Insurance Policy and MBIA Insurance Corporation
MBIA Insurance Corporation will provide a financial guaranty insurance policy to
protect certificateholders against certain losses. In most instances, if funds
in the certificate account are insufficient to distribute interest or scheduled
principal to the certificateholders on any distribution date and GreenPoint Bank
is in default under the letter of credit or the letter of credit has been
cancelled or is insufficient, MBIA Insurance Corporation will make a payment
into the certificate account to cover the shortfall under a certificate
insurance policy. See "GreenPoint Bank," "MBIA Insurance Corporation,"
"Description of the Certificates--Certificate Insurance Policy" and "--The
Letter of Credit" in this prospectus supplement.
Distributions on the Certificates
General
Each month, the trustee, Bank One, National Association, will make distributions
of interest and principal to the holders of the certificates.
S-5
<PAGE>
The first distribution date with respect to the offered certificates will be
January 17, 2001. Thereafter, distributions on the offered certificates will be
made on the 17th day of each month, or if the 17th day is not a business day, on
the next business day.
The obligors under the contracts are required to pay their interest and
principal during each month to the servicer of the contracts. Within two
business days of receipt of payments from obligors, the servicer will forward
these amounts to the trustee. On the distribution date occurring in the
succeeding month, the trustee will distribute the amount remitted by the
servicer to the trustee during the prior month, less fees and expenses owed to
the servicer, plus any draws under the letter of credit and/or any enhancement
payment under the certificate insurance policy, to the holders of the
certificates, in the amount and priority set forth in this prospectus
supplement. See "Description of the Certificates--Priority of Distributions" in
this prospectus supplement.
Distributions of Interest
Interest Accrual. With respect to each distribution date, the offered
certificates will accrue interest on their respective certificate balance at a
rate equal to the product of:
. the actual number of days during the interest period divided by 360; and
. the applicable pass-through rate on the certificate balance of the
certificate immediately prior to the related distribution date.
Interest Period. For any distribution date, interest will accrue during the
period from the preceding distribution date (or for the first distribution date,
from the closing date) through the day prior to the related distribution date.
See "Description of the Certificates--Interest Distributions" in this prospectus
supplement.
On each distribution date, interest will be distributed to certificateholders in
the order described in "Description of the Certificates--Priority of
Distributions" in this prospectus supplement. It is possible that, on any given
distribution date, there will be insufficient payments from the contracts to
cover interest owed on the certificates. If there is a shortfall in collections
or there are losses on the contracts and there is a default by MBIA Insurance
Corporation under the certificate insurance policy and GreenPoint Bank is in
default under the letter of credit or the letter of credit has been cancelled or
is insufficient, the outstanding classes of certificates may not receive the
full amount of accrued interest.
The classes of certificates that do not receive the full interest payment will
be entitled to receive the shortfall in interest distributions in the following
month in the same priority as their distribution of current interest.
See "GreenPoint Bank," "MBIA Insurance Corporation," "Description of the
Certificates--Certificate Insurance Policy," "--The Letter of Credit," and
"--Priority of Distributions" in this prospectus supplement.
LIBOR. The pass-through rate for the Class A-1 Certificates will be adjusted
each month, based on changes in LIBOR for one-month U.S. dollar deposits,
subject to a cap equal to the weighted average of the net contract rates on the
contracts, as described in "Description of the Certificates--Pass-Through Rates
and Last Scheduled Distribution Dates" in this prospectus supplement.
Auction Rate. The pass-through rate for the Class A-2 Certificates will be
adjusted each month, based on the auction procedures, subject to a cap equal to
the weighted average of the net contract rates on the contracts, described in
Annex II and Annex III to this prospectus supplement.
S-6
<PAGE>
Distributions of Principal
Certificateholders will receive payments of principal corresponding to payments
of principal on the contracts.
On each distribution date, a certain portion of collections received on the
contracts will be distributed to the offered certificates in the amount and
priority set forth in this prospectus supplement.
See "Description of the Certificates--Priority of Distributions" in this
prospectus supplement.
It is possible that there will be insufficient payments from the contracts to
cover principal payable to certificateholders. If there is a shortfall in
collections or there are losses on the contracts and there is a default by MBIA
Insurance Corporation under the certificate insurance policy and GreenPoint Bank
is in default under the letter of credit or the letter of credit has been
cancelled or is insufficient, certificateholders may not receive the full amount
of principal distributions to which they are otherwise entitled.
See "GreenPoint Bank," "MBIA Insurance Corporation," "Description of the
Certificates--Certificate Insurance Policy," "--The Letter of Credit" and
"--Priority of Distributions" in this prospectus supplement.
Allocation of Losses
A contract suffers a loss when the servicer determines that:
. it has received all amounts it expects to recover from that contract; and
. the amounts recovered are less than the sum of the outstanding principal
balance of the contract and the accrued and unpaid interest thereon.
In the event losses on the contracts would reduce the amount available for
distribution to the Class A-1 Certificates and Class A-2 Certificates and there
is no payment under the certificate insurance policy and GreenPoint Bank is in
default under the letter of credit or the letter of credit has been cancelled or
is insufficient, losses will be allocated pro rata among the Class A-1
Certificates and Class A-2 Certificates.
See "Risk Factors--Losses on the contracts may reduce the yield on the offered
certificates," "--The letter of credit may be amended, replaced, substituted,
reduced or cancelled at any time by the mutual agreement of MBIA Insurance
Corporation and GreenPoint Bank, without the consent of certificateholders, the
seller, the servicer or the trustee" and "Description of the Certificates--
Losses on Liquidated Contracts" in this prospectus supplement.
Advances
The servicer will advance its own funds to cover any shortfalls in payments of
principal and interest due to the offered certificates in any month that:
. the servicer receives a payment on a contract that is less than the full
scheduled payment; or
. the servicer receives no payment on a contract; and
. in each case, the servicer determines that the advance will be recoverable
from future payments or collections on that contract.
Any advances made by the servicer with respect to a distribution date will not
exceed the amount of delinquent contract payments that were due in the
applicable prior month. See "Description of the Certificates-- Advances" in
this prospectus supplement.
S-7
<PAGE>
Yield and Prepayment Considerations
The yield to maturity of each class of certificates will depend upon, among
other things:
. the price at which the certificates are purchased;
. the applicable pass-through rate;
. the rate of principal prepayments on the contracts; and
. the occurrence of defaults on the contracts.
A higher than anticipated rate of principal prepayments on the contracts would
reduce the aggregate principal balance of the contracts more quickly than
expected, thereby reducing the aggregate interest payments that would otherwise
be payable with respect to the contracts. A higher rate of principal
prepayments could result in a lower than expected yield to maturity on classes
of certificates purchased at a premium. A lower than anticipated rate of
principal prepayments could result in a lower than expected yield to maturity on
classes of certificates purchased at a discount since payments of principal with
respect to the contracts would occur later than anticipated. For a discussion
of special yield and prepayment considerations applicable to the offered
certificates, see "Risk Factors--The yield on the offered certificates could be
limited by a higher than expected rate of prepayments on the contracts
underlying the certificates" and "Prepayment and Yield Considerations" in this
prospectus supplement.
Book-Entry Registration
The offered certificates will be available only in book-entry form through the
facilities of DTC, Clearstream, Luxembourg and the Euroclear System. See
"Description of the Certificates--Registration of the Offered Certificates" in
this prospectus supplement and Annex I to this prospectus supplement.
Optional Termination
The pooling and servicing agreement provides that on or after the distribution
date on which the aggregate scheduled principal balances of the contracts is
less than 10% of the aggregate scheduled principal balances of the contracts as
of the cut-off date, the servicer will have the right to purchase all
outstanding contracts and terminate the trust fund as more fully described in
"Description of the Certificates--Optional Termination and Termination Auction"
in this prospectus supplement.
Tax Status
For federal income tax purposes, GreenPoint Credit, LLC will cause an election
to be made to treat the trust fund as a "real estate mortgage investment
conduit." Orrick, Herrington & Sutcliffe llp, special counsel to GreenPoint
Credit, LLC, based on certain assumptions set forth in this prospectus
supplement and in the prospectus, is of the opinion that the electing portion of
the trust fund will qualify as a "real estate mortgage investment conduit" for
federal income tax purposes and that the offered certificates will constitute
"regular interests" in the "real estate mortgage investment conduit" for federal
income tax purposes and will be treated as debt instruments of the trust fund
for purposes of calculating a certificateholder's federal income tax liability.
Holders of the offered certificates that would otherwise report income under a
cash method of accounting will be required to include in income interest on the
certificates (including "original issue discount," if any) in accordance with
the accrual method of accounting with the effect that an investor may be
required to report income for federal income tax purposes despite not yet having
received a cash distribution in respect of the income.
Assuming in each case that a substantial amount of a class of certificates is
sold at the price for
S-8
<PAGE>
the class of certificates stated on the cover of this prospectus supplement, and
subject to the uncertainties concerning the determination of "original issue
discount" for variable rate certificates discussed in "Federal Income Tax
Consequences--REMIC Certificates--Taxation of Regular Certificates--Variable
Rate Certificates" in the prospectus, the offered certificates will not be
issued with "original issue discount."
For further information regarding the federal income tax consequences of
investing in the offered certificates, see "Federal Income Tax Consequences" in
this prospectus supplement and in the accompanying prospectus
ERISA Considerations
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus, the offered
certificates will be eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts.
Ratings
The offered certificates are required to receive the ratings of "AAA" by
Standard & Poor's Ratings Services and "Aaa" by Moody's Investors Service, Inc.
The ratings do not address whether or not the Class A-1 Certificates or Class A-
2 Certificates will receive any related carryover amount or the ability of the
holder of the Class R Certificates to purchase any contract that has been
converted to a fixed rate of interest. A rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time. See "Ratings" in this prospectus supplement.
Legal Investment
All of the offered certificates will be "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984.
You should consult your own legal advisors in determining whether and to what
extent the offered certificates constitute legal investments for you.
See "Legal Investment" in this prospectus supplement.
S-9
<PAGE>
Risk Factors
The offered certificates are not suitable investments for all investors. In
particular, you should not purchase the offered certificates unless you
understand the prepayment, credit, liquidity and market risks associated with
the offered certificates.
The offered certificates are complex securities. You should possess, either
alone or together with an investment advisor, the expertise necessary to
evaluate the information contained in this prospectus supplement and the
accompanying prospectus in the context of your financial situation and tolerance
for risk.
You should carefully consider the following risk factors prior to any
decision to invest in the offered certificates. The following discussion
supplements, and does not replace or supersede, the discussion under "Risk
Factors" in the prospectus.
<TABLE>
<S> <C>
The yield on the offered General Risks Associated with Higher Than Expected Prepayments. The
certificates could be offered certificates represent an interest in a trust fund containing
limited by a higher manufactured housing contracts. As the obligors make payments of
than expected rate of interest and principal on the contracts, certificateholders will receive
prepayments on the payments on the related distribution date. Because the obligors are free
contracts underlying to make those payments faster than scheduled, certificateholders may
the certificates. receive distributions of principal faster than expected. Therefore, the
offered certificates may be paid in full earlier than the scheduled
maturity of the offered certificates. Once a certificateholder receives
a distribution of principal, interest will no longer accrue on that
amount of principal. There is no guarantee that certificateholders will
receive principal payments on the offered certificates at any specific
rate or on specific dates.
Payment of principal on the contracts may be in the following forms:
. Scheduled payments of principal; and
. Principal prepayments which consist of:
-- Prepayments in full of a contract;
-- Repurchases by GreenPoint Credit, LLC, as the seller, of any
contracts that violate any representations and warranties in the pooling
and servicing agreement;
-- Repurchases by the holder of the Class R Certificates of variable
rate contracts that have been converted to a fixed interest rate;
-- Partial prepayments on any contract; and
-- Liquidation principal, which is the principal recovered after
foreclosing on or otherwise liquidating a defaulted contract.
For a complete discussion of the situations that might cause prepayments,
see "Prepayment and Yield Considerations" in the prospectus and in this
prospectus supplement.
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Offered Certificates Bought at Premiums and Discounts May Receive a Lower
Yield Than Expected. Offered certificates purchased at a discount may
receive a lower yield than expected if the rate of principal payments is
slower than expected. Offered certificates purchased at a premium may
receive a lower yield than expected if the rate of principal payments is
faster than expected.
See "Prepayment and Yield Considerations" in this prospectus supplement.
Prepayments May Limit Pass-Through Rates Due to the Weighted Average Cap
on Pass-Through Rates. The pass-through rates for the offered
certificates will not exceed the weighted average of the net contract
rates. For the first twelve distribution dates, the net contract rate of
a contract equals the rate of interest borne by the contract minus 1.00%,
and for each distribution date thereafter, the net contract rate of a
contract equals the rate of interest borne by the contract minus 1.50%.
Disproportionate prepayments of contracts with net contract rates that
are higher than the pass-through rates for any class of offered
certificates will increase the possibility that the pass-through rate for
that class of certificates will be lowered to the weighted average of the
net contract rates. There is no mechanism to compensate the holders of
the related classes of offered certificates for any cap on the
pass-through rate other than the payment, if any, of a carryover amount.
Carryover amounts are not covered by MBIA Insurance Corporation or the
letter of credit.
See "Prepayment and Yield Considerations" and "Description of the
Certificates--Priority of Distributions" in this prospectus supplement.
Variable Rate Contracts With Contract Rates Based on a Twelve-Month LIBOR
Index May Prepay at a Higher Rate Than Other Variable Rate Contracts.
Approximately 99.97%, by principal balance as of the cut-off date, of the
contracts are variable rate contracts based on a twelve-month LIBOR
index. While GreenPoint Credit, LLC does not anticipate that variable
rate contracts based on a twelve-month LIBOR index will have materially
different delinquency or default rates from other types of variable rate
contracts, GreenPoint Credit, LLC has a limited operating history with
respect to variable rate contracts based on a twelve-month LIBOR index
and therefore no assurance can be given that variable rate contracts
based on a twelve-month LIBOR index will not have higher prepayments,
delinquencies or losses than other types of variable rate contracts.
See "Prepayment and Yield Considerations" in this prospectus supplement.
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The offered certificates The contracts are variable rate contracts that:
may have a lower yield if
LIBOR for one-month . provide for periodic adjustments to their interest rates;
dollar deposits is
greater than the interest . may not have their first interest adjustment dates for a period of
rate accruing on the time that is longer than would otherwise be indicated by the index under
contracts which the contracts are adjusted;
. bear interest at the rate set at the origination of the contract until
their first adjustment dates; and
. after the first adjustment date, will only adjust every 12 months
thereafter.
However, the Class A-1 Certificates adjust monthly based on the one-month
LIBOR index. The one-month LIBOR index:
. is a different index than the index with which the contracts adjust;
and
. may be higher or adjust differently than the index under which the
contracts are adjusted.
Because the pass-through rate on the Class A-1 Certificates may be capped
by the weighted average of the net contract rates on the contracts, the
yield to the holders of the Class A-1 Certificates may be lower than a
yield based upon the one-month LIBOR index.
Similarly, the Class A-2 Certificates are subject to adjustment monthly
pursuant to the auction procedures set forth in Annex II and Annex III to
this prospectus supplement. Since the pass-through rate on the Class A-2
Certificates may be capped by the weighted average of the net contract
rates on the contracts, the yield to the holders of the Class A-2
Certificates may be lower than a yield based upon the auction procedures.
There may not be funds to Although holders of the offered certificates will be entitled to any
pay certificateholders related interest shortfalls resulting from the cap based on the weighted
amounts in respect of average of the net contract rates from and to the limited extent of funds
interest shortfalls available therefor as provided in this prospectus supplement, there can
resulting from the cap be no assurance that funds will be available or sufficient for payment of
based on the weighted any interest shortfalls resulting from the cap based on the weighted
average of the net average of the net contract rates. In addition, the certificate
contract rates of the insurance policy and the letter of credit do not cover, and the ratings
contracts. of the offered certificates do not address, the likelihood of payment of
any interest shortfalls resulting from the cap based on the weighted
average of the net contract rates.
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Some variable rate Although all of the contracts are variable rate contracts, the obligor on
contracts may convert to each of the contracts can convert from a variable rate to a fixed rate as
fixed rates which may long as the obligor is current in payment on the obligor's contract. If
reduce the yield to an obligor converts a contract from a variable rate to a fixed rate, the
certificateholders. holder of the Class R Certificates is obligated to purchase the converted
contract. The fixed rate may be lower than the pass-through rate on the
Class A-1 Certificates or the pass-through rate on the Class A-2
Certificates. Since the pass-through rates on the certificates are
capped by the weighted average of the net contract rates, any conversion
to a fixed rate of a contract that has not been purchased by the holder
of the Class R Certificates may make it more likely that the pass-through
rates on the Class A-1 Certificates or Class A-2 Certificates will be
lower than the pass-through rate based upon one-month LIBOR plus the
spread or produced by the auction procedures, as applicable.
Losses on the contracts MBIA Insurance Corporation has insured the payments of scheduled
may reduce the yield on principal and interest on all classes of offered certificates. However,
the offered certificates. if there is a shortfall, MBIA Insurance Corporation has defaulted under
the certificate insurance policy and GreenPoint Bank is in default under
the letter of credit or the letter of credit has been cancelled or is
insufficient, the yield to maturity on the offered certificates may be
reduced by losses on the contracts.
See "Prepayment and Yield Considerations," "GreenPoint Bank," "MBIA
Insurance Corporation," "Description of the Certificates--The Letter of
Credit" and "--Certificate Insurance Policy" in this prospectus
supplement.
Upon the occurrence of So long as MBIA Insurance Corporation is not in default in payment under
events of default of the the certificate insurance policy, upon the occurrence of an event of
servicer under the default of the servicer under the pooling and servicing agreement,
pooling and servicing neither the trustee nor the certificateholders may exercise any remedies
agreement, MBIA Insurance provided for in the pooling and servicing agreement. MBIA Insurance
Corporation will have the Corporation will generally have the right to control all remedies
sole right to exercise provided for in the pooling and servicing agreement. In addition, MBIA
any remedies. Insurance Corporation will have additional rights to remove the servicer
that neither the trustee nor certificateholders may exercise. If MBIA
Insurance Corporation is in default under the certificate insurance
policy, under certain circumstances described in the pooling and
servicing agreement, GreenPoint Bank (or a substitute letter of credit
provider if the letter of credit has been replaced) will have certain
rights upon an event of default that may be prior to the rights of the
certificateholders.
See "MBIA Insurance Corporation" and "Description of the
Certificates--Rights Upon an Event of Default" in this prospectus
supplement.
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The letter of credit may The letter of credit will be issued and maintained in an amount as
be amended, replaced, determined by MBIA Insurance Corporation and may be amended, replaced,
substituted, reduced or substituted, reduced or cancelled at any time by the mutual agreement of
cancelled at any time by MBIA Insurance Corporation and GreenPoint Bank, without the consent of
the mutual agreement of certificateholders, the seller, the servicer or the trustee. There can
MBIA Insurance be no assurance that the letter of credit will remain in effect or
Corporation and provide credit support to certificateholders for any period of time.
GreenPoint Bank, without
the consent of See "Description of the Certificates--The Letter of Credit" in this
certificateholders, the prospectus supplement.
seller, the servicer or
the trustee.
Certificateholders must The trust fund will not have, nor is it permitted or expected to have,
rely on the limited any significant assets or sources of funds other than the contracts and
assets of the trust fund related assets, the certificate account, the letter of credit and the
only for payment on the certificate insurance policy. Certificateholders must rely upon payments
offered certificates and on the contracts, amounts received by the trust fund pursuant to the
will have no recourse letter of credit and payments of claims made under the certificate
against the seller or the insurance policy for payments on their certificates. Although the letter
servicer if the offered of credit and the certificate insurance policy will be available for the
certificates incur offered certificates to cover shortfalls in distributions of interest and
shortfalls and/or losses. scheduled principal due thereon, if MBIA Insurance Corporation defaults
in its obligations under the certificate insurance policy and GreenPoint
Bank defaults in its obligations under the letter of credit or if the
letter of credit has been cancelled or is insufficient, the trustee will
depend solely on current distributions on the contracts to make payments
on the offered certificates.
See "GreenPoint Bank," "MBIA Insurance Corporation," "Description of the
Certificates--The Letter of Credit" and "--Certificate Insurance Policy"
in this prospectus supplement.
The offered certificates will not represent interests in or obligations
of the seller or the servicer. None of the offered certificates nor the
underlying contracts or any collections thereon will be insured or
guaranteed against losses by any governmental agency or instrumentality,
the underwriter or any of their affiliates, GreenPoint Credit, LLC or any
of its affiliates, except for GreenPoint Bank to the limited extent of
the letter of credit.
Random lot procedures make Distributions of principal on the Class A-2 Certificates will be made in
the timing and amount of round lots of $25,000 and integral multiples thereof. Further,
distributions on the distributions will be allocated to specific Class A-2 Certificates in
Class A-2 Certificates accordance with the then-applicable established random lot procedures of
uncertain. DTC, and the then-applicable established procedures of its participating
organizations and indirect participating organizations, which may or may
not be by random lot. On any distribution date, some Class A-2
Certificates may receive distributions of principal while others may not.
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
A secondary market may not The underwriter of the offered certificates intends to make a secondary
develop or may not market in the offered certificates, but will have no obligation to do so.
continue to provide There can be no assurance that a secondary market of any class of offered
sufficient liquidity for certificates will develop, or if one does develop, that it will continue
the offered certificates. or provide sufficient liquidity of investment or that it will remain for
the term of the related class of offered certificates.
</TABLE>
S-15
<PAGE>
The Contract Pool
Each contract was either originated or purchased by GreenPoint Credit on an
individual basis in the ordinary course of its business. A description of the
general practices of GreenPoint Credit with respect to the origination or
purchase of manufactured housing contracts similar to the contracts being
conveyed to the Trust Fund as described in this prospectus supplement is set
forth in the prospectus under "The Seller and Servicer--Loan Originations" and
"The Seller and Servicer--Underwriting Practices."
On the Closing Date, GreenPoint Credit will convey the contracts to the Trust
Fund. So long as GreenPoint Credit is acting as the servicer, it will obtain
and maintain possession of all contract documents. See "Description of the
Certificates--Conveyance of Contracts" in this prospectus supplement and "The
Contract Pools" in the prospectus.
The underwriting practices of GreenPoint Credit regarding loan-to-value ratios
of contracts it originates or purchases are set forth in the prospectus under
"The Seller and Servicer--Loan Originations" and "The Seller and Servicer--
Underwriting Practices." No contract at its origination had an LTV in excess of
approximately 100%.
Manufactured homes, unlike site-built homes, generally depreciate in value,
and GreenPoint Credit believes that, upon repossession, the market value of a
manufactured home securing a manufactured housing contract is generally lower
than the principal balance of the related manufactured housing contract. The
percentage recovery of principal on liquidation of manufactured housing
contracts historically has been adversely affected by downturns in regional or
local economic conditions. These regional or local economic conditions are
often volatile and no predictions can be made regarding future economic loss
upon liquidation.
Approximately 36.0%, by principal balance as of the Cut-off Date, of the
contracts are Land Home Contracts or Land-in-Lieu Contracts. The Land Home
Contracts or Land-in-Lieu Contracts will be secured by either first mortgages or
deeds of trust on the real estate on which the manufactured home is located,
depending upon the prevailing practice in the state in which the underlying
property is located. See "Certain Legal Aspects of the Contracts--Land Home
Contracts and Land-in-Lieu Contracts" in the prospectus.
Under certain limited circumstances, as set forth in the Agreement, the
servicer may make a one-time modification to the contract rate on any contract
by an amount equal to the lesser of:
. 5% of the contract rate for the related contract; and
. 0.50%.
The charge-off policy with respect to any particular contract is determined by
GreenPoint Credit on a case by case basis.
Each contract has a contract rate that is adjustable, as further described in
this prospectus supplement. Each contract fully amortizes the principal balance
of the contract over the term of the contract.
None of the contracts are insured in whole or in part by the Veterans
Administration, the Federal Housing Administration or any other governmental
entity or instrumentality.
Each contract either provides for a contract rate fixed for one year or a
contract rate fixed for three years from the date of origination, or with
respect to any contracts that had an interest-only period, eleven months from
the date of the first payment of interest on the contract, and then adjusts
annually (each, an "Adjustment Date") thereafter to an amount equal to the sum,
rounded, if applicable, of the Index on the date 45 days
S-16
<PAGE>
preceding the Adjustment Date, and the number of basis points, if any (the
"Gross Margin"), set forth in the related contract, subject to the limitation
set forth in the related contract with respect to increases and decreases on any
Adjustment Date (the "Periodic Cap") and the maximum and minimum rates, if any,
set forth in the related contract (the "Maximum Cap" and the "Minimum Cap,"
respectively). None of the contracts are currently in an interest-only period.
The "Index" with respect to each contract is either:
. Twelve-Month LIBOR; or
. the per annum rate equal to the monthly average yield on U.S. Treasury
securities adjusted to a constant maturity ("CMT") of one year.
The contract rate on each contract can be converted to a fixed rate at the
request of the related obligor for a fee of $200.00 so long as the requesting
obligor is not delinquent in payment on the related contract. The converted
fixed rate will be the current fixed rate offered by GreenPoint Credit for
manufactured housing installment sales contracts or installment loan agreements
with characteristics that are similar to the converted contract. GreenPoint
Bank, as initial holder of the Class R Certificates, is obligated to purchase
any contract so converted as of the date of the conversion in an amount equal to
the Scheduled Principal Balance of the converted contract on the date of
conversion plus accrued interest thereon. Any amounts received in respect of
the purchase shall be deposited into the Payment Account for distribution on the
Distribution Date in the month following the purchase.
As of the Cut-off Date, the contracts will have an aggregate unpaid principal
balance of approximately $259,999,597.68. The average outstanding principal
balance of the contracts as of the Cut-off Date was approximately $49,751.17.
Approximately 89.6% of the contracts by outstanding principal balance as of the
Cut-off Date are secured by manufactured homes which were new at the time of
origination and approximately 10.4% of the contracts by outstanding principal
balance as of the Cut-off Date are secured by manufactured homes which were used
at the time of origination. As of the Cut-off Date, each contract has a
contract rate of at least 5.500% and not more than 18.000% per annum. As of the
Cut-off Date, the weighted average contract rate of the contracts is
approximately 9.683% per annum. The contracts have original maturities of at
least 36 months but not more than 360 months and have remaining maturities as of
the Cut-off Date of at least 26.89 months but not more than 360.00 months. As
of the Cut-off Date, the contracts had a weighted average original term to
scheduled maturity of approximately 310.9 months, and a weighted average
remaining term to scheduled maturity of approximately 307.8 months. Management
of GreenPoint Credit estimates that in excess of 90% of the manufactured homes
are used as primary residences by the obligors under the contracts secured by
their manufactured homes. The weighted average loan-to-value ratio at the time
of origination of the contracts was approximately 88.17%. The contracts are
secured by manufactured homes and real estate located in 45 states.
Approximately 9.18%, 8.81%, 8.43%, 5.68%, 5.46% and 5.25% of the contracts by
aggregate unpaid principal balance as of the Cut-off Date were secured by
manufactured homes or real estate located in Texas, North Carolina, Florida,
Mississippi, Missouri and Georgia, respectively. No other state represented
more than approximately 5.00% of the contracts by aggregate unpaid principal
balance as of the Cut-off Date.
All of the Periodic Caps for the contracts are 2.00%. The months to the next
Adjustment Date for the contracts as of the Cut-off Date ranged from 1 to 30
months with a weighted average of approximately 9.72 months. The Maximum Cap
for the contracts as of the Cut-off Date ranged from 10.500% to 23.000% with a
weighted average of approximately 14.683%. The Gross Margins for the contracts
as of the Cut-off Date ranged from 0.500% to 13.500% with a weighted average of
approximately 4.744%. Approximately 0.03%, 99.64%, 0.31% and 0.02%,
respectively, of the contracts, by principal balance as of the Cut-off Date have
their first Adjustment Date in 2000, 2001, 2002 and 2003, respectively.
S-17
<PAGE>
Set forth below are tables containing certain additional characteristics of
the contracts as of the Cut-off Date. Entries in the tables may not add to 100%
due to rounding.
Geographical Distribution of Manufactured Homes as of Origination
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Number of Contracts Principal Balance Principal Balance
State as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
---------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Alabama....................................... 297 $ 12,643,526.68 4.86%
Arizona....................................... 61 3,495,565.93 1.34
Arkansas...................................... 124 5,235,406.93 2.01
California.................................... 20 1,168,079.02 0.45
Colorado...................................... 19 1,095,947.10 0.42
Delaware...................................... 2 161,302.13 0.06
Florida....................................... 384 21,908,261.43 8.43
Georgia....................................... 270 13,661,525.20 5.25
Idaho......................................... 43 2,521,108.07 0.97
Illinois...................................... 94 4,410,519.86 1.70
Indiana....................................... 94 5,220,355.24 2.01
Iowa.......................................... 119 4,803,409.18 1.85
Kansas........................................ 63 2,821,076.79 1.09
Kentucky...................................... 260 12,747,127.16 4.90
Louisiana..................................... 115 4,528,894.94 1.74
Maine......................................... 7 537,572.05 0.21
Maryland...................................... 23 1,053,531.86 0.41
Massachusetts................................. 1 33,121.52 0.01
Michigan...................................... 133 6,393,325.07 2.46
Minnesota..................................... 126 5,066,463.02 1.95
Mississippi................................... 336 14,758,342.63 5.68
Missouri...................................... 324 14,201,064.71 5.46
Montana....................................... 28 1,545,009.62 0.59
Nebraska...................................... 25 1,200,646.89 0.46
Nevada........................................ 44 2,833,577.44 1.09
New Hampshire................................. 8 603,719.88 0.23
New Mexico.................................... 54 2,573,561.00 0.99
New York...................................... 16 1,054,903.95 0.41
North Carolina................................ 414 22,895,364.45 8.81
North Dakota.................................. 25 1,137,855.78 0.44
Ohio.......................................... 105 5,469,278.33 2.10
Oklahoma...................................... 111 4,766,211.59 1.83
Oregon........................................ 119 8,207,647.03 3.16
Pennsylvania.................................. 9 705,374.66 0.27
South Carolina................................ 59 2,473,780.43 0.95
South Dakota.................................. 105 5,091,598.91 1.96
Tennessee..................................... 201 10,411,564.88 4.00
Texas......................................... 524 23,874,769.79 9.18
Utah.......................................... 31 1,932,321.33 0.74
Vermont....................................... 12 1,039,300.33 0.40
Virginia...................................... 102 5,834,906.70 2.24
Washington.................................... 93 6,898,464.33 2.65
West Virginia................................. 149 6,507,691.85 2.50
Wisconsin..................................... 60 3,501,815.70 1.35
Wyoming....................................... 17 974,706.29 0.37
---------------------- ---------------------- ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
S-18
<PAGE>
Distribution of Original Principal Balances of Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Number of Contracts Principal Balance Principal Balance
Original Principal Balance as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
---------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
$0-5,000...................................... 1 $ 4,449.19 *
5,001-7,500................................... 5 31,249.39 0.01%
7,501-10,000.................................. 29 255,927.78 0.10
10,001-12,500................................. 47 539,647.06 0.21
12,501-15,000................................. 63 871,434.60 0.34
15,001-17,500................................. 67 1,073,081.20 0.41
17,501-20,000................................. 102 1,892,405.26 0.73
20,001-22,500................................. 129 2,732,601.44 1.05
22,501-25,000................................. 161 3,820,014.32 1.47
25,001-27,500................................. 212 5,542,940.86 2.13
27,501-30,000................................. 221 6,312,502.12 2.43
30,001-32,500................................. 247 7,705,574.16 2.96
32,501-35,000................................. 245 8,256,994.33 3.18
35,001-40,000................................. 504 18,796,891.30 7.23
40,001-45,000................................. 497 21,093,979.28 8.11
45,001-50,000................................. 454 21,473,659.30 8.26
50,001-55,000................................. 422 22,137,604.36 8.51
55,001-60,000................................. 385 22,039,016.91 8.48
60,001-65,000................................. 321 19,999,859.23 7.69
65,001-70,000................................. 220 14,800,143.65 5.69
70,001-75,000................................. 181 13,126,783.12 5.05
75,001-80,000................................. 132 10,211,785.73 3.93
80,001-85,000................................. 132 10,855,756.58 4.18
Over $85,000.................................. 449 46,425,296.51 17.86
---------------------- ---------------------- ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
. Use of a "*" in the table above denotes a value that is less than 0.01%.
. The greatest original Scheduled Principal Balance for a contract is
$259,662.01. The Scheduled Principal Balance of this contract represents
0.10% of the aggregate Scheduled Principal Balance of the contracts as of the
Cut-off Date.
S-19
<PAGE>
Distribution of Original Loan-to-Value Ratios of Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Number of Contracts Principal Balance Principal Balance
Loan-to-Value Ration as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
--------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Less than or equal to 50%..................... 51 $ 1,243,283.00 0.48%
51-60......................................... 62 2,368,767.07 0.91
61-70......................................... 97 4,611,587.36 1.77
71-80......................................... 623 29,365,266.10 11.29
81-85......................................... 517 27,462,988.77 10.56
86-90......................................... 2,299 114,978,778.39 44.22
91-95......................................... 1,440 74,376,837.13 28.61
96-100........................................ 137 5,592,089.86 2.15
---------------------- ------------------ ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
S-20
<PAGE>
Distribution of Contract Rates of Contracts as of the Cut-off Date
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Contract Rate Number of Contracts Principal Balance Principal Balance
as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
---------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
5.50-5.74%................................... 1 $ 85,729.08 0.03%
5.75-5.99.................................... 3 270,623.65 0.10
6.00-6.24.................................... 10 960,302.75 0.37
6.25-6.49.................................... 46 3,669,857.22 1.41
6.50-6.74.................................... 39 3,167,213.69 1.22
6.75-6.99.................................... 82 6,230,542.47 2.40
7.00-7.24.................................... 81 6,953,826.16 2.67
7.25-7.49.................................... 168 11,623,422.17 4.47
7.50-7.74.................................... 113 8,715,110.84 3.35
7.75-7.99.................................... 231 15,118,956.47 5.81
8.00-8.24.................................... 143 10,316,221.74 3.97
8.25-8.49.................................... 260 14,847,818.62 5.71
8.50-8.74.................................... 150 9,686,227.57 3.73
8.75-8.99.................................... 228 13,898,787.30 5.35
9.00-9.24.................................... 231 13,960,730.37 5.37
9.25-9.49.................................... 195 10,670,137.61 4.10
9.50-9.74.................................... 271 14,591,127.13 5.61
9.75-9.99.................................... 168 8,684,293.69 3.34
10.00-10.24................................... 272 14,073,865.73 5.41
10.25-10.49................................... 142 6,551,899.87 2.52
10.50-10.74................................... 182 8,424,351.40 3.24
10.75-10.99................................... 160 7,294,083.06 2.81
11.00-11.24................................... 247 10,780,796.11 4.15
11.25-11.49................................... 138 5,469,348.03 2.10
11.50-11.74................................... 232 10,140,355.90 3.90
11.75-11.99................................... 103 3,721,612.13 1.43
12.00-12.24................................... 135 5,233,680.78 2.01
12.25-12.49................................... 121 4,549,623.80 1.75
12.50-12.74................................... 81 2,779,041.83 1.07
12.75-12.99................................... 129 4,507,679.11 1.73
13.00-13.24................................... 90 2,744,795.28 1.06
13.25-13.49................................... 123 3,543,408.43 1.36
13.50-13.74................................... 77 2,362,088.63 0.91
13.75-13.99................................... 98 2,878,742.07 1.11
14.00-14.24................................... 83 1,992,974.45 0.77
14.25-14.49................................... 69 2,024,154.46 0.78
14.50-14.74................................... 31 921,400.29 0.35
14.75-14.99................................... 57 1,436,621.41 0.55
15.00-15.24................................... 41 1,011,822.70 0.39
15.25-15.49................................... 38 822,296.97 0.32
15.50-15.74................................... 43 1,118,204.97 0.43
15.75-15.99................................... 10 234,836.51 0.09
16.00-16.24................................... 28 539,228.53 0.21
Greater than 16.24%........................... 76 1,391,756.70 0.54
---------------------- ---------------------- ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
S-21
<PAGE>
Distribution of Remaining Months to Maturity of Contracts as of Cut-off Date
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Months Remaining Number of Contracts Principal Balance Principal Balance
as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
------------------------------------------- ------------------------ ---------------------- ----------------------
<S> <C> <C> <C>
1-30....................................... 1 $ 8,733.92 *
31-60...................................... 18 218,813.22 0.08%
61-90...................................... 27 477,883.77 0.18
91-120..................................... 129 2,391,741.10 0.92
121-150.................................... 40 899,550.49 0.35
151-180.................................... 583 16,883,385.84 6.49
181-210.................................... 3 89,980.40 0.03
211-240.................................... 1,784 70,598,226.54 27.15
241-270.................................... 2 75,866.07 0.03
271-300.................................... 94 5,173,919.99 1.99
301-360.................................... 2,545 163,181,496.34 62.76
------------------------ ---------------------- ----------------------
Total................................. 5,226 $259,999,597.68 100.00%
</TABLE>
. Use of a "*" in the table above denotes a value that is less than 0.01%.
S-22
<PAGE>
Distribution of Maximum Cap of Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Number of Contracts Principal Balance Principal Balance
Maximum Cap as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
--------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
10.01-10.50%.................................. 1 $ 85,729.08 0.03%
10.51-11.00................................... 13 1,230,926.40 0.47
11.01-11.50................................... 85 6,837,070.91 2.63
11.51-12.00................................... 163 13,184,368.63 5.07
12.01-12.50................................... 281 20,338,533.01 7.82
12.51-13.00................................... 374 25,435,178.21 9.78
13.01-13.50................................... 410 24,534,046.19 9.44
13.51-14.00................................... 459 27,859,517.67 10.72
14.01-14.50................................... 466 25,261,264.74 9.72
14.51-15.00................................... 440 22,758,159.42 8.75
15.01-15.50................................... 324 14,976,251.27 5.76
15.51-16.00................................... 407 18,074,879.17 6.95
16.01-16.50................................... 370 15,609,703.93 6.00
16.51-17.00................................... 238 8,955,292.91 3.44
17.01-17.50................................... 202 7,328,665.63 2.82
17.51-18.00................................... 219 7,252,474.39 2.79
18.01-18.50................................... 200 5,905,497.06 2.27
18.51-19.00................................... 181 4,871,716.52 1.87
19.01-19.50................................... 100 2,945,554.75 1.13
19.51-20.00................................... 98 2,448,444.11 0.94
20.01-20.50................................... 81 1,940,501.94 0.75
20.51-21.00................................... 38 774,065.04 0.30
21.01-21.50................................... 42 796,304.47 0.31
21.51-22.00................................... 15 275,165.27 0.11
22.01-22.50................................... 11 183,586.40 0.07
22.51-23.00................................... 8 136,700.56 0.05
---------------------- ---------------------- ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
S-23
<PAGE>
Distribution of Gross Margins of Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Number of Contracts Principal Balance Principal Balance
Gross Margin as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
--------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
0.50-1.50%.................................... 83 $ 7,041,551.31 2.71%
1.51-2.00..................................... 175 13,987,563.60 5.38
2.01-2.50..................................... 225 16,179,891.12 6.22
2.51-3.00..................................... 390 26,796,959.03 10.31
3.01-3.50..................................... 417 25,618,531.03 9.85
3.51-4.00..................................... 435 26,041,050.26 10.02
4.01-4.50..................................... 477 26,158,595.11 10.06
4.51-5.00..................................... 436 22,948,881.34 8.83
5.01-5.50..................................... 356 16,776,552.07 6.45
5.51-6.00..................................... 408 18,154,915.08 6.98
6.01-6.50..................................... 366 15,367,890.17 5.91
6.51-7.00..................................... 231 8,853,151.74 3.41
7.01-7.50..................................... 213 7,804,808.45 3.00
7.51-8.00..................................... 238 7,880,536.20 3.03
Greater than 8.00%............................ 776 20,388,721.17 7.84
--------- --------------- ------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
Distribution of Next Adjustment Date of Contracts as of Cut-off Date
<TABLE>
<CAPTION>
% of Contracts
Aggregate Scheduled by Scheduled
Month of Next Adjustment Date Number of Contracts Principal Balance Principal Balance
as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date as of the Cut-off Date
---------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
December 2000................................. 1 $ 79,642.62 0.03%
January 2001.................................. 4 278,055.05 0.11
February 2001................................. 3 191,240.18 0.07
March 2001.................................... 58 3,011,182.46 1.16
April 2001.................................... 77 4,320,753.29 1.66
May 2001...................................... 123 8,538,449.44 3.28
June 2001..................................... 198 16,331,926.16 6.28
July 2001..................................... 238 19,091,121.02 7.34
August 2001................................... 757 40,986,503.75 15.76
September 2001................................ 1,613 73,782,974.74 28.38
October 2001.................................. 1,422 62,384,918.77 23.99
November 2001................................. 715 30,143,458.14 11.59
August 2002................................... 2 43,756.58 0.02
September 2002................................ 5 238,171.00 0.09
October 2002.................................. 7 368,093.61 0.14
November 2002................................. 2 157,392.84 0.06
May 2003...................................... 1 51,958.03 0.02
---------------------- ---------------------- ----------------------
Total.................................... 5,226 $259,999,597.68 100.00%
</TABLE>
S-24
<PAGE>
The Seller and Servicer
The following information supplements the information in the prospectus under
the heading "The Seller and Servicer."
As of September 30, 2000, GreenPoint Credit had total assets of approximately
$1,553.8 million, total liabilities of approximately $1,026.9 million and total
stockholders' equity of approximately $526.9 million. The seller's principal
place of business is located at 10089 Willow Creek Road, San Diego, California
92131.
In the ordinary course of business, GreenPoint Financial Corp. and its
subsidiaries (including GreenPoint Credit) are routinely defendants in or
parties to a number of pending and threatened legal actions and proceedings, in
which monetary damages and other forms of relief are sought. Certain of such
actions involve alleged violations of consumer protection laws, including claims
relating to GreenPoint Credit's loan collection efforts, and other federal and
state banking laws. Certain of such actions involve claims for punitive damages.
Management of GreenPoint Financial Corp. has established what it believes to be
sufficient allocated reserves to cover any anticipated losses stemming from the
settlement or payment of any final judgments rendered in any such cases.
Accordingly, management of GreenPoint Financial Corp. believes that these
actions and proceedings and the losses, if any, resulting from the financial
outcome thereof, will not be material in the aggregate to GreenPoint Credit's
financial position or results of operations.
The volume of manufactured housing contracts originated by GreenPoint Credit,
acquired by GreenPoint Credit from Bank of America, FSB (See "The Seller and
Servicer" in the prospectus), or purchased from dealers on an individual basis
by GreenPoint Credit, for the periods indicated below and certain other
information at the end of the related periods are as follows:
Contracts Originated or Purchased on an Individual Basis
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter Ended Year to Date Year to Date
December 31, 1998 December 31, 1999 September 30, 2000
----------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Principal Balance of Contracts
Purchased.............................. $1,451,368 $3,045,734 $1,896,922
Number of Contracts Purchased.......... 38,010 75,622 44,266
Average Contract Size.................. $ 38.18 $ 40.27 $ 42.85
Number of Regional Offices............. 45 45 33
</TABLE>
The table above includes only contracts originated by GreenPoint Credit or
purchased from dealers and does not include any portfolios acquired in bulk from
third parties other than from Bank of America, FSB. Regional offices include
offices in the United States originating or purchasing manufactured housing
contracts as of the end of the time period.
S-25
<PAGE>
The following table shows the size of the portfolio of manufactured housing
contracts serviced, including contracts already in repossession, by GreenPoint
Credit, through the manufactured housing regional office system, as of the dates
indicated:
Size of Serviced Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of As of As of
December 31, 1998 December 31, 1999 September 30, 2000
----------------------- --------------------- -----------------------
<S> <C> <C> <C>
Unpaid Principal Balance of Contracts
Being Serviced......................... $11,504,320 $13,054,239 $13,744,114
Average Contract Unpaid Principal
Balance................................ $ 27.7 $ 29.9 $ 31.1
Number of Contracts Being Serviced..... 415,373 437,093 441,964
</TABLE>
Delinquency and Loan Loss/Repossession Experience
The following table sets forth the delinquency experience of manufactured
housing contracts serviced by GreenPoint Credit since October 1998, excluding
contracts already in repossession and approximately $600,000,000 of contracts
owned by Nations Credit Manufactured Housing Corporation and serviced by
GreenPoint Credit since August 1999, as of the dates indicated:
Delinquency Experience
<TABLE>
<CAPTION>
As of As of As of
December 31, 1998 December 31, 1999 September 30, 2000
------------------------ ---------------------- ------------------------
<S> <C> <C> <C>
Number of Contracts Outstanding........ 411,852 433,221 436,602
Number of Contracts Delinquent:
30-59 days........................... 6,397 8,244 9,565
60-89 days........................... 1,753 2,055 2,455
90 days or more...................... 2,372 2,641 3,300
------- ------- -------
Total Contracts Delinquent............. 10,522 12,940 15,320
======= ======= =======
Delinquencies as a Percentage of
Contracts Outstanding.................. 2.55% 2.99% 3.51%
</TABLE>
The "Number of Contracts Delinquent" in the table above is based on the number
of days payments are contractually past due and assumes 30-day months.
Consequently, a payment due on the first day of a month is not 30 days
delinquent until the first day of the following month. "Delinquencies as a
Percentage of Contracts Outstanding" in the table above is calculated by number
of contracts.
Since GreenPoint Credit has only been servicing the contracts for a limited
amount of time, the delinquency experience reflected in the table above may not
necessarily be indicative of the actual performance of the contracts over time.
The following table sets forth the loan loss/repossession experience of
manufactured housing contracts serviced by GreenPoint Credit, including
contracts already in repossession, but excluding approximately $600,000,000 of
contracts owned by Nations Credit Manufactured Housing Corporation and serviced
by GreenPoint Credit since August 1999, for the periods indicated:
S-26
<PAGE>
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year to Date Year to Date
December 31, 1999 September 30, 2000
-------------------------- ----------------------
<S> <C> <C>
Number of Contracts Being Serviced........................... 437,093 441,964
Aggregate Principal Balance of Contracts Being Serviced...... $13,054,239 $13,744,114
Average Principal Recovery Upon Liquidation.................. 46.15% 44.16%
Contract Liquidations........................................ 3.88% 2.88%
Net Losses:
Dollars................................................. $ 281,757 $ 227,962
Percentage.............................................. 2.16% 1.66%
Contracts in Repossession.................................... 3,872 5,362
</TABLE>
The "Average Principal Recovery Upon Liquidation" in the table above is
calculated as a percentage of the outstanding principal balance of contracts
that were liquidated during the applicable period, based on the gross amounts
recovered upon liquidation, proceeds applied to unpaid interest accrued through
the date of repossession and after the payment of repossession and other
liquidation expenses. Deficiency recoveries received subsequent to the
liquidation date are also included net of collection expenses paid to third
parties. "Contract Liquidations" in the table above are calculated by the
number of contracts liquidated during the period as a percentage of the total
number of contracts being serviced as of period end. The calculation of the
dollar amount of "Net Losses" in the table above includes unpaid interest
accrued through the date of repossession and all repossession and other
liquidation expenses and is reduced by deficiency recoveries received subsequent
to the date of liquidation net of collection expenses paid to third parties.
The percentage of "Net Losses" in the table above is calculated as a percentage
of the total number of contracts being serviced as of period end. The "Number
of Contracts Being Serviced," the "Aggregate Principal Balance of Contracts
Being Serviced" and the total number of "Contracts in Repossession" in the table
above are based upon the total number of contracts being serviced by GreenPoint
Credit as of period end.
GreenPoint Credit Management's Discussion and Analysis of Delinquency,
Repossession and Loan Loss Experience
Management of GreenPoint Credit has not observed any material economic
development in the general business environment of the country or in local areas
where GreenPoint Credit originates its manufactured housing contracts which has
unfavorably affected portfolio performance in relation to delinquencies,
repossessions and loan losses. However, the delinquency, loan loss and
repossession experience of manufactured housing contracts historically has been
adversely affected by a downturn in regional or local economic conditions.
These regional or local economic conditions are often volatile, and no
predictions can be made regarding future economic loss upon repossession.
Information regarding the geographic location, at origination, of the
manufactured homes securing the contracts in the contract pool is set forth
under "The Contract Pool" in this prospectus supplement.
S-27
<PAGE>
GreenPoint Bank
General
GreenPoint Bank represents the consumer banking line of GreenPoint Financial
Corp.'s principal operating segments and has approximately $11.3 billion in
deposits in 74 branches serving more than 400,000 households in the greater New
York area. GreenPoint Bank is a New York state-chartered savings bank with its
principal office in New York, New York and is subject to examination and primary
regulation by the State of New York Banking Department.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as FIRREA. Pursuant to the provisions of FIRREA,
an FDIC-insured financial institution sharing common ownership with a failed
institution can be required to indemnify the FDIC for its losses resulting from
the insolvency of the failed institution, even if such indemnification causes
the affiliated institution also to become insolvent. As a result, GreenPoint
Bank may, under certain circumstances, be obligated for the liabilities of the
banking subsidiaries of GreenPoint Financial Corp.
NO BANKING OR OTHER AFFILIATE CONTROLLED BY GREENPOINT FINANCIAL CORP., EXCEPT
GREENPOINT BANK, IS OBLIGATED TO MAKE PAYMENTS UNDER THE LETTER OF CREDIT.
Financial Information
The table below summarizes selected consolidated information of GreenPoint
Bank determined in accordance with generally accepted accounting principles:
Summary Financials
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of or for the
Nine Months Ended
September 30, 2000
(Unaudited)
------------------
<S> <C>
Total Assets..................................................................... $15,283,648
Total Liabilities................................................................ 13,016,512
Stockholder's Equity............................................................. 2,267,136
Net Interest Income.............................................................. 444,985
Provision for Loan Losses........................................................ 24,519
Non-interest Income.............................................................. 293,500
Non-interest Expense............................................................. 380,685
Net Income....................................................................... 198,349
</TABLE>
S-28
<PAGE>
Where You Can Obtain Additional Information About GreenPoint Bank
GreenPoint Bank submits quarterly to the FDIC reports called "Consolidated
Reports of Condition and Income for a Bank With Domestic and Foreign Offices"
(each, a "Call Report", and collectively, the "Call Reports"). The publicly
available portions of the Call Reports with respect to GreenPoint Bank are on
file with the FDIC, and copies of such portions of the Call Reports may be
obtained from the FDIC, Disclosure Group, Room F518, 550 17th Street, N.W.,
Washington, D.C. 20429, at prescribed rates.
The information contained in "GreenPoint Bank--General," "--Financial
Information," and "--Where You Can Obtain Additional Information About
GreenPoint Bank" in this prospectus supplement relates to and has been obtained
from GreenPoint Bank and is furnished solely to provide limited introductory
information regarding GreenPoint Bank and does not purport to be comprehensive.
Information regarding GreenPoint Bank is qualified in its entirety by the
detailed information appearing in the documents and financial statements
referenced above.
MBIA Insurance Corporation
MBIA
MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of
MBIA Inc., a New York Stock Exchange listed company (the "Company"). The
Company is not obligated to pay the debts of or claims against MBIA. MBIA is
domiciled in the State of New York and licensed to do business in and subject to
regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. MBIA has two
European branches, one in the Republic of France and the other in the Kingdom of
Spain. New York has laws prescribing minimum capital requirements, limiting
classes and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes
in control and transactions among affiliates. Additionally, MBIA is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of
this prospectus supplement or any information or disclosure contained in this
prospectus supplement, or omitted from this prospectus supplement, other than
with respect to the accuracy of the information regarding MBIA set forth under
the headings "MBIA Insurance Corporation" and "Experts." Additionally, MBIA
makes no representation regarding the offered certificates or the advisability
of investing in the offered certificates.
The certificate insurance policy is not covered by the Property/Casualty
Insurance Security Fund specified in Article 76 of the New York Insurance Law.
MBIA Financial Information
The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Company and its subsidiaries as of December 31, 1999 and December 31, 1998
and for each of the three years in the period ended December 31, 1999, prepared
in accordance with generally accepted accounting principles, included in the
Annual Report on Form 10-K of the Company for the year ended December 31, 1999
and the consolidated financial statements of MBIA and its subsidiaries as of
September 30, 2000 and for the nine month periods ended September 30, 2000 and
September 30, 1999 included in the Quarterly Report on Form 10-Q of the Company
for the period ended September 30, 2000 are hereby incorporated by reference
into this prospectus
S-29
<PAGE>
supplement and shall be deemed to be a part hereof. Any statement contained in a
document incorporated by reference herein shall be modified or superseded for
purposes of this prospectus supplement to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement.
All financial statements of MBIA and its subsidiaries included in documents
filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the
offered certificates shall be deemed to be incorporated by reference into this
prospectus supplement and to be a part hereof from the respective dates of
filing such documents.
The tables below present selected financial information of MBIA determined in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") and generally accepted accounting
principles ("GAAP"):
<TABLE>
<CAPTION>
SAP
----------------------------------------
(In Millions)
December 31, 1999 September 30, 2000
----------------------------------------
(Audited) (Unaudited)
<S> <C> <C>
Admitted Assets................................................... $7,045 $7,525
Liabilities....................................................... 4,632 5,101
Capital and Surplus............................................... 2,413 2,424
</TABLE>
<TABLE>
<CAPTION>
GAAP
----------------------------------------
(In Millions)
December 31, 1999 September 30, 2000
----------------------------------------
(Audited) (Unaudited)
<S> <C> <C>
Assets............................................................ $7,446 $8,124
Liabilities....................................................... 3,218 3,531
Shareholder's Equity.............................................. 4,228 4,593
</TABLE>
Where You Can Obtain Additional Information About MBIA
Copies of the financial statements of MBIA incorporated by reference herein
and copies of MBIA's 1999 year-end audited financial statements prepared in
accordance with statutory accounting practices are available, without charge,
from MBIA. The address of MBIA is 113 King Street, Armonk, New York 10504. The
telephone number of MBIA is (914) 273-4545.
Financial Strength Ratings of MBIA
Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. rates the financial strength of MBIA "AAA."
S-30
<PAGE>
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates the
financial strength of MBIA "AAA."
Each rating of MBIA should be evaluated independently. The ratings reflect
the respective rating agency's current assessment of the creditworthiness of
MBIA and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
securities, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the securities.
MBIA does not guaranty the market price of the securities nor does it guaranty
that the ratings on the securities will not be revised or withdrawn.
Prepayment and Yield Considerations
The contracts have maturities at origination ranging from 36 to 360 months,
but may be prepaid in full or in part at any time. The prepayment experience of
the contracts, including prepayments and liquidations due to defaulted
contracts, casualties and condemnations or due to the exercise of an optional
termination or termination auction (see "Description of the Certificates--
Optional Termination and Termination Auction" in this prospectus supplement),
will affect the average life of the offered certificates. The weighted average
life of, and, if purchased at other than par, the yield to maturity on, the
certificates will relate to the rate of payment of principal on the contracts,
including, for this purpose, prepayments, liquidations due to defaulted
contracts, casualties and condemnations. Based on GreenPoint Credit's
experience with the portfolio of conventional manufactured housing contracts
serviced by it, GreenPoint Credit anticipates that a number of contracts will be
prepaid in full prior to their maturity. A number of factors, including
homeowner mobility, general and regional economic conditions and prevailing
interest rates may influence prepayments. In addition, repurchases of contracts
on account of certain breaches of representations and warranties as described
below under "Description of the Certificates--Conveyance of Contracts" will have
the effect of prepayment of the repurchased contracts and therefore will affect
the life of the offered certificates. Most of the contracts contain provisions
that prohibit the owner from selling the manufactured home without the prior
consent of the holder of the related contract. These provisions are similar to
"due-on-sale" clauses and may not be enforceable in some states. See "Certain
Legal Aspects of the Contracts--Transfers of Manufactured Homes; Enforceability
of Restrictions on Transfer" in the prospectus. The servicer's policy is to
permit most sales of manufactured homes where the proposed buyer meets the
servicer's then current underwriting standards and enters into an assumption
agreement. See "--Weighted Average Life of the Certificates" below and
"Prepayment and Yield Considerations" in the prospectus.
Adjustable rate obligations may be subject to a greater rate of principal
prepayments in a declining interest rate environment. For example, if
prevailing interest rates fall significantly, adjustable rate contracts could be
subject to higher prepayment rates than if prevailing interest rates remain
constant because the availability of fixed-rate contracts at competitive
interest rates may encourage obligors to refinance their adjustable rate
contract to "lock in" a lower fixed interest rate. However, no assurance can be
given as to the level of prepayments that the contracts will experience.
Although all of the contracts are variable rate, the obligor on each of the
contracts can convert from a variable rate to a fixed rate as long as the
obligor is current in payment on the obligor's contract. If an obligor converts
a contract from a variable rate to a fixed rate, the holder of the Class R
Certificates is obligated to purchase the converted contract. The fixed rate
may be lower than the pass-through rate on the Class A-1
S-31
<PAGE>
Certificates or the pass-through rate on the Class A-2 Certificates, as
applicable. Since the pass-through rates on the offered certificates are capped
by the Net Funds Cap, any conversion to a fixed rate of a contract that has not
been purchased by the holder of the Class R Certificates may make it more likely
that the pass-through rates on the Class A-1 Certificates or Class A-2
Certificates will be lower than the pass-through rate based upon LIBOR plus a
spread or produced by the Auction Procedures (see Annex II and Annex III to this
prospectus supplement), as applicable.
Approximately 99.97%, by principal balance as of the Cut-off Date, of the
contracts are variable rate contracts based on a Twelve-Month LIBOR index.
While GreenPoint Credit does not anticipate that variable rate contracts based
on a Twelve-Month LIBOR index will have materially different delinquency or
default rates from other types of variable rate contracts, GreenPoint Credit has
a limited operating history with variable rate contracts based on a Twelve-Month
LIBOR index and therefore no assurance can be given that variable rate Contracts
based on a Twelve-Month LIBOR index will not have higher prepayments,
delinquencies or losses than other types of variable rate contracts.
As described under "Description of the Certificates" in this prospectus
supplement, to the extent that, on any Distribution Date, the Available
Distribution Amount is not sufficient to permit a full distribution of the
Formula Principal Distribution Amount or the portion thereof due on the related
Distribution Date to the class of certificates entitled to the distribution and
there is a Credit Enhancement Default, the effect will be to delay the
amortization of the related class of certificates. If a purchaser of a class of
certificates purchases them at a discount and calculates its anticipated yield
to maturity based on an assumed rate of payment of principal on the certificates
that is faster than the rate actually realized, the purchaser's actual yield to
maturity will be lower than the yield so calculated by the purchaser.
The servicer has the option to purchase, or in the alternative, the servicer
may direct the trustee to conduct a termination auction in order to sell, the
contracts and any property constituting the Trust Fund if on any Distribution
Date the Pool Scheduled Principal Balance is less than 10% of the Cut-off Date
Pool Principal Balance. See "Description of the Certificates--Optional
Termination and Termination Auction" in this prospectus supplement. The
exercise of the option to purchase, as applicable, would effect the early
retirement of the then outstanding certificates.
The rate of distributions of principal of the offered certificates and the
yield to maturity of the offered certificates also will be directly related to
the rate of payment of principal, including prepayments, of the contracts. The
rate of principal distributions on the offered certificates will be affected by
the amortization schedules of the contracts and the rate of principal payments
on the contracts, including prepayments due to liquidations upon default. The
contracts may be prepaid by the obligors at any time without payment of any
prepayment fee or penalty.
On any Distribution Date on or after the Distribution Date, if any, on which
the aggregate Certificate Balances of the offered certificates is greater than
the aggregate Scheduled Principal Balances of the contracts, if the Available
Distribution Amount is not sufficient to permit a full distribution of the
Formula Principal Distribution Amount to the holders of the offered
certificates, in the event a Credit Enhancement Default has occurred and is
continuing, the holders of the offered certificates will absorb:
. all losses on each liquidated contract in the amount by which its
liquidation proceeds, net of liquidation expenses and applicable Monthly
Advances, are less than its unpaid principal balance plus accrued and
unpaid interest thereon at the weighted average Pass-Through Rate plus
the percentage rate used to calculate the monthly servicing fee; and
. other shortfalls in the Available Distribution Amount;
S-32
<PAGE>
and will incur a loss on their investments. See "Description of the
Certificates--Distributions" and "--Priority of Distributions" in this
prospectus supplement.
In the event that there were a sufficiently large number of delinquencies on
the contracts in any Collection Period that were not covered by Monthly Advances
as described in this prospectus supplement, the amounts paid to holders of the
offered certificates could be less than the amount of principal and interest
that would otherwise be payable on the offered certificates with respect to the
related Collection Period if a Credit Enhancement Default has occurred and is
continuing. Even if delinquent payments on the contracts were eventually
recovered upon liquidation, since the amounts received would not include
interest on delinquent interest payments, the effective yield on the contracts
would be reduced, and under certain circumstances it is possible that sufficient
amounts might not be available for the ultimate payment of all principal of the
offered certificates plus accrued interest thereon at the related pass-through
rate, thus also reducing the effective yield on the offered certificates.
While partial prepayments of the principal on the contracts are applied on
each Due Date, obligors are not required to pay interest on the contracts after
the date of a full prepayment of principal. As a result, full prepayments in
advance of the related Due Dates for the related contracts in any Collection
Period will reduce the amount of interest received from obligors during the
related Collection Period to less than one month's interest. On the other hand,
when a contract is prepaid in full during any period, but after the Due Date for
the related contract in the related Collection Period, the effect will be to
increase the amount of interest received from the related obligor during the
related Collection Period to more than one month's interest. If a sufficient
number of contracts are prepaid in full in a given Collection Period in advance
of their respective Due Dates, interest payable on all of the contracts during
that Collection Period may be less than the interest payable on the related
classes of certificates with respect to the related Collection Period. As a
result, if a Credit Enhancement Default has occurred and is continuing the Trust
Fund may not receive sufficient monies to pay the interest on the related
certificates in the amounts set forth in this prospectus supplement under
"Description of the Certificates--Distributions" and to make a full distribution
to the related holders of the offered certificates of the Formula Principal
Distribution Amounts allocable to them. Although no assurance can be given in
this matter, GreenPoint Credit does not anticipate that the net shortfall of
interest received because of prepayments in full in any Collection Period would
be great enough, in the absence of delinquencies and liquidation losses, to
reduce the Available Distribution Amount for a Distribution Date below the
amount required to be distributed to the related holders of the offered
certificates on that Distribution Date in the absence of prepayment interest
shortfalls.
Weighted Average Life of the Certificates
The following information is given solely to illustrate the effect of
prepayments of the contracts on the weighted average life of the certificates
under the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced by the contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of the security will be
repaid to the investor. The weighted average life of the certificates will be
affected by the rate at which principal on the contracts is paid. Principal
payments on contracts may be in the form of scheduled amortization or
prepayments. For this purpose, the term "prepayment" includes repayments and
liquidations due to default or other dispositions of contracts and repurchases
of contracts by the seller due to breaches of representations and warranties
contained in the Agreement. Prepayments on contracts may be measured by a
prepayment standard or model. The Prepayment Model used in this prospectus
supplement is based on an assumed rate of prepayment each month of the then
unpaid principal balance of a pool of new contracts. 100% of the Prepayment
Model assumes prepayment rates of 3.7% per annum of the
S-33
<PAGE>
then unpaid principal balance of the contracts in the first month of the life of
the contracts and an additional 0.1% per annum in each month thereafter until
the 24th month. Beginning in the 24th month and in each month thereafter during
the life of the contracts, 100% of the Prepayment Model assumes a constant
prepayment rate of 6.00% per annum.
As used in the following tables "0% of the Prepayment Model" assumes no
prepayments on the contracts; "125% of the Prepayment Model" assumes the
contracts will prepay at rates equal to 125% of the Prepayment Model assumed
prepayment rates; "175% of the Prepayment Model" assumes the contracts will
prepay at rates equal to 175% of the Prepayment Model assumed prepayment rates;
"225% of the Prepayment Model" assumes the contracts will prepay at rates equal
to 225% of the Prepayment Model assumed prepayment rates; "275% of the
Prepayment Model" assumes the contracts will prepay at rates equal to 275% of
the Prepayment Model assumed prepayment rates; and "325% of the Prepayment
Model" assumes the contracts will prepay at rates equal to 325% of the
Prepayment Model assumed prepayment rates.
There is no assurance, however, that prepayments of the contracts will
conform to any level of the Prepayment Model, and no representation is made that
the contracts will prepay at the prepayment rates shown or any other prepayment
rate. The rate of principal payments on pools of manufactured housing contracts
is influenced by a variety of economic, geographic, social and other factors,
including the level of interest rates and the rate at which manufactured
homeowners sell their manufactured homes or default on their contracts. Other
factors affecting prepayment of contracts include changes in obligors' housing
needs, job transfers, unemployment and obligors' net equity in the manufactured
homes. Because the outstanding principal balances of the contracts are, in
general, much smaller than mortgage loan balances and the original term to
maturity of each contract is generally shorter, the reduction or increase in the
size of the monthly payments on contracts of the same maturity and principal
balance arising from a change in the interest rate thereon is generally much
smaller. Consequently, changes in prevailing interest rates may not have a
similar effect, or may have a similar effect, but to a smaller degree, on the
prepayment rates on manufactured housing contracts.
Assumptions
The percentages and weighted average lives in the following tables relating to
the offered certificates were determined using the following assumptions (the
"Structuring Assumptions"):
. scheduled interest and principal payments on the contracts are received in
a timely manner and prepayments are made at the indicated percentages of
the Prepayment Model with 30 days interest thereon set forth in the tables;
. the servicer does not exercise its right of optional termination as
described under "Optional Termination and Termination Auction" in this
prospectus supplement;
. the contracts will, as of the Cut-off Date, have the characteristics
described in the table below titled "Assumed Contract Characteristics";
. 1yr CMT = 5.57%, Twelve-Month LIBOR = 6.26%;
. the Initial Certificate Balance and the Pass-Through Rate of each class of
offered certificates, is as set forth or described under "Summary
Information" in this prospectus supplement;
. no interest shortfalls will arise in connection with prepayment in full of
the contracts;
. there will be no delinquencies or losses on the contracts;
S-34
<PAGE>
. the Distribution Date of the offered certificates occurs on the 17th of
each month commencing on January 17, 2001 whether or not that day is a
business day; and
. the offered certificates are purchased on December 21, 2000. No
representation is made that the contracts will experience delinquencies or
losses at the respective rates assumed above or at any other rates.
Assumed Contract Characteristics
<TABLE>
<CAPTION>
Original Remaining Months to
Scheduled Contract Term to Term to Gross Next Rate Maximum Reset
Pool Principal Balance Rate Maturity Maturity Margin Change Rate Cap Index Frequency
----- ----------------- ---- -------- -------- ------ ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.... $ 77,200.78 8.500% 360 353 3.750% 4 13.500% 1 YR CMT 12
2.... 357,697.67 8.091 351 348 3.776 1 13.091 1 YR LIBOR 12
3.... 191,240.18 9.641 338 333 5.047 2 14.641 1 YR LIBOR 12
4.... 3,011,182.46 9.379 343 335 4.830 3 14.379 1 YR LIBOR 12
5.... 4,243,552.51 9.319 334 328 4.423 4 14.319 1 YR LIBOR 12
6.... 8,538,449.44 8.418 335 331 3.241 5 13.418 1 YR LIBOR 12
7.... 16,331,926.16 8.051 345 342 2.976 6 13.051 1 YR LIBOR 12
8.... 19,091,121.02 8.184 343 340 3.208 7 13.184 1 YR LIBOR 12
9.... 40,986,503.75 9.309 317 314 4.383 8 14.309 1 YR LIBOR 12
10... 73,783,377.06 9.882 305 302 4.944 9 14.882 1 YR LIBOR 12
11... 62,384,918.77 10.359 298 297 5.424 10 15.359 1 YR LIBOR 12
12... 30,143,458.14 10.584 292 291 5.749 11 15.584 1 YR LIBOR 12
13... 807,414.03 10.122 276 274 4.680 22 15.122 1 YR LIBOR 12
14... 51,958.03 10.750 360 353 4.500 29 15.750 1 YR LIBOR 12
</TABLE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the characteristics of the
contracts being conveyed to the Trust Fund and the characteristics of the
contracts assumed in preparing the tables. Any such discrepancy may have an
effect upon the percentages of the Class A-1 Initial Certificate Balance and
Class A-2 Initial Certificate Balance outstanding and weighted average lives of
the Class A-1 Certificates and Class A-2 Certificates set forth in the tables.
In addition, since the actual contracts and the Trust Fund have characteristics
which differ from those assumed in preparing the tables set forth below, the
distributions of principal on the Class A-1 Certificates and Class A-2
Certificates may be made earlier or later than as indicated in the tables.
It is not likely that contracts will prepay at any constant percentage of
the Prepayment Model to maturity or that all contracts will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the contracts,
which include recently originated contracts, could produce slower distributions
of principal than as indicated in the tables at the various percentages of the
Prepayment Model specified even if the weighted average remaining term to
maturity of the contracts is the same as the weighted average remaining term to
maturity of the Assumed Contract Characteristics.
S-35
<PAGE>
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed in this prospectus supplement.
Based on the Structuring Assumptions, the following tables indicate the
resulting weighted average lives of the Class A-1 Certificates and Class A-2
Certificates and sets forth the percentage of the Class A-1 Initial Certificate
Balance and Class A-2 Initial Certificate Balance that would be outstanding
after each of the dates shown at the indicated percentages of the Prepayment
Model.
Percent of the Class A-1 Initial Certificate Balance at the
Respective Percentages of the Prepayment Model
<TABLE>
<CAPTION>
Prepayments (% of Prepayment Model)
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Distribution Date 0% 125% 175% 225% 275% 325%
----------------- ----- ---- ---- ---- ---- ----
Initial Percentage.................................... 100 100 100 100 100 100
December 2001......................................... 99 90 86 82 79 75
December 2002......................................... 97 78 70 63 56 49
December 2003......................................... 96 66 55 45 35 26
December 2004......................................... 94 55 42 29 18 8
December 2005......................................... 92 45 30 16 4 0
December 2006......................................... 90 35 19 5 0 0
December 2007......................................... 88 27 9 0 0 0
December 2008......................................... 85 19 1 0 0 0
December 2009......................................... 82 11 0 0 0 0
December 2010......................................... 79 4 0 0 0 0
December 2011......................................... 75 0 0 0 0 0
December 2012......................................... 71 0 0 0 0 0
December 2013......................................... 67 0 0 0 0 0
December 2014......................................... 62 0 0 0 0 0
December 2015......................................... 56 0 0 0 0 0
December 2016......................................... 50 0 0 0 0 0
December 2017......................................... 43 0 0 0 0 0
December 2018......................................... 35 0 0 0 0 0
December 2019......................................... 26 0 0 0 0 0
December 2020......................................... 16 0 0 0 0 0
December 2021......................................... 6 0 0 0 0 0
December 2022......................................... 0 0 0 0 0 0
Weighted Average Life (years)......................... 14.62 4.81 3.63 2.91 2.43 2.09
</TABLE>
S-36
<PAGE>
Percent of the Class A-2 Initial Certificate Balance at the
Respective Percentages of the Prepaymsnt Model
<TABLE>
<CAPTION>
Prepayments (% of Prepayment Model)
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Distribution Date 0% 125% 175% 225% 275% 325%
----------------- ----- ----- ----- ----- ----- ----
Initial Percentage.................................... 100 100 100 100 100 100
December 2001......................................... 100 100 100 100 100 100
December 2002......................................... 100 100 100 100 100 100
December 2003......................................... 100 100 100 100 100 100
December 2004......................................... 100 100 100 100 100 100
December 2005......................................... 100 100 100 100 100 90
December 2006......................................... 100 100 100 100 88 71
December 2007......................................... 100 100 100 91 72 57
December 2008......................................... 100 100 100 78 59 45
December 2009......................................... 100 100 88 66 49 35
December 2010......................................... 100 100 77 56 40 28
December 2011......................................... 100 96 67 47 32 22
December 2012......................................... 100 86 59 39 26 17
December 2013......................................... 100 77 51 33 21 13
December 2014......................................... 100 68 44 27 17 10
December 2015......................................... 100 60 37 23 13 8
December 2016......................................... 100 53 32 19 11 6
December 2017......................................... 100 46 26 15 8 5
December 2018......................................... 100 39 22 12 6 3
December 2019......................................... 100 33 18 9 5 2
December 2020......................................... 100 27 14 7 4 2
December 2021......................................... 100 22 11 5 3 1
December 2022......................................... 89 16 8 4 2 1
December 2023......................................... 67 12 5 3 1 *
December 2024......................................... 43 7 3 1 1 *
December 2025......................................... 21 3 1 1 * *
December 2026......................................... 11 1 1 * * *
December 2027......................................... 6 1 * * * *
December 2028......................................... 1 * * * * *
December 2029......................................... * * * * * *
December 2030......................................... 0 0 0 0 0 0
Weighted Average Life (years)......................... 23.93 17.02 14.18 11.90 10.11 8.71
</TABLE>
. Use of a "*" in the table above denotes a value that is less than 1% but
greater than zero.
S-37
<PAGE>
Description of the Certificates
The certificates will be issued pursuant to the Agreement. A copy of a
general form of the Agreement has been filed with the Securities and Exchange
Commission. A copy of the execution form of the Agreement, without certain
exhibits, will be filed with the Securities and Exchange Commission after the
initial issuance of the certificates. The following description supplements the
description of the Agreement and the certificates under the caption "Description
of the Certificates" in the prospectus and must be read together with the
prospectus. The following summaries describe certain terms of the Agreement, do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the provisions of the Agreement. When particular
provisions or terms used in the Agreement are referred to, the actual
provisions, including definitions of terms, are incorporated by reference.
General
The Class A-1 Certificates will be issued in fully registered form only, in
denominations of $50,000 and integral multiples of $1 in excess thereof. The
Class A-2 Certificates will be issued in fully registered form only, in
denominations of $25,000 and integral multiples of $25,000 in excess thereof.
Definitive Certificates, if issued, will be transferable and exchangeable at the
corporate trust office of the trustee. No service charge will be made for any
registration of exchange or transfer, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge.
The Trust Fund includes:
. the contract pool, including all rights to receive payments on the
contracts received on or after the Cut-off Date;
. the amounts held from time to time in the Payment Account;
. any property which initially secured a contract and which is acquired in
the process of realizing thereon;
. the letter of credit;
. the certificate insurance policy; and
. the proceeds of all insurance policies described in this prospectus
supplement.
The seller will convey the contracts to the trustee. See "The Contract
Pool," "Description of the Certificates--Conveyance of Contracts" in this
prospectus supplement. The servicer will service the contracts pursuant to the
Agreement. The contract documents will be held for the benefit of the trustee on
behalf of MBIA, the letter of credit provider and the certificateholders by the
servicer or a third party custodian.
Distributions of principal, interest or both to the holders of the offered
certificates will be made on each Distribution Date beginning in January 2001 to
the persons in whose names the certificates are registered on the Record Date.
Pass-Through Rates and Last Scheduled Distribution Dates
The Pass-Through Rate on any Distribution Date with respect to the Class A-1
Certificates will be a per annum rate equal to the lesser of (a) the Class A-1
Formula Rate and (b) the Net Funds Cap for that Distribution Date. The last
scheduled Distribution Date for the Class A-1 Certificates will occur in June
2022.
S-38
<PAGE>
The Pass-Through Rate on any Distribution Date with respect to the Class A-2
Certificates will be a per annum rate equal to the lesser of (a) the Class A-2
Formula Rate and (b) the Net Funds Cap for that Distribution Date. The Pass-
Through Rate on the first Distribution Date with respect to the Class A-2
Certificates will be set by Credit Suisse First Boston Corporation as the
broker-dealer no later than December 20, 2000. The last scheduled Distribution
Date for the Class A-2 Certificates will occur in November 2031.
Conveyance of Contracts
On the Closing Date, GreenPoint Credit will convey to the trustee, without
recourse, all its right, title and interest in and to the contracts, and all
rights under the standard hazard insurance policies on the related manufactured
homes. The conveyance of contracts to the trustee will include a conveyance of
all rights to receive Scheduled Payments thereon that were due on or after the
Cut-off Date, even if received prior to the Cut-off Date, as well as all rights
to any payments received on or after the Cut-off Date, other than late receipts
of Scheduled Payments that were due prior to the Cut-off Date. The Contract
Schedule will include the principal balance of each contract as of the Cut-off
Date, the amount of each Scheduled Payment due on each contract as of the Cut-
off Date, the contract rate on each contract, determined as of the Cut-off Date,
and the maturity date of each contract. Prior to the conveyance of the
contracts to the trustee, the operations department of GreenPoint Credit will be
required to complete a review of all of the Contract Files confirming the
accuracy of the Contract Schedule delivered to the trustee. Any contract
discovered not to agree with the Contract Schedule in a manner that is
materially adverse to the interests of the holders of the offered certificates
will be repurchased by GreenPoint Credit, or replaced with another contract,
except that if the discrepancy relates to the principal balance of a contract,
GreenPoint Credit may, under certain conditions, deposit cash in the Payment
Account in an amount sufficient to offset the discrepancy. The trustee will not
review the Contract Files.
The servicer or if GreenPoint Credit is replaced as servicer, a custodian or
the trustee, will hold, as custodian and agent on behalf of the trustee, the
original contracts and copies of documents and instruments relating to each
contract and the security interest in the manufactured home, and real property,
if any, relating to each contract. See "Risk Factors--Defects in the security
interests of the issuer or the seller may make those security interests
ineffective against creditors of the issuer or the seller, as applicable, or
against a receiver or trustee in bankruptcy for the issuer or the seller, as
applicable" and "Certain Legal Aspects of the Contracts--The Contracts (other
than Land Home Contracts and Land-in-Lieu Contracts)--Security Interests of the
Seller in the Manufactured Homes" and "--Land Home Contracts and Land-in-Lieu
Contracts" in the prospectus for discussion of the consequences of the servicer
maintaining possession of the original contracts and the security interest in
the related manufactured homes and real property securing contracts, if any. In
order to give notice of the trustee's right, title and interest in and to the
contracts, a UCC-1 financing statement identifying the trustee as the secured
party and identifying all the contracts as collateral will be filed in the
appropriate office in the appropriate states. The contracts will be stamped or
otherwise marked to reflect their assignment to the trustee. To the extent that
the contracts do not constitute "chattel paper," "general intangibles" or
"accounts" within the meaning of the UCC as in effect in the applicable
jurisdictions or to the extent that the contracts do constitute chattel paper
and a subsequent purchaser is able to take physical possession of the contracts
without notice of the assignment to the trustee, the trustee's interest in the
contracts could be defeated. See "Certain Legal Aspects of the Contracts" in
the prospectus.
The seller will make certain representations and warranties to the trustee
with respect to each contract sold by it, as of the Closing Date unless
expressly stated otherwise, including the following:
(a) as of the Cut-off Date, the contract is not more than 59 days
delinquent;
(b) no provision of the contract has been waived, altered or modified in
any respect, except by instruments or documents identified in the
related Contract File;
S-39
<PAGE>
(c) the contract is a legal, valid and binding obligation of the obligor
and is enforceable in accordance with its terms, except as may be
limited by laws affecting creditors' rights generally or by general
equity principles;
(d) the contract is not subject to any right of rescission, set-off,
counterclaim or defense;
(e) the contract is covered by hazard insurance described under
"Description of the Certificates--Servicing Compensation and Payment of
Expenses; Certain Matters Regarding the Servicer--Hazard Insurance
Policies" in the prospectus;
(f) the contract was either:
(1) originated by a manufactured housing dealer acting, to the
knowledge of the seller, in the regular course of its business and
purchased on an individual basis by the seller in the ordinary
course of its business; or
(2) originated by the seller in the ordinary course of its business;
(g) the contract was neither originated in nor is subject to the laws of
any jurisdiction whose laws would make the transfer of the contract or
an interest therein to the trustee pursuant to the Agreement or
pursuant to the certificates unlawful;
(h) all requirements of any federal, state or local law, including, without
limitation, usury, truth-in-lending and equal credit opportunity laws
and lender licensing laws, applicable to the contract and any related
mortgage or the servicing of any contract have been complied with to
the extent any of the foregoing would have a material adverse effect on
the enforceability of the related contract;
(i) the contract has not been satisfied or subordinated in whole or in part
or rescinded and the manufactured home securing the contract has not
been released from the lien of the contract;
(j) the contract creates a valid and enforceable, except as may be limited
by laws affecting creditors' rights generally, first-priority security
interest in favor of the seller in the manufactured home and real
property securing the contract, if any;
(k) the security interest has been assigned to the trustee, and, after the
assignment, the trustee has a valid and perfected first-priority
security interest in the manufactured home and real property securing
the contract, if any;
(l) the contract has not been sold, assigned or pledged to any other
person, and prior to the transfer of the contracts to the trustee, the
seller owned the contract sold by it, free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest,
and it was the sole owner thereof and had full right to transfer the
contract to the trustee;
(m) as of the Cut-off Date, there was no default, breach, violation or
event permitting acceleration under the contract and no event which,
with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event permitting
acceleration, except payment delinquencies permitted by clause (a)
above, and the seller has not waived any of the foregoing;
(n) as of the Closing Date, there were, to the knowledge of the seller, no
liens or claims which have been filed for work, labor or materials
affecting a manufactured home or real property securing the contract,
which are or may be liens prior to or equal with or subordinate to the
lien of the contract;
S-40
<PAGE>
(o) the contract is a fully-amortizing loan;
(p) the contract contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security;
(q) the information contained in the Contract Schedule with respect to the
contract is true and correct;
(r) there is only one original of the contract;
(s) the contract did not have a loan-to-value ratio at origination greater
than 100%;
(t) the manufactured home related to the contract is not considered or
classified as part of the real estate on which it is located under the
laws of the jurisdiction in which it is located unless it is subject to
a Land-in-Lieu or Land Home Contract and as of the Closing Date the
manufactured home is, to the knowledge of the seller, free of damage
and in good repair;
(u) the contract is a "qualified mortgage" under Section 860G(a)(3) of the
Code;
(v) the related manufactured home is a "manufactured home" within the
meaning of Section 5402(6) of Title 42 of the United States Code;
(w) the contract is secured by a "single family residence" within the
meaning of Section 25(e)(10) of the Code;
(x) the contract will be stamped to indicate its assignment to the trustee
within 60 days of the Closing Date; and
(y) the contract with the lowest contract rate as of the Cut-off Date has a
contract rate of 5.500% and the contract with the highest contract rate
as of the Cut-off Date has a contract rate of 18.000%.
Under the terms of the Agreement, and subject to the seller's option to
effect a substitution as described in the last paragraph under this subheading,
the seller will be obligated to repurchase, at the price described below, within
90 days after the seller becomes aware, or after the seller's receipt of written
notice from MBIA, the trustee or the servicer, of a breach of any representation
or warranty of the seller in the Agreement that materially and adversely affects
the Trust Fund's interest in any contract, unless the seller's breach has been
cured.
Notwithstanding the previous paragraph, the seller will not be required to
repurchase or substitute any contract relating to a manufactured home and real
property securing such contract, if any, located in any jurisdiction on account
of a breach of the representation and warranty described in clause (k) above
solely on the basis of the failure by the seller to cause a notation to be made
on any document of title relating to any such manufactured home or to execute
any transfer instrument relating to any such manufactured home or real property,
if any, other than a notation or transfer instrument necessary to show the
seller as lienholder or legal title holder, unless:
(a) a court of competent jurisdiction has adjudged that, because of the
failure to cause a notation, the trustee does not have a perfected
first-priority security interest in the related manufactured home; or
(b) (1) the servicer has received written advice of counsel to the effect
that a court of competent jurisdiction has held that, solely because of
a substantially similar failure on the part of a pledgor or assignor of
manufactured housing contracts who has perfected the assignment or
pledge of such
S-41
<PAGE>
manufactured housing contracts, a perfected first-priority security
interest was not created in favor of the pledgee or assignee in a
related manufactured home which is located in the same jurisdiction and
which is subject to the same laws regarding the perfection of security
interests therein applicable to the manufactured homes located in the
jurisdiction; and
(2) the servicer shall not have completed all appropriate remedial
action with respect to the manufactured home within 180 days after
receipt of the written advice of counsel.
Any advice of counsel described in (b)(1) above will be from counsel
selected by the servicer on a non-discriminatory basis from among the counsel
used by the servicer in its general business in the jurisdiction in question.
The servicer will have no ongoing obligation to seek advice with respect to the
matters described in clause (b) above. However, the servicer is required to seek
advice with respect to the matters described in clause (b) above whenever
information comes to the attention of its counsel which causes its counsel to
determine that a holding of the type described in clause (b)(1) might exist. If
any counsel selected by the servicer informs the servicer that no holding of the
type described in clause (b)(1) exists, the advice of counsel will be conclusive
and binding on the parties to the Agreement pursuant to which a trustee has an
interest in any contracts in the applicable jurisdiction as of the applicable
date. If any holding described above which would give rise to a repurchase
obligation on the part of the seller were to result from proceedings brought by
a bankruptcy trustee of the seller, it is likely that the bankruptcy trustee
would also reject the resulting repurchase obligation.
The repurchase obligation described in the fourth paragraph of this section
"Conveyance of Contracts" generally constitutes the sole remedy available to the
trustee and the holders of the offered certificates for a breach of a
representation or warranty under the Agreement with respect to the contracts.
The repurchase price for any contract will be equal to the remaining principal
balance of the contract as of the beginning of the month of repurchase, plus
accrued and unpaid interest from the Due Date with respect to which the obligor
last made a payment to the Due Date occurring in the Collection Period during
which the contract is repurchased.
In lieu of repurchasing a contract as specified in the fourth paragraph of
this section "Conveyance of Contracts" during the two-year period following the
Closing Date, the seller may, at its option, substitute an Eligible Substitute
contract for the replaced contract. The seller will be required to deposit in
the Payment Account cash in the amount, if any, by which the Scheduled Principal
Balance of the replaced contract as of the beginning of the month in which
substitution takes place exceeds the Scheduled Principal Balance of the contract
for which it is being substituted as of the beginning of the month.
Payments on the Contracts; the Payment Account
The trustee will initially establish and maintain the Payment Account at an
Eligible Institution. The funds in the Payment Account are required to be
invested by the trustee in common trust funds, collective investment trusts or
Eligible Investments that will mature not later than the business day preceding
the applicable Distribution Date.
All payments in respect of principal and interest on the contracts received
during any Collection Period by the servicer, exclusive of Scheduled Payments
due prior to the Cut-off Date, including liquidation proceeds, net of
liquidation expenses, are required to be paid into the Payment Account not later
than the second business day following receipt thereof. Amounts received as
late payment fees, extension fees, assumption fees or similar fees may be
retained by the servicer as part of its servicing fees. See "--Servicing
Compensation; Certain Other Matters Regarding the Servicer" below. In addition,
the amount paid by the seller for any contract repurchased by it as a result of
a breach of a representation or warranty under the Agreement, and amounts
required to be deposited upon substitution of an Eligible Substitute contract
because of a breach of a
S-42
<PAGE>
representation or warranty, which amounts will be treated as partial principal
prepayments, as described under "--Conveyance of Contracts" above and amounts in
respect of converted contracts purchased by the holder of the Class R
Certificates, are required to be paid into the Payment Account.
On each Determination Date, the servicer will determine the Available
Distribution Amount and the amounts to be distributed on the certificates for
the following Distribution Date.
The trustee or its paying agent will withdraw funds from the Payment Account
on each Distribution Date, but only to the extent of the Available Distribution
Amount, to make payments to holders of the offered certificates as specified
under "--Distributions" below. From time to time, as provided in the Agreement,
the servicer will also withdraw funds from the Payment Account to make payments
to it as permitted by the Agreement and described in subclauses (1), (2), (4),
(5) and (6) of clause (b) in the definition of Available Distribution Amount.
Distributions
Distributions of principal and interest to holders of a class of
certificates will be made on each Distribution Date in an amount equal to the
respective Percentage Interests multiplied by the aggregate amount distributed
on the class of certificates on the related Distribution Date.
Each distribution with respect to a Book-Entry Certificate will be paid to
DTC, which will credit the amount of the distribution to the accounts of its
Participants in accordance with its normal procedures. Each Participant will be
responsible for disbursing the distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm will be responsible for disbursing funds to the Certificate Owners that it
represents. All credits and disbursements with respect to Book-Entry
Certificates are to be made by DTC and the Participants in accordance with DTC's
rules.
Interest Distributions
With respect to any Distribution Date, the "Interest Period" shall be the
period from the preceding Distribution Date, or in the case of the first
Distribution Date, from the Closing Date, through the day preceding such
Distribution Date on the basis of the actual number of days elapsed during the
Interest Period and a 360-day year.
With respect to each Distribution Date, the "Interest Distribution Amount"
means with respect to any class of certificates:
. interest accrued on the class of certificates during the related Interest
Period at the then applicable Pass-Through Rate on the Certificate
Balance of the class of certificates immediately prior to that
Distribution Date; plus
. any previously undistributed shortfalls in interest, other than the Net
Funds Cap Carryover Amount, due to the holders of the offered
certificates of that class in respect of prior Distribution Dates;
. plus, to the extent legally permissible, interest accrued on any such
shortfalls during the related Interest Period at the then applicable
Pass-Through Rate.
S-43
<PAGE>
Principal Distributions
With respect to any Distribution Date on which the Class A-1 Certificates
are entitled to distributions of principal, principal will be distributed pro
rata among the Class A-1 Certificates.
With respect to any Distribution Date on which the Class A-2 Certificates
are entitled to distributions of principal, so long as there has not been a
Deficiency Event, distributions of principal to the Class A-2 Certificates will
be made in round lots of $25,000 and integral multiples thereof and will be
allocated to specific Class A-2 Certificates in accordance with the then-
applicable established random lot procedures of DTC, and the then-applicable
established procedures of the Participants and Indirect Participants, which may
or may not be by random lot. Investors may ask Participants or Indirect
Participants which allocation procedures they use. On any Distribution Date on
which principal is to be distributed to the Class A-2 Certificates, one or more
holders of a Class A-2 Certificate may receive no distributions of principal
while other holders of Class A-2 Certificates receive distributions. In the
event the principal amount of each Class A-2 Certificate is less than $25,000 or
the Class A-2 Certificates are no longer held in book-entry form, principal will
be distributed pro rata among the Class A-2 Certificates.
If the amount described in "--Priority of Distributions" below otherwise
required to be applied as a payment of principal on the Class A-2 Certificates
either (1) is less than $25,000 or (2) exceeds an integral multiple of $25,000,
then, in the case of (1), such entire amount or, in the case of (2), such excess
amount, will not be paid as principal on the upcoming Distribution Date, but
will be retained in the Payment Account until the amount therein available for
payment of principal on the Class A-2 Certificates equals $25,000 or any
integral multiple thereof. In no event however, shall amounts remain in the
Payment Account more than 13 months after the related payments are deposited
into the Trust Fund. The amount being distributed to the Class A-2 Certificates
as principal will be allocated to the specific certificates of that class which
are selected prior to the related Distribution Date by lot or such other manner
as may be determined, which allocations will be made only in amounts equal to
$25,000 and integral multiples of $25,000 in excess thereof.
Priority of Distributions
On each Distribution Date, the Available Distribution Amount, if any, and
any Credit Enhancement Amount (provided that any Enhancement Payment may only be
used for the items listed in clauses (1) and (2) below and any Letter of Credit
Draw Amount may only be used for the items listed in clauses (1) through (4)
below) in the Payment Account will be distributed in the following amounts in
the following order of priority:
(1) concurrently to the Class A-1 Certificates and the Class A-2
Certificates, the Class A-1 Interest Distribution Amount and the Class
A-2 Interest Distribution Amount; if the Available Distribution Amount
together with any Letter of Credit Draw Amount and any Enhancement
Payment is not sufficient to distribute the full amount of interest due
on the Class A-1 Certificates and the Class A-2 Certificates, the
Available Distribution Amount together with any Letter of Credit Draw
Amount and any Enhancement Payment will be distributed to such Classes
of certificates pro rata on the basis of the interest due thereon;
(2) the Formula Principal Distribution Amount in the following order of
priority:
(a) to the Class A-1 Certificates until the Class A-1 Certificate
Balance is reduced to zero; and
(b) to the Class A-2 Certificates until the Class A-2 Certificate
Balance is reduced to zero;
(3) to MBIA, the premium owing pursuant to the Insurance Agreement and all
premium owing from previous Distribution Dates remaining unpaid;
S-44
<PAGE>
(4) to the Special Account, amounts, if any, required to be deposited
therein as required by the Insurance Agreement;
(5) to GreenPoint Bank, an amount equal to any unreimbursed Letter of
Credit Draw Amount;
(6) to the Broker-Dealer, certain amounts that may be required to be paid
pursuant to the Agreement;
(7) to the Class A-1 certificateholders and the Class A-2
certificateholders, any remaining available funds up to the applicable
Net Funds Cap Carryover Amounts, pro rata on the basis of the Class A-1
Net Funds Cap Carryover Amount and Class A-2 Net Funds Cap Carryover
Amount, respectively;
(8) to the Auction Agent, certain amounts that may be required to be paid
pursuant to the Agreement; and
(9) to the holder of the Class R Certificates, any remaining available
funds.
In addition, notwithstanding the prioritization of the distribution of the
Formula Principal Distribution Amount to the holders of the Class A-1
Certificates and Class A-2 Certificates pursuant to clause (2) above, on a
Distribution Date, if any, in respect of which a Deficiency Event is in effect,
the portion of the Formula Principal Distribution Amount for such Distribution
Date that would otherwise be distributed sequentially to the holders of the
Class A-1 Certificates and Class A-2 Certificates pursuant to clause (2) above
will instead be distributed to the holders of the Class A-1 Certificates and
Class A-2 Certificates pro rata based upon the Certificate Balance of each such
Class until the Certificate Balances of each of the Class A-1 Certificates and
Class A-2 Certificates have been reduced to zero.
In certain limited circumstances, but only to the extent described in the
Agreement, a portion of the Monthly Servicing Fee may be subordinated to the
payments set forth in clauses (1) through (4) above.
Furthermore, notwithstanding the previous paragraph, if the Formula
Principal Distribution Amount allocable to the holders of the Class A-1
Certificates on any Distribution Date pursuant to clause (2) above exceeds the
Class A-1 Certificate Balance for such Distribution Date, such excess will be
distributed to the Class A-2 Certificateholders.
In no event will the aggregate distributions of principal to any class of
certificates exceed the Initial Certificate Balance of such class of
certificates.
Losses on Liquidated Contracts
As described above, the distribution of principal to the holders of the
offered certificates is intended to include the Scheduled Principal Balance of
each contract that became a liquidated contract during the Collection Period
immediately preceding the month of such distribution. If the liquidation
proceeds, net of related liquidation expenses, from that liquidated contract are
less than the sum of:
. the Scheduled Principal Balance of that liquidated contract; and
. accrued and unpaid interest thereon;
then to the extent the deficiency is not covered by any excess interest
collections on non-defaulted contracts and a Credit Enhancement Default has
occurred and is continuing, the deficiency may, in effect, be absorbed by the
certificates.
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On each Distribution Date, if any, on or after the date on which a
Deficiency Event occurs and there has been a Credit Enhancement Default and such
default is continuing, the Class A-1 Certificates and Class A-2 Certificates
will receive only their respective percentage interest of liquidation proceeds,
net of liquidation expenses, realized in respect of liquidated contracts, rather
than the Scheduled Principal Balances thereof, and will therefore bear all
losses on liquidated contracts, with no ability to recover the amount of any
liquidation loss from future principal collections on the contracts, and incur a
loss on their investment in the offered certificates. Any losses as described in
the previous sentence will be allocated pro rata between the Class A-1
Certificates and Class A-2 Certificates. See "Prepayment and Yield
Considerations" in this prospectus supplement.
The Letter of Credit
The letter of credit will be an asset of the Trust Fund and the trustee will
maintain possession of and make claims for payment pursuant to the letter of
credit for the benefit of the Trust Fund.
The letter of credit will be issued in an amount as determined by MBIA, and
may be amended, replaced, substituted, reduced or cancelled at any time by
mutual agreement of MBIA and GreenPoint Bank, without the consent of
certificateholders, the seller, the servicer or the trustee.
Under certain conditions (as determined by the mutual agreement of MBIA and
GreenPoint Bank), the trustee will make a draw of the full amount available
under the letter of credit and deposit that amount into a spread account.
Thereafter, the trustee will withdraw from the spread account an amount equal to
the Letter of Credit Draw Amount that would otherwise have been drawn under the
letter of credit. After any draw of the full amount available under the letter
of credit, amounts that would otherwise have been available to reimburse
GreenPoint Bank for previous unreimbursed draws in respect of the letter of
credit will instead be deposited in the spread account.
The letter of credit will remain outstanding until the earlier of (1) the
date on which the offered certificates are retired and (2) any date that the
letter of credit is cancelled by the mutual agreement of MBIA and GreenPoint
Bank.
Certificate Insurance Policy
The offered certificates will be entitled to the benefit of an unconditional
and irrevocable financial guaranty insurance policy issued by MBIA. As of any
determination date, the aggregate amount available under the certificate
insurance policy will be equal to the aggregate Certificate Balance of the
offered certificates plus interest thereon. With respect to any Distribution
Date, an Enhancement Payment will be payable under the certificate insurance
policy equal to the amount by which the aggregate amount distributable to the
offered certificates described in clauses (1) and (2) of "--Priority of
Distributions" above exceeds the Available Distribution Amount plus the Letter
of Credit Draw Amount, if any.
The certificate insurance policy will be issued pursuant to the Insurance
Agreement.
The Special Account is not a part of the Trust Fund and, accordingly, no
holders of the offered certificates will have any rights to and will not receive
amounts on deposit in the Special Account.
The certificate insurance policy will be an asset of the Trust Fund and the
trustee will maintain possession of and make claims for payment pursuant to the
certificate insurance policy for the benefit of the Trust Fund.
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The terms of the certificate insurance policy will provide that MBIA will
waive and agree not to assert any and all rights to require the trustee to make
demand on or to proceed against any person, party or security prior to demanding
payment under the certificate insurance policy. Under the certificate insurance
policy, MBIA will also waive and agree not to assert any and all defenses, set-
offs and counterclaims of any kind available to it so as to deny payment of any
amount due under the certificate insurance policy.
MBIA shall be subrogated to the rights of each certificateholder to receive
payments on the certificates to the extent of any payment by MBIA under the
certificate insurance policy.
The certificate insurance policy will provide that any rights of subrogation
acquired by MBIA as a result of any payment made under the certificate insurance
policy shall, in all respects, be subordinate and junior in right of payment to
the prior indefeasible payment in full of all amounts due the trustee on account
of payments due under the offered certificates.
The obligations of MBIA under the certificate insurance policy will be
irrevocable, primary, absolute and unconditional, except as expressly provided
therein, and neither the failure of the trustee, GreenPoint, or any other person
to perform any covenants or obligations in favor of MBIA, or otherwise, nor the
failure or omission to make a demand permitted thereunder, nor the commencement
of any receivership, bankruptcy, debtor or other insolvency proceeding by or
against the trustee, GreenPoint Credit, or any other person shall in any way
affect or limit MBIA's obligations under the certificate insurance policy. If
an action or proceeding to enforce the certificate insurance policy is brought,
the trustee will be entitled to recover from MBIA costs and expenses reasonably
incurred, including without limitation reasonable fees and expenses of counsel.
There shall be no acceleration payment due under the certificate insurance
policy unless such acceleration is at the sole option of MBIA.
Advances
For each Distribution Date, the servicer will be obligated to make Monthly
Advances to the extent it deems them recoverable.
Instead of using its own funds, the servicer may apply any Excess Contract
Payments in the Payment Account to make all or a portion of a Monthly Advance,
but must replace such Excess Contract Payments to the extent required to make
Scheduled Payments on the related contracts. In addition, upon the
determination that a Nonrecoverable Advance has been made in respect of a
contract, the servicer will reimburse itself out of funds in the Payment Account
for the amount of that Nonrecoverable Advance.
In making Monthly Advances, the servicer will be attempting to maintain a
regular flow of scheduled interest and principal to the holders of the offered
certificates rather than to guarantee or insure against losses.
The servicer will also be obligated to make advances, to the extent
recoverable out of liquidation proceeds, pursuant to the Agreement, in respect
of certain taxes and insurance premiums not paid by an obligor on a timely
basis.
Reports to Certificateholders
The trustee will include with each distribution to each certificateholder a
statement as of each Distribution Date setting forth, among other things:
(a) the aggregate amount distributed on each class of offered certificates
on that Distribution Date;
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(b) the amount of the distribution to each class which constitutes
principal;
(c) the amount of the distribution to each class which constitutes
interest;
(d) the remaining Certificate Balance of each class of offered
certificates;
(e) the amount of the Monthly Servicing Fee;
(f) the Pass-Through Rate for each class of offered certificates;
(g) the Class A-1 Net Funds Cap Carryover Amount;
(h) the Class A-2 Net Funds Cap Carryover Amount;
(i) the Enhancement Payment, if any, for that Distribution Date;
(j) the Letter of Credit Draw Amount, if any, for that Distribution Date;
(k) the amount available under the letter of credit;
(l) the amount owed to GreenPoint Bank for reimbursement of previous draws
on the letter of credit; and
(m) the number of and aggregate unpaid principal balance of contracts with
payments delinquent 31 to 59, 60 to 89 and 90 or more days,
respectively.
In addition, within a reasonable period of time after the end of each
calendar year, the trustee will furnish a report to each certificateholder of
record at any time during such calendar year as to certain aggregate of amounts
for such calendar year.
Optional Termination and Termination Auction
The Agreement provides that on or after the Distribution Date on which the
Pool Scheduled Principal Balance is less than 10% of the Cut-off Date Pool
Principal Balance, the servicer will have the option to purchase, upon giving
notice mailed no later than the 17th day of the month next preceding the month
of the exercise of such option, all outstanding contracts at a price equal to
the greater of:
(a) the sum of:
(1) 100% of the Scheduled Principal Balance of each contract (other
than any contract as to which the related manufactured home has
been acquired and not yet disposed of and whose fair market value
is included pursuant to clause (2) below) as of the final
Distribution Date; and
(2) the fair market value of the acquired property described in clause
(1) above (as determined by the servicer), and
(b) the aggregate fair market value (as determined by the servicer) of all
of the assets of the Trust Fund;
plus, in the case of both clause (a) and (b), an amount sufficient to reimburse
certificateholders for any shortfall in interest due thereto in respect of prior
Distribution Dates and not previously distributed, provided, however, that if
any Letter of Credit Draw Amounts have been made but not yet reimbursed, any
Enhancement Payment has been made but not yet reimbursed or any amounts shall be
owing to MBIA pursuant to the Insurance
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Agreement, the servicer may only exercise the option with the consent of
GreenPoint Bank (or a substitute letter of credit provider if the letter of
credit has been replaced) or MBIA, as applicable.
Notwithstanding the foregoing, the option of the servicer to purchase the
contracts then outstanding in the Trust Fund shall not be exercisable if there
will not be distributed to the holders of the offered certificates an amount
equal to the Certificate Balance of each class together with any shortfall in
interest due to the holders of the offered certificates in respect of prior
Distribution Dates and not previously distributed and one month's interest on
the Certificate Balance, for each class of certificates, at the applicable Pass-
Through Rate. The amount described in the preceding sentence is referred to as
the "Minimum Termination Amount."
On any Distribution Date after the Distribution Date on which the Pool
Scheduled Principal Balance is less than 10% of the Cut-off Date Pool Principal
Balance, the servicer may also direct the trustee to conduct a Termination
Auction for the sale of all contracts then outstanding in the Trust Fund, and in
any case the servicer shall be obligated to direct the trustee to conduct such a
Termination Auction within 90 days of the Distribution Date on which the Pool
Scheduled Principal Balance is less than 10% of the Cut-off Date Pool Principal
Balance, unless the servicer has exercised the purchase option described above.
The servicer shall give notice mailed no later than 10 days preceding the date
on which the Termination Auction is to occur. The trustee will solicit each
certificateholder, the seller and one or more active participants in the asset-
backed securities or manufactured housing contract market that are not
affiliated with GreenPoint Credit to make a bid to purchase the contracts at the
Termination Auction. The trustee will sell all the contracts to the highest
bidder, subject, among other things, to the requirements that:
. the highest bid equal or exceed the Minimum Termination Amount plus, an
amount sufficient to reimburse GreenPoint Bank (or a substitute letter of
credit provider if the letter of credit has been replaced) for any Letter
of Credit Draw Amounts paid but not yet reimbursed and an amount
sufficient to reimburse MBIA for any unreimbursed payments under the
certificate insurance policy and other amounts owing under the Insurance
Agreement, if any; and
. at least one bid be tendered by an active participant in the asset-backed
securities or manufactured housing contract market that is not affiliated
with GreenPoint Credit.
If the foregoing requirements are satisfied, the successful bidder or
bidders shall deposit the aggregate purchase price for the contracts in the
Payment Account. If the foregoing requirements are not satisfied, the purchase
shall not occur and distributions will continue to be made on the certificates.
Any sale and consequent termination of the Trust Fund as a result of a
Termination Auction must constitute a "qualified liquidation" of the Trust Fund
under Section 860F of the Code.
Termination of the Agreement
The Agreement will terminate upon the last action required to be taken by
the trustee on the final Distribution Date following the earlier of:
. the purchase by the servicer of all contracts and all property acquired
in respect of any contract remaining in the Trust Fund as described above
under "--Optional Termination and Termination Auction;"
. the final payment or other liquidation, or any advance with respect
thereto, of the last contract remaining in the Trust Fund or the
disposition of all property acquired upon repossession of any
manufactured home; or
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. the sale in a Termination Auction of all contracts and all other property
acquired in respect of any contract remaining in the Trust Fund as
described above under "--Optional Termination and Termination Auction."
Upon presentation and surrender of the offered certificates, the trustee
shall cause to be distributed, to the extent of funds available, to such
certificateholders on the final Distribution Date in proportion to their
respective Percentage Interests an amount equal to the respective unpaid
Certificate Balances of the offered certificates, together with any unpaid
interest on such certificates due on prior Distribution Dates and one month's
interest at the applicable Pass-Through Rates on such unpaid Certificate
Balances; provided that such funds will be distributed in the applicable order
of priority specified under "--Priority of Distributions" above. If the
Agreement is then being terminated, any amount which remains on deposit in the
Payment Account, other than amounts retained to meet claims, after distribution
to the holders of the offered certificates will be distributed to the Special
Account to the extent any amounts are owed to MBIA under the Insurance
Agreement, any amount which remains will be distributed to GreenPoint Bank (or a
substitute letter of credit provider if the letter of credit has been replaced)
for any Letter of Credit Draw Amounts paid but not yet reimbursed, and then any
amount which remains will be distributed to the Class R Certificateholders.
Collection and Other Servicing Procedures
The servicer will administer, service and make collections on the contracts,
exercising the degree of care that the servicer exercises with respect to
similar contracts serviced by the servicer.
Subject to the requirements of applicable law, the servicer will be required
to commence repossession and other realization procedures with respect to any
defaulted contract promptly after the servicer determines that such contract
will not be brought current. The servicer may rescind, cancel or make material
modifications of the terms of a contract, including modifying the amounts and
Due Dates of Scheduled Payments, in connection with a default or imminent
default thereunder.
Servicing Compensation; Certain Other Matters Regarding the Servicer
For its servicing of the contracts, the servicer will be entitled to receive
a monthly servicing fee equal to the product of one-twelfth of 1.00% (the
"Monthly Servicing Fee Rate") of the Pool Scheduled Principal Balance for the
related Distribution Date (the "Monthly Servicing Fee"), whether or not the
related Scheduled Payments on the contracts are received. The Available
Distribution Amount will be net of the Monthly Servicing Fee. See "--Payments on
the Contracts; the Payment Account" above.
As part of its servicing fees, the servicer will also be entitled to retain,
as compensation for the additional services provided in connection therewith,
any fees for late payments made by obligors, extension fees paid by obligors for
the extension of Scheduled Payments and assumption fees for permitted
assumptions of contracts by purchasers of the related manufactured homes and
real property securing such contracts, if any.
Rights Upon an Event of Default
If an event of default has occurred under the Agreement and so long as there
has been no MBIA Default that has occurred and is continuing, MBIA may terminate
all of the rights of the servicer under the Agreement without the consent of the
certificateholders. Upon the occurrence of a MBIA Default, such right of
termination shall vest in the trustee or in holders of certificates aggregating
not less than 51% of the outstanding certificates. Upon such termination of the
servicer, all authority and power of the servicer under the Agreement will pass
to and be vested in the trustee or a successor servicer as provided in the
Agreement. Notwithstanding the foregoing, if a MBIA Default has occurred and is
continuing, under circumstances described in the Agreement,
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GreenPoint Bank (or a substitute letter of credit provider if the letter of
credit has been replaced) will have certain rights upon an event of default
under the Agreement that may be prior to the rights of certificateholders.
In addition to the rights that MBIA may have against the servicer with
respect to an event of default under the Agreement, MBIA may review the
operations of the servicer in the event that any of the following servicing
triggers occur:
. losses on the contracts exceed the percentages and levels set forth in
the Agreement; or
. GreenPoint Bank, the ultimate parent of GreenPoint Credit, defaults on
certain payment obligations;
. certain material adverse occurrences with respect to GreenPoint Bank or
its parent as described in the Agreement; or
. GreenPoint Bank fails to maintain certain capital standards established
for financial institutions under the Federal Deposit Insurance
Corporation Improvement Act of 1991, as amended.
MBIA, so long as no MBIA Default has occurred or is continuing, in its sole
discretion, may remove the servicer based upon such review. In the event that
MBIA removes the servicer, all authority and power of the servicer under the
Agreement will pass to and be vested in the trustee or a successor servicer as
provided in the Agreement. Neither the trustee nor the certificateholders may
remove the servicer upon the occurrence of a servicing trigger.
The Trustee
The trustee, Bank One, National Association, has its corporate trust offices
at One North State Street, 9th Floor, Chicago, Illinois 60670. The trustee may
resign at any time, in which event the seller will be obligated to appoint a
successor trustee. The seller may also remove the trustee if the trustee ceases
to be eligible to continue as such under the Agreement or if the trustee becomes
insolvent. In such circumstances, the seller will also be obligated to appoint
a successor trustee. Any resignation or removal of the trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
Copies of the monthly report to certificateholders, as described in "Reports
to Certificateholders" in this prospectus supplement, will be made available
each month to certificateholders and other parties to the Agreement via the
trustee's internet website, which is presently located at www.abs.bankone.com.
Persons that are unable to use the above website are entitled to have a paper
copy mailed to them via First Class mail by calling the trustee at (800) 524-
9472. The trustee will have the right pursuant to the Agreement to change the
way the monthly report is distributed in order to make the distribution more
convenient and/or more accessible to the above parties and to the
certificateholders.
The Agreement requires the trustee to maintain, at its own expense, an
office or agency in New York City or Chicago where certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the trustee and the certificate registrar in respect of the
certificates pursuant to the Agreement may be served.
The trustee, or any of its affiliates, in its individual or any other
capacity, may become the owner or pledgee of certificates with the same rights
as it would have if it were not trustee.
The trustee will also act as paying agent, certificate registrar and
authenticating agent under the Agreement.
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The Auction Agent
Bankers Trust Company, a New York banking corporation, will act as Auction
Agent with respect to the Class A-2 Certificates pursuant to an auction agent
agreement, between the trustee and Bankers Trust Company.
Registration of the Offered Certificates
The offered certificates will be book-entry certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
certificates ("Certificate Owners") will hold their certificates through DTC in
the United States, or Clearstream, Luxembourg or the Euroclear System in Europe
if they are participants of those systems, or indirectly through organizations
which are participants in those systems. The Book-Entry Certificates will be
issued in one or more certificates which equal the aggregate Certificate Balance
of the certificates and will initially be registered in the name of Cede & Co.,
the nominee of DTC. Clearstream, Luxembourg and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Clearstream, Luxembourg's and Euroclear's names on the books of their
respective depositaries which in turn will hold such positions in customers'
securities accounts in the depositaries' names on the books of DTC. Citibank,
N.A. will act as depositary for Clearstream, Luxembourg and The Chase Manhattan
Bank will act as depositary for Euroclear (in such capacities, individually the
"Relevant Depositary" and collectively the "European Depositaries"). Except as
described below, no person acquiring a Book-Entry Certificate (each, a
"Beneficial Owner") will be entitled to receive a physical certificate
representing such certificate (a "Definitive Certificate"). Unless and until
Definitive Certificates are issued, it is anticipated that the only
"certificateholder" of the certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be certificateholders as that term is used in the
Agreement. Certificate Owners are only permitted to exercise their rights
indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded in the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a Participant and on the
records of Clearstream, Luxembourg or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of and
interest on the certificates from the trustee through DTC and Participants.
While the certificates are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the certificates and
is required to receive and transmit distributions of principal of, and interest
on, the certificates. Participants and Indirect Participants with whom
Certificate Owners have accounts with respect to certificates are similarly
required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess certificates representing their
respective interests in the certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer their
interest.
Certificateholders will not receive or be entitled to receive certificates
representing their respective interests in the certificates, except under the
limited circumstances described below. Unless and until Definitive Certificates
are issued, certificateholders who are not Participants may transfer ownership
of certificates only through Participants and Indirect Participants by
instructing such Participants and Indirect Participants to transfer
certificates, by book-entry transfer, through DTC for the account of the
purchasers of such certificates, which account is maintained with their
respective Participants. Under the Rules and in accordance with DTC's
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normal procedures, transfers of ownership of certificates will be executed
through DTC and the accounts of the respective Participants at DTC will be
debited and credited. Similarly, the Participants and Indirect Participants will
make debits or credits, as the case may be, on their records on behalf of the
selling and purchasing certificateholders.
Because of time zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear as a result of a transaction with a
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 Clearstream, Luxembourg customers on such business
day. Cash received in Clearstream, Luxembourg or Euroclear as a result of sales
of securities by or through a Clearstream, Luxembourg customer or Euroclear
Participant (as defined below) to a DTC Participant will be received with value
on the DTC settlement date but will be available in the relevant Clearstream,
Luxembourg or Euroclear cash account only as of the business day following
settlement in DTC. For information with respect to tax documentation procedures
relating to the certificates, see "Federal Income Tax Consequences--Taxation of
Regular Certificates--Taxation of Certain Foreign Investors" and "--Backup
Withholding" in the prospectus and "Global Clearance, Settlement and Tax
Documentation Procedures--Certain U.S. Federal Income Tax Documentation
Requirements" in Annex I to this prospectus supplement.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Clearstream, Luxembourg customers and Euroclear Participants
will occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg customers or Euroclear Participants, on the other, will be effected
in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by the Relevant Depositary; however, such cross-
market transactions will require delivery of instructions to the relevant
European international clearing system by a counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. Clearstream, Luxembourg customers and Euroclear Participants may not
deliver instructions directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company, performs
services for its Participants, some of which, and/or their representatives, own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each Participant in the Book-Entry Certificates, whether held
for its own account or as a nominee for another person. In general, beneficial
ownership of Book-Entry Certificates will be subject to the Rules, as in effect
from time to time.
Clearstream, Luxembourg was incorporated in 1970 as "Cedel S.A.," a company
with limited liability under Luxembourg law, or a societe anonyme. Cedel S.A.
subsequently changed its name to Cedelbank. On January 10, 2000, Cedelbank's
parent company, Cedel International, societe anonyme ("CI") merged its clearing,
settlement and custody business with that of Deutsche Borse Clearing AG ("DBC").
The merger involved the transfer by CI of substantially all of its assets and
liabilities (including its shares in CB) to a new Luxembourg company, New Cedel
International, societe anonyme ("New CI"), which is 50% owned by CI and 50%
owned by DBC's parent company Deutsche Borse AG. The shareholders of these two
entities are banks, securities dealers and financial institutions. CI currently
has 92 shareholders, including U.S. financial institutions or their
subsidiaries. No single entity may own more than 5 percent of CI's stock.
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Further to the merger, the Board of Directors of New CI decided to re-name
the companies in the group in order to give them a cohesive brand name. The new
brand name that was chosen is "Clearstream." Effective January 14, 2000, New CI
has been renamed "Clearstream International, societe anonyme." On January 18,
2000, Cedelbank was renamed "Clearstream Banking, societe anonyme," and Cedel
Global Services was renamed "Clearstream Services, societe anonyme."
On January 17, 2000, DBC was renamed "Clearstream Banking AG." This means
that there are now two entities in the corporate group headed by Clearstream
International which share the name "Clearstream Banking," the entity previously
named "Cedelbank" and the entity previously named "Deutsche Borse Clearing AG."
Clearstream, Luxembourg holds securities for its customers and facilitates
the clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Clearstream, Luxembourg
in any of 36 currencies, including United States Dollars. Clearstream,
Luxembourg provides to its customers, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg also
deals with domestic securities markets in over 30 countries through established
depository and custodial relationships. Clearstream, Luxembourg is registered as
a bank in Luxembourg, and as such is subject to regulation by the Commission de
Surveillance du Secteur Financier, CSSF, which supervises Luxembourg banks.
Clearstream, Luxembourg's customers are world-wide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream, Luxembourg's U.S. customers are limited
to securities brokers and dealers, and banks. Currently, Clearstream, Luxembourg
has approximately 2,000 customers located in over 80 countries, including all
major European countries, Canada, and the United States. Indirect access to
Clearstream, Luxembourg is available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream,
Luxembourg. Clearstream, Luxembourg has established an electronic bridge with
Morgan Guaranty Trust Company of New York as the Operator of the Euroclear
System (MGT/EOC) in Brussels to facilitate settlement of trades between
Clearstream, Luxembourg and MGT/EOC.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 29 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
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Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a tangible basis with
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable Participants in
accordance with DTC's normal procedures. Each Participant will be responsible
for disbursing such payments to the beneficial owners of the Book-Entry
Certificates that it represents and to each Financial Intermediary for which it
acts as agent. Each such Financial Intermediary will be responsible for
distributing funds to the beneficial owners of the Book-Entry Certificates that
it represents.
Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience some delay in their receipt of payments, since such payments will
be forwarded by the trustee to Cede. Distributions with respect to certificates
held through Clearstream, Luxembourg or Euroclear will be credited to the cash
accounts of Clearstream, Luxembourg customers or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by the Relevant Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences--Taxation of Regular Certificates--Taxation
of Certain Foreign Investors" and "--Backup Withholding" in the prospectus.
Because DTC can only act on behalf of Financial Intermediaries, the ability of a
beneficial owner to pledge Book-Entry Certificates to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such Book-Entry Certificates, may be limited due to the lack of physical
certificates for such Book-Entry Certificates. In addition, issuance of the
Book-Entry Certificates in the book-entry form may reduce the liquidity of such
certificates in the secondary market since certain potential investors may be
unwilling to purchase certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust Fund will be provided to Cede, as
nominee of DTC, and may be made available by Cede to beneficial owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting DTC, and to the Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates of such beneficial owners are credited.
DTC has advised the trustee that, unless and until Definitive Certificates
are issued, DTC will take any action permitted to be taken by the holders of the
Book-Entry Certificates under the Agreement only at the direction of one or more
Financial Intermediaries to whose DTC accounts the Book-Entry Certificates are
credited, to the extent that such actions are taken on behalf of Financial
Intermediaries whose holdings include such Book-Entry Certificates. Clearstream,
Luxembourg or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a certificateholder under the Agreement on
behalf of a Clearstream, Luxembourg customer or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to the ability of
the Relevant Depository to effect such actions on its behalf through DTC. DTC
may take actions, at the direction of the related Participants, with respect to
some certificates which conflict with actions taken with respect to other
certificates.
Definitive Certificates will be issued to beneficial owners of the Book-
Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC or
GreenPoint Credit advises the trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the
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Book-Entry Certificates and GreenPoint Credit or the trustee is unable to locate
a qualified successor, (b) GreenPoint Credit, at its sole option, with the
consent of the trustee, elects to terminate a book-entry system through DTC or
(c) after the occurrence of an event of default under the Agreement, beneficial
owners having Percentage Interests aggregating not less than 51% of the Book-
Entry Certificates advise the trustee and DTC through the Financial
Intermediaries and the Participants in writing that the continuation of a book-
entry system through DTC, or a successor thereto, is no longer in the best
interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for re-
registration, the trustee will issue Definitive Certificates, and thereafter the
trustee will recognize the holders of such Definitive Certificates as
certificateholders under the Agreement.
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfer of certificates among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
Neither the seller or the servicer nor the trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held by
Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Federal Income Tax Consequences
Orrick, Herrington & Sutcliffe llp, special counsel to the seller, is of the
opinion that, assuming (1) the making of appropriate elections and (2)
compliance by the seller, the servicer and the trustee with all of the
provisions of the related Agreements:
. the electing portion of the Trust Fund will qualify, for federal income
tax purposes, as a real estate mortgage investment conduit (a "REMIC")
within the meaning of Sections 860A through 860G of the Code (the "REMIC
Provisions");
. the offered certificates evidence the "regular interests" in such REMIC
and will be treated as debt instruments for purposes of Chapter 1 of the
Code (generally relating to the calculation of a certificateholder's tax
liability);
. the Class R Certificates are the sole class of "residual interests" in
such REMIC; and
. the REMIC represented by the Trust Fund will not be subject to federal
income tax as a separate entity except for:
(1) the tax on "prohibited transactions" imposed by Section 860F of the
Code;
(2) the tax on "contributions after startup date" imposed by Section
860G(d) of the Code; and
(3) the tax on "income on foreclosure property" imposed by Section
860G(c) of the Code, respectively, each within the meaning of the
REMIC Provisions in effect on the date of this prospectus supplement.
However, continuing qualification as a REMIC requires ongoing compliance
with applicable provisions of the Code, including the REMIC provisions, and
related Treasury regulations all of which are subject to change.
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The following are the currently applicable material federal income tax
consequences of the purchase, ownership and disposition of certificates. In
addition to its opinions set forth above, Orrick, Herrington & Sutcliffe llp has
prepared or reviewed the statements in the prospectus and this prospectus
supplement under the headings "Federal Income Tax Consequences," and is of the
opinion that such statements in the prospectus and as supplemented by such
statements in this prospectus supplement are correct in all material respects.
Such statements are intended as an explanatory discussion of the possible
effects of the classification of the Trust Fund as a REMIC for federal income
tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's own tax advisor. Accordingly, each investor
is urged to consult its own tax advisors with regard to the tax consequences to
it of investing in the offered certificates.
The offered certificates will be Regular Certificates as defined in the
prospectus under "Federal Income Tax Consequences--REMIC Certificates." As such,
the offered certificates will be treated as debt instruments for purposes of
calculating a certificateholder's federal income tax liability. Holders of
offered certificates will be required to report income with respect to such
certificates under the accrual method of accounting, regardless of their normal
tax accounting method.
Assuming in each case that a substantial amount of a Class is sold at the
price for such Class stated on the cover of this prospectus supplement, and
subject to the uncertainties concerning the determination of "original issue
discount" for variable rate certificates discussed in "Federal Income Tax
Consequences--Taxation of Regular Certificates--Original Issue Discount" and "--
Variable Rate Certificates" in the prospectus, the offered certificates will not
be issued with "original issue discount."
The prepayment assumption that will be used in determining the rate of
accrual of original issue discount, market discount and premium, if any, for
federal income tax purposes will be based on the assumption that, subsequent to
the date of any determination the contracts will prepay at a rate equal to 225%
of the Prepayment Model. No representation is made that the contracts will
prepay at that rate or at any other rate. See "Federal Income Tax Consequences--
Taxation of Regular Certificates--Original Issue Discount" and "--Premium" in
the prospectus.
If the method for computing original issue discount described in the
prospectus results in a negative amount for any period with respect to a holder
of an offered certificate, the amount of original issue discount allocable to
such period would be zero and such certificateholder will be permitted to offset
such negative amount only against future original issue discount (if any)
attributable to such certificates.
In certain circumstances IRS Regulations relating to "original issue
discount" permit the holder of a debt instrument to recognize "original issue
discount" under a method that differs from that used by the issuer. Accordingly,
it is possible that the holder of an offered certificate may be able to select a
method for recognizing "original issue discount" that differs from that used by
the REMIC administrator in preparing reports to the certificateholders and the
IRS.
Certain classes of the offered certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a class of offered certificates will be treated as holding a certificate
with amortizable bond premium will depend on such certificateholder's purchase
price and the distributions remaining to be made on such certificate at the time
of its acquisition by such certificateholder. Holders of such classes of
certificates should consult their tax advisors regarding the possibility of
making an election to amortize such premium. See "Federal Income Tax
Consequences--Taxation of Regular Certificates" and "--Premium" in the
prospectus.
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The offered certificates will be treated as assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(4)(A)
of the Code generally in the same proportion that the assets of 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 certificates
are treated as "real estate assets" under Section 856(c)(4)(A) of the Code.
Moreover, the certificates (other than the Residual Certificates) will be
"qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if
transferred to another REMIC on its startup day in exchange for a regular or
residual interest therein. See "Description of the Certificates--Termination of
the Agreement" in this prospectus supplement and "Federal Income Tax
Consequences--REMIC Certificates" in the prospectus.
For further information regarding federal income tax consequences of
investing in the offered certificates, see "Federal Income Tax Consequences--
REMIC Certificates" in the prospectus.
ERISA Considerations
General
ERISA and Section 4975 of the Code impose certain restrictions on employee
benefit or other plans that are subject to ERISA and/or Section 4975 of the Code
("Plans") and on persons who are fiduciaries with respect to such Plans. See
"ERISA Considerations" in the prospectus.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption
(defined below) and other administrative exemptions under ERISA and the
potential consequences in their specific circumstances, prior to making an
investment in the certificates. Moreover, each Plan fiduciary should determine
whether under the general fiduciary standards of investment prudence 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.
Class A Certificates
The U.S. Department of Labor, or "DOL," has granted to the underwriter an
individual prohibited transaction exemption (as amended by PTE 1997-34, 62 Fed.
Reg. 39021 (July 21, 1997), and PTE 2000-58, 65 Fed. Reg. 67765 (November 13,
2000), the "Exemption") from certain of the prohibited transaction rules of
ERISA. The Exemption exempts from the prohibitions of Sections 406(a) and 407(a)
of ERISA, and the related excise tax provisions of Section 4975 of the Code, the
purchase, holding and resale by Plans of pass-through certificates or debt
securities representing interests in trusts or other specifed entities that hold
assets consisting primarily of certain receivables, loans and other obligations
that are secured and meet the general conditions summarized below. The
obligations covered by the Exemption include manufactured housing installment
sales contracts and installment loan agreements secured by manufactured homes
such as the contracts.
Among the general conditions which must be satisfied for the Exemption to
apply to the acquisition, holding and resale by a Plan of the offered
certificates are the following:
(1) The acquisition of such certificates by a Plan is on terms (including
the price for such 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.
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(3) The certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the four highest generic
rating categories from either S&P, Moody's or Fitch, Inc. ("Fitch")
(the "Exemption Rating Agencies").
(4) The trustee is not an affiliate of the underwriter, GreenPoint Credit,
MBIA, any obligor with respect to contracts included in the Trust Fund
constituting more than 5% of the aggregate unamortized principal
balance of the assets in the Trust Fund, or any affiliate of such
parties. (Such parties, and the trustee and its affiliates, are
sometimes referred to in this prospectus supplement collectively as the
"Restricted Group.") As of the date hereof, no obligor with respect to
contracts included in the Trust Fund is an obligor with respect to
contracts constituting more than 5% of the aggregate unamortized
principal balance of the assets of the Trust Fund.
(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 the certificates.
The sum of all payments made to and retained by the seller pursuant to
the sale of the contracts to the Trust Fund represents not more than
the fair market value of such contracts. The sum of all payments made
to and retained by GreenPoint Credit, represents not more than
reasonable compensation for GreenPoint Credit's services under the
Agreement and reimbursement of GreenPoint Credit's reasonable expenses
in connection therewith.
(6) The Plan 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.
In addition, the Exemption exempts from the prohibitions of Sections 406(a),
406(b) and 407(a) of ERISA, and the related excise tax provisions of Section
4975 of the Code, transactions undertaken in connection with the servicing,
management and operation of such a Trust Fund pursuant to a binding pooling and
servicing agreement, subject to the foregoing general conditions and to certain
additional requirements. The seller believes that the Exemption will apply to
such transactions undertaken with respect to the Trust Fund and the contracts
and that all conditions of the Exemption, other than those within the control of
the investors, have been or will be met.
The Exemption also exempts from the prohibition of Sections 406(b)(1) and
406(b)(2) of ERISA, and the related excise tax provisions of Section 4975 of the
Code, the direct or indirect sale, exchange or transfer of the offered
certificates between the seller or the underwriter and a Plan when the person
who has discretionary authority or renders investment advice with respect to the
investment of the Plan's assets in such certificates (the "Fiduciary") is (a) an
obligor with respect to 5% or less of the fair market value of contracts in the
Trust Fund or (b) an affiliate of any such person, subject to the general
conditions summarized above and to the following additional requirements:
(1) No member of the Restricted Group is a sponsor of the Plan.
(2) In connection with the initial issuance of such certificates, at least
50% in Percentage Interests of such class of certificates is acquired
by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the Trust Fund is acquired by persons independent
of the Restricted Group.
(3) The Plan's investment in the certificates does not exceed 25% in
Percentage Interests of any class of such certificates outstanding at
the time of acquisition.
(4) Immediately after the acquisition of such certificates, no more than
25% of the assets of a Plan with respect to which the Fiduciary has
discretionary authority or renders investment advice are invested in
certificates representing an interest in a Trust Fund containing assets
sold or serviced by the same entity.
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The Exemption also applies to the direct or indirect acquisition or
disposition of offered certificates by a Plan in the secondary market if certain
conditions are met and to the continued holding of certificates acquired in
initial or secondary markets.
The seller believes that the Exemption will apply to the acquisition and
holding of offered certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors have been met.
Any Plan fiduciary who proposes to cause a Plan to purchase such certificates
should consult with its own counsel with respect to the potential consequences
under ERISA and the Code of the Plan's acquisition and ownership of
certificates. Assets of a Plan should not be invested in certificates unless it
is clear that the Exemption will apply and exempt all potential prohibited
transactions. See "ERISA Considerations" in the prospectus.
Before purchasing a certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive relief provided in the
Exemption or the availability of any other prohibited transaction exemptions,
and whether the conditions of any such exemption will be applicable to the
certificate. Any fiduciary of a Plan considering whether to purchase an offered
certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and Section 4975 of the Code to such investment. See "ERISA
Considerations" in the prospectus.
Ratings
It is a condition to the issuance of the certificates that the offered
certificates be rated "AAA" by Standard & Poor's Ratings Services ("S&P") and
"Aaa" by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the
"Rating Agencies"). A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating agency. The security rating of the offered certificates should
be evaluated independently of similar security ratings assigned to other kinds
of securities. Ratings do not address whether or not the offered certificates
will receive any Net Funds Cap Carryover Amount or the ability of the holder of
the Class R Certificates to purchase any contract that has been converted to a
fixed interest rate.
The ratings assigned by Moody's to pass-through certificates address the
likelihood of the receipt by the related certificateholders of their allocable
share of principal and/or interest on the underlying assets. The ratings
assigned by S&P to the pass-through certificates address the likelihood that the
related certificateholder will receive its allocable share of timely payment of
interest and ultimate repayment of principal by the related Last Scheduled
Distribution Date. S&P and Moody's ratings take into consideration the credit
quality of the related underlying assets, any credit support arrangements,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on such underlying assets is adequate to make
payments required by such certificates. Among other things, a reduction in the
rating of MBIA's claims-paying ability may result in a reduction of the ratings
of the offered certificates. S&P and Moody's ratings on such certificates do
not, however, constitute a statement regarding frequency of prepayments on the
underlying assets or as to whether yield may be adversely affected as a result
thereof. An explanation of the significance of such ratings may be obtained
from Standard & Poor's Ratings Services, 55 Water Street, New York, New York
10041, telephone (212) 438-2000 and Moody's Investors Service, Inc., Moody's
Investors Service, Manufactured Housing Monitoring Department, 99 Church Street,
New York, NY 10007, telephone (212) 553-0300.
The seller has not requested a rating on the offered certificates by any
rating agency other than S&P and Moody's. However, there can be no assurance as
to whether any other rating agency will rate any or all of the offered
certificates, or if it did, what rating would be assigned to the offered
certificates by any such other rating
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agency. A rating on any or all of the offered certificates by certain other
rating agencies, if assigned at all, may be lower than the rating assigned to
such certificates by S&P and Moody's.
Legal Investment
The offered certificates will constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA") so
long as they are rated in the two highest categories by at least one nationally
recognized statistical rating organization and, as such, will constitute legal
investments for certain types of investors to the extent provided in SMMEA.
Such institutions should consult their own legal advisors in determining whether
and to what extent the offered certificates constitute legal investments for
such investors. See "Legal Investment" in the prospectus.
Method of Distribution
Credit Suisse First Boston Corporation has agreed, subject to the terms and
conditions of the underwriting agreement, dated the date of this prospectus
supplement, between the seller and Credit Suisse First Boston Corporation, as
underwriter, to purchase the offered certificates from the seller.
In the underwriting agreement, the underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the offered
certificates if any offered certificates are purchased. The underwriting
agreement provides that the seller will indemnify the underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments the underwriter may be required to make in
respect thereof. The underwriter will reimburse certain expenses of the seller.
The seller has been advised by the underwriter that it proposes initially to
offer the offered certificates to the public at the prices set forth in this
prospectus supplement, and to certain dealers at such prices, less the initial
concession not in excess of 0.165% of the Class A-1 Certificate Balance and
0.165% of the Class A-2 Certificate Balance. The underwriter may allow dealers,
and such dealers may allow, a concession not in excess of 0.135% of the Class A-
1 Certificate Balance and 0.135% of the Class A-2 Certificate Balance. After
the initial public offering of the offered certificates, the public offering
prices and such concessions may be changed. GreenPoint Credit estimates that it
will incur expenses of $500,000 in connection with this offering.
In connection with the sale of the offered certificates, the underwriter and
other persons participating in the sale may engage in transactions that
stabilize, maintain or otherwise affect the price of the offered certificates.
Specifically, the underwriter may over-allot in connection with the sale,
creating a short position in the offered certificates for its own account. To
cover over-allotments or to stabilize the price of the offered certificates, the
underwriter may bid for, and purchase, offered certificates in the open market.
The underwriter may also impose a penalty bid whereby they may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the offered
certificates, if the underwriter repurchases previously distributed offered
certificates in transactions to cover its short positions, in stabilization
transactions or otherwise. Finally, the underwriter may bid for, and purchase,
the offered certificates in market making transactions. These activities may
stabilize or maintain the market price of the offered certificates above market
levels that may otherwise prevail. The underwriter is not required to engage in
these activities and may end any of these activities at any time.
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Use of Proceeds
Substantially all of the net proceeds to be received from the sale of the
offered certificates will be used by the seller for general corporate purposes,
including the purchase of the contracts and the payment of other expenses
connected with pooling the contracts and issuing the offered certificates.
Legal Matters
Certain legal matters relating to the offered certificates, including legal
matters relating to material federal income tax consequences concerning the
offered certificates, will be passed upon for the seller by Orrick, Herrington &
Sutcliffe llp, Los Angeles, California and for the underwriter by Brown & Wood
llp, New York, New York.
Experts
The consolidated balance sheets of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1999 and December 31, 1998 and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for each of the three years in the period ended December 31, 1999,
incorporated by reference into this prospectus supplement, have been
incorporated in this prospectus supplement in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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Glossary
Below are abbreviated definitions of significant capitalized terms used in
this prospectus supplement. Capitalized terms used in this prospectus
supplement but not defined in this prospectus supplement shall have the meanings
assigned to them in the accompanying prospectus. The Agreement may contain more
complete definitions of the terms used in this prospectus supplement and
reference should be made to the Agreement for a more complete understanding of
all terms.
"Agreement" means that certain Pooling and Servicing Agreement, dated as of
December 1, 2000, by and between GreenPoint Credit, as seller and servicer, and
Bank One, National Association, as trustee.
"Available Distribution Amount" with respect to each Distribution Date, is
the sum of:
(a) the Monthly Advance (as defined under "Description of the Certificates-
-Advances" in this prospectus supplement) for the related Distribution
Date; and
(b) the amount in the Payment Account on the close of business on the last
day of the immediately preceding Collection Period, less the sum of:
(1) any repossession profits, of which there are expected to be a de
minimis amount;
(2) payments on contracts that have been repurchased as a result of a
breach of a representation or warranty that are received during or
after the month of repurchase;
(3) Excess Contract Payments and any payments not required to be
distributed to the certificateholders on the related Distribution
Date;
(4) liquidation expenses and certain taxes and insurance premiums
advanced by the servicer in respect of the manufactured homes (as
described under "Description of the Certificates--Advances" in this
prospectus supplement);
(5) reimbursements to the servicer for Nonrecoverable Advances and
Monthly Advances, to the extent permitted by the Agreement (as
described under "Description of the Certificates--Advances" in this
prospectus supplement); and
(6) the Monthly Servicing Fee.
"Available Funds Shortfall" means, with respect to any Distribution Date,
the amount, if any, by which the Available Distribution Amount, prior to giving
effect to any Letter of Credit Draw Amount or any Enhancement Payment for the
related Distribution Date, is less than the amount required to be distributed to
the Class A-1 Certificates and the Class A-2 Certificates on such Distribution
Date pursuant to clauses (1) and (2) of "Description of the Certificates--
Priority of Distributions" in this prospectus supplement.
"Class A-1 Formula Rate" means a per annum rate equal to LIBOR plus 0.29%.
"Class A-1 Net Funds Cap Carryover Amount" means the Net Funds Cap Carryover
Amount attributable to the Class A-1 Certificates, if any.
"Class A-2 Formula Rate" means, with respect to the first Distribution Date,
the rate as set by the broker-dealer not later than December 20, 2000, which
will not exceed the Maximum Auction Rate (as defined in Annex II hereto).
Thereafter, the "Class A-2 Formula Rate" will be the Auction Rate (as defined in
Annex II hereto) established for the Class A-2 Certificates for such
Distribution Date based upon the Auction Procedures described in Annex II
hereto.
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"Class A-2 Net Funds Cap Carryover Amount" means the Net Funds Cap Carryover
Amount attributable to the Class A-2 Certificates, if any.
"Clearstream, Luxembourg" means Clearstream Banking, societe anonyme, 67 Bd
Grande-Duchesse Charlotte, L-2967 Luxembourg.
"Closing Date" means December 21, 2000.
"Collection Period" means, with respect to any Distribution Date, the
calendar month preceding the month of that Distribution Date.
"Contract Schedule" means the schedule attached to the Agreement describing
the contracts to be conveyed to the Trust Fund.
"Credit Enhancement Amount" means, with respect to each Distribution Date,
the sum of any Letter of Credit Draw Amount and any Enhancement Payment.
"Credit Enhancement Default" means that the following events have occurred:
. a Letter of Credit Default has occurred and is continuing or the
letter of credit has been cancelled by the mutual agreement of MBIA
and GreenPoint Bank, without the consent of the seller, the servicer,
the trustee or the certificateholders and the letter of credit has not
been replaced or the letter of credit is insufficient; and
. an MBIA Default has occurred and is continuing.
"Cut-off Date" means November 30, 2000.
"Deficiency Event" means the date on which the Pool Scheduled Principal
Balance is less than the aggregate Certificate Balance of the offered
certificates.
"Determination Date" means the third business day prior to each Distribution
Date.
"Distribution Date" means the 17th day of each month, or, if the 17th day is
not a business day, the next succeeding business day, beginning in January 2001.
"Enhancement Payment" means, with respect to any Distribution Date, payments
payable under the certificate insurance policy equal to the amount by which the
aggregate amount distributable to the offered certificates described in clauses
(1) and (2) of "Description of the Certificates--Priority of Distributions"
exceeds the Available Distribution Amount plus the Letter of Credit Draw Amount,
if any.
"Excess Contract Payment" means a payment received on a contract that is in
excess of the Scheduled Payment or, generally, an integral multiple thereof, on
the contract, is not a partial principal prepayment or prepayment in full and is
not part of any liquidation proceeds. Excess Contract Payments will be held by
the trustee in the Payment Account and may be applied as described under
"Description of the Certificates--Advances" in this prospectus supplement.
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"Formula Principal Distribution Amount" means, with respect to each
Distribution Date, the sum of:
(1) all scheduled payments of principal due on each outstanding contract
during the Collection Period preceding the month in which the
Distribution Date occurs;
(2) the Scheduled Principal Balance of each contract which, during the
Collection Period preceding the month of such Distribution Date, was
purchased by GreenPoint Credit pursuant to the Agreement on account of
certain breaches of its representations and warranties or purchased by
the holder of the Class R Certificates pursuant to the Agreement on
account of any contract which has been converted to a fixed rate from a
variable rate;
(3) all partial prepayments of principal on the contracts received during
such preceding Collection Period;
(4) the Scheduled Principal Balance of each contract that was prepaid in
full during such preceding Collection Period;
(5) the Scheduled Principal Balance of each contract that became a
Liquidated Contract during such preceding Collection Period;
(6) the aggregate of all non-cash reductions in the Scheduled Principal
Balance of the contracts during such proceeding Collection Period
whether by bankruptcy or other similar proceeding or other adjustment
by the servicer in the normal course of its servicing activities; and
(7) any previously undistributed shortfalls in the amounts in clauses (1)
through (6) above in respect of prior Distribution Dates, other than
any such shortfall with respect to which an Enhancement Payment has
been made to the certificateholders.
"Insurance Agreement" means that certain Insurance and Reimbursement
Agreement (as amended or supplemented from time to time), dated as of the
Closing Date, among GreenPoint Credit, the initial holder of the Class R
Certificates, the trustee and MBIA.
"Interest Distribution Amount" means the amount of interest distributable to
each class of offered certificates as described under "Description of the
Certificates--Interest Distributions" in this prospectus supplement.
"Interest Period" means the period during which the offered certificates
accrue interest at their respective Pass-Through Rate as described under
"Description of the Certificates--Interest Distributions" in this prospectus
supplement.
"Letter of Credit Default" means the failure of GreenPoint Bank, or a
substitute letter of credit provider if the letter of credit has been replaced,
to make a payment under the letter of credit in accordance with its terms.
"Letter of Credit Draw Amount" means, with respect to any Distribution Date
and the immediately preceding Collection Period, and for so long as the letter
of credit remains in effect, the lesser of (1) the remaining amount available
under the letter of credit and (2) the Available Funds Shortfall.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period) which appears on Telerate
Screen Page 3750 as of 11:00 a.m., London time, on such date. If such rate does
not appear on Telerate Screen Page 3750, the rate for that day will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a period equal to the
relevant Interest Period (commencing
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on the first day of such Interest Period). On each LIBOR Determination Date, the
trustee will determine LIBOR for the next Interest Period (as defined in this
prospectus supplement) for the Class A-1 Certificates. The trustee will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that day will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that day will be the
arithmetic mean of the rates quoted by major banks in New York City, selected by
the servicer, at approximately 11:00 a.m., New York City time, on that day for
loans in United States dollars to leading European banks for a period equal to
the relevant Interest Period (commencing on the first day of such Interest
Period).
"LIBOR Determination Date" means, with respect to any Interest Period, the
second London business day preceding the commencement of that Interest Period.
For purposes of determining LIBOR, a "London business day" is any day on which
dealings in deposits of United States dollars are transacted in the London
interbank market.
"MBIA" means MBIA Insurance Corporation and its permitted successors and
assigns.
"MBIA Default" means the failure by MBIA to make a payment under the
certificate insurance policy in accordance with its terms.
"Monthly Advance" means an advance required to be made by the servicer
pursuant to the Agreement equal to the lesser of:
. delinquent Scheduled Payments of principal and interest on the contracts
that were due in the preceding Collection Period; or
. the amount, if any, by which scheduled distributions of principal and
interest due on the certificates exceed the amount specified in clause
(b) of the definition of the Available Distribution Amount on that
Distribution Date;
except to the extent that, in the servicer's sole judgment, the advance would
not be recoverable from related late payments, liquidation proceeds or
otherwise.
"Net Contract Rate" means, with respect to each contract, (a) for the first
twelve Distribution Dates, the related Contract Rate on the first day of the
related Collection Period minus 1.00% and (b) for each Distribution Date
thereafter, the related Contract Rate on the first day of the related Collection
Period minus 1.50%.
"Net Funds Cap" means, with respect to any Distribution Date, a per annum
rate equal to the average of the Net Contract Rates of the contracts as of the
first day of the related Collection Period, weighted on the basis of the
Scheduled Principal Balance of the contracts on the first day of the related
Collection Period.
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"Net Funds Cap Carryover Amount" means, with respect to the first
Distribution Date, zero. On each subsequent Distribution Date and with respect
to each of the Class A-1 Certificates and Class A-2 Certificates, the Net Funds
Cap Carryover Amount means the sum of:
(A) if on such Distribution Date, the Pass-Through Rate for the Class
A-1 Certificates or the Class A-2 Certificates is based upon the
Net Funds Cap, the excess of:
(1) the lesser of:
(a) the product of:
. the Weighted Average Maximum Cap; and
. the Class A-1 Certificate Balance or Class A-2
Certificate Balance, as applicable; and
(b) the amount of interest the Class A-1 Certificates or
Class A-2 Certificates, as applicable, would otherwise be
entitled to receive on such Distribution Date had such
rate been calculated at the Class A-1 Formula Rate or the
Class A-2 Formula Rate, as applicable, for such
Distribution Date; over
(2) the amount of interest payable on the Class A-1 Certificates
or Class A-2 Certificates, as applicable, at the Net Funds Cap
for such Distribution Date; and
(B) the Net Funds Cap Carryover Amount, together with accrued interest
thereon at the Class A-1 Pass-Through Rate or Class A-2 Pass-
Through Rate, as applicable, in effect on such Distribution Date,
for all previous Distribution Dates not previously paid pursuant to
clause (7) under "Description of the Certificates--Priority of
Distributions" in this prospectus supplement.
"Nonrecoverable Advance" means a Monthly Advance or an advance made by the
servicer in respect of certain taxes and insurance premiums not paid by an
obligor on a timely basis, in each case, that is subsequently deemed, in the
servicer's sole judgment, to be nonrecoverable from related late payments,
liquidation proceeds or otherwise.
"Percentage Interest" means the undivided percentage interest of a
certificate in the distributions on the class of certificates to which it
relates which will be equal to the percentage obtained from dividing the
denomination of the certificate by the Initial Certificate Balance of the class
of certificates to which it relates.
"Pool Scheduled Principal Balance" means, with respect to any Distribution
Date, the Cut-off Date Pool Principal Balance, less the aggregate of the Formula
Principal Distribution Amounts (exclusive of the amounts in clause (7) of the
definition thereof) for all prior Distribution Dates.
"Record Date" means, with respect to the first Distribution Date, the close
of business on the Closing Date and with respect to subsequent Distribution
Dates, the close of business on the last business day preceding the applicable
Distribution Date.
"Reference Banks" means leading banks selected by the trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market.
"Special Account" means the account established and maintained in accordance
with the terms of the Insurance Agreement.
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"Telerate Screen Page 3750" means the display page so designated on the
Bridge Telerate Capital Markets Report, or such other page as may replace page
3750 on such service for the purpose of displaying London interbank offered
rates of major banks. If the rate does not appear on that page, or some other
page as may replace that page on such service, or if the service is no longer
offered, some other service for displaying LIBOR or comparable rates as may be
selected by the trustee after consultation with the servicer.
"Trust Fund" means all of the assets of the trust fund created by GreenPoint
Credit to issue the GreenPoint Credit Manufactured Housing Contract Trust Pass-
Through Certificates, Series 2000-7.
"Twelve-Month LIBOR" means, the average of interbank offered rates for one
year U.S. dollar denominated deposits in the London market based on the
quotation of major banks listed as the "1-Year London Interbank Offered Rates
Index" found in the Wall Street Journal, Money & Investing section, under the
"Money Rates" table.
"Weighted Average Maximum Cap" means, with respect to any Distribution Date,
the weighted average of the Maximum Caps of the contracts on such Distribution
Date or with respect to any contract that has converted from a variable rate to
a fixed rate and has not been repurchased by the Class R certificateholders, the
applicable fixed rate, multiplied by a fraction, the numerator of which is the
actual number of days elapsed in the related Interest Period and the denominator
of which is 360.
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Annex I
Global Clearance, Settlement and
Tax Documentation Procedures
Except in certain limited circumstances, the globally offered GreenPoint
Credit Manufactured Housing Contract Trust Pass-Through Certificates, Series
2000-7 (the "Global Securities") will be available only in book-entry form.
Investors in the Global Securities may hold such Global Securities through any
of DTC, Clearstream, Luxembourg or Euroclear. The Global Securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities through
Clearstream, Luxembourg and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Clearstream, Luxembourg or Euroclear
and Participants holding certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Clearstream, Luxembourg and
Euroclear (in such capacity) and as Participants.
Non-U.S. holders (as described below) of Global Securities will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
Initial Settlement for the Global Securities will be in immediately available
funds.
Investors electing to hold their Global Securities through DTC (other than
through accounts at Euroclear or Clearstream, Luxembourg) will follow the
settlement practices applicable to U.S. corporate debt obligations. The
securities custody accounts of investors will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Euroclear or
Clearstream, Luxembourg accounts will follow the settlement procedures
applicable to conventional Eurobonds in registered form. Global Securities will
be credited to the securities custody accounts of Euroclear and Clearstream,
Luxembourg holders on the business day following the settlement date against
payment for value on the settlement date.
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Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trading of any Global Securities where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading Between DTC Participants. Secondary market trading between
Participants (other than Morgan Guaranty Trust Company of New York ("Morgan")
and Citibank, N.A. ("Citibank") as depositories for Euroclear and Clearstream,
Luxembourg respectively) will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
Trading Between Euroclear Participants and/or Clearstream, Luxembourg
Customers. Secondary market trading between Euroclear Participants and/or
Clearstream, Luxembourg customers will be settled using the procedures
applicable to conventional eurobonds in same-day funds.
Trading Between DTC Seller and Euroclear or Clearstream, Luxembourg Purchaser.
When Global Securities are to be transferred from the account of a Participant
(other than Morgan and Citibank as depositories for Euroclear and Clearstream,
Luxembourg, respectively) to the account of a Euroclear Participant or a
Clearstream, Luxembourg customer, the purchaser must send instructions to
Clearstream, Luxembourg before settlement date 12:30. Euroclear or Clearstream,
Luxembourg, as the case may be, will instruct Morgan or Citibank respectively,
to receive the Global Securities against payment. Payment will then be made by
Morgan or Citibank as the case may be, to the Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Euroclear
Participants' or Clearstream, Luxembourg customers' accounts. Credit for the
Global Securities will appear on the next day (European time) and cash debit
will be back-valued to, and the interest on the certificates will accrue from
the value date (which would be the preceding day when settlement occurs in New
York). If settlement is not completed on the intended value date (i.e. the
trade fails), the Euroclear or Clearstream, Luxembourg cash debit will be valued
instead as of the actual settlement date.
Euroclear Participants and Clearstream, Luxembourg customers will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Euroclear or Clearstream,
Luxembourg. Under this approach, they may take on credit exposure to Euroclear
or Clearstream, Luxembourg until the Securities are credited to their accounts
one-day later.
As an alternative, if Euroclear or Clearstream, Luxembourg has extended a line
of credit to them, participants/customers can elect not pre-position funds and
allow that credit line to be drawn upon to finance settlement. Under this
procedure, Euroclear Participants or Clearstream, Luxembourg customers
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the
value date. Therefore, in many cases, the investment income on Global
Securities earned during that one-day period may substantially reduce or offset
the amount of such overdraft charges, although this result will depend on each
participant's/customer's particular cost of funds.
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Because the settlement is taking place during New York business hours,
Participants can employ their usual procedures for sending Global Securities to
Morgan or Citibank for the benefit of Euroclear participants or Clearstream,
Luxembourg customers. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the Participant, a cross-market transaction will
settle no differently from a trade between two Participants.
Trading Between Euroclear or Clearstream, Luxembourg Seller and DTC Purchaser.
Due to time zone differences in their favor, Euroclear Participants and
Clearstream, Luxembourg customers may employ their customary procedures for
transactions in which Global Securities are to be transferred by the respective
clearing system, through Morgan or Citibank, to another Participant. The seller
must send instructions to Clearstream, Luxembourg before settlement date 12:30.
In these cases, Euroclear or Clearstream, Luxembourg will instruct Morgan or
Citibank, as appropriate, to credit the Global Securities to the Participant's
account against payment. The payment will then be reflected in the account of
the Euroclear Participant or Clearstream, Luxembourg customer the following
business day, and receipt of the cash proceeds in the Euroclear Participant's or
Clearstream, Luxembourg customers' account will be back-valued to the value date
(which would be the preceding day, when settlement occurs in New York). If the
Euroclear Participant or Clearstream, Luxembourg customer has a line of credit
with its respective clearing system and elects to draw on such line of credit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
may substantially reduce or offset any overdraft charges incurred over that one-
day period. If settlement is not completed on the intended value date (i.e.
the trade fails), receipt of the cash proceeds in the Euroclear Participant's or
Clearstream, Luxembourg customer's account would instead be valued as of the
actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Clearstream, Luxembourg or Euroclear (or through DTC if the holder has an
address outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including "original issue discount")
on registered debt issued by U.S. Persons, unless, under currently applicable
laws, (i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8 or Form W-8BEN). Beneficial owners
of Global Securities that are non-U.S. Persons can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status) or Form W-8BEN (Certificate of Foreign Status of Beneficial Owner's
United States Tax Withholding). After December 31, 2000, only Form W-8BEN will
be acceptable. If the information shown on Form W-8 or Form W-8BEN, changes, a
new Form W-8 or Form W-8BEN must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form 4224
or Form W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States) or
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Form W-8ECI (Certificate of Foreign Person's Claim for Exemption from
Withholding on Income Effectively Connected with the Conduct of a Trade or
Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001 or Form W-8BEN). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate) or Form W-8BEN
(Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding). If Form 1001 is provided and the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8 or Form W-8BEN. Form 1001 may be filed by the
Certificate Owner or his agent. After December 31, 2000, only Form W-8BEN will
be acceptable.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8, Form 1001 and Form 4224 are effective until
December 31, 2000. Form W-8BEN and Form W-8ECI are effective until the third
succeeding calendar year from the date the form is signed. The term "U.S.
Person" means (i) a citizen or resident of the United States, (ii) a corporation
or partnership organized in or under the laws of the United States, any State
thereof or the District of Columbia, or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes, regardless
of its source. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities. Further, the U.S. Treasury Department has recently finalized new
regulations that will revise some aspects of the current system for withholding
on amounts paid to foreign persons. Under these regulations, interest or
"original issue discount" paid to a nonresident alien would continue to be
exempt from U.S. withholding taxes (including backup withholding) provided that
the holder complies with the new certification procedures.
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Annex II
Auction Procedures
The following description of the Auction Procedures applies to the Class A-2
Certificates. The term "certificate," as used in this Annex, refers to the
Class A-2 Certificates, and the term "certificateholder" refers to
certificateholders holding the Class A-2 Certificates.
Definitions
Capitalized terms used in this Annex II and not otherwise defined have the
meanings ascribed to them in the accompanying prospectus supplement.
Additionally, the following terms have the meanings ascribed to them:
"All Hold Rate" means for any Interest Period ninety percent (90%) of LIBOR
for such period.
"Auction" means the implementation of the Auction Procedures on an Auction
Date.
"Auction Agent" means Bankers Trust Company, a New York banking corporation,
or any successor appointed under the Auction Agent Agreement.
"Auction Agent Agreement" means the Auction Agent Agreement, to be entered
into as of the Closing Date, among the trustee, the Auction Agent and GreenPoint
Bank, as holder of the Class R Certificates.
"Auction Agent Fee" means the fee paid to the Auction Agent pursuant to the
Agreement and the Auction Agent Agreement.
"Auction Date" means the Business Day immediately preceding the first day of
each Auction Period, commencing in January 2001, other than:
(1) each Auction Period commencing after the certificates are no longer Book-
Entry Certificates;
(2) each Auction Period commencing after and during the continuance of a MBIA
Default; or
(3) each Auction Period commencing less than two Business Days after the cure
or waiver of a MBIA Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction Periods
may be changed pursuant to the Auction Agent Agreement, as described in this
prospectus supplement.
"Auction Period" means the Interest Period for the Class A-2 Certificates.
"Auction Procedures" means the procedures set forth in the Agreement, and
described in this prospectus supplement by which the Auction Rate is determined.
"Auction Rate" means the rate of interest per annum that results from the
implementation of the Auction Procedures.
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"Authorized Denominations" means $25,000 and integral multiples of $25,000 in
excess thereof.
"Broker-Dealer" means Credit Suisse First Boston Corporation or any other
broker or dealer (each as defined in the Securities Exchange Act of 1934, as
amended), commercial bank or other entity permitted by law to perform the
functions required of a Broker-Dealer set forth in the Auction Procedures that
(a) is a Participant (or an affiliate of a Participant), (b) has been appointed
as such by the servicer, with the consent of the Market Agent and (c) has
entered into a Broker-Dealer Agreement that is in effect on the date of
reference.
"Broker-Dealer Agreement" means the Broker-Dealer Agreement, to be entered
into as of the Closing Date, among the Auction Agent, the Broker-Dealer and
GreenPoint Bank, as holder of the Class R Certificates and each other agreement
among the Auction Agent, the holder of the Class R Certificates and an eligible
Broker-Dealer, as from time to time, amended or supplemented.
"Broker-Dealer Fee" means the fee paid to the Broker-Dealer pursuant to the
Agreement and the Broker-Dealer Agreement.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a day
on which the New York Stock Exchange or banking institutions in the States of
New York, Illinois or California are authorized or obligated by law or executive
order to be closed.
"Existing Certificateholder" means (i) with respect to and for the purpose of
dealing with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Certificateholder Registry at the close of
business on the Business Day immediately preceding such Auction and (ii) with
respect to and for the purpose of dealing with the Broker-Dealer in connection
with an Auction, a Person who is a beneficial owner of any certificate.
"Existing Certificateholder Registry" means the registry of Persons who are
owners of the Class A-2 Certificates maintained by the Auction Agent as provided
in the Auction Agent Agreement.
"Market Agent" means Credit Suisse First Boston Corporation.
"Maximum Auction Rate" means (A) LIBOR plus 1.00% (if the ratings assigned by
the Rating Agencies to the Class A-2 Certificates are "AAA" and "Aaa"), (B)
LIBOR plus 1.25% (if the ratings assigned by the Rating Agencies to the Class A-
2 Certificates are "AA" and "Aa2" or better, unless the requirements of (A)
above are satisfied), (C) LIBOR plus 2.00% (if the ratings assigned by the
Rating Agencies to the Class A-2 Certificates are "A" and "A2" or better, unless
the requirements of (A) or (B) above are satisfied) or (D) LIBOR plus 3.50% (if
any one of the ratings assigned by the Rating Agencies to the Class A-2
Certificates is less than "A" or "A2"). For purposes of the Auction Agent and
the Auction Procedures, the ratings referred to in this definition shall be the
last rating of which the Auction Agent has been given notice pursuant to the
Auction Agent Agreement.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any such agency or political subdivision thereof.
"Potential Certificateholder" means any Person (including an Existing
Certificateholder that is (i) a Broker-Dealer when dealing with the Auction
Agent and (ii) a potential beneficial owner when dealing
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with a Broker-Dealer) who may be interested in acquiring Class A-2 Certificates
(or, in the case of an Existing Certificateholder thereof, an additional
principal amount of Class A-2 Certificates).
"Rate Adjustment Date" means the date on which the Class A-2 Pass-Through Rate
is effective and means, with respect to each certificate, the date of
commencement of each Auction Period.
"Rate Determination Date" means the Auction Date, or if no Auction Date is
applicable, the Business Day immediately preceding the date of commencement of
an Auction Period.
"Reference Banks" means leading banks selected by the Auction Agent and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market.
Existing Certificateholders and Potential Certificateholders
Participants in each Auction may include: (i) Existing Certificateholders as
of the close of business on the Business Day preceding each Auction Date
according to the records of the Auction Agent; and (ii) Potential
Certificateholders. See "--Broker-Dealer."
By purchasing a Class A-2 Certificate, whether in an Auction or otherwise,
each prospective purchaser of the Class A-2 Certificates or its Broker-Dealer
must agree and will be deemed to have agreed: (i) to participate in Auctions on
the terms described in this prospectus supplement; (ii) so long as the
beneficial ownership of the Class A-2 Certificates is maintained in book-entry
form to sell, transfer or otherwise dispose of the Class A-2 Certificates only
pursuant to a Bid (as defined below) or a Sell Order (as defined below) in an
Auction, or to or through a Broker-Dealer, provided that in the case of all
transfers other than those pursuant to an Auction, the Existing
Certificateholder of the Class A-2 Certificates so transferred, its Participant
or Broker-Dealer advises the Auction Agent of such transfer; (iii) to have its
beneficial ownership of the Class A-2 Certificates maintained at all times in
book-entry form for the account of its Participant, which in turn will maintain
records of such beneficial ownership, and to authorize such Participant to
disclose to the Auction Agent such information with respect to such beneficial
ownership as the Auction Agent may request; (iv) that a Sell Order placed by an
Existing Certificateholder will constitute an irrevocable offer to sell the
principal amount of the Class A-2 Certificate specified in such Sell Order; (v)
that a Bid placed by an Existing Certificateholder will constitute an
irrevocable offer to sell the principal amount of the Class A-2 Certificates
specified in such Bid if the rate specified in such Bid is greater than, or in
some cases equal to, the Class A-2 Pass-Through Rate determined as described in
this prospectus supplement; and (vi) that a Bid placed by a Potential
Certificateholder will constitute an irrevocable offer to purchase the amount,
or a lesser principal amount, of the Class A-2 Certificate specified in such Bid
if the rate specified in such Bid is, respectively, less than or equal to the
Class A-2 Pass-Through Rate then in effect, determined as described in this
prospectus supplement.
The principal amount of the Class A-2 Certificates purchased or sold may be
subject to proration procedures on the Auction Date. Each purchase or sale of
the Class A-2 Certificates on the Auction Date will be made for settlement on
the first day of the Auction Period immediately following such Auction Date at a
price equal to 100% of the principal amount thereof, plus accrued but unpaid
interest thereon. The Auction Agent is entitled to rely upon the terms of any
Order submitted to it by a Broker-Dealer.
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Auction Agent
Bankers Trust Company, a New York banking corporation, will be appointed as
Auction Agent to serve as agent for the Trust Fund in connection with Auctions.
The trustee will enter into the Auction Agent Agreement with Bankers Trust
Company as the Auction Agent. Any substitute Auction Agent ("Substitute Auction
Agent") will be (i) a bank, national banking association or trust company duly
organized under the laws of the United States of America or any state or
territory thereof having its principal place of business in the Borough of
Manhattan, New York, or such other location as approved by the trustee and the
Market Agent in writing and having a combined capital stock or surplus of at
least $50,000,000, or (ii) a member of the National Association of Securities
Dealers, Inc. having a capitalization of at least $50,000,000, and, in either
case, authorized by law to perform all the duties imposed upon it under the
Auction Agent Agreement and approved by MBIA in writing. The Auction Agent may
at any time resign by giving at least 90 days notice to the trustee, MBIA and
the Market Agent. The Auction Agent may be removed at any time by the trustee
upon the written direction of MBIA, or, with the written consent of MBIA, the
certificateholders holding 66-2/3% of the aggregate principal amount of the
Class A-2 Certificates then outstanding, by an instrument signed by MBIA or such
certificateholders or their attorneys and filed with the Auction Agent, the
trustee and the Market Agent upon at least 90 days notice. Neither resignation
nor removal of the Auction Agent pursuant to the preceding two sentences will be
effective until and unless a Substitute Auction Agent has been appointed, has
been approved in writing by MBIA and has accepted such appointment. If required
by MBIA, certificateholders holding 66-2/3% of the aggregate principal amount of
the Class A-2 Certificates then outstanding or by the Market Agent, a substitute
Auction Agent Agreement shall be entered into with a Substitute Auction Agent.
Notwithstanding the foregoing, the Auction Agent may terminate the Auction Agent
Agreement if, within 25 days after notifying the trustee, MBIA and the Market
Agent in writing that it has not received payment of any Auction Agent Fee due
it in accordance with the Auction Agent Agreement, the Auction Agent does not
receive such payment.
If the Auction Agent should resign or be removed or be dissolved, or if the
property or affairs of the Auction Agent shall be taken under the control of any
state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, the trustee, with the consent of MBIA
(after receipt of a certificate from the Market Agent confirming that any
proposed Substitute Auction Agent meets the requirements described in the
immediately preceding paragraph above), shall use its best efforts to appoint a
Substitute Auction Agent.
The Auction Agent is acting as agent for the Trust Fund in connection with
Auctions. In the absence of bad faith, negligent failure to act or negligence
on its part, the Auction Agent will not be liable for any action taken, suffered
or omitted or any error of judgment made by it in the performance of its duties
under the Auction Agent Agreement and will not be liable for any error of
judgment made in good faith unless the Auction Agent will have been negligent in
ascertaining (or failing to ascertain) the pertinent facts. The Auction Agent
Fee will be paid in the order of priority described in this prospectus
supplement. Pursuant to the Auction Agent Agreement, the holder of the Class R
Certificates will guaranty the Auction Agent the Auction Agent Fee. To the
extent funds are available as described in "Description of the Certificates--
Priority of Distributions" in this prospectus supplement, the Trust Fund will
indemnify and hold harmless the Auction Agent for and against any loss,
liability or expense incurred without negligence or bad faith on the Auction
Agent's part, arising out of or in connection with the acceptance or
administration of its agency under the Auction Agent Agreement and any Broker-
Dealer Agreement, including the reasonable costs and expenses (including the
reasonable fees and
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expenses of its counsel) of defending itself against any such claim or liability
in connection with its exercise or performance of any of its respective duties
thereunder and of enforcing this indemnification provision; provided that the
Trust Fund will not indemnify the Auction Agent as described in this paragraph
for any fees and expenses incurred by the Auction Agent in the normal course of
performing its duties under the Auction Agent Agreement and under any Broker-
Dealer Agreement, such fees and expenses being payable as described above.
Broker-Dealer
Existing Certificateholders and Potential Certificateholders may participate
in Auctions only by submitting orders (in the manner described below) through a
Broker-Dealer.
Each Broker-Dealer is entitled to a Broker-Dealer Fee, which is payable in the
priority described in this prospectus supplement and guaranteed by the holder of
the Class R Certificates pursuant to the related Broker-Dealer Agreement.
Auction Procedures
General
Pursuant to the Auction Agent Agreement, Auctions to establish the Auction
Rate for the Class A-2 Certificates issued by the Trust Fund will be held on
each applicable Auction Date, except as described below, by application of the
Auction Procedures described in this prospectus supplement.
In the event the ownership of the Class A-2 Certificates is no longer
maintained in book-entry form by DTC, no further Auctions will be held.
The Auction Agent will calculate the Maximum Auction Rate, the All Hold Rate
and LIBOR on each Auction Date. The trustee will calculate and, no later than
the Business Day preceding each Auction Date, will report to the Auction Agent
in writing, the Net Funds Cap. If the Class A-2 Certificates are no longer
maintained in book-entry form, the trustee will calculate the Maximum Auction
Rate on the Business Day immediately preceding the first day of each Auction
Period. If a MBIA Default has occurred, the trustee will calculate the Maximum
Auction Rate on the Rate Determination Date for (i) each Auction Period
commencing after the occurrence and during the continuance of such MBIA Default
and (ii) any Auction Period commencing less than two Business Days after the
cure of any MBIA Default. The Auction Agent will determine LIBOR for each
Auction Period; provided, that if the ownership of the certificates is no longer
maintained in book-entry form, or if a MBIA Default has occurred, then the
trustee will determine LIBOR for each such Auction Period. The determination by
the trustee or the Auction Agent, as the case may be, of LIBOR will (in the
absence of manifest error) be final and binding upon the certificateholders and
all other parties. If calculated or determined by the Auction Agent, the
Auction Agent will promptly advise the trustee of LIBOR.
Submission of Orders
So long as the ownership of the Class A-2 Certificates is maintained in book-
entry form, an Existing Certificateholder may sell, transfer or otherwise
dispose of Class A-2 Certificates pursuant to a Bid or Sell Order (as
hereinafter defined) placed in an Auction only through a Broker-Dealer, provided
that, in
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the case of all transfers other than pursuant to Auctions, such Existing
Certificateholder, its Broker-Dealer or its Participant advises the Auction
Agent of such transfer. Auctions for the Class A-2 Certificates will be
conducted on each applicable Auction Date, if there is an Auction Agent on such
Auction Date, in the following manner.
Prior to the "Submission Deadline" (defined as 1:00 p.m., eastern time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time) on each Auction Date relating to a certificate:
(a) each Existing Certificateholder may submit to a Broker-Dealer by
telephone or otherwise information as to: (i) the principal amount of Class A-2
Certificates held by such Existing Certificateholder which such Existing
Certificateholder desires to continue to hold without regard to the Class A-2
Pass-Through Rate for the next succeeding Auction Period (a "Hold Order"); (ii)
the principal amount of Class A-2 Certificates which such Existing
Certificateholder offers to sell if the Class A-2 Pass-Through Rate for the next
succeeding Auction Period will be less than the rate per annum specified by such
Existing Certificateholder (a "Bid"); and/or (iii) the principal amount of Class
A-2 Certificates held by such Existing Certificateholder which such Existing
Certificateholder offers to sell without regard to the Class A-2 Pass-Through
Rate for the next succeeding Auction Period (a "Sell Order"); and
(b) the Broker-Dealer may contact Potential Certificateholders to determine
the principal amount of Class A-2 Certificates which each such Potential
Certificateholder offers to purchase, if the Class A-2 Pass-Through Rate for the
next succeeding Auction Period will not be less than (and in some cases equal
to) the rate per annum specified by such Potential Certificateholder (also a
"Bid").
Each Hold Order, Bid and Sell Order will be an "Order." Each Existing
Certificateholder and each Potential Certificateholder placing an Order is
referred to as a "Bidder."
Subject to the provisions described below under "Validity of Orders," a Bid by
an Existing Certificateholder will constitute an irrevocable offer to sell: (i)
the principal amount of Class A-2 Certificates specified in such Bid if the
Class A-2 Pass-Through Rate will be less than the rate specified in such Bid,
(ii) such principal amount or a lesser principal amount of Class A-2
Certificates to be determined as described below in "Acceptance and Rejection of
Orders," if the Class A-2 Pass-Through Rate will be equal to the rate specified
in such Bid or (iii) such principal amount or a lesser principal amount of the
Class A-2 Certificates to be determined as described below under "Acceptance and
Rejection of Orders," if the Class A-2 Pass-Through Rate is less than the rate
specified in such Bid and Sufficient Bids (as defined below) have not been made.
Subject to the provisions described below under "Validity of Orders," a Sell
Order by an Existing Certificateholder will constitute an irrevocable offer to
sell: (i) the principal amount of the Class A-2 Certificate specified in such
Sell Order or (ii) such principal amount or a lesser principal amount of Class
A-2 Certificate as described below under "Acceptance and Rejection of Orders,"
if Sufficient Bids have not been made.
Subject to the provisions described below under "Validity of Orders," a Bid by
a Potential Certificateholder will constitute an irrevocable offer to purchase
(i) the principal amount of the Class A-2 Certificate specified in such Bid if
the Class A-2 Pass-Through Rate will be higher than the
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<PAGE>
rate specified in such Bid or (ii) such principal amount or a lesser principal
amount as described below in "Acceptance and Rejection of Orders," if the Class
A-2 Pass-Through Rate is equal to the rate specified in such Bid.
The Broker-Dealer will submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders obtained by such Broker-
Dealer and will specify with respect to each such Order: (i) the name of the
Bidder placing such Order; (ii) the aggregate principal amount that is the
subject of such order; (iii) to the extent that such Bidder is an Existing
Certificateholder: (a) the principal amount of the Class A-2 Certificates
subject to any Hold Order placed by such Existing Certificateholder; (b) the
principal amount subject to any Bid placed by such Existing Certificateholder
and the rate specified in such Bid; and (c) the principal amount subject to any
Sell Order placed by such Existing Certificateholder, and (iv) to the extent
such Bidder is a Potential Certificateholder, the rate specified in such
Potential Certificateholder's Bid.
If any rate specified in any Bid contains more than three figures to the right
of the decimal point, the Auction Agent will round such rate up to the next
highest one-thousandth (.001) of one percent.
If an Order or Orders covering the Class A-2 Certificates held by any Existing
Certificateholder are not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent will deem a Hold Order to have been submitted on
behalf of such Existing Certificateholder covering the principal amount of Class
A-2 Certificates held by such Existing Certificateholder and not subject to an
Order submitted to the Auction Agent.
Neither the seller, the trustee nor the Auction Agent will be responsible for
any failure of the Broker-Dealer to submit an Order to the Auction Agent on
behalf of any Existing Certificateholder or Potential Certificateholder.
An Existing Certificateholder may submit multiple Orders, of different types
and specifying different rates, in an Auction with respect to Class A-2
Certificates then held by such Existing Certificateholder. An Existing
Certificateholder that offers to purchase additional Class A-2 Certificates is,
for purposes of such offer, treated as a Potential Certificateholder.
Any Bid specifying a rate higher than the Maximum Auction Rate will (i) be
treated as a Sell Order if submitted by an Existing Certificateholder and (ii)
not be accepted if submitted by a Potential Certificateholder.
Validity of Orders
If any Existing Certificateholder submits through a Broker-Dealer to the
Auction Agent one or more Orders covering in the aggregate more than the
principal amount of the Class A-2 Certificates held by such Existing
Certificateholder, such Orders will be considered valid as follows and in the
order of priority described below.
Hold Orders. All Hold Orders will be considered valid, but only up to the
aggregate principal amount of the Class A-2 Certificates held by such Existing
Certificateholder.
Bids. Any Bid will be considered valid up to an amount equal to the excess of
the principal amount of the Class A-2 Certificates held by such Existing
Certificateholder over the aggregate principal amount
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<PAGE>
of the Class A-2 Certificates subject to any Hold Orders referred to above.
Subject to the preceding sentence, if multiple Bids with the same rate are
submitted on behalf of such Existing Certificateholder and the aggregate
principal amount of Class A-2 Certificates subject to such Bids is greater than
such excess, such Bids will be considered valid up to an amount equal to such
excess. Subject to the two preceding sentences, if more than one Bid with
different rates is submitted on behalf of such Existing Certificateholder, such
Bids will be considered valid first in the ascending order of their respective
rates until the highest rate is reached at which such excess exists and then at
such rate up to the amount of such excess. In any event, the aggregate principal
amount of Class A-2 Certificates, if any, subject to Bids not valid under the
provisions described above will be treated as the subject of a Bid by a
Potential Certificateholder at the rate therein specified.
Sell Orders. All Sell Orders will be considered valid up to an amount equal
to the excess of the principal amount of Class A-2 Certificates held by such
Existing Certificateholder over the aggregate principal amount of certificates
subject to valid Hold Orders and valid Bids as referred to above.
If more than one Bid for a Class A-2 Certificate is submitted on behalf of any
Potential Certificateholder, each Bid submitted will be a separate Bid with the
rate and principal amount therein specified. Any Bid or Sell Order submitted by
an Existing Certificateholder covering an aggregate principal amount of Class A-
2 Certificates not equal to an Authorized Denomination or an integral multiple
thereof will be rejected and will be deemed a Hold Order. Any Bid submitted by
a Potential Certificateholder covering an aggregate principal amount of Class A-
2 Certificates not equal to an Authorized Denomination or an integral multiple
thereof will be rejected. Any Order submitted in an Auction by the Broker-
Dealer to the Auction Agent prior to the Submission Deadline on any Auction Date
will be irrevocable.
A Hold Order, a Bid or a Sell Order that has been determined valid pursuant to
the procedures described above is referred to as a "Submitted Hold Order," a
"Submitted Bid" and a "Submitted Sell Order," respectively (collectively,
"Submitted Orders").
Determination of Sufficient Bid and Bid Auction Rate
Not earlier than the Submission Deadline on each Auction Date, the Auction
Agent will assemble all valid Submitted Orders and will determine:
(a) the excess of the total principal amount of Class A-2 Certificates over
the sum of the aggregate principal amount of such certificates subject to
Submitted Hold Orders (such excess being in this prospectus hereinafter referred
to as the "Available Certificates");
(b) from such Submitted Orders whether the aggregate principal amount of
Class A-2 Certificates subject to Submitted Bids by Potential Certificateholders
specifying one or more rates equal to or lower than the Maximum Auction Rate
exceeds or is equal to the sum of (i) the aggregate principal amount of Class A-
2 Certificates subject to Submitted Bids by Existing Certificateholders
specifying one or more rates higher than the Maximum Auction Rate and (ii) the
aggregate principal amount of Class A-2 Certificates subject to Submitted Sell
Orders (in the event such excess or such equality exists other than because all
of the Class A-2 Certificates are subject to Submitted Hold Orders, such
Submitted Bids by Potential Certificateholders above will be in this prospectus
hereinafter referred to collectively as "Sufficient Bids"); and
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<PAGE>
(c) Sufficient Bids exist, the "Bid Auction Rate," which will be the lowest
rate specified in such Submitted Bids such that if:
(i) each such Submitted Bid from Existing Certificateholders of such
certificate specifying such lowest rate and all other Submitted Bids
from Existing Certificateholders of such certificate specifying
lower rates were rejected (thus entitling such Existing
Certificateholders to continue to hold the principal amount of
certificates subject to such Submitted Bids); and
(ii) each such Submitted Bid from Potential Certificateholders of such
certificate specifying such lowest rate and all other Submitted Bids
from Potential Certificateholder specifying lower rates, were
accepted;
the result would be that such Existing Certificateholders described in
subparagraph (c)(i) above would continue to hold an aggregate principal amount
of certificates which, when added to the aggregate principal amount of
certificates to be purchased by such Potential Certificateholders described in
this subparagraph (c)(ii) would equal not less than the Available Certificates.
Determination of Auction Rate and Class A-2 Pass-Through Rate, Notice
Promptly after the Auction Agent has made the determinations described above,
the Auction Agent is to advise the trustee of the Net Funds Cap, the Maximum
Auction Rate, the All Hold Rate and the components thereof on the Auction Date,
and based on such determinations, the Auction Rate for the next succeeding
Auction Period as follows:
(a) if Sufficient Bids exist, that the Auction Rate for the next succeeding
Auction Period will be equal to the Bid Auction Rate so determined;
(b) if Sufficient Bids do not exist (other than because all of the
certificates are subject to Submitted Hold Orders), that the Auction Rate for
the next succeeding Auction Period will be equal to the Maximum Auction Rate; or
(c) if all the Class A-2 Certificates are subject to Submitted Hold Orders,
that the Auction Rate for the next succeeding Auction Period will be equal to
the All Hold Rate.
Promptly after the Auction Agent has determined the Auction Rate, the Auction
Agent will determine and advise the trustee of the Class A-2 Pass-Through Rate,
which rate will be the lesser of (a) the Auction Rate and (b) the Net Funds Cap.
At any time when a scheduled Auction is not being held for any reason, the
Auction Rate will be the Maximum Auction Rate for the applicable period.
Acceptance and Rejection of Orders
Existing Certificateholders will continue to hold the principal amount of
Class A-2 Certificates that are subject to Submitted Hold Orders. If the Net
Funds Cap is equal to or greater than the Bid Auction
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Rate and Sufficient Bids, as described above under "Determination of Sufficient
Bids and Bid Auction Rate," have been received by the Auction Agent, the Bid
Auction Rate will be the Class A-2 Pass-Through Rate, and Submitted Bids and
Submitted Sell Orders will be accepted or rejected and the Auction Agent will
take such other action as provided in the Auction Agent Agreement and described
below under "Sufficient Bids."
If the Net Funds Cap is less than the Auction Rate, the Class A-2 Pass-Through
Rate will be the Net Funds Cap. If the Auction Agent has not received
Sufficient Bids as described above under "Determination of Sufficient Bids and
Bid Auction Rate" (other than because all of the certificates are subject to
Submitted Holds Orders), the Class A-2 Pass-Through Rate will be the lesser of
(a) the Maximum Auction Rate and (b) the Net Funds Cap. In any of the cases
described above in this paragraph, Submitted Orders will be accepted or rejected
and the Auction Agent will take such other action as described below under
"Insufficient Bids."
Sufficient Bids. If Sufficient Bids have been made with respect to the Class
A-2 Certificates and the Net Funds Cap is equal to or greater than the Bid
Auction Rate (in which case the Class A-2 Pass-Through Rate would be the Bid
Auction Rate), all Submitted Sell Orders will be accepted and, subject to the
denomination requirements described below, Submitted Bids will be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids will be rejected:
(a) Existing Certificateholders' Submitted Bids specifying any rate that is
higher than the Class A-2 Pass-Through Rate will be accepted, thus requiring
each such Existing Certificateholder to sell the aggregate principal amount of
Class A-2 Certificates subject to such Submitted Bids;
(b) Existing Certificateholders' Submitted Bids specifying any rate that is
lower than the Class A-2 Pass-Through Rate will be rejected, thus entitling each
such Existing Certificateholder to continue to hold the aggregate principal
amount of certificates subject to such Submitted Bids;
(c) Potential Certificateholders' Submitted Bids specifying any rate that
is lower than (or in some cases, equal to) the Class A-2 Pass-Through Rate will
be accepted;
(d) Each Existing Certificateholder's Submitted Bid specifying a rate that
is equal to the Class A-2 Pass-Through Rate will be rejected, thus entitling
such Existing Certificateholder to continue to hold the aggregate principal
amount of Class A-2 Certificates subject to such Submitted Bid, unless the
aggregate principal amount of Class A-2 Certificates subject to such Submitted
Bids will be greater than the principal amount of Class A-2 Certificates (the
"remaining principal amount") equal to the excess of the Available Certificates
over the aggregate principal amount of Class A-2 Certificates subject to
Submitted Bids described in subparagraphs (b) and (c) above, in which event such
Submitted Bid of such Existing Certificateholder will be rejected in part and
such Existing Certificateholder will be entitled to continue to hold the
principal amount of Class A-2 Certificates subject to such Submitted Bid, but
only in an amount equal to the aggregate principal amount of Class A-2
Certificates obtained by multiplying the remaining principal amount by a
fraction, the numerator of which will be the principal amount of certificates
held by such Existing Certificateholder subject to such Submitted Bid and the
denominator of which will be the sum of the principal amount of Class A-2
Certificates subject to such Submitted Bids made by all such Existing
Certificateholders that specified a rate equal to the Class A-2 Pass-Through
Rate; and
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(e) Each Potential Certificateholder's Submitted Bid specifying a rate that
is equal to the Class A-2 Pass-Through Rate will be accepted, but only in an
amount equal to the principal amount of Class A-2 Certificates obtained by
multiplying the excess of the aggregate principal amount of Available
Certificates over the aggregate principal amount of Class A-2 Certificates
subject to Submitted Bids described in subparagraphs (b), (c) and (d) above by a
fraction, the numerator of which will be the aggregate principal amount of Class
A-2 Certificates subject to such Submitted Bid and the denominator of which will
be the sum of the principal amount of Class A-2 Certificates subject to
Submitted Bids made by all such Potential Certificateholders that specified a
rate equal to the Class A-2 Pass-Through Rate.
Insufficient Bids. If Sufficient Bids have not been made with respect to the
Class A-2 Certificates (other than because all of the certificates are subject
to Submitted Hold Orders) or if the Net Funds Cap is less than the Bid Auction
Rate (in which case the Class A-2 Pass-Through Rate will be the Net Funds Cap),
subject to the denomination requirements described below, Submitted Orders will
be accepted or rejected as follows in the following order of priority and all
other Submitted Bids will be rejected:
(a) Existing Certificateholders' Submitted Bids specifying any rate that is
equal to or lower than the Class A-2 Pass-Through Rate will be rejected, thus
entitling such Existing Certificateholders to continue to hold the aggregate
principal amount of Class A-2 Certificates subject to such Submitted Bids;
(b) Potential Certificateholders' Submitted Bids specifying any rate that
is equal to or lower than the Class A-2 Pass-Through Rate will be accepted, and
specifying any rate that is higher than the Class A-2 Pass-Through Rate will be
rejected; and
(c) each Existing Certificateholder's Submitted Bid specifying any rate
that is higher than the Class A-2 Pass-Through Rate and the Submitted Sell Order
of each Existing Certificateholder will be accepted, thus entitling each
Existing Certificateholder that submitted any such Submitted Bid or Submitted
Sell Order to sell such Class A-2 Certificates subject to such Submitted Bid or
Submitted Sell Order, but in both cases only in an amount equal to the aggregate
principal amount of Class A-2 Certificates obtained by multiplying the aggregate
principal amount of Class A-2 Certificates subject to Submitted Bids described
in subparagraph (b) above by a fraction, the numerator of which will be the
aggregate principal amount of Class A-2 Certificates held by such Existing
Certificateholder subject to such Submitted Bid or Submitted Sell Order and the
denominator of which will be the aggregate principal amount of Class A-2
Certificates subject to all such Submitted Bids and Submitted Sell Orders.
All Hold Orders. If all Class A-2 Certificates are subject to Submitted Hold
Orders, all Submitted Bids will be rejected.
Authorized Denominations Requirement. If, as a result of the procedures
described above under "Sufficient Bids" and "Insufficient Bids", any Existing
Certificateholder would be entitled or required to sell, or any Potential
Certificateholder would be entitled or required to purchase, a principal amount
of Class A-2 Certificates that is not equal to an Authorized Denomination or an
integral multiple thereof, the Auction Agent will, in such manner as in its sole
discretion it will determine, round up or down the principal amount of Class A-2
Certificates to be purchased or sold by any Existing Certificateholder or
Potential Certificateholder so that the principal amount of Class A-2
Certificates purchased or sold by each Existing Certificateholder or Potential
Certificateholder will be equal to an Authorized
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Denomination or an integral multiple in excess thereof. If, as a result of the
procedures described above under "Insufficient Bids", any Potential
Certificateholder would be entitled or required to purchase less than a
principal amount of Class A-2 Certificates equal to an Authorized Denomination
or any integral multiple thereof, the Auction Agent will, in such manner as in
its sole discretion it will determine, allocate Class A-2 Certificates for
purchase among Potential Certificateholders so that only Class A-2 Certificates
in an Authorized Denomination or any integral multiples in excess thereof are
purchased by any Potential Certificateholder, even if such allocation results in
one or more of such Potential Certificateholders not purchasing any Class A-2
Certificates.
Based on the results of each Auction, the Auction Agent is to determine the
aggregate principal amount of Class A-2 Certificates to be purchased and the
aggregate principal amount of Class A-2 Certificates to be sold by Potential
Certificateholders and Existing Certificateholders on whose behalf the Broker-
Dealer submitted Bids or Sell Orders and to the extent that such aggregate
principal amount of the Class A-2 Certificates to be sold differs from such
aggregate principal amount of Class A-2 Certificates to be purchased, determine
to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers
such Broker-Dealer will deliver, or from which Broker-Dealers acting for one or
more sellers such Broker-Dealer will receive, as the case may be, Class A-2
Certificates.
Any calculation by the Auction Agent (or the trustee, if applicable) of the
Class A-2 Pass-Through Rate, LIBOR, the All Hold Rate, the Net Funds Cap and the
Maximum Auction Rate will, in the absence of manifest error, be binding on all
other parties.
Settlement Procedures
The Auction Agent is required to advise the Broker-Dealer of the Class A-2
Pass-Through Rate for the Class A-2 Certificates for the next Auction Period
and, whether the Bids or Sell Orders were accepted or rejected, in whole or in
part by telephone not later than 3:00 p.m., eastern time, on the Auction Date.
The Broker-Dealer is required to then advise such Bidder of the applicable Class
A-2 Pass-Through Rate for the next Interest Period and, if such Order was a Bid
or a Sell Order, whether such Bid or Sell Order was accepted or rejected, in
whole or in part, confirm purchases and sales with each Existing
Certificateholder or Potential Certificateholder, as the case may be, purchasing
or selling Class A-2 Certificates as a result of the Auction and advise each
Existing Certificateholder or Potential Certificateholder, as the case may be,
purchasing or selling Class A-2 Certificates as a result of the Auction to give
instructions to its Participant to pay the purchase price against delivery of
such Class A-2 Certificates or to deliver such Class A-2 Certificates against
payment therefor, as appropriate. Pursuant to the Auction Agent Agreement, the
Auction Agent is to record each transfer of Class A-2 Certificates on the
Existing Certificateholders Registry to be maintained by the Auction Agent.
In accordance with DTC's normal procedures, on the Business Day after the
Auction Date, the transactions described above will be executed through DTC, so
long as DTC is the Relevant Depository, and the accounts of the respective
Participants at DTC will be debited and credited and the Class A-2 Certificates
delivered as necessary to effect the purchases and sales of the Class A-2
Certificates as determined in the Auction. Purchasers are required to make
payment through their Participants in same-day funds to DTC against delivery
through their Participants. DTC will make payment in accordance with its normal
procedures, which now provide for payment against delivery by its Participants
in immediately available funds.
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If any Existing Certificateholder selling Class A-2 Certificates in an Auction
fails to deliver such certificates, the Broker-Dealer may deliver to any person
that was to have purchased Class A-2 Certificates in such Auction a principal
amount of Class A-2 Certificates that is less than the principal amount of Class
A-2 Certificates that otherwise was to be purchased by such person but in any
event equal to an Authorized Denomination or any integral multiple thereof. In
such event, the principal amount of Class A-2 Certificates to be delivered will
be determined by the Broker-Dealer. Delivery of such lesser principal amount of
Class A-2 Certificates will constitute good delivery. Neither the trustee nor
the Auction Agent will have any responsibility or liability with respect to the
failure of a Potential Certificateholder, Existing Certificateholder or the
Broker-Dealer or Participant to deliver the principal amount of Class A-2
Certificates or to pay for the Class A-2 Certificates purchased or sold pursuant
to an Auction or otherwise. For a further description of the settlement
procedures, see "Settlement Procedures" attached hereto as Annex III.
Trustee Not Responsible for Auction Agent,
Market Agent and Broker-Dealers
The trustee shall not be liable or responsible for the actions of or failure
to act by the Auction Agent, Market Agent or the Broker-Dealer under the
Agreement, the Auction Agent Agreement, or any Broker-Dealer Agreement. The
trustee may conclusively rely upon any information required to be furnished by
the Auction Agent, the Market Agent or any Broker-Dealer without undertaking any
independent review or investigation of the truth or accuracy of such
information.
Changes in the Auction Date
The Market Agent may specify an earlier or later Auction Date (but in no event
more than five Business Days earlier or later) than the Auction Date that would
otherwise be determined in accordance with the definition of "Auction Date" with
respect to one or more specified Auction Periods, if, the Market Agent
determines (in its reasonable judgment) that such a change is necessary in order
to conform with then current market practice with respect to similar securities
or to accommodate economic and financial factors that may affect or be relevant
to the day of the week constituting an Auction Date and the interest rate borne
on the Class A-2 Certificates. The Market Agent will provide notice of its
determination to specify an earlier or later Auction Date for one or more
Auction Periods by means of a written notice delivered at least 10 days prior to
the proposed changed Auction Date to the trustee, the Auction Agent and MBIA.
The changes in Auction terms described above may be made with respect to any
Authorized Denomination of Class A-2 Certificates. In connection with any
change in Auction terms described above, the Auction Agent is to provide such
further notice to such parties as is specified in the Auction Agent Agreement.
II-13
<PAGE>
Annex III
Settlement Procedures
The following description of Settlement Procedures applies to the Class A-2
Certificates. Capitalized terms used in this prospectus supplement and not
otherwise defined have the meanings ascribed in Annex II and the accompanying
prospectus supplement.
(a) Not later than (1) 3:00 p.m. if the Class A-2 Pass-Through Rate is the
Auction Rate or (2) 4:00 p.m. if the Class A-2 Pass-Through Rate is the Net
Funds Cap, the Auction Agent is to notify by telephone each Broker-Dealer that
participated in the Auction held on such Auction Date and submitted an Order on
behalf of an Existing Certificateholder or Potential Certificateholder of:
(i) the Class A-2 Pass-Through Rate fixed for the Class A-2
Certificate for the next Auction Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted Bids
or Sell Orders on behalf of an Existing Certificateholder, whether
such Bid or Sell Order was accepted or rejected, in whole or in
part, and the principal amount of Class A-2 Certificates, if any,
to be sold by such Existing Certificateholder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid
on behalf of a Potential Certificateholder, whether such Bid was
accepted or rejected, in whole or in part, and the principal
amount of Class A-2 Certificates, if any, to be purchased by such
Potential Certificateholder;
(v) if the aggregate amount of Class A-2 Certificates to be sold by
all Existing Certificateholders on whose behalf such Seller's
Broker-Dealer submitted Bids or Sell Orders exceeds the aggregate
principal amount of Class A-2 Certificates to be purchased by all
Potential Certificateholders on whose behalf such Buyer's Broker-
Dealer submitted a Bid, the name or names of one or more Buyer's
Broker-Dealers and the name of the Participant, if any, of each
such Buyer's Broker-Dealer acting for one or more purchasers of
such excess principal amount of Class A-2 Certificates and the
principal amount of Class A-2 Certificates to be purchased from
one or more Existing Certificateholders on whose behalf such
Seller's Broker-Dealer acted by one or more Potential
Certificateholders on whose behalf each of such Buyer's Broker-
Dealers acted;
(vi) if the principal amount of Class A-2 Certificates to be purchased
by all Potential Certificateholders on whose behalf such Buyer's
Broker-Dealer submitted a Bid exceeds the amount of Class A-2
Certificates to be sold by all Existing Certificateholders on
whose behalf such Seller's Broker-Dealer submitted a Bid or a Sell
Order, the name or names of one or more Seller's Broker-Dealers
(and the name of the Participant, if any, of each such Seller's
Broker-Dealer) acting for one or more sellers of such excess
principal amount of Class A-2 Certificates and the principal
amount of Class A-2 Certificates to be sold to one or more
Potential Certificateholders on whose behalf such Buyer's
III-1
<PAGE>
Broker-Dealer acted by one or more Existing Certificateholder on
whose behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Certificateholder or Potential Certificateholder is to:
(i) advise each Existing Certificateholder and Potential
Certificateholder on whose behalf such Broker-Dealer submitted a
Bid or Sell Order in the Auction on such Auction Date whether such
Bid or Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
advise each Potential Certificateholder on whose behalf such
Buyer's Broker-Dealer submitted a Bid that was accepted, in whole
or in part, to instruct such Potential Certificateholder's
Participant to pay to such Buyer's Broker-Dealer (or its
Participant) through DTC the amount necessary to purchase the
principal amount of the Class A-2 Certificates to be purchased
pursuant to such Bid against receipt of such Class A-2
Certificates together with accrued interest;
(iii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Certificateholder on whose behalf such
Seller's Broker-Dealer submitted a Sell Order that was accepted,
in whole or in part, or a Bid that was accepted, in whole or in
part, to instruct such Existing Certificateholder's Participant to
deliver to such Seller's Broker-Dealer (or its Participant)
through DTC the principal amount of the Class A-2 Certificates to
be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Certificateholder on whose behalf such
Broker-Dealer submitted an Order and each Potential
Certificateholder on whose behalf such Broker-Dealer submitted a
Bid of the Class A-2 Pass-Through Rate for the next Auction
Period;
(v) advise each Existing Certificateholder on whose behalf such
Broker-Dealer submitted an Order of the next Auction Date; and
(vi) advise each Potential Certificateholder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in
part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph
(a) above, each Broker-Dealer that submitted a Bid or Sell Order in an Auction
is required to allocate any funds received by it in connection with such Auction
pursuant to paragraph (b)(ii) above, and any Class A-2 Certificates received by
it in connection with such Auction pursuant to paragraph (b)(iii) above, among
the Potential Certificateholders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Certificateholder, if any, on whose behalf such
Broker-Dealer submitted Bids or Sell Orders in such Auction, and any Broker-
Dealers identified to it by the Auction Agent following such Auction pursuant to
paragraph (a)(v) or (a)(vi) above.
III-2
<PAGE>
(d) On each Auction Date:
(i) each Potential Certificateholder and Existing Certificateholder with
an Order in the Auction on such Auction Date will instruct its
Participant as provided in (b)(ii) or (b)(iii) above, as the case may
be:
(ii) each Seller's Broker-Dealer that is not a Participant of DTC will
instruct its Participant to deliver such Class A-2 Certificates
through DTC to a Buyer's Broker-Dealer (or its Participant)
identified to such Seller's Broker-Dealer pursuant to (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in DTC will
instruct its Participant to pay through DTC to Seller's Broker-Dealer
(or its Participant) identified following such Auction pursuant to
(a)(vi) above the amount necessary to purchase the Class A-2
Certificates to be purchased pursuant to (b)(ii) above against
receipt of such certificates.
(e) On the Business Day following each Auction Date;
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d)(i) above will instruct DTC to execute the
transactions described under (b)(ii) or (b)(iii) above for such
Auction, and DTC will execute such transactions;
(ii) each Seller's Broker-Dealer or its Participant will instruct DTC to
execute the transactions described in (d)(ii) above for such Auction,
and DTC will execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Participant will instruct DTC to
execute the transactions described in (d)(iii) above for such
Auction, and DTC will execute such transactions.
(f) If an Existing Certificateholder selling Class A-2 Certificates in an
Auction fails to deliver such certificates (by authorized book-entry), a Broker-
Dealer may deliver to the Potential Certificateholder on behalf of which it
submitted a Bid that was accepted a principal amount of Class A-2 Certificates
that is less than the principal amount of Class A-2 Certificates that otherwise
was to be purchased by such Potential Certificateholder. In such event, the
principal amount of Class A-2 Certificates to be so delivered will be determined
solely by such Broker-Dealer (but only in Authorized Denominations).
Delivery of such lesser principal amount of Class A-2 Certificates will
constitute good delivery. Notwithstanding the foregoing terms of this paragraph
(f), any delivery or nondelivery of Class A-2 Certificates which will represent
any departure from the results of an Auction, as determined by the Auction
Agent, will be of no effect unless and until the Auction Agent will have been
notified of such delivery or nondelivery in accordance with the provisions of
the Auction Agent Agreement and the Broker-Dealer Agreements. Neither the
trustee nor the Auction Agent will have any responsibility or liability with
respect to the failure of a Potential Certificateholder, Existing
Certificateholder or their respective Broker-Dealer or Participant to take
delivery of or deliver, as the case may be, the principal amount of the
certificates purchased or sold pursuant to an Auction or otherwise.
III-3
<PAGE>
PROSPECTUS
GREENPOINT ASSET LLC
Issuer
GREENPOINT CREDIT, LLC
Seller and Servicer
Manufactured Housing Contract Pass-Through Certificates
and Manufactured Housing Contract-Backed Notes
Consider carefully the risk factors beginning on page 4 in this prospectus.
A security will represent an interest in or indebtedness of, as applicable,
only GreenPoint Asset LLC or the trust related to that series of securities.
A security will not represent an interest in, indebtedness of or obligation
of GreenPoint Credit, LLC.
This prospectus may be used to offer and sell a series of securities only if
accompanied by the prospectus supplement for that series.
The issuer may periodically issue notes representing indebtedness of the
issuer and secured by the collateral described below. Trusts formed by the
seller may periodically issue certificates or notes representing interests in
the collateral described below.
The collateral with respect to each trust relating to a series of securities
will consist of:
. a pool of manufactured housing installment sales contracts and installment
loan agreements, described in detail in the accompanying prospectus
supplement;
. related property and interests, if so specified in the related prospectus
supplement; and
. other property as described in the accompanying prospectus supplement.
The securities may be offered to the public through different methods as
described in "Method of Distribution" in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
December 6, 2000
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate documents
that progressively provide more detail:
(1) this prospectus, which provides general information, some of which may
not apply to your series of securities; and
(2) the accompanying prospectus supplement, which describes the specific
terms of your series of securities.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the securities in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus supplement provide the pages
on which these captions are located.
Some capitalized terms used in this prospectus are defined in the "Glossary"
beginning on page 81.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Risk Factors.............................................................. 4
The Contract Pools........................................................ 10
The Pre-Funding Account................................................. 12
The Issuer................................................................ 13
The Seller and Servicer................................................... 13
Loan Originations....................................................... 14
Underwriting Practices.................................................. 14
Servicing............................................................... 17
Delinquency and Loan Loss/Repossession Experience....................... 18
Prepayment and Yield Considerations....................................... 19
Prepayment Considerations............................................... 19
Yield Considerations.................................................... 20
Description of the Securities............................................. 21
General................................................................. 22
Conveyance of Contracts................................................. 22
Payments on Contracts................................................... 23
Distributions on Securities............................................. 23
Global Securities....................................................... 26
Optional and Mandatory Repurchase of Securities; Optional Termination
and Termination Auction................................................ 27
Termination............................................................. 28
Collection and Other Servicing Procedures............................... 29
Servicing Compensation and Payment of Expenses; Matters Regarding the
Servicer............................................................... 29
Amendment............................................................... 33
The Trustee of Indenture Trustee........................................ 35
Indemnification......................................................... 35
Credit and Liquidity Enhancement.......................................... 35
Subordination........................................................... 35
Reserve Funds........................................................... 37
Credit Facilities....................................................... 38
Liquidity Facilities.................................................... 38
Federal Income Tax Consequences........................................... 39
REMIC Elections......................................................... 40
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
REMIC Certificates...................................................... 40
Taxation of Regular Certificates........................................ 43
Treatment of Certificates Representing a REMIC Regular Interest Coupled
with a Swap or Cap Agreement........................................... 53
Taxation of Residual Certificates....................................... 54
Non-REMIC Trusts........................................................ 63
Owner Trust Certificates or Notes....................................... 67
Treatment of the Owner Trust Certificates or Notes as Debt.............. 67
Treatment of the Owner Trust or Indenture Trust......................... 67
Treatment of the Owner Trust Certificates or Notes...................... 68
Other Tax Consequences.................................................. 69
Restrictions on Transfer of REMIC Residual Certificates................. 69
Tax-Exempt Investors.................................................... 69
Legal Investment.......................................................... 69
ERISA Considerations...................................................... 70
Certain Legal Aspects of the Contracts.................................... 72
The Contracts (Other than Land Home Contracts and Land-in-Lieu
Contracts)............................................................. 72
Land Home Contracts and Land-in-Lieu Contracts.......................... 75
Matters Relating to Insolvency.......................................... 77
Consumer Protection Laws................................................ 77
Transfers of Manufactured Homes; Enforceability of Restrictions on
Transfer............................................................... 78
Applicability of Usury Laws............................................. 78
Ratings................................................................... 79
Method of Distribution.................................................... 79
Use of Proceeds........................................................... 80
Legal Matters............................................................. 80
Glossary.................................................................. 81
</TABLE>
3
<PAGE>
Risk Factors
You should consider the following risk factors, in addition to the risk
factors reported in the prospectus supplement, in deciding whether to purchase
any of the securities.
Due to their complexity the The offered securities are not suitable
offered securities are not investments for all investors. In particular,
suitable for all investors. you should not purchase any class of offered
securities unless you understand and are able
to bear the prepayment, credit, liquidity and
market risks associated with that class. The
offered securities are complex securities and
it is important that you possess, either alone
or together with an investment advisor, the
expertise necessary to evaluate the information
contained in this prospectus and the
accompanying prospectus supplement in the
context of your financial situation.
The lack of secondary A secondary market for any series of securities
markets may limit the may not develop. If a secondary market does
ability to resell develop, it might not continue or it might not
securities. be sufficiently liquid to allow you to resell
any of your securities. The underwriters of a
particular series of securities may decide to
establish a secondary market for that
particular series of securities. If so, the
prospectus supplement for that series of
securities will indicate this intention.
However, no underwriter will be obligated to do
so. The securities will not be listed on any
securities exchange.
The lack of physical There is a risk that the liquidity of any of
securities may cause the offered securities issued in book-entry
difficulties in pledging or form will be reduced in the secondary trading
selling securities or cause market because many potential investors may be
delays in the payment on unwilling to purchase securities unless they
securities. can obtain physical securities. To the extent
transactions in securities can be effected only
through DTC, participating organizations,
indirect participants and banks, the ability of
a holder of offered securities to pledge any
offered security to persons or entities that do
not participate in the DTC system, or otherwise
to take actions in respect of the offered
securities, may be limited due to the lack of
physical securities representing any offered
security. This may limit the holders of offered
securities liquidity of investment. To the
extent any offered security is held in book-
entry form, the holder of the offered security
may experience some delay in their receipt of
distributions. Distributions will be forwarded
by the trustee to DTC and DTC will credit the
distributions to the accounts of its
participants, which will thereafter credit them
to the accounts of the holder of the offered
security either directly or indirectly through
indirect participants. See "Description of the
Securities--Global Securities" in this
prospectus.
4
<PAGE>
The offered securities bear General Economic Conditions. An investment in
the risk of defaults on the securities may be adversely affected by, among
contracts. other things, a downturn in national, regional
or local economic conditions. An economic
downturn in any region where a number of
obligors on the contracts are located might
cause higher delinquencies, defaults and losses
on the contracts. If delinquencies, defaults or
losses on the contracts are higher than
expected, the holders of the securities may not
recoup their investment.
Depreciation in Value of Manufactured Home.
Manufactured housing generally depreciates in
value, regardless of its location. As a result,
the market value of a manufactured home may
decline faster than the outstanding principal
balance of the contract for that manufactured
home. Therefore, amounts received upon the sale
of any manufactured home repossessed by the
servicer may be less than the outstanding
amount of the related contract.
Investors in the offered securities may be
protected from losses resulting from economic
conditions or from the depreciation in the
value of a manufactured home by any of the
following:
. the amount, if any, by which the interest
collected on nondefaulted contracts during a
collection period exceeds interest
distributions due to the holders of the
offered securities and, if so specified in
the related prospectus supplement, the
monthly servicing fee;
. any credit facility or reserve fund that may
support one or more classes of securities;
and
. the subordination in interest of any junior
classes of securities issued with a class of
securities. See "Credit and Liquidity
Enhancement" in this prospectus.
If losses on the contracts are not covered by
the excess interest on the contracts, a form of
credit enhancement or reserve fund or by a
junior class of securities, the payments on
securities will be delayed and losses will be
borne by the holders of the offered securities.
To the extent that the offered securities have
been designated as senior or subordinate, the
most junior securities would be the first to
bear these delays or losses. See "The Contract
Pools" and "Credit and Liquidity Enhancement"
in this prospectus.
5
<PAGE>
The securities will not be The offered securities will not represent
guaranteed by GreenPoint interests in, indebtedness of or obligations of
Asset LLC or GreenPoint GreenPoint Credit, LLC. A series of offered
Credit, LLC, so if payments notes may represent indebtedness of GreenPoint
on the contracts are Asset LLC, however only the assets pledged to
insufficient to pay secure that indebtedness as described in the
principal or interest on the related prospectus supplement will be available
securities, there may be no to make payments on the related notes. The
other source for payments to offered securities will not be insured or
securityholders and guaranteed by any governmental agency or
shortfalls may occur. instrumentality, the underwriter of the offered
securities, GreenPoint Asset LLC, GreenPoint
Credit, LLC or any affiliate of any of them,
except in the case of a letter of credit or
other credit enhancement if so specified in the
related prospectus supplement. The payments by
the obligors on the contracts included in the
related trust or pledged by GreenPoint Asset
LLC, as applicable, and any credit enhancement
will be the sole source of the payments on the
securities. If the payments by the obligors on
the contracts are insufficient to pay the
principal or interest on the securities, there
is no other source of payments. The seller of
the contracts and/or the servicer will have
limited obligations only with respect to the
contracts. These obligations usually include:
. the obligation under some circumstances to
repurchase a contract if there has been a
breach of representations and warranties;
and
. advancing payments, to the extent described
in the prospectus supplement, on contracts
when the obligor is delinquent if the
servicer believes that the advance is
recoverable.
Defects in the security If a security interest has been effectively
interests of the issuer or assigned in favor of the trustee but is not
the seller may make those perfected, the assignment of the security
security interests interest to the trustee may not be effective
ineffective against against creditors of the issuer or the seller,
creditors of the issuer or as applicable, or against a receiver or trustee
the seller, as applicable, in bankruptcy for the issuer or the seller, as
or against a receiver or applicable.
trustee in bankruptcy for
the issuer or the seller, as Upon the initial issuance of the offered
applicable. securities in any series, the issuer or seller,
as applicable, will convey or pledge,
respectively, the contracts securing the
securities to a trust. The servicer of the
contracts will obtain and maintain physical
possession of the contract documents as
custodian and agent for the trustee of the
trust. Each contract is secured by a security
interest in a manufactured home and, in some
cases only, the real estate on which the
related manufactured home is located.
Perfection of security interests in the
manufactured homes and enforcement of rights to
realize upon the value of the manufactured
homes as collateral for the contracts are
subject to a number of federal and state laws,
including:
. The Uniform Commercial Code as adopted in
the states in which the manufactured homes
are located;
. certificate of title statutes as adopted in
the states in which the manufactured homes
are located; and
. if applicable, the real estate laws as
adopted in the states which the manufactured
homes are located.
6
<PAGE>
Under federal and state laws, a number of
factors may limit the ability of the holder of
a perfected security interest in manufactured
homes to realize upon the related manufactured
homes or may limit the amount realized to less
than the amount due under the related contract.
See "Certain Legal Aspects of the Contracts--
Security Interests of the Seller in the
Manufactured Homes" and "Land Home Contracts
and Land-in-Lieu Contracts" in this prospectus.
If so specified in the related prospectus
supplement, the certificates of title for the
manufactured homes will show "GreenPoint
Credit, LLC" as the lienholder and the UCC
financing statements, will show "GreenPoint
Credit, LLC" as secured party. Because it is
not economically feasible to amend the
certificates of title, GreenPoint Credit, LLC
will not:
. amend the certificates of title to change
the lienholder specified therein to the
trustee at the time contracts are conveyed
to a trust;
. execute any transfer instrument, including,
among other instruments, UCC-3 assignments,
relating to any manufactured home in favor
of the trustee;
. deliver any certificate of title to the
trustee or make a notation on the
certificate of title of the trustee's
interest therein;
. record an assignment, except if so specified
in the related prospectus supplement as
required under the related pooling and
servicing agreement upon the occurrence of
certain events, to the trustee of the
mortgage, deed of trust or other instrument
securing any real estate.
In some states, without complying with the
foregoing, the assignment to the trustee of the
security interest in the manufactured homes, or
the mortgage, deed of trust or other instrument
securing real estate, may not be effective to
grant or perfect a security interest.
Federal and state consumer Numerous federal and state consumer protection
protection laws may prevent laws could adversely affect the interest of any
the enforceability of the trust in the contracts comprising the related
contracts. contract pool. In addition, other federal and
state consumer protection laws impose
requirements on lending under contracts. An
assignee of a contract could be liable for the
failure by the original lender under the
contract to comply with the requirements on
lending. These laws could apply to any trust as
assignee of the related contracts. Pursuant to
the agreement related to each series of
securities, GreenPoint Credit, LLC will
represent and warrant that each contract
complies with all requirements of law and will
generally be required to repurchase, or
substitute a new contract, for any contract
that does not comply with all requirements of
law if holders of the securities are adversely
affected by GreenPoint Credit, LLC's breach of
representation or warranty. Pursuant to the
indenture related to each series of notes,
GreenPoint Asset LLC will assign the
representations and
7
<PAGE>
warranties that are similar to the those
described in the preceding sentence made by
GreenPoint Credit, LLC under the related sale
and servicing agreement to the indenture
trustee. The indenture trustee, on behalf of
the related noteholders, will then have the
right to require GreenPoint Credit, LLC to
repurchase, or substitute a new contract, for
any contract that does not comply with all
requirements of law if noteholders are
adversely affected by the breach of
representation or warranty.
Prepayments on the contracts The prepayment experience on the contracts
will affect the average life underlying any series of securities, including
and maturity of any series prepayments due to liquidations of defaulted
of securities. contracts, will affect the average life and the
maturity of any series of securities.
Prepayments on the contracts in any contract
pool may be influenced by a variety of
economic, geographic, social and other factors,
including repossessions, aging, seasonality and
interest rates. Other factors affecting
prepayment on the contracts include changes in
housing needs, job transfers and unemployment.
In addition, interest on contracts that have
been subject to a partial prepayment or a
prepayment in full will cease to accrue on the
prepaid amount as of the date of prepayment.
High prepayments on the contracts during a
collection period for any trust could result in
high interest shortfalls. Therefore, the amount
available for distribution to the holders of
the offered securities on the related
distribution date could be less than the amount
of principal and interest that would normally
be distributable. This would result in losses
to the holders of the offered securities. To
the extent that the offered securities have
been designated as senior or subordinate, the
most junior securities would be the first to
bear these delays or losses. See "Prepayment
and Yield Considerations" in this prospectus.
Insolvency or bankruptcy of GreenPoint Credit, LLC intends that each
GreenPoint Credit, LLC may transfer of contracts to the issuer or the
affect payments on the trust related to any series of securities, as
securities. applicable, constitutes a sale, rather than a
pledge of the contracts to secure indebtedness
of GreenPoint Credit, LLC. However, if
GreenPoint Credit, LLC were to become a debtor
under the federal bankruptcy code, it is
possible that a creditor or trustee in
bankruptcy of GreenPoint Credit, LLC or
GreenPoint Credit, LLC as debtor-in-possession
may argue that the sale of the contracts by
GreenPoint Credit, LLC could be recharacterized
as a borrowing secured by a pledge of the
contracts. An attempt by a creditor, trustee or
debtor-in-possession in bankruptcy to
recharacterize the transfer as a borrowing,
even if unsuccessful, could result in delays in
or reductions of distributions on the offered
securities to the holders of the securities. To
the extent that the offered securities have
been designated as senior or subordinate, the
most junior securities would be the first to
bear these delays or losses.
8
<PAGE>
Bankruptcy of the servicer In the event of a bankruptcy of GreenPoint
could prevent the Credit, LLC, the trustee in bankruptcy for
termination of the servicer GreenPoint Credit, LLC could prevent the
and could result in possible termination of GreenPoint Credit, LLC, as
delays or reductions in servicer of the contracts, if no event of
payments on the offered default under the applicable servicing
securities. agreement exists other than the bankruptcy of
GreenPoint Credit, LLC. This prevention could
result in a delay or possibly a reduction in
payments on the offered securities to the
holders of the securities to the extent
GreenPoint Credit, LLC received, but did not
deposit with the trustee or indenture trustee,
as applicable, contract collections before the
date of bankruptcy. To the extent that the
offered securities have been designated as
senior or subordinate, the most junior
securities would be the first to bear these
delays or losses. See "Certain Legal Aspects of
the Contracts" in this prospectus.
9
<PAGE>
The Contract Pools
Each contract contained in a contract pool will have been either:
. originated or purchased by GreenPoint Credit, as seller, in each case on
an individual basis in the ordinary course of its business, and/or
. purchased from Bulk Sellers,
all as more particularly specified in the related prospectus supplement. Each
contract will be secured by a new or used manufactured home and, in the case
of a Land Home Contract or Land-in-Lieu Contract, by real property upon which
the manufactured home is located. If so specified in the related prospectus
supplement, the contracts will not be insured by any governmental agency or
instrumentality. However, if so specified in the related prospectus
supplement, some or all of the contracts and collections thereon will, subject
to the conditions described below, be partially insured by the Federal Housing
Administration or partially guaranteed by the Veterans Administration. If so
specified in the related prospectus supplement, the contract pool will include
modular homes, as described in the related prospectus supplement.
On the date of initial issuance of the securities of any series, the seller
will convey the contracts comprising the related contract pool to the issuer
or the trust related to any series of securities, as applicable. The servicer
will obtain and maintain possession of all contract documents, except in some
instances where the trustee will obtain and maintain possession of the
contract documents relating to Land Home Contracts and Land-in-Lieu Contracts.
If so specified in the applicable prospectus supplement, the agreement
relating to each series of securities will require the manufactured homes in
the related contract pool to comply with the requirements of federal statutes
which generally would require the manufactured homes to have a minimum of 400
square feet of living space and a minimum width of 102 inches and to be of a
kind customarily used at a fixed location. The statutes would also require the
manufactured homes to be transportable in one or more sections, built on a
permanent chassis and designed to be used as dwellings, with or without
permanent foundations, when connected to the required utilities. The statutes
also would require that the security interest in any manufactured home include
the plumbing, heating, air conditioning and electrical systems constituting a
part of, or associated with, the manufactured home.
The servicing agreement relating to each series of securities will require
the servicer to maintain hazard and flood insurance policies with respect to
each manufactured home in the related contract pool in the amounts and manner
set forth in this prospectus under "Description of the Securities--Servicing
Compensation and Payment of Expenses; Matters Regarding the Servicer--Hazard
Insurance Policies." Generally, no other insurance will be required with
respect to the manufactured homes, the contracts or any contract pool.
A contract pool relating to any series of securities may contain Step-Up
Rate Contracts. If a contract pool contains Step-Up Rate Contracts, the
related prospectus supplement will specify the percentage of the contract pool
comprised of Step-Up Rate Contracts, the period during which the contract
interest rates for Step-Up Rate Contracts will be stepped up, the range of
increases in the contract interest rates for the Step-Up Rate Contracts and
the range of increases in the scheduled payments for the Step-Up Rate
Contracts.
The rate at which the contracts in a particular contract pool bear interest
will be further described in the applicable prospectus supplement. If so
specified in the applicable prospectus supplement, each contract will provide
for payments on a scheduled due date. The day of each month constituting the
due date will vary from contract to contract. Unless the contracts bear
interest at a variable rate, the scheduled payment will be specified in the
contract. The scheduled payments for fixed-rate contracts will be constant
assuming no prepayments. If so specified in the applicable prospectus
supplement, the scheduled payments for Step-Up Rate Contracts will increase on
the dates on which the contract interest rates are stepped up. In addition, if
so specified in the related prospectus supplement, the contracts may be
prepaid in full or in part at any time.
10
<PAGE>
If so specified in the applicable prospectus supplement, scheduled payments
whether for actuarial or simple interest contracts, may be paid prior to their
due dates, whether in, or in months prior to, the months of their due dates.
Thus, the obligor may, in June, pay the scheduled payments due in June, July
and August. In that event, no further payment will become due on the contract
until the September due date. In the case of a simple interest contract, the
obligor would have to instruct the servicer to apply the payment as a pay-
ahead of future scheduled payments; otherwise the payment would be applied as
a partial principal prepayment. There is no limit to the number of scheduled
payments that may be paid ahead in this manner. The effect of paid-ahead
scheduled payments will be different for actuarial contracts than for simple
interest contracts, as further described below.
The scheduled payments for each actuarial contract, whether a fixed rate
contract or Step-Up Rate Contract, will fully amortize the principal balance
of the contract over its term. The portion of each scheduled payment allocable
to principal is equal to the total amount thereof less the portion allocable
to interest. The portion of each scheduled payment due in a particular month
that is allocable to interest is a precomputed amount equal to one month's
interest, determined on the basis of a thirty-day month and a 360-day calendar
year, except in the state of Kansas where it is determined on the basis of a
365/366-day calendar year and actual days elapsed, on the principal balance of
the contract, which principal balance is determined by reducing the initial
principal balance by the principal portion of all scheduled payments that were
due in prior months, whether or not scheduled payments were timely made, and
all prior partial principal prepayments. Thus, each scheduled payment will be
applied to interest and to principal in accordance with a precomputed
allocation, whether or not the scheduled payments are received in advance of
or subsequent to their due dates. If so specified in the applicable prospectus
supplement, all payments received in a Collection Period on an actuarial
contract in excess of the related obligor's scheduled payment, other than
payments not allocated to principal and interest such as late payment charges
or payments sufficient to pay in full the outstanding principal balance of and
all accrued and unpaid interest on the obligor's contract, are applied as a
partial prepayment of principal on the contract, unless (1) the related
obligor notifies or confirms with the servicer that its payments are to be
applied to future scheduled payments in the order of the due dates of its
payments or (2) the amount of any excess payment is approximately equal,
subject to a variance of plus or minus 10%, to the amount of a future
scheduled payment.
If simple interest contracts are to be included in a contract pool, the
related prospectus supplement will describe the characteristics of the simple
interest contracts in the contract pool.
If so specified in the related prospectus supplement, the scheduled payments
on variable rate contracts will be allocated between principal and interest as
described above for actuarial contracts based upon the contract interest rate
in effect when the scheduled payments on the contracts are due. If so
specified in the related prospectus supplement, the amounts of the scheduled
payments on variable rate contracts will be adjusted, on the basis described
in the prospectus supplement, whenever the related contract interest rate is
adjusted.
If so specified in the applicable prospectus supplement, a contract pool may
contain contracts which combine features of actuarial and simple interest
contracts.
If specified in the related prospectus supplement, the contract pool may
contain Land Home Contracts and/or Land-in-Lieu Contracts. In some
jurisdictions, a lender cannot obtain separate evidence of its lien on the
manufactured home securing a Land Home Contract and its lien on the property
on which the manufactured home is located. In those jurisdictions, the only
evidence of liens on the manufactured homes securing Land Home Contracts will
be the deeds of trust, mortgages or similar security instruments on the real
estate on which the manufactured homes are located. It is a policy of the
seller, to obtain title insurance policies, where available, with respect to
any Land Home Contract that it originates insuring that the related
manufactured home is subject to the lien of the related mortgage. However,
title policies may not have been obtained with respect to Land Home Contracts
acquired from Bulk Sellers and some title insurers will not insure the
manufactured home unless it is permanently attached to the land. Generally,
separate evidences of liens on manufactured homes and the real property
securing Land-in-Lieu Contracts are obtained. However, no title insurance is
obtained for Land-in-Lieu Contracts. See "Certain Legal Aspects of the
Contracts--Land Home Contracts and Land-in-Lieu Contracts" in this prospectus.
11
<PAGE>
A contract pool may include "staged-funding" contracts which provide
multiple disbursements to an obligor to finance the purchase of a manufactured
home or the acquisition or improvement of the real estate on which the
manufactured home will be located. The obligor pays only the interest on the
disbursed amount of the loan or an additional origination fee which is
financed, in lieu of interest until the final disbursement, and, following the
final disbursement, pays both interest and principal. If so specified in the
related prospectus supplement, no contract pool will contain a "staged-
funding" contract unless it has been fully disbursed.
The prospectus supplement relating to each series of securities will provide
information as of the Cut-off Date for the related series with respect to,
among other things:
. the number, the aggregate principal balance, and the range of
outstanding principal balances of the contracts comprising the related
contract pool;
. the weighted average contract interest rate of the contracts and the
distribution of contract interest rates;
. the weighted average original and remaining terms to maturity of the
contracts and the distribution of remaining terms to maturity;
. the average outstanding principal balance of the contracts;
. the geographical distribution of the related manufactured homes at
origination;
. the years of origination of the contracts;
. the distribution of original principal balances of the contracts;
. the percentage amount of contracts secured by new or used manufactured
homes;
. the range of and weighted average loan-to-value ratios at origination;
and
. the month and year in which the final scheduled payment date for the
contract with the latest maturity is scheduled to occur.
Additionally, no more than a maximum of 5% of the contracts, measured by
aggregate principal balance of the assets in the contract pool, as described
in this prospectus and the related prospectus supplement, as of the Cut-off
Date, may deviate from the characteristics of the assets in the contract pool
as of the Cut-off Date.
If a contract pool contains variable rate contracts, the related prospectus
supplement will contain a description of the basis on which the contract
interest rates are determined, including any maximum or minimum rates and the
frequency with which any contract interest rate adjusts. The prospectus
supplement relating to a series of securities also will contain information
about contracts in the related trust that are Land Home Contracts, Land-in-
Lieu Contracts or contracts that are partially guaranteed by the Veterans
Administration or partially insured by the Federal Housing Administration.
To the extent any contracts in a contract pool were purchased by the seller
from one or more Bulk Sellers, the applicable prospectus supplement will
contain a description of practices observed by the seller or Bulk Sellers, as
applicable, in connection with any such purchase.
In addition, to the extent GreenPoint Credit's management believes
additional information concerning the related contract pool that is stored in
the electronic data processing system of GreenPoint Credit to be material, the
prospectus supplement may also include the additional information.
The Pre-Funding Account
If a trust for a particular series includes a pre-funding account, as
described in the related prospectus supplement, the prospectus supplement will
specify:
(1) the term or duration of the pre-funding account;
(2) the percentage of the related series that may be represented by the
pre-funding account;
12
<PAGE>
(3) the types of investments that pre-funding accounts may be invested in;
and
(4) the conditions that must be satisfied prior to any transfer of
additional contracts and/or subsequent contracts, as described in the
related prospectus supplement, including the requisite characteristics
of the additional contracts and/or subsequent contracts.
The Issuer
Each series of notes will either:
. be issued by an owner trust established by GreenPoint Credit and
described in the related prospectus supplement; or
. be issued directly by GreenPoint Asset.
GreenPoint Asset was formed in August 2000 as a Delaware limited liability
company for the purposes described in this prospectus and is a wholly-owned
subsidiary of GreenPoint Credit. GreenPoint Asset will not engage in any
activity other than:
. acquiring and holding contracts and other assets to be used as
collateral for any series of notes and any proceeds therefrom;
. issuing the notes;
. making payments on the notes;
. holding equity interests and residual interests relating to any series
of securities; and
. engaging in other activities that are necessary, suitable or convenient
to accomplish the foregoing or are incidental thereto or connected
therewith.
GreenPoint Asset's principal offices are located at 10089 Willow Creek Road,
San Diego, California 92131.
The Seller and Servicer
GreenPoint Credit will be the seller and initial servicer for each series of
securities. GreenPoint Credit was formed in May 1998 as a Delaware corporation
for the purpose of acquiring the operating business of the BankAmerica Housing
Services division of Bank of America, FSB from Bank of America, FSB. This
acquisition was consummated on September 30, 1998. The operating business of
the BankAmerica Housing Services division consisted primarily of originating,
purchasing and servicing manufactured housing installment sale contracts and
installment loan agreements. The origination and underwriting practices of
Bank of America, FSB and its affiliates relating to the manufactured housing
installment sale contracts and installment loan agreements acquired by
GreenPoint Credit in the acquisition were substantially similar to those
described under "--Loan Originations" below.
On October 1, 1999 GreenPoint Credit changed its company structure from a
Delaware corporation to a Delaware limited liability company. GreenPoint
Credit Corp. was merged with a newly created affiliate company named
GreenPoint Credit, LLC and the surviving entity is named GreenPoint Credit,
LLC. GreenPoint Credit's sole member is Green Point Mortgage Funding, Inc.
Green Point Mortgage Funding, Inc. is a wholly owned subsidiary of Headlands
Mortgage Company, which is a wholly owned subsidiary of GreenPoint Bank, a New
York state chartered bank. GreenPoint Bank is a wholly owned subsidiary of
GreenPoint Financial Corp., a publicly traded corporation whose shares are
traded on the New York stock exchange. As of June 30, 2000, GreenPoint Credit
had total assets of $1,751.5 million, total liabilities of $1,232.9 million
and total stockholders' equity of $518.6 million. As of June 30, 2000,
GreenPoint Financial Corp. and its consolidated subsidiaries had total
deposits of $11,371.5 million, total assets of $15,767.3 million and total
stockholders' equity of
13
<PAGE>
$2,035.3 million. The headquarters of GreenPoint Credit are located in San
Diego, California. The headquarters of both GreenPoint Financial Corp. and
GreenPoint Bank are located in New York, New York.
Loan Originations
GreenPoint Credit purchases and originates manufactured housing contracts on
an individual basis through 26 regional offices throughout the United States,
serving retailers and borrowers in the 48 contiguous states. In the state of
Mississippi, real estate secured manufactured housing contracts are purchased
and originated through a wholly owned subsidiary of GreenPoint Credit named
GreenPoint Credit Corp. of Mississippi. Regional personnel of GreenPoint
Credit arrange to purchase manufactured housing contracts originated by
manufactured housing retailers located throughout the United States.
Generally, these purchases result from GreenPoint Credit regional office
personnel contacting retailers located in their regions and explaining
GreenPoint Credit's available financing plans, terms, prevailing rates and
credit and financing policies. If a retailer wishes to make a financing
available to its customers, the retailer would apply for retailer approval.
Upon satisfactory results of GreenPoint Credit's investigation of the
retailer's creditworthiness and general business reputation, GreenPoint Credit
and the retailer would enter into a retailer agreement. GreenPoint Credit also
originates manufactured housing contracts and installment loan agreements
directly with customers and through brokers.
Underwriting Practices
With respect to each retail manufactured housing contract that was purchased
from a retailer, the general practice of GreenPoint Credit has been that the
retailer submit the customer's credit application, manufacturer's invoice, if
the contract was for a new home, and other information relating to the
contract to the applicable regional office of GreenPoint Credit. Personnel at
the regional office analyze the creditworthiness of the customer and other
aspects of the proposed transaction. If the creditworthiness of the customer
and other aspects of the transaction are approved by the regional office, the
customer and the retailer execute a contract on a form provided or approved in
advance by GreenPoint Credit. After the manufactured home financed under the
contract is delivered and set up by the retailer, and the customer has moved
in, GreenPoint Credit purchases the contract from the retailer.
Because manufactured homes generally depreciate in value, GreenPoint
Credit's management believes that the creditworthiness of a potential obligor
should be the most important criterion in determining whether to approve the
purchase or origination of a contract. As a result, the underwriting
guidelines of GreenPoint Credit generally require regional office personnel to
examine each applicant's credit history, residence history, employment history
and debt-to-income ratio. There is no minimum requirement for any of these
criteria, although GreenPoint Credit has developed certain guidelines for
employment history and debt-to-income ratios. In the case of employment
history, GreenPoint Credit generally requires its regional office personnel to
consider whether the applicant had worked continuously for the same employer
for at least 24 months and, if not, whether the applicant has worked in the
same occupational field for at least 24 months. The recommended debt-to-income
ratio for a particular credit application depends on the credit score
recommendation generated for that application. In general, the maximum debt-
to-income ratio for each application that is approved by the credit scoring
system ranged from 70 percent to 53 percent, based on GreenPoint Credit's
estimate of the applicant's after-tax income. Although GreenPoint Credit has
guidelines for some of these criteria, GreenPoint Credit's management does not
believe that an applicant's inability to satisfy some of these guidelines
warrants denial of credit in all cases. For example, if an applicant fails to
meet a guideline by a certain margin for one of the criteria mentioned above,
the applicant generally must exceed the threshold for one or more other
criteria by a compensating margin for the applicant's credit application to be
approved. In addition, in special cases, credit applications are approved even
if certain of the criteria are not met. For these reasons, management of
GreenPoint Credit believes that the ultimate decision whether to approve or
reject a credit application should be made by regional office personnel. To
assist personnel in evaluating credit applications, GreenPoint Credit utilizes
a proprietary credit scoring system, developed by GreenPoint Credit in
conjunction with Fair-Isaacs, implemented in May 2000. The credit scoring
system generates a recommendation to approve or deny a credit application
based on certain criteria established by GreenPoint Credit. The underwriting
guidelines of GreenPoint Credit
14
<PAGE>
allow the recommendation generated by the credit scoring system to be used by
regional personnel as a guide in determining whether to extend credit to an
applicant, but do not require regional personnel to make credit decisions
based solely on the system's recommendations. GreenPoint Credit does not
disclose the criteria used by this credit scoring system either to regional
personnel or to the retailers assisting in the preparation of credit
applications. The underwriting criteria will be periodically reviewed by
GreenPoint Credit, and modified as necessary.
It is the policy of GreenPoint Credit that one authorized person provide
written approval of credit applications for amounts up to or equal to certain
limits and that at least one additional authorized person provide written
approval of credit applications for amounts over those limits. The credit
limits established by GreenPoint Credit vary depending upon each authorized
person's position or grade level. In addition, each person authorized to make
these credit decisions has to be either a regional manager, branch manager or
another regional office employee to whom the authority to approve credit
applications has been delegated. Any delegated authority may be limited in
that the person to whom the authority was delegated may not have been
authorized to approve credit applications for contracts with initial principal
amounts above certain specified levels. The qualifications of all regional
office personnel authorized to approve or reject credit applications are
reviewed and approved by GreenPoint Credit's senior management. However, each
regional office may at various times have additional, or in some cases fewer,
personnel authorized to approve or reject credit applications.
It is the policy of GreenPoint Credit that each credit application be
approved or rejected within one to seven days after receipt. Thus, there is
less time for credit investigation than is the case, for example, with loans
for site-built homes. Although GreenPoint Credit's management believes that
the one to seven-day period for approval or rejection of each credit
application is consistent with industry practice, no assurance can be given
that any credit application that was approved in one to seven days would have
been approved if a longer period had been provided for credit investigation.
The credit review and approval practices of each regional office are subject
to internal reviews and audits that, through sampling, examine the nature of
the verification of credit histories, residence histories, employment
histories and debt-to-income ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through each regional office by
rating the obligors on the underlying contracts according to their credit
histories, employment histories and debt-to-income ratios. Selection of
underwriting files for review is generally made by the personnel performing
the examination, without prior knowledge on the part of regional office
personnel of the files to be selected for review. However, GreenPoint Credit
has no requirement that any specific random selection procedures be followed
and no assurance can be given that the files reviewed in any examination
process are representative of the contract originations in the related
regional office.
With respect to new and used manufactured homes, Green Point's policy is to
finance no more than 95% of the total buyer's cost of any manufactured home,
including taxes and insurance premiums, plus 100% of the costs attributable to
prepaid finance charges and closing costs that are financed.
In the case of new manufactured homes, the maximum amount financed cannot
exceed:
. 130% of the manufacturer's invoice price, plus
. taxes, insurance, freight charges, certain retailer installed equipment,
certain set-up costs and certain prepaid finance charges and closing
costs.
For used manufactured homes, the amount financed cannot exceed:
. the lesser of 95% of the total sales price or 140% of the base value, as
specified in the NADA Mobile/Manufactured Housing Appraisal Guide, plus
. taxes, insurance, certain retailer installed equipment, certain set-up
costs and certain prepaid finance charges and closing costs.
15
<PAGE>
With respect to Land Home Contracts involving new manufactured homes,
GreenPoint Credit's policy is to finance no more than:
. the lesser of 95% of the value of the real property as determined by
appraisal subject to certain limitations or 95% of the purchase price of
the land subject to certain limitations or the payoff of the encumbered
land, plus
. 130% of the manufacturer's invoice, plus
. taxes, insurance, freight charges, certain retailer installed equipment,
certain set-up costs and prepaid finance charges and closing costs, plus
. the cost of improvements to the land, subject to certain limitations.
With respect to Land Home Contracts involving used manufactured homes,
GreenPoint Credit's policy is to finance no more than the lesser of:
. 95% of the total sales price, or
. the sum of 95% of the appraised value of the land and 140% of the base
value as specified in the NADA Mobile/Manufactured Housing Appraisal
Guide,
. and in either case, plus taxes, insurance, certain retailer installed
equipment, certain set-up costs, prepaid finance charges and closing
costs and the cost of improvements to the land, subject to certain
limitations.
With respect to Land Home Contracts in which the manufactured home is
already on the land, GreenPoint Credit's policy is to finance:
. the lesser of 95% of the total sales price or 95% of the appraised value
of the land and home, plus
. taxes, fees, insurance and certain prepaid finance charges and closing
costs.
With respect to Land-in-Lieu Contracts involving new manufactured homes,
GreenPoint Credit's policy is to finance:
. up to 140% of the manufacturer's invoice for the home depending on the
borrower's down payment, plus
. taxes, insurance, freight charges, certain retailer installed equipment,
certain set-up costs and pre-paid finance charges and closing costs,
plus
. the costs of improvements to the land, subject to certain limitations.
With respect to Land-in-Lieu Contracts involving used manufactured homes,
GreenPoint Credit's policy is to finance no more than the lesser of:
. 95% of the total sales price, or
. 140% of the base value, as specified in the NADA Mobile/Manufactured
Housing Appraisal Guide,
. and in either case, plus
-- taxes, insurance, certain retailer installed equipment, certain set-
up costs and prepaid finance charges and closing costs, and
-- the cost of improvements to the land, subject to certain
limitations.
In June 1999, GreenPoint Credit initiated a marketing program for new
manufactured homes in which the maximum amount financed could not exceed:
. 140% of the manufacturer's invoice price, plus
. taxes, insurance, freight charges, certain retailer installed equipment,
certain set-up costs and prepaid finance charges and closing costs.
16
<PAGE>
This marketing program is offered only to certain retailers whose applicants
who score in the highest credit score recommendation given by GreenPoint
Credit's proprietary credit scoring system (as described in the second
paragraph of this section).
GreenPoint Credit generally requires a down payment in the form of cash
and/or the trade-in value of a previously owned manufactured home and/or, in
the case of Land-in-Lieu Contracts, an estimated value of equity in real
property pledged as additional collateral. For previously owned homes, the
trade-in allowance accepted by the retailer must be consistent with the value
of the owned home determined by GreenPoint Credit in light of current market
conditions. The value of real property pledged as additional collateral is
estimated by regional personnel, using tax assessed value, or appraisers who
are familiar with the area in which the property is located.
Underwriting policies and marketing programs for the origination or purchase
on an individual basis of manufactured housing contracts are established by
GreenPoint Credit's management at its headquarters in San Diego and are
subject to change from time to time. Any material changes or conditions will
be disclosed in the prospectus supplement.
The volume of contracts originated by GreenPoint Credit or purchased from
retailers on an individual basis by GreenPoint Credit for the periods
indicated below and other information at the end of the periods below are as
follows:
Contracts Originated or Purchased on an Individual Basis
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter Ended Year Ended Year to Date
December 31, 1998 December 31, 1999 June 30, 2000
----------------- ----------------- -------------
<S> <C> <C> <C>
Principal Balance of Con-
tracts Purchased........... $1,451,368.00 $3,045,734.00 $1,405,061.00
Number of Contracts Pur-
chased..................... 38,010 75,622 33,461
Average Contract Size....... $ 38.18 $ 40.27 $ 41.99
Number of Regional Offices.. 45 45 45
</TABLE>
The information in the table above includes only contracts originated by
GreenPoint Credit or purchased from retailers. The number of regional offices
includes regional offices in the United States originating or purchasing
contracts.
Servicing
GreenPoint Credit, through its regional offices, services all of the
manufactured housing contracts that it purchases or originates, whether on an
individual basis or in bulk. Generally, whenever any contracts are sold,
GreenPoint Credit will retain servicing responsibilities with respect to the
sold contracts. In addition, GreenPoint Credit may make arrangements pursuant
to which it services, or would service, manufactured housing contracts owned
by other entities. These service contracts were not originated, and would not
be purchased, by GreenPoint Credit. Servicing responsibilities include
collecting principal and interest payments, taxes, insurance premiums and
other payments from obligors and, when the contracts are not owned by
GreenPoint Credit, remitting principal and interest payments to the owners
thereof, to the extent the owners of the serviced contracts are entitled
thereto. Collection procedures include repossession and resale of manufactured
homes securing defaulted contracts and foreclosure if land is involved and, if
deemed advisable by GreenPoint Credit, entering into workout arrangements with
obligors under certain defaulted contracts. Although decisions as to whether
to repossess any manufactured home are made on an individual basis, GreenPoint
Credit's general policy is to institute repossession procedures promptly after
regional office personnel determine that it is unlikely that a defaulted
contract will be brought current, and thereafter to diligently pursue the
resale of repossessed manufactured homes.
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<PAGE>
The following table shows the size of the portfolio of contracts serviced,
including contracts already in repossession, by GreenPoint Credit, through the
manufactured housing regional office system, as of the dates indicated:
Size of Serviced Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
As of As of As of
December 31, 1998 December 31, 1999 June 30, 2000
----------------- ----------------- -------------
<S> <C> <C> <C>
Unpaid Principal Balance of
Contracts Being Serviced... $11,504,320 $13,054,239 $13,659,538
Average Contract Unpaid
Principal Balance.......... $ 27.7 $ 29.9 $ 30.7
Number of Contracts Being
Serviced................... 415,373 437,093 444,642
</TABLE>
Delinquency and Loan Loss/Repossession Experience
The following table sets forth the delinquency experience of manufactured
housing contracts serviced by GreenPoint Credit since October 1998, other than
contracts already in repossession, as of the dates indicated:
Delinquency Experience
<TABLE>
<CAPTION>
As of As of As of
December 31, 1998 December 31, 1999 June 30, 2000
----------------- ----------------- -------------
<S> <C> <C> <C>
Number of Contracts Out-
standing................... 411,852 433,221 440,011
Number of Contracts Delin-
quent:
30-59 days................ 6,397 8,244 7,753
60-89 days................ 1,753 2,055 2,022
90 days or more........... 2,372 2,641 2,304
------- ------- -------
Total Contracts Delinquent.. 10,522 12,940 12,079
======= ======= =======
Delinquencies as a Percent-
age of Contracts Outstand-
ing........................ 2.55% 2.99% 2.75%
======= ======= =======
</TABLE>
The information contained in the table above is based on number of days
payments are contractually past due, assuming 30-day months. Consequently, a
payment due on the first day of a month is not 30 days delinquent until the
first day of the following month.
Since GreenPoint Credit has only been servicing the contracts for a limited
amount of time, the delinquency experience reflected in the table above may
not necessarily be indicative of the actual performance of the contracts over
time.
The following table sets forth the loan loss/repossession experience of
contracts serviced through the manufactured housing regional office system of
GreenPoint Credit, including contracts already in repossession, as of the
dates indicated:
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended Year to Date
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
Number of Contracts Being Serviced............ 437,093 444,642
Aggregate Principal Balance of Contracts Being
Serviced..................................... $13,054,239 $13,659,538
Average Principal Recovery Upon Liquidation... 46.15% 45.85%
Contract Liquidations......................... 3.88% 1.83%
Net Losses:
Dollars..................................... $ 281,757 $ 138,916
Percentage.................................. 2.16% 1.02%
Contracts in Repossession..................... 3,872 4,631
</TABLE>
18
<PAGE>
The "Average Principal Recovery Upon Liquidation" in the table above is
shown as a percentage of the outstanding principal balance of contracts that
were liquidated during the applicable period, based on the gross amounts
recovered upon liquidation, proceeds applied to unpaid interest accrued
through the date of liquidation and after the payment of repossession and
other liquidation expenses. Deficiency recoveries received subsequent to
liquidation date are also included net of collection expenses paid to third
parties.
The "Contract Liquidations" in the table above are shown as the number of
contracts liquidated during the period as a percentage of the total number of
contracts being serviced as of period end.
The calculation of "Net Losses" includes unpaid interest accrued through the
date of liquidation and all repossession and other liquidation expenses and is
reduced by deficiency recoveries received subsequent to liquidation date net
of collection expenses paid to third parties.
Prepayment and Yield Considerations
Prepayment Considerations
If so specified in the related prospectus supplement, the contracts in any
contract pool may be prepaid in full or in part at any time. The prepayment
experience of the contracts, including prepayments due to liquidations of
defaulted contracts, will affect the average life and the maturity of the
related securities. A contract pool might include contracts with contract
interest rates that are generally higher or lower, in absolute terms or in
comparison to prevailing rates, than the contract rates of the contracts from
which are derived certain historical statistical data set forth in this
prospectus or the related prospectus supplement. As a result, the prepayment
performance of the contracts contained in that contract pool might be higher
or lower than the prepayment performance of the contracts reflected in the
historical data. In addition, GreenPoint Credit's management is aware of
limited publicly available information relating to historical rates of
prepayment on manufactured housing contracts. However, GreenPoint Credit's
management believes that neither the prepayment experience of other pools of
manufactured housing contracts nor the historical rates of prepayment for any
other manufactured housing contracts will necessarily be indicative of the
rate of prepayment that may be expected to be exhibited by the contracts in
any other contract pool. Nevertheless, GreenPoint Credit's management
anticipates that a number of contracts will be prepaid in full in each year
during which any related securities are outstanding. The amount of prepayments
on the contracts, including prepayments due to liquidations of defaulted
contracts, during any particular year may be influenced by a variety of
economic, geographic, social and other factors, including repossessions,
aging, seasonality, interest rates and the rate at which owners of
manufactured homes sell their manufactured homes. Other factors affecting
prepayments on the contracts include changes in obligors' housing needs, job
transfers, unemployment and obligors' net equity in manufactured homes.
Because of the depreciating nature of manufactured housing, which limits the
possibilities for refinancing, and because the terms of manufactured housing
contracts are generally shorter than the terms for mortgage loans secured by
site-built homes, and changes in interest rates have a correspondingly smaller
effect on the monthly payments on manufactured housing contracts as opposed to
mortgage loans secured by site-built homes, changes in interest rates may play
a smaller role in prepayment behavior of manufactured housing contracts than
they do in the prepayment behavior of loans secured by mortgages on site-built
homes. Conversely, local economic conditions and certain of the other factors
mentioned above are likely to play a larger role in the prepayment behavior of
manufactured housing contracts than they do in the prepayment behavior of
loans secured by mortgages on site-built homes.
Repurchases of contracts on account of certain breaches of representations
and warranties as described in the applicable prospectus supplement also will
have the effect of prepaying the repurchased contracts and therefore will
affect the average life of and yield on the securities. See "Description of
the Securities--Conveyance of Contracts." In addition, most of the contracts
contain provisions that prohibit the related owner from selling the
manufactured home without the prior consent of the holder of the related
contract. These contract provisions are similar to "due-on-sale" clauses and
may not be enforceable in all states.
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See "Certain Legal Aspects of the Contracts--Transfers of Manufactured Homes;
Enforceability of Restrictions on Transfer" in this prospectus. The servicer's
policy is to permit most sales of manufactured homes where the proposed buyer
meets the servicer's then current underwriting standards and enters into an
assumption agreement.
To the extent provided in the related prospectus supplement, the servicer,
or any other party as may be designated in the related prospectus supplement,
will have the option to purchase all of the contracts in the related contract
pool, at the price and under the conditions specified in the related
prospectus supplement, when the aggregate Pool Principal Balance of the
related contract pool has been reduced to 10%, or any other percentage as may
be specified in the related prospectus supplement, of its Cut-off Date Pool
Principal Balance. The exercise of any option to purchase the contracts early
will affect the average life of and yield on the related securities.
To the extent provided in the related prospectus supplement, the trustee or
indenture trustee, as applicable, for the related trust shall solicit bids for
the purchase of the contracts remaining in the trust at a Termination Auction
within ninety days following the distribution date as of which the Pool
Principal Balance for a contract pool is less than 10%, or any other
percentage as may be specified in the related prospectus supplement, of that
contract pool's Cut-off Date Pool Principal Balance. The sale and consequent
termination of the related trust pursuant to a Termination Auction will affect
the average life and yield on the related securities.
The average life and maturity of the securities of any class will also be
affected by the amount and timing of any special principal distributions to
the holders of the securities. In addition, if any security of a class is
subject to mandatory repurchase, the occurrence of the repurchase date for the
security subject to mandatory repurchase will have the same effect as the
maturation of the security subject to mandatory repurchase, with the
repurchase price being equivalent to the amount due at maturity. See
"Description of the Securities--Distributions on Securities" and "Description
of the Securities--Optional and Mandatory Repurchase of Securities; Optional
Termination and Termination Auction" in this prospectus. The prospectus
supplement relating to any class that is entitled to special principal
distributions or is subject to mandatory repurchase will contain a description
of the conditions under which special principal distributions or mandatory
repurchases will take place and a description of some of the factors that
might affect the rate of special principal distributions or the timing of any
repurchase dates.
Information regarding the prepayment assumption or any other rate of assumed
prepayment, as applicable, will be set forth in the prospectus supplement
applicable to the relevant class or classes of securities described therein.
Yield Considerations
To the extent that any credit enhancement or any advancing obligation of the
servicer described in the related prospectus supplement is insufficient to
protect the holders of any class of securities from losses or delinquencies on
the related contract pool, the yield to the holders from their investment in
the securities will be adversely affected should losses or delinquencies
occur. In the absence of losses or delinquencies which are not covered by
credit enhancement or advances, respectively, on a distribution date, the
effective yield on the securities will depend upon, among other things, the
price at which the securities are purchased, the rate at which the contracts
for the related trust liquidate or are prepaid and the amount and timing of
any special principal distributions. If a purchaser of securities purchases
them at a discount or premium, as applicable, and calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal on
the purchased securities that is faster or slower, respectively, than the rate
actually realized, the purchaser's actual yield to maturity will be lower than
the yield so calculated by the purchaser. Losses which are covered by credit
enhancement, but on later than anticipated distribution dates, will have the
same effect on anticipated yield as prepayments that are made later than
anticipated, as just described, depending on whether the securities were
purchased at a discount or premium.
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The yield to holders of any class of securities may be below that otherwise
produced by the applicable Security Rate because, while, in the absence of
losses or delinquencies, one month's interest on the related contracts will be
collected during each Collection Period, the portion of one month's interest
to which the holders of the related securities are entitled will not be
distributed until the first distribution date after the Collection Period in
which the interest was collected.
If a security is subject to mandatory repurchase, the yield to the
repurchase date will be affected by, among other things, the applicable
repurchase price, the ability of any liquidity facility provider to distribute
the repurchase price and the date, if any, on which the repurchase date
occurs. If, in connection with a mandatory repurchase, the repurchase price
for a security is equal to its Percentage Interest of the then current
Security Balance, and the security is purchased at a discount, and the
purchaser calculates its anticipated yield to the repurchase date based on an
assumed repurchase date that is earlier than the actual repurchase date, then
such purchaser's actual yield to maturity will be lower than it would have
been if a repurchase occurred on the assumed date.
The payment features of the contracts comprising any contract pool, as
described above under "The Contract Pools," may, under extraordinary
circumstances, cause the amounts collected thereon during particular
Collection Periods to be insufficient to fund all distributions of principal
and interest to the holders of some or all of the securities of the related
series, even in the absence of losses or delinquencies. The circumstances
described in the preceding sentence could occur if a sufficiently large number
of partial or full prepayments, as a percentage of the then outstanding Pool
Principal Balance of the related contract pool, are received on contracts in a
particular Collection Period, if those prepayments are made in advance of the
related contracts' respective due dates during the particular Collection
Period. In that case, a non-default collection shortfall could occur because
interest that actually accrues on the related contracts is less than interest
that would have accrued if the payments were paid on the contracts' respective
due dates. A non-default collection shortfall could adversely affect the yield
to holders of any class of securities to the extent the non-default collection
shortfalls are not covered by credit enhancement or advances.
Description of the Securities
The securities will be issued in series. Each series of certificates will be
issued pursuant to a separate pooling and servicing agreement similar to the
form of pooling and servicing agreement filed as an exhibit to the
registration statement under the Securities Act of 1933, as amended, for the
certificates, of which this prospectus is a part. Each series of notes issued
by GreenPoint Asset will be issued pursuant to an indenture trust agreement
similar to the form of indenture filed as an exhibit to the registration
statement under the Securities Act of 1933, as amended, for the notes, of
which this prospectus is a part. Each series of notes issued by GreenPoint
Credit through an owner-trust structure will be issued pursuant to a trust
agreement similar to the trust agreement filed as an exhibit to the
registration statement under the Securities Act of 1933, as amended, for the
notes, of which this prospectus is a part together with the Indenture. In the
case of each series of notes, the servicer and the issuer or related owner
trust, as applicable, will enter into a separate servicing agreement. An
execution copy of each pooling and servicing agreement, indenture, trust
agreement and servicing agreement will be filed with the Securities and
Exchange Commission as an exhibit to a Form 8-K. The following summaries
describe only the material provisions expected to be common to each pooling
and servicing agreement, indenture, trust agreement or servicing agreement, as
applicable, and the related securities. All references to an "agreement" and
any discussion of the provisions of any agreement applies to pooling and
servicing agreements, indentures, trust agreements and servicing agreements,
as applicable. GreenPoint Credit recommends that the investor read all of the
provisions of the related pooling and servicing agreement, indenture, trust
agreement and/or servicing agreement, as applicable, and the descriptions set
forth in the related prospectus supplement. The prospectus supplement for each
series will describe the specific material provisions of the pooling and
servicing agreement, indenture trust agreement and/or servicing agreement, as
applicable, relating to that series.
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General
Each series of securities may be issued in one or more classes. If the
securities of a series are issued in more than one class, the securities of
all or less than all of the classes for that series may be sold pursuant to
this prospectus, and there may be separate prospectus supplements relating to
one or more of those classes so sold. Any reference in this prospectus to the
prospectus supplement relating to a series comprised of more than one class
should be understood as a reference to each of the prospectus supplements
relating to the classes sold hereunder. Any reference in this prospectus to
the securities of a class should be understood to refer to the securities of a
class within a series, the securities of a subclass within a series or all of
the securities of a single-class series, as the context may require.
The securities will be issued in the denominations specified in the related
prospectus supplement. Interest-only securities will have no Percentage
Interest. Securities, if issued in registered form to beneficial owners of the
securities or nominees thereof, will be transferable and exchangeable at the
corporate trust office of the trustee or, if it so elects, at the office of an
agent in New York, New York. No service charge will be made for any
registration of exchange or transfer, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge.
The securities of each series will evidence an interest in or indebtedness
of, as applicable, a trust or the issuer, respectively, as specified in the
related prospectus supplement. Each trust will include:
(1) a contract pool, including rights to receive payments on the contracts
comprising the contract pool on and after the Cut-off Date;
(2) the amounts held from time to time in the Payment Account as described
in the applicable prospectus supplement;
(3) any property which initially secured a contract and which is acquired
in the process of realizing thereon;
(4) the obligations of the seller, under certain conditions, to repurchase
contracts sold by it with respect to which certain representations and
warranties have been breached and not cured;
(5) certain contractual servicing obligations of the servicer;
(6) the proceeds of all insurance policies described in this prospectus;
and
(7) if applicable, one or more forms of credit support.
The seller will convey the contracts to the issuer or trust related to any
series of securities, as applicable. See "The Contract Pools" in this
prospectus and "--Conveyance of Contracts" below. The servicer will service
the contracts pursuant to the related agreement. If so specified in the
related prospectus supplement, the contract documents will be held for the
benefit of the trustee or the indenture trustee, as applicable, by the
servicer.
Conveyance of Contracts
On the date of initial issuance of the securities of a series, the seller
will sell to the issuer or trust related to any series of securities, as
applicable, without recourse, all of its right, title and interest in and to
the contracts sold by it, and all rights under the standard hazard insurance
policies on the related manufactured homes. The conveyance of the contracts to
the issuer or trust related to any series of securities, as applicable, will
include a conveyance of all rights to receive scheduled payments thereon that
were due on or after the Cut-off Date, even if received prior to the Cut-off
Date, as well as all rights to any payments received on or after the Cut-off
Date other than late receipts of scheduled payments that were due prior to the
Cut-off Date. The contracts will be described on the contract schedule
attached to the related agreement. The contract schedule will include the
principal balance of each contract as of the Cut-off Date, the amount of each
scheduled payment due on each contract as of the Cut-off Date, the contract
interest rate on each contract as of the Cut-off Date and the maturity date of
each contract. The servicer will be required to complete a review of the
contract files and confirm the
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accuracy of the contract schedule delivered to the trustee within the time
period set forth in the related agreement. Any contract discovered not to
agree with the contract schedule in a manner that is materially adverse to the
interests of the securityholders will be repurchased by the seller, or
replaced with another contract, except that if the discrepancy relates to the
principal balance of a contract the seller may, under certain conditions,
deposit cash in the Payment Account in an amount sufficient to offset the
discrepancy. The trustee will not review the contract files.
If so provided in the related prospectus supplement, the servicer will hold,
as custodian and agent on behalf of the trustee or indenture trustee, as
applicable, the original contracts and copies of documents and instruments
relating to each contract and the security interest in the manufactured home,
and real property, if any, relating to each contract. In order to give notice
of the trustee's or indenture trustee's, as applicable, right, title and
interest in and to the contracts, a UCC-1 financing statement identifying the
trustee or indenture trustee, as applicable, as the secured party and
identifying all the contracts as collateral will be filed in the appropriate
office in the appropriate states. The contracts will be stamped or otherwise
marked to reflect their assignment to the trustee or indenture trustee, as
applicable. To the extent that the contracts do not constitute "chattel paper"
within the meaning of the UCC as in effect in the applicable jurisdictions or
to the extent that the contracts do constitute chattel paper and a subsequent
purchaser is able to take physical possession of the contracts without notice
of the assignment to the trustee or indenture trustee, as applicable, the
trustee's or indenture trustee's, as applicable, interest in the contracts
could be defeated. See "Certain Legal Aspects of the Contracts--Security
Interests of the Seller in the Manufactured Homes" and "--Land Home Contracts
and Land-in-Lieu Contracts" in this prospectus.
The seller will make representations and warranties to the issuer or trust
related to any series of securities, as applicable, with respect to each
contract sold by it. With respect to any series of notes, the representations
and warranties made by the Seller to the issuer pursuant to the related sale
and servicing agreement will be assigned to the indenture trustee pursuant to
the indenture. The applicable prospectus supplement will describe:
. the representations and warranties made by the seller in connection with
the contracts conveyed to the issuer or trust related to any series of
securities, as applicable;
. the terms pursuant to which the seller will be obligated to repurchase
any contract sold by it if any representation and warranty has been
breached, unless the breach has been cured or otherwise is not required
to be cured; and
. the terms pursuant to which the seller may remedy any breach.
Payments on Contracts
The applicable prospectus supplement will specify the arrangements pursuant
to which contract collections are held pending distribution to
securityholders. Certain contract collections will be applied to pay the
servicer's servicing compensation and to reimburse it for certain expenses, as
set forth in each prospectus supplement and as set forth in this prospectus
under "--Servicing Compensation and Payment of Expenses; Matters Regarding the
Servicer" below.
Distributions on Securities
The securities of any class will entitle the holders thereof to
distributions, on the distribution dates specified in the related prospectus
supplement, from amounts collected on the underlying contracts. The securities
of a class may entitle the holders thereof to:
. distributions of both principal and interest;
. distributions of principal only; or
. distributions of interest only.
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The distributions described in the previous sentence will be made in
accordance with a formula described in the related prospectus supplement, and,
if so specified in the related prospectus supplement, the distributions will
be applied first to interest, if any, and second to principal, if any. To the
extent specified in the related prospectus supplement, the rights of the
holders of the securities of one or more classes of a multiple class series to
receive distributions of principal or of interest or of both from amounts
collected on the contracts may be subordinate to the rights of the holders of
securities of one or more other classes. See "Credit and Liquidity
Enhancement" in this prospectus.
Distributions of Principal. If the securities of a class entitle the holders
thereof to distributions of principal, the related prospectus supplement will
specify an initial aggregate Security Balance for the securities of that class
and a method of computing the amount of principal, if any, to be distributed
to the holders of the securities of that class on each distribution date. If
so specified in the related prospectus supplement, principal distributions for
the securities of a class will be computed on the basis of a formula which, on
each distribution date, allocates all or a portion of the Total Regular
Principal Amount relating to that distribution date to the securities of the
applicable class. See "The Contract Pools" and "--Servicing Compensation and
Payment of Expenses; Matters Regarding the Servicer" in this prospectus.
Distributions with respect to all or a portion of the Total Regular Principal
Amount are sometimes referred to in this prospectus as distributions of
"Regular Principal." The Total Regular Principal Amount with respect to any
contract pool and any distribution date may be estimated in a manner specified
in the related prospectus supplement.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying contract pool, the contract collections
available on any distribution date to make distributions of Regular Principal
to the holders of the securities of a class are less than the portion of the
Total Regular Principal Amount allocable to such class, the deficiency may be
made up from:
. Excess Interest; or
. funds available from one or more forms of credit support referred to
below, but only to the extent, if any, specified in the applicable
prospectus supplement. See "Credit and Liquidity Enhancement" in this
prospectus.
If specified in the applicable prospectus supplement, the Security Balance
of the securities of a class will be reduced on each distribution date by the
full amount of the portion of the Total Regular Principal Amount allocable to
such class even if, due to deficient contract collections, a full distribution
thereof is not made.
The applicable distribution formula for each class of a multiple-class
series may allocate the Total Regular Principal Amount among the various
classes on a pro rata, sequential or other basis, as specified in the related
prospectus supplement. If specified in the related prospectus supplement, the
applicable distribution formula may entitle the holders of securities of a
particular class to receive on certain distribution dates, distributions of
Regular Principal from particular sources of funds (e. g. , one or more of the
forms of credit support referred to below) upon the occurrence of certain
losses or delinquencies, even if the holders of the securities of that class
would not have been entitled to receive principal distributions on the related
distribution dates from amounts collected on the underlying contracts in the
absence of losses or delinquencies.
If so specified in the applicable prospectus supplement, the securities of a
class may entitle the holders thereof to special principal distributions on
particular distribution dates that are unrelated to the Total Regular
Principal Amount for those distribution dates. Special principal distributions
may be made, under the circumstances set forth in the applicable prospectus
supplement, from interest collected on the underlying contract pool, from
funds available from one or more forms of credit support or from any other
source specified in the related prospectus supplement. The securities of a
class having an initial Security Balance may entitle the holders thereof to
distributions of Regular Principal only, to distributions of Regular Principal
and to special principal distributions or to special principal distributions
only. However, if so specified in the related prospectus supplement, the
securities of a class will not entitle the holders thereof to aggregate
principal distributions in excess of the initial Security Balance for the
securities in that class.
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Distributions of Interest. The distribution formula for a class of
securities having an initial Security Balance may, but need not, also specify
a method of computing the interest, if any, to be distributed on specified
distribution dates, which may include all or less than all of the distribution
dates, to the holders of the securities of such class. The interest described
in the previous sentence may be equal, subject to the adjustments as may be
described in the related prospectus supplement, to a specified number of days'
interest on the applicable Security Balance, before giving effect to any
reduction thereof on the related distribution date, calculated at the Security
Rate specified in the related prospectus supplement. The Security Rate may be
fixed or variable, and, if specified in the related prospectus supplement, may
shift from a variable rate to a fixed rate under the conditions specified in
the related prospectus supplement. Variable Security Rates may vary from time
to time based upon changes in an index or other measure of market rates, all
as more fully described in the related prospectus supplement. In that case,
the Rate Period and the specific basis on which the Security Rate for each
Rate Period will be determined, including the particular market rates and
measures thereof relevant for determining the Security Rate for each Rate
Period, may remain constant or may change from time to time at the election of
the servicer or otherwise, all as specified in the related prospectus
supplement. Variable Security Rates may also vary from time to time, in the
manner specified in the related prospectus supplement, based upon changes in
the weighted average of the contract interest rates of the contracts in the
related contract pool or on any other basis. To the extent set forth in the
related prospectus supplement, variable Security Rates may also have floor
rates and/or ceiling rates which may be fixed or subject to adjustment as set
forth in the related prospectus supplement. In addition, a variable Security
Rate may be converted to a fixed Security Rate at the election of the seller
or upon the occurrence of certain conditions. In that event, the related
prospectus supplement will set forth the conditions under which the variable
Security Rate may be converted to a fixed Security Rate.
Rather than entitling the holders thereof to receive distributions of
interest based upon a Security Rate, the distribution formula for the
securities of a class may entitle the holders thereof to distributions of
interest on specified distribution dates, which may include all or less than
all of the distribution dates, equal, in the case of those distribution dates,
to all or a portion, which portion will be determined as described in the
related prospectus supplement, of the interest payable on the related
contracts during one or more Collection Periods occurring prior to the related
distribution date. Classes of securities that do not entitle the holders
thereof to receive distributions of principal may nevertheless entitle such
holders to receive interest distributions calculated on this basis.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying contract pool, the contract collections
available to make distributions of interest to the holders of the securities
of a class are less than the amount of interest computed as described above,
the deficiency may be made up from other sources, but only to the extent, if
any, specified in the applicable prospectus supplement. See "Credit and
Liquidity Enhancement" in this prospectus.
Each prospectus supplement will contain information relating to the full
amounts of principal and interest required to be distributed to the holders of
the related class or classes of securities, to the extent there are sufficient
contract collections available therefor, sometimes referred to in this
prospectus as "full distributions," from amounts paid or payable on the
underlying contracts.
Residual Interests. If specified in the related prospectus supplement, a
class of securities sold hereunder may evidence the residual interest in the
related trust. Securities evidencing a residual interest will not have the
features described above. Rather, if so specified in the related prospectus
supplement, securities evidencing a residual interest will entitle the holders
thereof to receive distributions from amounts collected on the contracts which
would not be needed to make distributions to the holders of other interests in
the trust or to pay expenses of the trust in the absence of liquidation losses
or other events resulting in deficient contract collections. In addition, if
specified in the related prospectus supplement, any securities evidencing a
residual interest may also entitle the holders thereof to receive additional
distributions of assets of the related trust, to the extent any assets remain
after being applied to make distributions to the holders of other interests in
the trust or to pay expenses of the trust. Further, if so specified in the
related prospectus supplement, any amounts due to the holders of a
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residual interest with respect to any series may be subordinated to amounts
due to holders of securities of another series to the extent described in the
related prospectus supplement. The securities evidencing a residual interest
may entitle the holders thereof to distributions at various times throughout
the life of the related trust or only upon termination of the trust, all as
more fully set forth in the related prospectus supplement. If an election is
made to treat the related trust as a REMIC Fund, the holders of a residual
interest in that REMIC Fund will be subject to federal income taxation with
respect to their ownership of the related residual interest as described in
this prospectus under "Federal Income Tax Consequences--REMIC Securities--
Taxation of Residual Securities."
Global Securities
If so specified in the applicable prospectus supplement, the securities of a
series, or of one or more classes within a series, will be issuable in the
form of Global Securities.
The Depository Trust Company, or 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 New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC accepts securities for
deposit from its Participants and facilitates the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of Participants, thereby eliminating the need for physical
movement of securities. Indirect access to the DTC system is also available to
the Indirect Participants.
Unless and until Definitive Securities are issued, beneficial owners of the
securities who are not Participants but desire to purchase, sell or otherwise
transfer ownership of securities may do so only through Participants. In
addition, beneficial owners of the securities will receive all distributions
of principal of, and interest on, the securities from the trustee through DTC
and Participants. Beneficial owners of the securities will not receive or be
entitled to receive securities representing their respective interests in the
securities, except under the limited circumstances described below. In
addition, if some or all of the securities of a series are issued in the form
of one or more Global Securities, certain monthly and annual reports prepared
by the servicer under the related pooling and servicing agreement will be sent
on behalf of the related trust to DTC and not to the beneficial owners of the
securities.
Unless and until Definitive Securities are issued, it is anticipated that
the only "securityholder" of the securities will be Cede & Co., as nominee of
DTC. Beneficial owners of the securities will not be securityholders as that
term is used in the pooling and servicing agreement. Beneficial owners of the
securities are only permitted to exercise the rights of securityholders
indirectly through Participants and DTC.
If so specified in the related prospectus supplement, while the securities
are outstanding, under DTC's rules. Participants are required to make book-
entry transfers through DTC's facilities with respect to the securities, and
DTC as the sole holder of the securities is required to receive and transmit
distributions of principal of, and interest on, the securities. Unless and
until Definitive Securities are issued, beneficial owners of the securities
who are not Participants may transfer ownership of securities only through
Participants by instructing its Participants to transfer securities, by book-
entry transfer, through DTC for the account of the purchasers of the
securities, which account is maintained with their respective Participants.
Under DTC's rules and in accordance with DTC's normal procedures, transfers of
ownership of securities will be executed through DTC, and the accounts of the
respective Participants at DTC will be debited and credited.
Definitive Securities will be issued to beneficial owners of the securities,
or their nominees, rather than to DTC, only if:
. the servicer advises the trustee in writing that DTC is no longer
willing or qualified to discharge properly its responsibilities as
nominee and depository with respect to the securities and the servicer
or the trustee is unable to locate a qualified successor;
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. the seller at its option, elects to terminate the book-entry system
through DTC; or
. after the occurrence of an Event of Default, beneficial owners of the
securities having a majority in Percentage Interests of each class of
the securities advise the trustee and DTC through the Participants, in
writing, that the continuation of a book-entry system through DTC or a
successor thereto to the exclusion of any physical securities being
issued to beneficial owners of the securities is no longer in the best
interests of beneficial owners of the securities. See "--Servicing
Compensation and Payment of Expenses; Matters Regarding the Servicer--
Events of Default" below.
Upon issuance of Definitive Securities to beneficial owners of the securities,
the Definitive Securities will be transferable directly and not exclusively on
a book-entry basis and registered holders will deal directly with the trustee
with respect to transfers, notices and distributions.
Except as otherwise specified in the related prospectus supplement, unless
and until Definitive Securities are issued, DTC will take any action permitted
to be taken by a securityholder under the pooling and servicing agreement only
at the direction of one or more Participants to whose DTC accounts the
securities are credited. DTC will take such action with respect to any
Percentage Interests of the securities only at the direction of and on behalf
of its Participants to whose DTC accounts the securities are credited with
respect to the Percentage Interests of the securities. DTC may take actions,
at the direction of the related Participants, with respect to some securities
which conflict with actions taken with respect to other securities.
Optional and Mandatory Repurchase of Securities; Optional Termination and
Termination Auction
Repurchase of Securities. Some or all of the securities of a class may be
subject to repurchase by or on behalf of the seller at the option of the
holders thereof and/or at the option of the seller, but only to the extent, at
the prices, on the dates and under the conditions specified in the related
prospectus supplement. In addition, some or all of the securities of a class
may be subject to mandatory repurchase by or on behalf of the seller, to the
extent, at the prices, on the dates and under the conditions specified in the
related prospectus supplement. On the date of repurchase, the holder of the
security to be repurchased will cease to be entitled to any benefit of the
security or the related agreement and will be entitled only to receive from
the trustee the repurchase price of the security upon surrender thereof at the
office or agency designated by the trustee. To the extent specified in the
related prospectus supplement, the funds necessary to distribute the
repurchase price of any security subject to mandatory or optional repurchase
as described therein will be provided under a security purchase agreement or
other liquidity facility as described in "Credit and Liquidity Enhancement" in
this prospectus.
Optional Termination. If so specified in the applicable prospectus
supplement, the servicer, or other parties as designated in the related
prospectus supplement, will have the option to purchase, upon giving notice
mailed no later than the distribution date next preceding the month of the
exercise of the option to purchase, all outstanding contracts in the related
contract pool after the first distribution date on which the Pool Scheduled
Principal Balance is less than 10%, or other percentage as may be specified in
the related prospectus supplement, of the Cut-off Date Pool Principal Balance.
The price at which the servicer may purchase the related contracts will equal,
after deductions of related advances by the servicer, the greater of:
(1) the sum of:
(a) 100% of the Scheduled Principal Balance of each contract, other
than any contract as to which the related manufactured home has
been acquired and not yet disposed of and whose fair market value
is included pursuant to clause (b) below, as of the final
distribution date; and
(b) the fair market value of the acquired property as determined by the
servicer; and
(2) the aggregate fair market value as determined by the servicer of all of
the assets of the related trust, plus
in the case of both clause (1) and clause (2), an amount sufficient to
reimburse securityholders of each outstanding class for any shortfall in
interest due thereto in respect of prior distribution dates and any other
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amounts specified in the related prospectus supplement. The servicer's option
shall not be exercisable if there will not be distributed to the
securityholders the Minimum Termination Amount. The related prospectus
supplement will specify whether losses suffered on the contracts in the normal
course will be allocated to the holders of securities when realized or upon
the termination of the related trust and whether an adjustment to the Minimum
Termination Amount will be made. In no event, will losses be recognized until
a liquidation of the collateral securing any defaulted contract has been
liquidated.
Termination Auction. If specified in the applicable prospectus supplement,
on any distribution date after the distribution date on which the Pool
Scheduled Principal Balance is less than 10%, or other percentage as may be
specified in the related prospectus supplement, of the Cut-off Date Pool
Principal Balance, the servicer, or other parties as designated in the related
prospectus supplement, will, in addition to the option to purchase the
contracts discussed above, have the option to direct the trustee to solicit
bids for a Termination Auction. Unless the servicer, or other party as
designated in the prospectus supplement, has either exercised the option to
purchase the contracts or directed the trustee to conduct a Termination
Auction within 90 days of the distribution date on which the Pool Scheduled
Principal Balance is less than 10%, or other percentage as may be specified in
the related prospectus supplement, of the Cut-off Date Pool Principal Balance,
the servicer shall, to the extent specified in the related prospectus
supplement, be obligated to direct the trustee to conduct a Termination
Auction. In any Termination Auction, the servicer shall give notice as
specified in the applicable prospectus supplement before the date on which the
Termination Auction is to occur. The trustee will solicit each securityholder,
the seller and one or more active participants in the asset-backed securities
or manufactured housing contract market that are not affiliated with
GreenPoint Credit to make a bid to purchase the contracts at the Termination
Auction. The trustee will sell all the contracts to the highest bidder,
subject, among other things, to:
. the requirement that the highest bid equal or exceed the Minimum
Termination Amount; and
. the requirement that at least one bid be tendered by an active
participant in the asset-backed securities or manufactured housing
contract market that is not affiliated with GreenPoint Credit.
If the foregoing requirements are satisfied, the successful bidder or bidders
shall deposit the aggregate purchase price for the contracts in the Payment
Account. If the foregoing requirements are not satisfied, the purchase shall
not occur and distributions will continue to be made on the securities. If a
REMIC election has been made with respect to the applicable trust, any sale
and consequent termination of the trust as a result of a Termination Auction
must constitute a "qualified liquidation" of the trust under Section 860F of
the Code.
Termination
Pooling and Servicing Agreement. The pooling and servicing agreement for any
series of certificates will terminate upon the last action required to be
taken by the trustee on the final distribution date following the earlier of:
. the purchase or sale of all contracts and all property acquired in
respect of any contract remaining in the related trust as described
above under "--Optional and Mandatory Repurchase of Securities;
Termination Auction;" or
. the final payment or other liquidation or any advance with respect
thereto of the last contract remaining in the related trust, including
the disposition of all property acquired upon repossession of any
manufactured home.
In the event of the termination of any pooling and servicing agreement, the
holders of securities of any class of the related series will be entitled to
receive, upon presentation and surrender of their securities at the office or
agency designated by the trustee, a final distribution in an amount computed
as described in the related prospectus supplement.
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Indenture. The indenture will be discharged with respect to a series of
notes, except with respect to continuing rights specified in the indenture,
upon the delivery to the indenture trustee for cancellation of all the notes
of that series or, with limitations, upon deposit with the indenture trustee
of funds sufficient for the payment in full of all of the notes of that
series.
In addition to the discharge with limitations, the indenture will provide
that, if so specified with respect to the notes of any series, the related
trust will be discharged from any and all obligations in respect of the notes
of that series, except for obligations relating to temporary notes and
exchange of notes, to register the transfer of or exchange notes of that
series, to replace stolen, lost or mutilated notes of that series, to maintain
paying agencies and to hold monies for payment in trust, upon the deposit with
the indenture trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of and
each installment of interest on the notes of that series on the last scheduled
distribution date for the notes and any installment of interest on the notes
in accordance with the terms of the indenture and the notes of that series. In
the event of any defeasance and discharge of notes of the series, holders of
notes of that series would be able to look only to the money and/or direct
obligations for payment of principal and interest, if any, on their notes
until maturity.
Collection and Other Servicing Procedures
Except as otherwise provided in the related servicing agreement with respect
to any series of securities, the servicer may rescind, cancel or make material
modifications to the terms of a contract, including modifying the amounts and
due dates of scheduled payments, in connection with a default or imminent
default thereunder. However, if so specified in the related prospectus
supplement and unless required by the applicable law or to bring contracts
into conformity with the representations and warranties contained in the
related servicing agreement, as appliable, the servicer may not rescind,
cancel or materially modify any contract unless the servicer obtains an
opinion of counsel to the effect that such action will not have certain
adverse federal income tax consequences.
Servicing Compensation and Payment of Expenses; Matters Regarding the Servicer
The servicer will be entitled to the Monthly Servicing Fee with respect to
the contracts underlying any series of securities. Any additional servicing
compensation with respect to the contracts underlying a series of securities
will be specified in the applicable prospectus supplement.
If so specified in the related prospectus supplement, if GreenPoint Credit
is acting as servicer, the servicer may subordinate the Monthly Servicing Fee
for a series with respect to all, or a portion of, the amounts due to the
related securityholders on the terms and conditions set forth in the related
prospectus supplement.
The Monthly Servicing Fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
servicer and for additional administrative services performed by the servicer.
Customary servicing activities include:
. collecting and recording payments;
. communicating with obligors;
. investigating payment delinquencies;
. providing billing and tax records to obligors; and
. maintaining internal records with respect to each contract.
Administrative services performed by the servicer include calculating
distributions to securityholders and providing related data processing and
reporting services for securityholders and on behalf of the trustee. If so
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specified in the applicable prospectus supplement, expenses incurred in
connection with servicing the contracts and paid by the servicer from its
Monthly Servicing Fee include, without limitation:
. payment of fees and expenses of accountants;
. payment of all fees and expenses incurred in connection with the
enforcement of contracts, except liquidation expenses and other
expenses; and
. payment of expenses incurred in connection with distributions and
reports to securityholders.
The servicer will be reimbursed out of the liquidation proceeds from a
defaulted contract for all reasonable, out-of-pocket liquidation expenses
incurred by it in realizing upon the related manufactured home as well as for
advances of taxes and insurance premiums previously made with respect to that
contract, to the extent not previously recovered.
If so specified in the related prospectus supplement, as part of its
servicing fees, the servicer will also be entitled to retain, as compensation
for the additional services provided in connection therewith:
. any fees for late payments made by obligors;
. any fees charged in connection with checks returned for non-sufficient
funds;
. conversion fees relating to variable rate contracts;
. any fees associated with the enforcement of deficiency amounts on
liquidated contracts if deficiency amounts are recoverable under the
laws of the applicable jurisdiction;
. extension fees paid by obligors for the extension of scheduled payments;
and
. assumption fees for permitted assumptions of contracts by purchasers of
the related manufactured homes.
To the extent specified in the related prospectus supplement, the servicer
will also be entitled to use payments of principal and interest, including
liquidation proceeds net of liquidation expenses, for its own benefit, without
an obligation to pay interest or any other investment return thereon, until
the related distribution date.
If so specified in the applicable prospectus supplement, any person with
which the servicer is merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the servicer is a party,
or any person succeeding to the business of the servicer, will be the
successor to the servicer under the related servicing agreement, so long as
such successor has a net worth of at least $50 million and has serviced at
least $100 million of manufactured housing contracts for at least one year.
The servicer may assign its rights and delegate its duties under any servicing
agreement, whereupon it will no longer be liable for the obligations of the
servicer under the servicing agreement, provided that, among other conditions,
any rating assigned to the securities will not be reduced because of the
assignment and delegation.
Hazard Insurance Policies. If so specified in the related prospectus
supplement, the servicer will be obligated to cause to be maintained one or
more hazard insurance policies with respect to each manufactured home in an
amount at least equal to the lesser of its actual cash value or the principal
amount due from the obligor under the related contract. The hazard insurance
policies will, at a minimum, provide fire and extended coverage on terms and
conditions customary in manufactured housing hazard insurance policies. If a
manufactured home is located within a federally designated flood area, the
servicer will, to the extent required by applicable law or regulation, also be
obligated to cause flood insurance to be maintained in an amount equal to the
lesser of the amounts described above or the maximum amount available for such
manufactured home under the federal flood insurance programs. The hazard
insurance policies may provide for customary deductible amounts. Coverage
thereunder will be required to be sufficient to avoid the application of any
co-insurance provisions. The hazard insurance policies will be required to
contain a standard loss payee clause in favor of the servicer and its
successors and assigns. In general, the servicer will not be obligated to
cause to be obtained and
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maintained hazard insurance policies that provide earthquake coverage. If
earthquake coverage is required with respect to contracts in a particular
trust, that fact will be disclosed in the related prospectus supplement.
If so specified in the related prospectus supplement, all amounts collected
by the servicer under a hazard or flood insurance policy will be applied
either to the restoration or repair of the manufactured home or against the
remaining principal balance of the related contract upon repossession of the
manufactured home, after reimbursing the servicer for amounts previously
advanced by it for such purposes. The servicer may satisfy its obligation to
maintain hazard and flood insurance policies with respect to each manufactured
home by maintaining a blanket policy insuring against hazard and flood losses
on the related obligor's interest in the manufactured home. The blanket policy
may contain a deductible clause, in which case the servicer will be required
to make payments to the related trust in the amount of any deductible amounts
in connection with insurance claims on repossessed manufactured homes.
If so specified in the related prospectus supplement, if the servicer
repossesses a manufactured home on behalf of the trustee, the servicer is
required to either maintain a hazard insurance policy with respect to the
repossessed manufactured home meeting the requirements set forth above, or to
indemnify the trust against any damage to the repossessed manufactured home
prior to resale or other disposition.
Evidence as to Compliance. If so specified in the related prospectus
supplement, the servicer will be required to deliver to the trustee each year
an officer's certificate executed by an officer of the servicer stating: (1)
that a review of the activities of the servicer during the preceding calendar
year and of performance under the related servicing agreement has been made
under the supervision of that officer, and (2) that to the best of that
officer's knowledge, the servicer has fulfilled all its obligations under the
related servicing agreement throughout the applicable year, or, if there has
been a default in the fulfillment of any obligation, specifying each default
known to that officer and the nature and status thereof. The officer's
certificate will be accompanied by a statement of a firm of independent public
accountants to the effect that, on the basis of an examination of documents
and records relating to servicing of the contracts under the servicing
agreement, or, at the servicer's option, the contracts and other contracts
being serviced by the servicer under agreements similar to the servicing
agreement conducted in accordance with generally accepted auditing standards,
the servicer's servicing has been conducted in compliance with the provisions
of the related servicing agreement or other agreements similar to the
servicing agreement except (1) such exceptions as such firm believes to be
immaterial and (2) such other exceptions as may be set forth in such
statement.
Pooling and Servicing Agreement Events of Default. Servicer events of
default under the pooling and servicing agreement relating to any series of
certificates will consist of, among other events:
. any failure by the servicer to make any deposit or payment required of
it under the pooling and servicing agreement which continues unremedied
for five days after the giving of written notice;
. any failure by the servicer duly to observe or perform in any material
respect any of its other covenants or agreements in the pooling and
servicing agreement which continues unremedied for 30 days after the
giving of written notice of such failure; and
. certain events of insolvency, readjustment of debt, marshaling of assets
and liabilities or other similar proceedings regarding the servicer.
If so specified in the related prospectus supplement, "notice" as used in this
paragraph means notice to the servicer by the trustee, the seller, or, if
applicable, any credit enhancement provider, or to the servicer, the trustee
and the seller by the holders of securities evidencing Fractional Interests
that, in the aggregate, equal at least 25% of the principal balance of all
outstanding certificates, excluding certificates held by the seller or any of
its affiliates.
Rights Upon Pooling and Servicing Agreement Event of Default. If so
specified in the related prospectus supplement so long as a pooling and
servicing agreement event of default remains unremedied, the trustee may,
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but only with the consent of the credit enhancement provider, if any, if the
applicable credit enhancement has not expired or if the credit enhancement has
expired or been terminated and the credit enhancement provider has not been
reimbursed for all amounts due it, and at the written direction of the holders
of certificates evidencing Fractional Interests aggregating not less than 51%
shall, terminate all of the rights and obligations of the servicer under the
pooling and servicing agreement and in and to the related contracts,
whereupon, subject to applicable law regarding the trustee's ability to make
monthly advances, the trustee or a successor servicer under the pooling and
servicing agreement will succeed to all the responsibilities, duties and
liabilities of the servicer under the pooling and servicing agreement and will
be entitled to similar compensation arrangements. If the trustee is obligated
to succeed the servicer but is unwilling or unable so to act, it may appoint
or petition a court of competent jurisdiction for the appointment of a
servicer. Pending the appointment of a servicer, the trustee is obligated to
act as servicer. The trustee and the successor servicer may agree upon the
servicing compensation to be paid, which in no event may be greater than a
monthly amount specified in the pooling and servicing agreement.
If so specified in the related prospectus supplement, no certificateholder
will have any right under the pooling and servicing agreement to institute any
proceeding with respect to the pooling and servicing agreement unless the
certificateholder previously has given to the trustee written notice of
default and unless the holders of certificates evidencing Fractional Interests
aggregating not less than 25% have requested the trustee in writing to
institute a proceeding in its own name as trustee and have offered to the
trustee reasonable indemnity and the trustee for 60 days has neglected or
refused to institute any such proceeding. The trustee will be under no
obligation to take any action or institute, conduct or defend any litigation
under the pooling and servicing agreement at the request, order or direction
of any of the holders of certificates, unless the requesting
certificateholders have offered to the trustee reasonable security or
indemnity against the costs, expenses and liabilities which the trustee may
incur.
Indenture Events of Default. Events of default under the indenture relating
to any series of notes, in most cases, will include:
. default for five days or more in the payment of any principal of or
interest on any note of the series;
. failure to perform any other covenant of the issuer or the trust in the
indenture which continues for a period of thirty days after notice of
that failure is given in accordance with the procedures described in the
accompanying prospectus supplement;
. any representation or warranty made by the issuer or the trust in the
indenture or in any certificate or other writing delivered pursuant
thereto or in connection therewith as to our affecting the series having
been incorrect in a material respect as of the time made, and the breach
is not cured within thirty days after notice of that error is given in
accordance with the procedures described in the accompanying prospectus
supplement; and
. certain bankruptcy, insolvency, or similar events relating to the issuer
or the trust.
Rights Upon Indenture Events of Default. If an indenture event of default as
to the notes of any series occurs and is continuing, either the indenture
trustee, the provider of credit enhancement, if any, or the holders of a
majority of the then aggregate outstanding amount of the notes of that series,
with the written consent of the provider of credit enhancement, if any, may
declare the Security Balance of all the notes of that series to be due and
payable immediately. That declaration may, under some circumstances, be
rescinded and annulled by the holders of a majority in aggregate outstanding
amount of the related notes.
If, following an indenture event of default for any series of notes, the
notes of the series have been declared to be due and payable, the indenture
trustee may, in its discretion, or, if directed in writing by the provider of
credit enhancement, if any, will, regardless of that acceleration, elect to
maintain possession of the collateral securing the notes of that series and to
continue to apply payments on that collateral as if there had been no
declaration of acceleration if that collateral continues to provide sufficient
funds for the payment of principal of and interest on the notes of the series
as they would have become due if there had not been a declaration.
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In addition, the indenture trustee may not sell or otherwise liquidate the
collateral securing the notes of a series following an event of default,
unless:
. the holders of 100% of the then aggregate outstanding amount of the
notes of the series consent to that sale;
. the proceeds of the sale or liquidation are sufficient to pay in full
the principal of the accrued interest, due and unpaid, on the
outstanding notes of the series, and to reimburse the provider of credit
enhancement, if any, at the date of that sale; or
. the indenture trustee determines that the collateral would not be
sufficient on an ongoing basis to make all payments on those notes as
those payments would have become due if those notes had not been
declared due and payable, and the indenture trustee obtains the consent
of the holders of 66-2/3% of the then aggregate outstanding amount of
the notes of the series and the provider of credit enhancement, if any.
In the event that the indenture trustee liquidates the collateral in
connection with an indenture event of default, the indenture provides that the
indenture trustee will have a prior lien on the proceeds of that liquidation
for unpaid fees and expenses. As a result, on the occurrence of that event of
default, the amount available for payments to noteholders would be less than
would otherwise be the case. However, the indenture trustee may not institute
a proceeding for the enforcement of its lien except in connection with a
proceeding for the enforcement of the lien of the indenture for the benefit of
noteholders after the occurrence of an indenture event of default.
If stated in the accompanying prospectus supplement, in the event the
principal of the notes of a series is declared due and payable, as described
in the second preceding paragraph, the holders of any notes issued at a
discount from par may be entitled to receive no more than an amount equal to
the unpaid principal amount of those notes less the amount of the discount
that is unamortized.
In most cases, no noteholder will have any right under an indenture to
institute any proceeding in connection with that indenture unless:
. the holder previously has given to the indenture trustee written notice
of a default and the continuance of that default;
. the holders of securities of any class evidencing not less than 25% of
the aggregate percentage interests constituting the class (1) have made
written request upon the indenture trustee to institute that proceeding
in its own name as indenture trustee thereunder and (2) have offered to
the indenture trustee reasonable indemnity;
. the indenture trustee has neglected or refused to institute that
proceeding for 60 days after receipt of that request and indemnity; and
. no direction inconsistent with that written request has been given to
the indenture trustee during that 60 day period by the holders of a
majority of the Security Balances of that class, except as otherwise
provided for in the related agreement regarding the provider of credit
enhancement, if any.
However, the indenture trustee will be under no obligation to exercise any
of the trusts or powers vested in it by the indenture 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 notes, unless noteholders have
offered to the indenture trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred in or by exercise of
that power.
Amendment
In most cases, each agreement may be amended by the parties thereto without
the consent of the securityholders, but only with the consent of the provider
of credit enhancement, if any, if the applicable credit
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enhancement has not expired or if the credit enhancement has expired or been
terminated and the provider of credit enhancement has not been reimbursed for
all amounts due it:
(1) to cure any ambiguity;
(2) to correct or supplement any provision therein that may be inconsistent
with any other provision therein;
(3) to add to the duties or obligations of the servicer;
(4) to obtain a rating from a nationally recognized rating agency or to
maintain or improve the ratings of any class of the securities then
given by any rating agency, it being understood that, after obtaining
the rating of the securities from the rating agencies specified in the
related agreement, none of the parties thereto is obligated to obtain,
maintain or improve any rating assigned to the securities; or
(5) to make any other provisions with respect to matters or questions
arising under the related agreement, provided that such action will
not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of the securityholders.
In most cases, each agreement may also be amended by the parties thereto and,
if so specified in the related prospectus supplement, the provider of credit
enhancement, if any, with the consent of at least 51% of the holders of
securities of each class affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the related agreement or of modifying in any manner the rights of the
securityholders; provided, however, that no such amendment shall:
(1) reduce in any manner the amount of, or delay the timing of, any
distributions on any security, without the consent of the holder of
such security as the case may be;
(2) adversely affect in any material respect the interests of the holders
of any class of securities in a manner other than as described in (1),
without the consent of the holders of securities of such class
evidencing, as to such class, Percentage Interests aggregating 66%; or
(3) reduce the aforesaid percentage of securities the holders of which are
required to consent to any such amendment, without the consent of the
holders of all securities then outstanding, and no such amendment shall
adversely affect the status of the trust as a REMIC if a REMIC election
has been made with respect to that trust.
In most cases each agreement may also be amended from time to time, without
the consent of any securityholders, by the parties thereto to modify,
eliminate or add to the provisions of the agreement to:
(1) maintain the qualification of the related trust as a REMIC under the
Code if a REMIC election has been made with respect to that trust or
avoid, or minimize the risk of, the imposition of any tax on the trust
under the Code that would be a claim against the trust assets, provided
that an opinion of counsel is delivered to the trustee to the effect
that such action is necessary or appropriate to maintain the
qualification of the trust or avoid any such tax or minimize the risk
of its imposition; or
(2) prevent the trust from entering into any "prohibited transaction" as
defined in Section 860F of the Code if a REMIC election has been made
with respect to that trust, provided that an opinion of counsel is
delivered to the trustee to the effect that such action is necessary or
appropriate to prevent the trust from entering into the prohibited
transaction.
Each agreement may otherwise be subject to amendment without the consent of
any securityholders and, under some circumstances, without the consent of the
trustee, if and to the extent specified in the related prospectus supplement.
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The Trustee of Indenture Trustee
The trustee or indenture trustee, as applicable, with respect to a series
will be identified in the applicable prospectus supplement. If so specified
therein, the trustee or indenture trustee, as applicable, may resign at any
time, in which event the seller or issuer, respectively, will be obligated to
appoint a successor trustee or indenture trustee, as applicable. The seller or
issuer, respectively, may also remove the trustee or indenture trustee, as
applicable, if the trustee or indenture trustee, as applicable, ceases to be
eligible to continue as trustee or indenture trustee, as applicable, under the
related agreement or if the trustee or indenture trustee, as applicable,
becomes insolvent. If the seller or issuer, respectively, removes the trustee
or indenture trustee, as applicable, the seller or issuer, respectively, will
also be obligated to appoint a successor trustee or indenture trustee, as
applicable. Any resignation or removal of the trustee or indenture trustee, as
applicable, and appointment of a successor trustee or indenture trustee, as
applicable, will not become effective until acceptance of the appointment by
the successor trustee or indenture trustee, as applicable.
If so specified in the related prospectus supplement, the agreement for any
series will require the trustee or indenture trustee, as applicable, to
maintain, at its own expense, an office or agency in New York City where the
securities for such series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the trustee or indenture
trustee, as applicable, and the security registrar in respect of such
securities pursuant to the related agreement may be served.
If so specified in the related prospectus supplement, the trustee or
indenture trustee, as applicable, or any of its affiliates, in its individual
or any other capacity, may become the owner or pledgee of the securities of
any series with the same rights as it would have if it were not trustee or
indenture trustee, as applicable.
If so specified in the related prospectus supplement, the trustee or
indenture trustee, as applicable, will act as paying agent, security registrar
and authenticating agent for the related series of securities.
Indemnification
If so specified in the applicable prospectus supplement, each agreement will
provide that neither the servicer nor any of its directors, officers,
employees or agents will be under any liability to the trustee or the
securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the related agreement, or for errors in
judgment; provided, however, that such provision shall not protect the
servicer or any of its directors, officers, employees or agents against any
liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or gross negligence. The servicer shall not be under any obligation
to appear in, prosecute or defend any legal action which arises under any
agreement, other than in connection with the enforcement of any contract in
accordance with any agreement, and which in its opinion may involve it in any
expenses or liability; provided, however, that the servicer may in its
discretion undertake any other legal action which it may deem necessary or
desirable in respect of any agreement and the rights and duties of the parties
thereto. In the event the servicer decides to take any other legal action, the
legal expenses and costs of such other legal action and any liability
resulting therefrom shall be expenses, costs and liabilities payable from the
trust and the servicer shall be entitled to be reimbursed therefor from
amounts collected on the contracts.
Credit and Liquidity Enhancement
To the extent specified in the related prospectus supplement, a class of
securities may be entitled to the benefit of one or more of the following
forms of credit and liquidity enhancement:
Subordination
The senior securities of any series may afford the holders thereof a right
to receive distributions of principal or of interest or of both on each
distribution date from amounts collected on the related contract pool that is
prior to the right to receive distributions afforded by the subordinate
securities of that series. If so specified in
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the related prospectus supplement, this prior right will result from one or
both of the two features described in the next two succeeding paragraphs.
The senior securities will entitle the related holders to receive on some or
all distribution dates, prior to any distribution of principal or of interest
or of both, as specified in the related prospectus supplement, being made to
the holders of the subordinate securities on any related distribution date, a
full distribution of principal or of interest or of both principal and
interest, as specified in the related prospectus supplement, from amounts
collected on the contracts during the related Collection Period(s). To the
extent that contract collections during the related Collection Period(s)
would, in the absence of liquidation losses or other circumstances adversely
affecting contract collections, have been applied to make distributions to the
holders of the subordinate securities, this feature will enhance the
likelihood of timely receipt by the holders of the senior securities of full
distributions of principal or of interest or of both in accordance with the
applicable distribution formula.
The distribution formula for the senior securities, other than interest-only
securities, will entitle the holders thereof to receive, on some or all
distribution dates, all or a disproportionate share of the Total Regular
Principal Amount until the Security Balance of the senior securities has been
reduced to zero. See "Description of Securities--Distributions on Securities--
Distributions of Principal" above. This feature, in effect, will provide the
holders of the senior securities, other than holders of interest-only
securities, with a prior right to receive the principal collected on the
contracts until the Security Balance of the senior securities has been reduced
to zero. The degree of priority will depend on the share of the Total Regular
Principal Amount to which the holders of the senior securities, other than
holders of interest-only securities, are entitled on particular distribution
dates. If the holders of the senior securities, other than holders of
interest-only securities, are entitled to receive all of the Total Regular
Principal Amount on each distribution date, to the extent of the contract
collections available to make distributions of Regular Principal on the
related distribution date, then the holders of the senior securities, other
than holders of interest-only securities, will, in effect, have a right to
receive all principal collected on the contracts that is absolutely prior to
the right of the holders of the subordinate securities to receive any
principal collected on the contracts. If, however, the holders of the senior
securities, other than holders of interest-only securities, are entitled to
receive only a disproportionate share of the Total Regular Principal Amount,
or are entitled to receive all or a disproportionate share of the Total
Regular Principal Amount only on certain distribution dates, then the prior
right of the holders of the senior securities, other than holders of interest-
only securities, to receive distributions of principal collected on the
contracts will, to that extent, be limited. The prior right to receive
distributions of principal collections described above will enhance the
likelihood that the holders of the senior securities, other than holders of
interest-only securities, will ultimately receive distributions of principal
in an aggregate amount equal to the initial Security Balance of the senior
securities. It will not, however, enhance the likelihood of timely receipt by
the holders of the senior securities of full distributions of the amounts to
which they would have been entitled in the absence of liquidation losses or
other circumstances adversely affecting contract collections.
If specified in the related prospectus supplement, the features described
above may be characteristic of different classes within a multiple-class
series. Thus, securities which constitute senior securities under the criteria
described in the second preceding paragraph may constitute subordinate
securities under the criteria described in the next preceding paragraph, and
securities which constitute senior securities under the criteria described in
the next preceding paragraph may constitute subordinate securities under the
criteria described in the second preceding paragraph. In general, the
splitting of the features described above among two separate classes of a
multiple-class series will undercut the protection against loss afforded by
each of such features. The particular effects of any splitting as described in
the previous sentence will be discussed in the applicable prospectus
supplement. The following discussion is based on the assumption that the
features described above will not be characteristic of different classes
within a multiple-class series.
The degree of protection against loss provided to the holders of the senior
securities at any time by either of the subordination features described above
will be determined primarily by the degree to which the Pool Principal Balance
exceeds the Security Balance of the senior securities. The senior securities
are also given a
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degree of protection against loss, to a lesser extent, if the holders of the
senior securities also have a prior right to receive interest, by the degree
to which the interest payable on the contracts, net of the portions thereof
used to pay the servicing fee of the servicer, if such servicing fee is
payable prior to distributions of interest to the holders of the senior
securities, and other expenses of the trust, exceeds the interest
distributable to the holders of the senior securities. The relative levels of
the Security Balance of the senior securities and the related Pool Principal
Balance, and hence the degree of protection against loss afforded by the
subordination features described above, may change over time depending on,
among other things, the formula by which principal is distributed to the
holders of the senior securities and the level of liquidation losses on the
underlying contracts. Generally, if the holders of senior securities, other
than holders of interest-only securities, receive a disproportionate share of
the Total Regular Principal Amount on any distribution date, the effect will
be to increase, as a relative matter, the degree by which the Pool Principal
Balance exceeds the Security Balance of the senior securities, thus increasing
the degree of protection against loss afforded by the subordination of the
subordinate securities. In addition, special principal distributions to the
holders of the senior securities from sources other than principal collections
on the underlying contracts generally will increase the degree of protection
against loss above the protection that would have been provided if such
distributions were not made, because the Security Balance of the senior
securities will be reduced without a reduction in the Pool Principal Balance.
On the other hand, if, due to liquidation losses or other circumstances
adversely affecting contract collections, the holders of senior securities,
other than holders of interest-only securities, receive less than their
proportionate share of the Total Regular Principal Amount, the effect will be
to decrease, as a relative matter, the degree to which the Pool Principal
Balance exceeds the Security Balance of the senior securities, thus decreasing
the degree of protection against loss afforded by the subordination of the
subordinate securities. The effects of particular principal distribution
formulae in this regard will be discussed in the applicable prospectus
supplement. The description of any of the effects described in this paragraph
in a particular prospectus supplement may relate the Security Balances of the
senior securities to Pool Principal Balances which are estimated or adjusted
as described therein.
Where there is more than one class of subordinate securities, the rights of
one or more classes of subordinate securities to receive distributions of
principal, interest or principal and interest may be subordinated to the
rights of one or more other classes of subordinate securities to receive
distributions. Any class of subordinate securities that is entitled to receive
distributions from contract pool collections prior to any other class of
subordinate securities is a "mezzanine" class of subordinate securities. The
subordination of any class of subordinate security to a mezzanine class of
subordinate securities will enhance the likelihood of timely receipt by the
holders of the mezzanine class of subordinate securities relative to any class
of subordinate securities that is subordinate to the mezzanine class of
subordinate securities. Subordinate securities, including any mezzanine
classes of subordinate securities, may only be sold hereunder if rated in one
of the four highest rating categories of a nationally recognized statistical
rating organization. See "Rating" in this prospectus. The effect of any
subordination on any classes of subordinate securities sold hereunder will be
discussed in the applicable prospectus supplement.
Reserve Funds
The securities of one or more classes may be entitled to the benefit of one
or more reserve funds which, to the extent specified in the related prospectus
supplement, will cover shortfalls created when collections on the related
contract pool that are available to make distributions to the holders of those
securities are not sufficient to fund full distributions of principal,
interest or principal and interest to those securityholders. Any reserve fund
may be available to cover all or a portion of shortfalls and may be available
to cover any shortfalls, no matter what the cause, or only shortfalls due to
certain causes (e.g., liquidation losses only or delinquencies only), all as
specified in the related prospectus supplement. In addition, to the extent
specified in the related prospectus supplement, a reserve fund may be used to
make distributions of interest or Regular Principal to the holders of a class
of securities on particular distribution dates upon the occurrence of certain
losses, delinquencies or other events, even if such securityholders would not
have been entitled to any such distributions on the related
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distribution dates in the absence of losses, delinquencies or other events. A
reserve fund may also be used to fund special principal distributions under
the circumstances set forth in the related prospectus supplement. The related
prospectus supplement will specify whether any Reserve Fund will be
established as part of the trust or held outside of the trust by a collateral
agent or similar third party, who may be the trustee acting in a different
capacity, and will contain a description of any arrangement pursuant to which
the reserve fund is held outside of the trust.
The method of funding any reserve fund, and the required levels of funding,
if any, as well as the circumstances under which amounts on deposit in any
reserve fund may be distributed to persons other than securityholders, will be
described in the applicable prospectus supplement. To the extent that a
reserve fund may be funded in whole or in part from some or all of the
interest collected on the contracts in excess of the interest needed to make
distributions to the holders of one or more classes of securities, such
reserve fund may be referred to in the applicable prospectus supplement as a
"Spread Account."
Credit Facilities
The securities of one or more classes may be entitled to the benefit of one
or more credit facilities, including but not limited to letters of credit,
swap agreements, interest rate caps, surety bonds or similar credit
facilities. Each credit facility may be in an amount greater than, equal to or
less than the Security Balance of the securities of each class entitled to the
benefits thereof, and may be subject to reduction or be limited as to
duration, all as described in the applicable prospectus supplement. To the
extent specified in the related prospectus supplement, amounts realized under
a credit facility supporting the securities of any class may be used for the
same purposes as amounts on deposit in reserve funds. See "--Reserve Funds"
above. A credit facility may be held by a trustee as part of the related trust
or may be held by a collateral agent or other third party, who may be the
trustee acting in a different capacity. The related prospectus supplement will
contain a description of the material terms of any credit facility and any
arrangement pursuant to which the credit facility is held outside of the
trust. The related prospectus supplement will also contain certain information
concerning the provider of the credit facility, which information will have
been provided to the seller by the credit facility provider for use in the
related prospectus supplement. GreenPoint Credit or an affiliate of GreenPoint
Credit may be a credit facility provider.
If specified in the applicable prospectus supplement, a credit facility,
rather than supporting distributions of particular amounts to the holders of
securities of particular classes, may, instead, support certain collections on
the related contract pool. These collections may be of all or a portion of
amounts due on contracts in liquidation, all or a portion of the scheduled
monthly payments due on the contracts or of other amounts. The extent to which
any such collections are supported by a credit facility which functions in
this manner will be described in the applicable prospectus supplement.
Liquidity Facilities
The securities of one or more classes may be entitled to the benefit of one
or more liquidity facilities, or security purchase agreements, pursuant to
which the provider of such liquidity facility will provide funds to be used to
purchase some or all of the securities entitled to the benefit of a liquidity
facility on the repurchase dates applicable thereto. If so specified in the
applicable prospectus supplement, a liquidity facility will be held outside of
the trust by a third party, which may be the trustee acting in another
capacity. The related prospectus supplement will contain a description of the
material terms of any liquidity facility and any arrangement pursuant to which
it is held outside of the trust, and will contain certain information
concerning the provider of the liquidity facility, which information will have
been provided to the seller by the liquidity facility provider for use in the
related prospectus supplement. GreenPoint Credit or an affiliate of GreenPoint
Credit may be a liquidity facility provider. If specified in the related
prospectus supplement, a reserve fund or credit facility may also serve as a
liquidity facility.
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Federal Income Tax Consequences
The following summary describes the material federal income tax consequences
of the purchase, ownership and disposition of the securities of any series as
of the date hereof. In connection with the issuance of each series, special
counsel to GreenPoint Credit will render its opinion that this discussion of
the federal income tax consequences, as supplemented by the discussion of
federal income tax consequences in the related prospectus supplement
accompanying that series, is accurate in all material respects. As more fully
discussed below, special counsel to GreenPoint Credit is also of the opinion
that:
(A) for a series for which an election to be treated as a "real estate
mortgage investment conduit," or REMIC will be made:
(1) the REMIC Fund will qualify as a REMIC for federal income tax
purposes;
(2) the certificates of a series identified in the related prospectus
supplement as "regular interests" in the REMIC ("Regular
Certificates") will be so treated for federal income tax purposes
and will be treated as debt instruments for purposes of chapter 1
of the Code (generally relating to the calculation of a
certificateholder's federal income tax liability);
(3) those certificates of a series identified in the related prospectus
supplement as "residual interests" in the REMIC ("Residual
Certificates") will be treated for federal income tax purposes as
the sole class of "residual interests" in the REMIC;
(4) the REMIC represented by the REMIC Fund will not be subject to
federal income tax as a separate entity except for:
(a) the tax on "prohibited transactions" imposed by Section 860F of
the Code;
(b) the tax on "contributions after startup date" imposed by Section
860G(d) of the Code; and
(c) the tax on "income from foreclosure property" imposed by Section
860G(c) of the Code; and
(5) those certificates, if any, identified as being comprised of a
REMIC "regular interest" coupled with a swap or cap contract will
be treated as representing ownership of a "regular interest" in a
REMIC to the extent of the portion thereof identified as such in
the related prospectus supplement;
(B) for a series for which no election to be treated as a REMIC will be
made and which is described as a "grantor trust" in the prospectus
supplement, for federal income tax purposes, the trust will be
classified as a grantor trust and not as a corporation or an
association which is taxable as a corporation and the certificates will
be treated as equity in that trust; or
(C) for a series for which no election to be treated as a REMIC will be
made and which is described in the prospectus supplement as an "owner
trust:"
(1) for federal income tax purposes, the trust will not be treated as
an association, taxable mortgage pool or publicly traded
partnership taxable as a corporation; and
(2) the offered securities of that series will be treated as
indebtedness for federal income tax purposes.
Except to the extent provided in a related prospectus supplement, special
counsel to GreenPoint Credit will render no other opinions on federal income
taxes to a trust with respect to the securities. Special counsel to GreenPoint
Credit for each series will be Orrick, Herrington & Sutcliffe LLP, and a copy
of the legal opinion of Orrick, Herrington & Sutcliffe LLP rendered in
connection with any series of certificates will be filed with the Securities
and Exchange Commission on a Current Report on Form 8-K prior to the sale of
the related series of securities. This discussion is directed primarily to
securityholders that hold the securities as "capital assets" within the
meaning of Section 1221 of the Code, although portions thereof also may apply
to securityholders who do not hold securities as "capital assets," and it does
not purport to discuss all federal income tax consequences that may be
applicable to the individual circumstances of particular investors, some of
which, such
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as banks, insurance companies and foreign investors, may be subject to special
treatment under the Code. Further, the authorities on which this discussion,
and the opinion referred to below, are based are subject to change or
differing interpretations, which could apply retroactively. Prospective
investors should note that no rulings have been or will be sought from the IRS
with respect to any of the federal income tax consequences discussed below,
and no assurance can be given that the IRS will not take contrary positions.
Taxpayers and preparers of tax returns, including those filed by any REMIC or
other issuer, should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice:
. is given with respect to events that have occurred at the time the
advice is rendered and is not given with respect to the consequences of
contemplated actions; and
. is directly relevant to the determination of an entry on a tax return.
Accordingly, taxpayers should consult their tax advisors and tax return
preparers regarding the preparation of any item on a tax return, even where
the anticipated tax treatment has been discussed in this prospectus. In
addition to the federal income tax consequences described in this prospectus,
potential investors are advised to consider the state, local and other tax
consequences, if any, of the purchase, ownership and disposition of the
securities in a series. See "Other Tax Consequences" in this prospectus.
The following discussion addresses securities of three general types:
(1) "REMIC certificates," which are certificates representing interests in
a REMIC Fund with respect to which an election to be treated as a REMIC
under the REMIC Provisions will be made;
(2) grantor trust certificates, which are certificates representing
interests in a grantor trust as to which no such election will be made;
and
(3) owner trust certificates or notes which will be treated as indebtedness
for federal income tax purposes and as to which no REMIC election will
be made.
The following discussion is based in part upon the rules governing original
issue discount that are set forth in the OID Regulations, and in part upon the
REMIC Regulations. The OID Regulations do not adequately address certain
issues relevant to, and in some instances provide that they are not applicable
to, some series of securities.
The following discussion is limited in applicability to certificates or
notes. For purposes of this tax discussion, references to a
"certificateholder" or a "holder" are to the beneficial owner of a
certificate.
REMIC Elections
Under the Code, an election may be made with respect to a REMIC Fund related
to any series of certificates to treat the REMIC Fund as a REMIC, in which
case the certificates of any class of a series will be either "regular
interests" in the REMIC within the meaning of Section 860G(a)(1) of the Code
or "residual interests" in the REMIC within the meaning of Section 860G(a)(2)
of the Code. The prospectus supplement for each series of certificates will
indicate whether the seller intends to cause an election to be made to treat
the REMIC Fund as a REMIC, and if such an election is to be made, which
certificates will be regular interests and which will be the residual interest
in the REMIC. The discussion under the heading "--REMIC Certificates"
discusses series with respect to which the seller will cause a REMIC election
to be made and the discussion under the heading "--Non-REMIC Trusts" discusses
series with respect to which the seller will not cause a REMIC election to be
made.
REMIC Certificates
General. The discussion in this section applies only to a series of
certificates for which a REMIC election is to be made. Upon the issuance of
each series of certificates for which a REMIC election is to be made, Orrick,
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Herrington & Sutcliffe LLP, special counsel to GreenPoint Credit will deliver
its opinion that, with respect to each such series of certificates, under then
existing law and assuming that a REMIC election is made in accordance with the
requirements of the Code and compliance by the seller, the servicer and the
trustee for such series with all of the provisions of the related pooling and
servicing agreement, the agreement or agreements, if any, providing for a
credit facility or a liquidity facility, together with any agreement
documenting the arrangement through which a credit facility or a liquidity
facility is held outside the related REMIC Fund, and agreement or agreements
with any underwriter, the REMIC Fund will be a REMIC, and the certificates of
a series will be treated as either "regular interests" in the REMIC ("Regular
Certificates") or "residual interests" in the REMIC ("Residual Certificates").
Orrick, Herrington & Sutcliffe LLP, special counsel to GreenPoint Credit,
has prepared or reviewed the statements in this prospectus under the heading
"Federal Income Tax Consequences--REMIC Certificates," and are of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion of the possible effects of the
classification of any REMIC Fund as a REMIC for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided
by an investor's own tax advisor. Accordingly, each investor is urged to
consult its own tax advisors with regard to the tax consequences to it of
investing in REMIC Certificates.
Tax Status of REMIC Certificates. If so specified in the related prospectus
supplement, the certificates of any series, in their entirety, will generally
be considered:
(1) "real estate assets" within the meaning of Section 856(c)(4)(A) of the
Code; and
(2) assets described in Section 7701(a)(19)(C) of the Code (assets
qualifying under one or more of those sections, applying each section
separately, "qualifying assets") for a calendar quarter if at least 95%
of the assets of the related REMIC Fund are qualifying assets during
the related calendar quarter.
In the event the percentage of the REMIC Fund's assets which are qualifying
assets falls below 95% for any calendar quarter, then a corresponding
percentage of the certificates will be treated as qualifying assets for the
related calendar quarter. Any amount includible in gross income with respect
to the certificates will be treated as "interest on obligations secured by
mortgages on real property or on interests in real property" within the
meaning of Section 856(c)(3)(B) of the Code to the extent that the
certificates are treated as "real estate assets" within the meaning of Section
856(c)(4)(A) of the Code.
The assets of the REMIC Fund will include, in addition to the contracts,
payments on the contracts held pending distribution, and may include, among
other assets, one or more reserve funds. With respect to the treatment of
contracts as qualifying assets:
. the Treasury regulations under Section 856 of the Code define a "real
estate asset" under Section 856(c)(4)(A) of the Code to include a loan
secured by manufactured housing that qualifies as a single family
residence under the Code; and
. the Treasury regulations under Section 7701(a)(19)(C) of the Code
provide that assets described in that section include loans secured by
manufactured housing that qualifies as a single family residence under
the Code.
The IRS has ruled that obligations secured by permanently installed mobile
home units qualify as "real estate assets" under Section 856(c)(4)(A) of the
Code. Assets described in Section 7701(a)(19)(C) of the Code include loans
secured by mobile homes not used on a transient basis. However, whether
manufactured homes would be viewed as permanently installed for purposes of
Section 856 of the Code would depend on the facts and circumstances of each
case, because the IRS rulings on this issue do not provide facts on which
taxpayers can rely to achieve treatment as "real estate assets." No assurance
can be given that the manufactured homes will be so treated. A "real estate
investment trust" or REIT, will not be able to treat that portion of its
investment in certificates that represents ownership of contracts on
manufactured homes that are not treated as permanently
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attached as "real estate assets" for REIT qualification purposes. In this
regard, investors should note that generally, most contracts prohibit the
obligor from permanently attaching the related manufactured home to its site
if it were not so attached on the date of the contract. If so specified in the
related prospectus supplement, contracts in the related contract pool may
permit the obligor to permanently attach the related manufactured home to its
site even if not attached at the date of the contract. It is unclear whether
other assets of the REMIC Fund would be treated as qualifying assets under the
foregoing sections of the Code. REMIC Certificates held by a regulated
investment company will not constitute "Government Securities" within the
meaning of Code Section 851(b)(4)(A)(ii).
Qualification as a REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. The following discussion assumes that such
requirements will be satisfied by a REMIC Fund so long as any REMIC
Certificates related to the REMIC Fund are outstanding. Substantially all of
the assets of the REMIC must consist of "qualified mortgages" and "permitted
investments" as of the Startup Day and at all times thereafter. The term
"qualified mortgage" means any obligation, including a participation or
certificate of beneficial ownership in such obligation, which is principally
secured by an interest in real property that is transferred to the REMIC on
the Startup Day in exchange for regular or residual interests in the REMIC or
is purchased by the REMIC within the three-month period beginning on the
Startup Day if such purchase is pursuant to a fixed price contract in effect
on the Startup Day. The REMIC Regulations provide that a manufactured housing
contract is principally secured by an interest in real property if the fair
market value of the real property securing the contract is at least equal to
either:
. 80% of the issue price (generally, the principal balance) of the
contract at the time it was originated; or
. 80% of the adjusted issue price (the then outstanding principal balance,
with certain adjustments) of the contract at the time it is contributed
to a REMIC.
The fair market value of the underlying real property is to be determined
after taking into account other liens encumbering that real property.
Alternatively, a manufactured housing contract is principally secured by an
interest in real property if substantially all of the proceeds of the contract
were used to acquire or to improve or protect an interest in real property
that, at the origination date, is the only security for the contract, other
than the personal liability of the obligor. The REMIC Regulations as well as a
published notice issued by the IRS provide that obligations secured by
interests in manufactured housing, which qualify as "single family residences"
within the meaning of Section 25(e)(10) of the Code, are to be treated as
"qualified mortgages" for qualifying a REMIC Fund as a REMIC. Under Section
25(e)(10) of the Code, the term "single family residence" includes any
manufactured home which has a minimum of 400 square feet of living space and a
minimum width in excess of 102 inches and which is of a kind customarily used
at a fixed location. GreenPoint Credit will represent and warrant that each of
the manufactured homes securing the contracts conveyed by it to a REMIC Fund
meets this definition of a "single family residence." A qualified mortgage
also includes a "qualified replacement mortgage" that is used to replace any
"qualified mortgage" within three months of the Startup Day or to replace a
defective mortgage within two years of the Startup Day.
"Permitted investments" consist of:
(1) temporary investments of cash received under qualified mortgages before
distribution to holders of interests in the REMIC ("cash-flow
investments");
(2) amounts, such as a reserve fund, if any, reasonably required to provide
for full payment of expenses of the REMIC, the principal and interest
due on regular or residual interests in the event of defaults on
qualified mortgages, lower than expected returns on cash-flow
investments, prepayment interest shortfalls or certain other
contingencies ("qualified reserve assets"); and
(3) certain property acquired as a result of foreclosure of defaulted
qualified mortgages ("foreclosure property").
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A reserve fund will not be qualified if more than 30% of the gross income from
the assets in the reserve fund is derived from the sale or other disposition
of property held for three months or less, unless that sale is necessary to
prevent a default in payment of principal or interest on Regular Certificates.
In accordance with Section 860G(a)(7) of the Code, a reserve fund must be
"promptly and appropriately" reduced as payments on contracts are received.
Foreclosure property will be a permitted investment only to the extent that
the property is not held for more than three years unless an extension of the
holding period is obtained from the IRS.
The Code requires that in order to qualify as a REMIC an entity must make
reasonable arrangements designed to ensure that certain specified entities,
generally including governmental entities or other entities that are exempt
from United States tax, including the tax on unrelated business income
("Disqualified Organizations"), do not hold the residual interest in the
REMIC. Consequently, it is expected that in the case of any REMIC Fund for
which a REMIC election is made, the transfer, sale, or other disposition of a
Residual Certificate to a Disqualified Organization will be prohibited, and
the ability of a Residual Certificate to be transferred will be conditioned on
the trustee's receipt of a certificate or other document representing that the
proposed transferee is not a Disqualified Organization. The transferor of a
Residual Certificate must not, as of the time of the transfer, have actual
knowledge that such representation is false. The Code further requires that
reasonable arrangements be made to enable a REMIC to provide the IRS and
certain other parties, including transferors of residual interests in a REMIC,
with the information needed to compute the tax imposed by Section 860E(e)(1)
of the Code if, in spite of the steps taken to prevent Disqualified
Organizations from holding residual interests, such an organization does, in
fact, acquire a residual interest. See "Restrictions on Transfer of Residual
Certificates" below.
For certain series of certificates, two or more separate elections may be
made to treat segregated portions of the assets of a single trust as REMICs
for federal income tax purposes. Upon the issuance of any such series of
certificates, Orrick, Herrington & Sutcliffe LLP, special tax counsel to
GreenPoint Credit, will have advised GreenPoint Credit, as described above,
that at the initial issuance of the certificates of a series, each segregated
portion qualifies as a REMIC for federal income tax purposes, and that the
certificates in that series will be treated either as Regular Certificates or
Residual Certificates of the appropriate REMIC. Solely for the purpose of
determining whether the Regular Certificates will constitute qualifying real
estate or real property assets for certain categories of financial
institutions or REITs as described above under "--Tax Status of REMIC
Certificates," some or all of the REMICs in a multiple-tier REMIC structure
may be treated as one. See the discussion below under "--Taxation of Regular
Certificates."
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for REMIC status during any
taxable year, the Code provides that the entity will not be treated as a REMIC
for that year and the following years. In this event, an entity with multiple
classes of ownership interests may be treated as a separate association
taxable as a corporation under Treasury regulations, and interests in the
REMIC may be treated as debt or equity interests therein. If the REMIC Fund
were treated as a corporation, income of the REMIC Fund would be subject to
corporate tax in the hands of the REMIC Fund, and, therefore, only a reduced
amount might be available for distribution to certificateholders. The Code
authorizes the Treasury Department to issue Treasury regulations that address
situations where failure to meet one or more of the requirements for REMIC
status occurs inadvertently and in good faith, and disqualification of a REMIC
would occur absent regulatory relief. Investors should be aware, however, that
the Conference Committee Report to the Tax Reform Act of 1986 indicates that
the relief may be accompanied by sanctions, such as the imposition of a
corporate income tax on all or a portion of the REMIC's income for the period
of time in which the requirements for REMIC status are not satisfied. The
pooling and servicing agreement with respect to each REMIC will include
provisions designed to maintain the related REMIC Fund's status as a REMIC. It
is not anticipated that the status of any REMIC Fund as a REMIC will be
terminated.
Taxation of Regular Certificates
General. The Regular Certificates in any series will constitute "regular
interests" in the related REMIC. Accordingly, the Regular Certificates will be
treated for purposes of calculating a certificateholder's federal
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income tax liability as debt instruments that are issued by the related REMIC
Fund on the date of issuance of the Regular Certificates and not as ownership
interests in the REMIC Fund or the REMIC Fund's assets. Interest, original
issue discount, and market discount accrued on a Regular Certificate will be
treated as ordinary income to the holder. Each holder must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by such holder with the effect that an
investor may be required to report income for federal income tax purposes
despite not yet having received a cash distribution in respect of such income.
Payments of interest on Regular Certificates may be based on a fixed rate or a
variable rate as permitted by the REMIC Regulations, or may consist of a
specified portion of the interest payments on qualified mortgages where such
portion does not vary during the period the Regular Certificate is
outstanding. If a Regular Certificate represents an interest in a REMIC that
consists of a specified portion of the interest payments on the REMIC's
qualified mortgages, the stated principal amount with respect to that Regular
Certificate may be zero.
Original Issue Discount. Certain Regular Certificates may be issued with
"original issue discount" within the meaning of Code Section 1273(a). Any
holders of Regular Certificates issued with original issue discount generally
will be required to include original issue discount in income as it accrues,
in accordance with a constant interest method that takes into account the
compounding of interest, in advance of the receipt of the cash attributable to
such income. The servicer will report annually, or more often if required to
the IRS and to certificateholders such information with respect to the
original issue discount accruing on the related Regular Certificates as may be
required under Code Section 6049 and the regulations thereunder. See "--
Reporting Requirements" below.
Rules governing original issue discount are set forth in Code Sections 1271
through 1273 and 1275 and, to some extent, in the Treasury regulations issued
thereunder. Code Section 1272(a)(6) provides special original issue discount
rules applicable to Regular Certificates. Regulations have not yet been
proposed or adopted under Section 1272(a)(6) of the Code. Further, application
of the OID Regulations to the Regular Certificates remains unclear in some
respects because the OID Regulations generally purport not to apply to
instruments to which section 1272(a)(6) applies such as Regular Certificates,
and separately because they either do not address, or are subject to varying
interpretations with regard to, several relevant issues.
Code Section 1272(a)(6) requires that a prepayment assumption be used in
computing the accrual of original issue discount on Regular Certificates and
for certain other federal income tax purposes. The prepayment assumption is to
be determined in the manner prescribed in Treasury regulations. To date, no
such regulations have been promulgated. The Conference Committee Report to the
Tax Reform Act of 1986 indicates that the regulations will provide that the
prepayment assumption, if any, used with respect to a particular transaction
must be the same as that used by the parties in pricing the transaction. If so
specified in the applicable prospectus supplement, the servicer will use a
percentage of the prepayment assumption specified in the applicable prospectus
supplement in reporting original issue discount that is consistent with this
standard. However, the servicer does not make any representation that the
contracts will in fact prepay at a rate equal to that prepayment assumption or
at any other rate. Each investor must make its own decision as to the
appropriate prepayment assumption to be used in deciding whether or not to
purchase any of the Regular Certificates. The prospectus supplement with
respect to a series of certificates will disclose the prepayment assumption to
be used in reporting original issue discount, if any, and for certain other
federal income tax purposes.
The total amount of original issue discount on a Regular Certificate is the
excess of the "stated redemption price at maturity" of the Regular Certificate
over its "issue price." Except as discussed in the following two paragraphs,
in general, the issue price of a particular class of Regular Certificates
offered under this prospectus and the accompanying prospectus supplement will
be the price at which a substantial amount of Regular Certificates of that
class are first sold to the public, excluding bond houses and brokers.
If a Regular Certificate is sold with accrued interest that relates to a
period prior to the issue date of the Regular Certificate, the amount paid for
the accrued interest will be treated instead as increasing the issue price of
the Regular Certificate. In addition, that portion of the first interest
payment in excess of interest accrued from
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the closing date to the first distribution date will be treated for federal
income tax reporting purposes as includible in the stated redemption price at
maturity of the Regular Certificate, and as excludible from income when
received as a payment of interest on the first distribution date. The OID
Regulations suggest that some or all of this pre-issuance accrued interest
"may" be treated as a separate asset and hence not includible in a Regular
Certificate's issue price or stated redemption price at maturity, whose cost
is recovered entirely out of interest paid on the first distribution date. It
is unclear how such treatment would be elected under the OID Regulations and
whether an election could be made unilaterally by a certificateholder.
The stated redemption price at maturity of a Regular Certificate is equal to
the total of all payments to be made on such certificate other than "qualified
stated interest." Under the OID Regulations, "qualified stated interest" is
interest that is unconditionally payable at least annually during the entire
term of the certificate at either:
. a single fixed rate that appropriately takes into account the length of
the interval between payments; or
. the current values of a single "qualified floating rate" or "objective
rate" (each, a "Single Variable Rate").
A "current value" is the value of a variable rate on any day that is no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that day. A "qualified floating
rate" is a rate whose variations can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which the certificate is denominated. Such a rate remains qualified even
though it is multiplied by a fixed, positive multiple not exceeding 1.35,
increased or decreased by a fixed rate, or both.
Certain combinations of rates constitute a single qualified floating rate,
including:
. interest stated at a fixed rate for an initial period of less than one
year followed by a qualified floating rate if the value of the floating
rate at the closing date is intended to approximate the fixed rate; and
. two or more qualified floating rates that can be expected to have
appropriately the same values throughout the term of the certificate.
A combination of such rates is conclusively presumed to be a single qualified
floating rate if the values of all rates on the closing date are within 0.25%
of each other. A variable rate that is subject to an interest rate cap, floor,
"governor" or similar restriction on rate adjustment may be a qualified
floating rate only if such restriction is fixed throughout the term of the
instrument, or is not reasonably expected as of the closing date to cause the
yield on the debt instrument to differ significantly from the expected yield
absent the restriction.
An "objective rate" is a rate, other than a qualified floating rate,
determined using a single formula fixed for the life of the certificate, which
is based on objective financial information. For example, rates of the
following types would generally be objective rates:
(1) one or more qualified floating rates (including a multiple or inverse
of a qualified floating rate);
(2) one or more rates each of which would be a qualified floating rate for
a debt instrument denominated in a foreign currency;
(3) a yield based on changes in price of one or more items of "actively
traded" personal property;
(4) a combination of rates described in (1), (2) and (3); or
(5) a rate designated by the IRS.
However, a variable rate is not an objective rate if it is reasonably expected
that the average value of the rate during the first half of the certificate's
term will differ significantly from the average value of that rate during the
final half of its term or if the rate is based on financial information that
is within the control of the issuer or a
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related party. A combination of interest stated at a fixed rate for an initial
period of less than one year followed by an objective rate is treated as a
single objective rate if the value of the objective rate at the closing date
is intended to approximate the fixed rate; such a combination of rates is
conclusively presumed to be a single objective rate if the objective rate on
the closing date does not differ from the fixed rate by more than 0.25%.
The qualified stated interest payable with respect to certain variable rate
debt instruments not bearing stated interest at a Single Variable Rate
generally is determined under the OID Regulations by converting such
instruments into fixed rate debt instruments. Instruments qualifying for such
treatment generally include those providing for stated interest at:
(1) more than one qualified floating rates; or
(2) a single fixed rate; and
(a) one or more qualified floating rates; or
(b) a single "qualified inverse floating rate" (each, a "Multiple
Variable Rate").
A qualified inverse floating rate is an objective rate equal to a fixed rate
reduced by a qualified floating rate, the variations in which can reasonably
be expected to inversely reflect contemporaneous variations in the cost of
newly borrowed funds, disregarding permissible rate caps, floors, governors
and similar restrictions such as are described above. Under these rules, some
of the payments of interest on a certificate bearing a fixed rate of interest
for an initial period followed by a qualified floating rate of interest in
subsequent periods could be treated as included in the stated redemption price
at maturity if the initial fixed rate were to differ sufficiently from the
rate that would have been set using the formula applicable to subsequent
periods. See "--Taxation of Regular Certificates--Variable Rate Certificates"
below. Regular Certificates offered hereby other than certificates providing
for variable rates of interest or for the accretion of interest are not
anticipated to have stated interest other than "qualified stated interest,"
but if any Regular Certificates are so offered, appropriate disclosures will
be made in the prospectus supplement. Some or all of the payments on Regular
Certificates providing for the accretion of interest will be included in the
stated redemption price at maturity of such certificates.
Under a de minimis rule in the Code, as interpreted in the OID Regulations,
original issue discount on a Regular Certificate will be considered to be zero
if such original issue discount is less than 0.25% of the stated redemption
price at maturity of the Regular Certificate multiplied by the weighted
average life of the Regular Certificate. For this purpose, the weighted
average life of the Regular Certificate is computed as the sum of the amounts
determined by multiplying the amount of each payment under the instrument
(other than a payment of qualified stated interest) by a fraction, whose
numerator is the number of complete years from the issue date until such
payment is made, and whose denominator is the stated redemption price at
maturity of the Regular Certificate. The IRS may be anticipated to take the
position that this rule should be applied taking into account the prepayment
assumption and the effect of any anticipated investment income. Under the OID
Regulations, Regular Certificates bearing only qualified stated interest
except for any "teaser" rate, interest holiday or similar provision would be
treated as subject to the de minimis rule if the greater of the deferred or
foregone interest or the other original issue discount is less than such de
minimis amount.
The OID Regulations generally would treat de minimis original issue discount
as includible in income as each principal payment is made, based on the
product of the total amount of such de minimis original issue discount and a
fraction, whose numerator is the amount of such principal payment and whose
denominator is the stated principal amount of the Regular Certificate. The OID
Regulations also would permit a certificateholder to elect to accrue de
minimis original issue discount into income currently based on a constant
yield method. See "--Taxation of Regular Certificates--Market Discount" and
"--Premium" below.
Each holder of a Regular Certificate must include in gross income the sum of
the "daily portions" of original issue discount on its Regular Certificate for
each day during its taxable year on which it held the Regular Certificate. For
this purpose, in the case of an original holder of a Regular Certificate, the
daily portions of original issue discount will be determined as follows. A
calculation will first be made of the portion of the
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original issue discount that accrued during each accrual period, that is, if
so specified in the applicable prospectus supplement, each period that begins
or ends on a date that corresponds to a distribution date on the Regular
Certificate and begins on the first day following the immediately preceding
accrual period (beginning on the closing date in the case of the first such
period). For any accrual period such portion will equal the excess, if any,
of:
(1) the sum of:
(a) the present value of all of the distributions remaining to be made
on the Regular Certificate, if any, as of the end of the accrual
period; and
(b) the distribution made on the Regular Certificate during the accrual
period of amounts included in the stated redemption price at
maturity; over
(2) the adjusted issue price of the Regular Certificate at the beginning of
the accrual period.
The present value of the remaining payments referred to in the preceding
sentence will be calculated based on:
(1) the yield to maturity of the Regular Certificate, calculated as of the
settlement date, giving effect to the prepayment assumption;
(2) events (including actual prepayments) that have occurred prior to the
end of the accrual period; and
(3) the prepayment assumption.
The adjusted issue price of a Regular Certificate at the beginning of any
accrual period will equal the issue price of such certificate, increased by
the aggregate amount of original issue discount with respect to the Regular
Certificate that accrued in prior accrual periods, and reduced by the amount
of any distributions made on the Regular Certificate in prior accrual periods
of amounts included in the stated redemption price at maturity. The original
issue discount accruing during any accrual period will be allocated ratably to
each day during the period to determine the daily portion of original issue
discount for each day. With respect to an accrual period between the
settlement date and the first distribution date on the Regular Certificate,
notwithstanding that no distribution is scheduled to be made on such date,
that is shorter than a full accrual period, the OID Regulations permit the
daily portions of original issue discount to be determined according to any
reasonable method.
A subsequent purchaser of a Regular Certificate that purchases the Regular
Certificate at a cost, not including payment for accrued qualified stated
interest, less than its remaining stated redemption price at maturity will
also be required to include in gross income, for each day on which it holds
the Regular Certificate, the daily portions of original issue discount with
respect to the Regular Certificate, but reduced, if such cost exceeds the
"adjusted issue price," by an amount equal to the product of:
. such daily portions; and
. a constant fraction, whose numerator is such excess and whose
denominator is the sum of the daily portions of original issue discount
on the Regular Certificate for all days on or after the day of purchase.
The adjusted issue price of a Regular Certificate on any given day is equal to
the sum of the adjusted issue price or, in the case of the first accrual
period, the issue price, of the Regular Certificate at the beginning of the
accrual period during which such day occurs and the daily portions of original
issue discount for all days during such accrual period prior to such day,
reduced by the aggregate amount of distributions previously made other than
distributions of qualified stated interest.
Variable Rate Certificates. Purchasers of Regular Certificates bearing a
variable rate of interest should be aware that there is uncertainty concerning
the application of Section 1272(a)(6) of the Code and the OID Regulations to
such certificates. In the absence of other authority, the servicer intends to
be guided by the provisions of the OID Regulations governing variable rate
debt instruments in adapting the provisions of
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Section 1272(a)(6) of the Code to such certificates for the purpose of
preparing reports furnished to certificateholders. The effect of the
application of such provisions generally will be to cause certificateholders
holding certificates bearing interest at a Single Variable Rate to take into
account for each period an amount corresponding approximately to the sum of:
. the qualified stated interest, accruing on the outstanding face amount
of the Regular Certificate as the stated interest rate for that
certificate varies from time to time; and
. the amount of original issue discount that would have been attributable
to that period on the basis of a constant yield to maturity for a bond
issued at the same time and issue price as the Regular Certificate,
having the same face amount and schedule of payments of principal as
such certificate, subject to the same prepayment assumption, and bearing
interest at a fixed rate equal to the value of the applicable qualified
floating rate or qualified inverse floating rate in the case of a
certificate providing for either such rate, or equal to the fixed rate
that reflects the reasonably expected yield on the certificate in the
case of a certificate providing for an objective rate other than an
inverse floating rate, in each case as of the issue date.
Certificateholders holding Regular Certificates bearing interest at a Multiple
Variable Rate generally will take into account interest and original issue
discount under a similar methodology, except that the amounts of qualified
stated interest and original issue discount attributable to such a certificate
first will be determined for an equivalent fixed rate debt instrument, the
assumed fixed rates for which are:
(1) for each qualified floating rate, the value of each such rate as of the
closing date, with appropriate adjustment for any differences in
intervals between interest adjustment dates;
(2) for a qualified inverse floating rate, the value of the rate as of the
closing date;
(3) for any other objective rate, the fixed rate that reflects the yield
that is reasonably expected for the certificate; and
(4) for an actual fixed rate, such hypothetical fixed rate as would result
under (1) or (2) if the actual fixed rate were replaced by a
hypothetical qualified floating rate or qualified inverse floating rate
such that the fair market value of the certificate as of the issue date
would be approximately the same as that of an otherwise identical debt
instrument providing for the hypothetical variable rate rather than the
actual fixed rate.
If the interest paid or accrued with respect to a Multiple Variable Rate
Certificate during an accrual period differs from the assumed fixed interest
rate, such difference will be an adjustment to the certificateholder's taxable
income for the taxable period or periods to which such difference relates,
treated as an adjustment to interest or original issue discount, as
applicable. Additionally, purchasers of such certificates should be aware that
the provisions of the OID Regulations applicable to variable rate debt
instruments have been limited and may not apply to some Regular Certificates
having variable rates. If such a certificate is not governed by the provisions
of the OID Regulations applicable to variable rate debt instruments, it may be
subject to the provisions thereof applicable to instruments having contingent
payments. The application of those provisions to instruments such as variable
rate Regular Certificates is subject to differing interpretations. Prospective
purchasers of variable rate Regular Certificates are urged to consult their
tax advisors concerning the tax treatment of such certificates.
Market Discount. A certificateholder that purchases a Regular Certificate at
a market discount, that is, at a purchase price less than the adjusted issue
price, as defined under "--Taxation of Regular Certificates--Original Issue
Discount" above, of the Regular Certificate generally will recognize market
discount upon receipt of each distribution of principal. In particular, such a
holder will generally be required to allocate each payment of principal on a
Regular Certificate first to accrued market discount, and to recognize
ordinary income to the extent such principal payment does not exceed the
aggregate amount of accrued market discount on the Regular Certificate not
previously included in income. Such market discount must be included in income
in addition to any original issue discount includible in income with respect
to the Regular Certificate.
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A certificateholder may elect to include market discount in income currently
as it accrues, rather than including it on a deferred basis in accordance with
the foregoing. If made, such election will apply to all market discount bonds
acquired by such certificateholder on or after the first day of the first
taxable year to which such election applies. In addition, the OID Regulations
permit a certificateholder to elect to accrue all interest, discount,
including de minimis market or original issue discount, and premium in income
as interest, based on a constant yield method. If such an election were made
for a Regular Certificate with market discount, the certificateholder would be
deemed to have made an election to currently include market discount in income
with respect to all other debt instruments having market discount that such
certificateholder acquires during the year of the election or the following
years. Similarly, a certificateholder that makes this election for a
certificate that is acquired at a premium is deemed to have made an election
to amortize bond premium, as described below, with respect to all debt
instruments having amortizable bond premium that such certificateholder owns
or acquires. The election to accrue interest, discount and premium on a
constant yield method with respect to a certificate is irrevocable.
Under a statutory de minimis exception, market discount with respect to a
Regular Certificate will be considered to be zero for purposes of Code
Sections 1276 through 1278 if such market discount is less than 0.25% of the
stated redemption price at maturity of the Regular Certificate multiplied by
the number of complete years to maturity remaining after the date of its
purchase. In interpreting a similar de minimis rule with respect to original
issue discount on obligations payable in installments, the OID Regulations
refer to the weighted average maturity of obligations, and it is likely that
the same rule will be applied in determining whether market discount is de
minimis. It appears that de minimis market discount on a Regular Certificate
would be treated in a manner similar to original issue discount of a de
minimis amount. See "--Taxation of Regular Certificates--Original Issue
Discount" above. Such treatment would result in discount being included in
income at a slower rate than discount would be required to be included using
the method described above. However, Treasury regulations implementing the
market discount de minimis exception have not been issued in proposed or
temporary form, and the precise treatment of de minimis market discount on
obligations payable in more than one installment therefore remains uncertain.
The Tax Reform Act of 1986 grants authority to the Treasury Department to
issue regulations providing for the method for accruing market discount of
more than a de minimis amount on debt instruments, the principal of which is
payable in more than one installment. Until such time as regulations are
issued by the Treasury Department, certain rules described in the Conference
Committee Report to the Tax Reform Act of 1986 will apply. Under those rules,
the holder of a bond purchased with more than de minimis market discount may
elect to accrue such market discount either on the basis of a constant yield
method or on the basis of the appropriate proportionate method described
below.
Under the proportionate method for obligations issued with original issue
discount, the amount of market discount that accrues during a period is equal
to the product of:
(1) the total remaining market discount; multiplied by
(2) a fraction, the numerator of which is the original issue discount
accruing during the period and the denominator of which is the total
remaining original issue discount at the beginning of the period.
Under the proportionate method for obligations issued without original issue
discount, the amount of market discount that accrues during a period is equal
to the product of:
(1) the total remaining market discount; multiplied by
(2) 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.
The prepayment assumption, if any, used in calculating the accrual of original
issue discount is to be used in calculating the accrual of market discount
under any of the above methods. Because the regulations referred
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to in this paragraph have not been issued, it is not possible to predict what
effect such regulations might have on the tax treatment of a Regular
Certificate purchased at a discount in the secondary market.
Further, a purchaser generally will be required to treat a portion of any
gain on sale or exchange of a Regular Certificate as ordinary income to the
extent of the market discount accrued to the date of disposition under one of
the foregoing methods, less any accrued market discount previously reported as
ordinary income. Such purchaser 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 the Regular Certificate. Any such
deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized. 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 the following years, the interest deferral rule described
above will not apply.
Premium. A Regular Certificate purchased at a cost, not including payment
for accrued qualified stated interest, greater than its remaining stated
redemption price at maturity will be considered to be purchased at a premium.
The holder of such a Regular Certificate may elect to amortize such premium
under the constant yield method. The OID Regulations also permit
certificateholders to elect to include all interest, discount and premium in
income based on a constant yield method, further treating the
certificateholder as having made the election to amortize premium generally,
as discussed above. The Conference Committee Report to the Tax Reform Act of
1986 indicates a Congressional intent that the same rules that will apply to
accrual of market discount on installment obligations will also apply in
amortizing bond premium under Code Section 171 on installment obligations such
as the Regular Certificates.
Effects of Defaults or Delinquencies. Certain series of certificates may
contain one or more classes of subordinate certificates. In the event there
are defaults or delinquencies on contracts in the related REMIC Fund, amounts
that would otherwise be distributed on the subordinate certificates may
instead be distributed on the senior certificates of that series. Holders of
subordinate certificates nevertheless will be required to report interest
income with respect to such certificates, including original issue discount,
as such income accrues without giving effect to delays or reductions in
distributions on such subordinate certificates attributable to defaults and
delinquencies on such contracts, except to the extent that it can be
established that the undistributed amounts are not collectible. As a result,
the amount of income reported by a holder of a subordinate certificate 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 subordinate certificate is reduced as a result
of defaults or delinquencies on the related contracts. However, the timing of
such losses or reductions in income is uncertain, and in some circumstances
losses could be capital losses that generally can be offset only with capital
gains. Holders of subordinate certificates should consult their own tax
advisors on these points.
Sales of Certificates. If a Regular Certificate is sold or exchanged, the
seller will recognize gain or loss equal to the difference, if any, between
the amount realized, net of accrued interest, and its adjusted basis in the
Regular Certificate. A seller's adjusted basis generally will equal the cost
of the Regular Certificate to the seller, increased by any original issue
discount reported by such seller with respect to the Regular Certificate and
reduced, but not below zero, by distributions received by such seller, other
than payments of qualified stated interest, and by any amortized premium.
Except as described above under "--Market Discount" and with respect to the
next three paragraphs, any such gain or loss will be capital gain or loss
provided the Regular Certificate is held as a capital asset.
Gain from the disposition of a 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:
(1) the amount that would have been includible in the seller's gross income
had income accrued at a rate equal to 110% of "the applicable Federal
rate" under Section 1274(d) of the Code (generally, an
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average yield of United States Treasury obligations of different ranges
of maturities published monthly by the IRS), determined as of the date
of purchase of the Regular Certificate; over
(2) the amount of income actually includible in the gross income of the
seller with respect to the Regular Certificate.
Regular Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, and accordingly, gain or loss recognized
from a sale of a Regular Certificate by a bank or thrift institution to which
such section applies would be ordinary income or loss.
If GreenPoint Credit is determined to have intended on the date of issue of
the Regular Certificates to call all or any portion of the Regular
Certificates prior to their stated maturity within the meaning of Section
1271(a)(2)(A) of the Code, any gain realized upon a sale, exchange,
retirement, or other disposition of a Regular Certificate would be considered
ordinary income to the extent it does not exceed the unrecognized portion of
the original issue discount, if any, with respect to the Regular Certificate.
The OID Regulations provide that the intention to call rule will not be
applied to mortgage-backed securities such as the Regular Certificates. In
addition, under the OID Regulations, a mandatory sinking fund or call option
is not evidence of an intention to call.
Pass-Through of Expenses Other Than Interest. If a REMIC Fund for which a
REMIC election is made is considered a "single-class REMIC" (as defined
below), a portion of such REMIC Fund's servicing, administrative and other
non-interest expenses will be allocated as a separate item to those holders of
Regular Certificates that are "pass-through interest holders" (as defined
below). Such a holder would be required to add its allocable share, if any, of
such expenses to its gross income and to treat the same amount as an item of
investment expense. An individual would generally be allowed a deduction for
such an expense item for regular tax purposes only as a miscellaneous itemized
deduction subject to the limitation under Section 67 of the Code, and may not
be allowed any deduction for such item for purposes of the alternative minimum
tax. Section 67 of the Code allows deductions for miscellaneous itemized
deductions only to the extent that in the aggregate they exceed 2% of an
individual's adjusted gross income. The Revenue Reconciliation Act of 1990
further limits the itemized deductions allowed to certain individuals. If so
specified in the related prospectus supplement, the applicable pooling and
servicing agreement will require each holder to give the REMIC Fund written
notice immediately upon becoming a holder, if it is a pass-through interest
holder, or is holding a Regular Certificate on behalf of a pass-through
interest holder. The REMIC Fund will report to each holder that has given the
REMIC Fund such notice (and others if it is required) and to the IRS, each
such holder's allocable share, if any, of the REMIC Fund's noninterest
expenses.
Generally, a "single-class REMIC" is defined as:
. a REMIC that would be treated as an investment trust under Treasury
regulations but for its qualification as a REMIC; or
. a REMIC that is substantially similar to an investment trust but is
structured with the principal purpose of avoiding the allocation
requirement imposed under Section 67 of the Code.
The term "pass-through interest holder" generally refers to individuals,
entities taxed as individuals and certain pass-through entities, but does not
include REITs. Such investors should consult their own tax advisors regarding
consequences to them of the allocation of the REMIC Fund's non-interest
expenses. In addition, the amount of itemized deductions otherwise allowable
for the taxable year of an individual whose adjusted gross income exceeds
certain thresholds will be reduced.
Taxation of Certain Foreign Investors. For purposes of this discussion, a
"Foreign Holder" is a certificateholder who holds a Regular Certificate and
who is not:
(1) a citizen or resident of the United States;
(2) a corporation or partnership, other than any partnership that is
treated as not a United States person under any applicable Treasury
regulations, organized in or under the laws of the United States, a
state thereof or the District of Columbia or an entity taxable as such
for U. S. federal income tax purposes;
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(3) an estate, the income of which is included in gross income for United
States tax purposes regardless of its source; or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial
decisions of the trust.
Unless the interest on a Regular Certificate is effectively connected with the
conduct by the Foreign Holder of a trade or business within the United States,
the Foreign Holder is not subject to federal income or withholding tax on
interest or original issue discount, if any, on a Regular Certificate, subject
to possible backup withholding of tax, discussed below, provided the Foreign
Holder is not a controlled foreign corporation related to GreenPoint Credit
and does not own actually or constructively 10% or more of the voting stock of
GreenPoint Credit. To qualify for this tax exemption, the Foreign Holder will
be required to provide periodically a statement signed under penalties of
perjury certifying that the Foreign Holder meets the requirements for
treatment as a Foreign Holder and providing the Foreign Holder's name and
address. The statement, which may be made on a Form W-8 or substantially
similar substitute form, generally must be provided in the year a payment
occurs or in either of the two preceding years. The statement must be provided
either directly or through a clearing organization or financial institution.
This exemption may not apply to a Foreign Holder that owns directly or
indirectly both Regular Certificates and Residual Certificates. If for any
reason the exemption does not apply, interest paid to Foreign Holders will be
subject to United States withholding tax at the rate of 30% or, if applicable,
a reduced rate provided in a tax treaty. If the interest on a Regular
Certificate is effectively connected with the conduct by a Foreign Holder of a
trade or business within the United States, then the Foreign Holder will be
subject to tax at regular graduated rates. Foreign Holders should consult
their own advisors regarding the specific tax consequences of their owning a
Regular Certificate.
Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of a Regular Certificate generally will not be subject to
United States federal income tax unless either:
. the Foreign Holder is a non-resident alien individual who holds the
Regular Certificate as a capital asset and who is present in the United
States for 183 days or more in the taxable year of the disposition and
either the gain is attributable to an office or other fixed place of
business maintained in the United States by the individual or the
individual has a "tax home" in the United States; or
. the gain is effectively connected with the conduct by the Foreign Holder
of a trade or business within the United States.
A Regular Certificate will not be included in the estate of a Foreign Holder
who does not own actually or constructively 10% or more of the voting stock of
GreenPoint Credit. Regular certificateholders who are non-United States
persons and persons related to such holders should not acquire any Residual
Certificates, and holders of Residual Certificates and persons related to
holders of Residual Certificates should not acquire any Regular Certificates
without consulting their tax advisors as to the possible adverse tax
consequences of doing so.
Backup Withholding. Under certain circumstances, a holder of a REMIC
Certificate may be subject to "backup withholding" at a 31% rate. Backup
withholding may apply to a holder of a REMIC Certificate who is a United
States person if the holder, among other circumstances, fails to furnish his
Social Security number or other taxpayer identification number to the trustee.
Backup withholding may apply, under certain circumstances, to a holder of a
REMIC Certificate who is a foreign person if the holder of a REMIC Certificate
fails to provide the trustee or the holder of a REMIC Certificate's securities
broker with the statement necessary to establish the exemption from federal
income and withholding tax on interest on the REMIC Certificates. Backup
withholding, however, does not apply to payments on a certificate made to
certain exempt recipients, such as corporations and tax-exempt organizations,
and to certain foreign persons. Each non-exempt certificateholder will be
required to provide, under penalty of perjury, a certificate on IRS Form W-9
containing his or her name, address, correct federal taxpayer identification
number and a statement that he or she is not subject to backup withholding.
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Holders of REMIC Certificates should consult their tax advisors for additional
information concerning the potential application of backup withholding to
payments received by them with respect to a certificate.
Requirements. The servicer will report annually to the IRS, to holders of
record of the Regular Certificates that are not excepted from the reporting
requirements and, to the extent required by the Code, to other interested
parties, information with respect to the interest paid or accrued on the
Regular Certificates, original issue discount, if any, accruing on the Regular
Certificates and information necessary to compute the accrual of any market
discount or the amortization of any premium on the Regular Certificates.
New Withholding Regulations. The Treasury Department has 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, 2000, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
Treatment of Certificates Representing a REMIC Regular Interest Coupled with a
Swap or Cap Agreement
Holders of Certificates that represent ownership of a REMIC regular interest
coupled with a swap or cap agreement will be treated for federal income tax
purposes as owning a REMIC regular interest and a swap or cap agreement. They
will be required to allocate the purchase price for their certificates between
the REMIC regular interest and the swap or cap agreement represented thereby
according to their respective fair market values on the date of acquisition of
the certificates for purposes of computing any market discount or premium, as
well as gain or loss on disposition. In making reports to the IRS, the
servicer will make such an allocation with respect to the original issuance of
the certificates. Such allocation will bind any holder of such a certificate
who does not properly report the use of a different allocation to the IRS for
purposes of determining the issue price and amount of original issue discount
for the portion of the certificate representing ownership of a REMIC regular
interest. The portions of such certificates representing ownership of REMIC
regular interests will be accorded the treatment described above in "--REMIC
Certificates--General--Tax Status of REMIC Certificates" and "--REMIC
Certificates--Taxation of REMIC Regular Certificates."
Any portion of a purchaser's investment in a certificate treated by such
purchaser as representing the right to payments from a swap or cap agreement
would be treated as an interest in a notional principal agreement. Any portion
of a certificate allocable to the right to payments from a swap or cap
contract and any payments with respect thereto will not qualify for any of the
treatments described above in "--REMIC Certificates--General--Tax Status of
REMIC Certificates." Treasury regulations issued under Section 446 of the Code
(the "Swap Regulations") specify rules for accounting for income from and
recovery of the purchase price of such investments. Under the Swap
Regulations, income in respect of the right to payments from a swap or cap
agreement would be taken into account for the taxable period to which it
related, which generally would approximate accrual basis accounting regardless
of an investor's usual method of tax accounting. Such income would be ordinary
income.
The Swap Regulations further provide that an investor in a certificate would
recover any purchase price allocable to the right to payments from a swap or
cap agreement over the term of that right, generally by allocating it to each
period in accordance with the prices of a series of cash-settled option
agreements that reflected the specified index and notional amount (i.e., any
excess of the applicable Security Rate over the weighted average net contract
rate and the applicable Security Balance, respectively) expiring in each
period. Under the Swap Regulations, straight-line or accelerated amortization
generally would be impermissible. The Swap Regulations also permit a
simplified alternative allocation methodology called the "level payment
method," under which the purchase price allocable to the right to payments
from a swap or cap contract would be allocated to each period on the basis of
the principal portion of each of a series of equal payments having a
discounted present value equal to such purchase price. There is no explicit
authority with respect to the character
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of such amortization deductions, although they are generally regarded as
ordinary items. Payments made by the trust on the swap agreement and allocable
to investors that are individuals may be treated as investment expenses
subject to the limitations on deductibility imposed by Section 67 of the Code
and described in "Federal Income Tax Consequences--Taxation of Regular
Certificates--Pass-Through of Expenses Other Than Interest."
Certificateholders should be aware that the effect of allocating a portion
of their purchase price to the right to payments from a swap or cap contract
would be to increase the amount of original issue discount. It is expected
that an investor's amortization of any portion of its purchase price allocable
to the right to payments from a swap or cap contract would offset such
additional original issue discount, but the degree of offset in any given
period would depend upon the applicable amortization methodology and upon the
treatment of such amortization as an ordinary deduction, each as discussed
above. Although dependent upon the applicable discount rate, the annual amount
of offset should be relatively complete in the case of an investor amortizing
purchase price allocable to the right to payments from a swap or cap agreement
under the "level payment method" described above.
On disposing of a certificate, a holder will recognize gain or loss
separately with respect to the related regular interest and any right to
payments from a swap or cap agreement. Gain or loss with respect to each asset
will be the excess of the amount realized in respect of such asset over its
adjusted basis; the amount realized will be allocated between the assets based
on their relative fair market value as of the date of disposition. The
holder's basis in its right to payments from a swap or cap agreement will be
any initial purchase price allocable thereto as discussed above, reduced by
amortization of such amount allowable through the date of disposition. Gain or
loss with respect to each asset generally will be capital gain or loss, the
term of which will be based on the period such holder held the certificate;
gain or loss attributable to the right to payments from a swap or cap
agreement may be ordinary if recognized by a bank, although the matter is
uncertain.
A purchaser of certificate who is not a United States person and is not
subject to federal income tax apart from its ownership of a certificate should
not be subject to United States federal income or withholding tax on payments
attributable to the right to payments from a swap or cap agreement, if such
purchaser complies with the identification requirements described in the
prospectus. However, the inapplicability of federal income tax withholding to
such payments is not completely clear, and prospective investors should
consult their tax advisors. In the absence of contrary authority, income tax
will not be withheld from amounts paid in respect of the right to payment from
a swap or cap agreement. See "--Taxation of Regular Certificates --Taxation of
Certain Foreign Investors" above.
Taxation of Residual Certificates
The discussion under this heading applies only to a series of certificates
with respect to which a REMIC election is made and to Residual Certificates.
Such Residual Certificates will be subject to tax rules, described below, that
differ from those that would apply if they were treated for federal income tax
purposes as direct ownership interests in the related REMIC Fund or as debt
instruments issued by such REMIC Fund.
Although a REMIC is a separate entity for federal income tax purposes, a
REMIC is not generally subject to federal income tax. Rather, the taxable
income of a REMIC is taken into account by the holders of REMIC residual
interests.
In general, each original holder of a Residual Certificate will report on
its federal income tax return, as ordinary income, its share of the "daily
portion" of the taxable income of the REMIC Fund for each day during the
taxable year on which such certificateholder held a Residual Certificate. The
"daily portion" of the taxable income of the REMIC Fund is determined by
allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC Fund for such quarter, and such
certificateholder's share of the "daily portion" is based on the portion of
outstanding Residual Certificates that such certificateholder owns on such
day. REMIC taxable income will be taxable to the holders of Residual
Certificates without regard to the timing or amounts of cash distributions by
the REMIC. Ordinary income derived from Residual Certificates will
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be "portfolio income" for purposes of the taxation of taxpayers subject to the
limitation on the deductibility of "passive losses." As residual interests,
the Residual Certificates will be subject to tax rules, described below, that
differ from those that would apply if the Residual Certificates were treated
for federal income tax purposes as direct ownership interests in the
contracts, or as debt instruments issued by the REMIC. Under certain
circumstances, a holder of a Residual Certificate may be required to recognize
for a given period income substantially in excess of distributions made on the
Residual Certificates.
A subsequent holder of a Residual Certificate also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC Fund for each day that such certificateholder held such
Residual Certificate. Those daily amounts generally would equal the amounts,
described above, that would have been reported for the same days by a holder
of a Residual Certificate that purchased such Residual Certificate at its
original issuance (an "Original Holder") and held it continuously thereafter.
As discussed below, the taxable income of the REMIC Fund will be calculated
based in part on the initial tax basis to the REMIC Fund of its assets, which
in turn equals the sum of the issue prices of the Residual Certificates and
each class of Regular Certificates. The legislative history of the Tax Reform
Act of 1986 indicates that certain adjustments may be appropriate to reduce or
increase the income of a subsequent certificateholder that purchased such
Residual Certificate at a price greater than or less than, respectively, the
adjusted basis such Residual Certificate would have in the hands of an
Original Holder. For the present, however, adjustments are apparently not
permitted or required.
A holder's adjusted basis in a Residual Certificate will equal the purchase
price of such Residual Certificate, increased by the amount of the related
REMIC Fund's taxable income that is allocated to the holder of such Residual
Certificate, and decreased, but not below zero, by the amount of distributions
received thereon by such holder and the REMIC Fund's net losses allocated to
such holder. Payments on a Residual Certificate, whether at their scheduled
times or as a result of prepayments, will generally not result in any taxable
income or loss to the holder of a Residual Certificate. If the amount of such
payment exceeds a holder's adjusted basis in its Residual Certificate,
however, the holder will recognize gain, treated as gain from the sale or
exchange of its Residual Certificate, to the extent of such excess. See "--
Sale or Exchange" below.
Taxable Income of the REMIC Fund. 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:
(1) the limitation on deductibility of investment interest expense and
expenses for the production of income do not apply;
(2) all bad loans will be deductible as business bad debts; and
(3) the limitation on the deductibility of interest and expenses related to
tax-exempt income will apply.
In general, the REMIC Fund's taxable income will reflect a netting of:
(1) the gross income produced by the assets of the REMIC Fund, including
the stated interest and any original issue discount or market discount
income on the contracts in the related contract pool, net of any
amortized premium on such contracts, income from the investment or
reinvestment of cash flows and, if applicable, reserve assets, and
amortization of any issue premium with respect to the Regular
Certificates; and
(2) deductions, including stated interest and original issue discount
expense on Regular Certificates that would be permitted if the Regular
Certificates were indebtedness of the REMIC Fund, servicing fees, and
other administrative expenses of the REMIC Fund, except as described
below under "--Expenses Other Than Interest."
Any gain or loss realized by the REMIC Fund from the disposition of any asset
is treated as gain or loss from the sale or exchange of property that is not a
capital asset. If there is more than one class of Regular Certificates,
deductions allowed to the REMIC Fund with respect to the Regular Certificates
will generally be calculated separately with respect to each class based on
the yield of that class.
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For purposes of determining its taxable income, the REMIC Fund will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular Certificates and the Residual Certificates. The issue price of
a certificate of a class, whether Regular Certificates or Residual
Certificates, that is publicly offered will be the initial offering price to
the public, excluding bond houses and brokers, at which a substantial amount
of the certificates of that class is sold, and if not publicly offered will be
the price paid by the first buyer of a certificate of such class. If a
Residual Certificate has a negative value, it is not clear whether its issue
price would be considered to be zero or such negative amount for purposes of
determining the REMIC's basis in its assets. The REMIC Regulations imply that
residual interest cannot have a negative basis or a negative issue price.
However, the preamble to the REMIC Regulations indicates that, while existing
tax rules do not accommodate such concepts, the IRS is considering the tax
treatment of these types of residual interests, including the proper tax
treatment of a payment made by the transferor of such a residual interest to
induce the transferee to acquire that interest. Absent regulations or
administrative guidance to the contrary, and unless the related prospectus
supplement otherwise provides, it is not expected that any REMIC Fund as to
which a REMIC election is made will treat a class of Residual Certificates as
having a value of less than zero for purposes of determining the basis of the
related REMIC in its assets.
If a REMIC Fund acquires a manufactured housing contract and the principal
amount of such contract or revised issue price in the case of a contract
issued with original issue discount exceeds the REMIC Fund's basis in such
contract by more than a de minimis amount as described above in "--Taxation of
Regular Certificates--Market Discount" above, such discount would generally be
includible in the REMIC Fund's income as it accrues, in advance of receipt of
the cash attributable to such income, under a constant yield method, similar
to the method for accruing original issue discount on Regular Certificates
described above in "--Taxation of Regular Certificates--Original Issue
Discount" above. The REMIC Fund's deductions for original issue discount
expense with respect to Regular Certificates also will be determined under
those rules, except that the de minimis rule that may apply to holders of
Regular Certificates and the adjustments for holders of Regular Certificates
that purchase their certificates at a price greater than the adjusted issue
price described therein will not apply.
If the REMIC Fund's basis in a contract exceeds the remaining stated
redemption price at maturity of such a contract, the REMIC Fund will be
considered to have acquired such contract at a premium equal to the amount of
such excess. In the event that any contract in a contract pool is acquired by
the related REMIC Fund at a premium, the REMIC Fund will be entitled to
amortize such premium on a yield-to-maturity basis. Although the matter is not
free from doubt, the REMIC Fund intends to make this calculation using a
reasonable prepayment assumption.
If a class of Regular Certificates is issued at a price in excess of the
aggregate principal amount of such class (the excess, the "Issue Premium"),
the portion of the Issue Premium that is considered to be amortized during a
taxable year will be treated as ordinary income of the REMIC Fund for such
taxable year. Although the matter is not entirely certain, it is likely that
the Issue Premium would be amortized under a constant yield method in a manner
analogous to the method of accruing original issue discount described above
under "--Taxation of Regular Certificates--Original Issue Discount."
The taxable income recognized by a holder of a Residual Certificate in any
taxable year will be affected by, among other factors, the relationship
between the timing of interest, original issue discount or market discount
income, or amortization of premium with respect to the contracts, on the one
hand, and the timing of deductions for interest, including original issue
discount, on the Regular Certificates, on the other hand. In the event that an
interest in the contracts is acquired by a REMIC at a discount, and one or
more of such contracts is prepaid, a holder of a Residual Certificate may
recognize taxable income without being entitled to receive a corresponding
cash distribution because:
. the prepayment may be used in whole or in part to make distributions on
Regular Certificates; and
. the discount on the contracts which is included in a REMIC's income may
exceed its deduction with respect to the distributions on those Regular
Certificates.
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When there is more than one class of Regular Certificates that receive
payments sequentially (i.e., a fast-pay, slow-pay structure), this mismatching
of income and deductions is particularly likely to occur in the early years
following issuance of the Regular Certificates, when distributions are being
made in respect of earlier classes of Regular Certificates to the extent that
such classes are not issued with substantial discount. If taxable income
attributable to such a mismatching is realized, in general, losses would be
allowed in later years as distributions on the later classes of Regular
Certificates are made. The taxable income recognized by a holder of a Residual
Certificate also may be greater in earlier years because the REMIC will use a
constant yield in computing income from the contracts, while interest
deductions with respect to Regular Certificates, expressed as a percentage of
the outstanding principal amount of the Regular Certificates, may increase
over time as earlier, lower-yielding classes or certificates are paid. The
mismatching of income and deductions described in this paragraph, if present
with respect to a series of Residual Certificates, could have a significant
adverse effect upon the holder's after-tax rate of return. In addition, a
holder of a Residual Certificate may need to have sufficient other sources of
cash to pay any federal, state, or local income taxes due as a result of such
mismatching, or such holders must have unrelated deductions against which to
offset such income, subject to the discussion of "excess inclusions" below in
"--Excess Inclusions."
A holder of a Residual Certificate will not be permitted to amortize the
cost of its Residual Certificate as an offset to its share of the taxable
income of the REMIC Fund. However, that taxable income will not include cash
received by the REMIC Fund that represents a recovery of the REMIC Fund's
basis in its assets, which will include the issue price of the Residual
Certificates as well as the issue price of Regular Certificates. Such recovery
of basis by the REMIC Fund will have the effect of amortization of the issue
price of the Residual Certificates over the life of the REMIC Fund's assets.
However, in view of the possible acceleration of the income of holders of
Residual Certificates described above, the period of time over which such
issue price is effectively amortized may be longer than the economic life of
the Residual Certificates.
The method of taxation of Residual Certificates described above can produce
a significantly lower after-tax yield for a Residual Certificate than would be
the case if:
. Residual Certificates were taxable in the same manner as debt
instruments issued by the REMIC Fund; or
. no portion of the taxable income on the Residual Certificates in each
period were treated as "excess inclusions" (as defined below).
In certain periods, taxable income and the resulting tax liability on a
Residual Certificate are likely to exceed payments received thereon. In
addition, a substantial tax may be imposed on certain transferors of the
Residual Certificates and certain beneficial owners of the Residual
Certificates that are "pass-through" entities. Investors should consult their
tax advisors before purchasing a Residual Certificate.
Net Losses of the REMIC Fund. The REMIC Fund will have a net loss for a
calendar quarter if its deductions for that calendar quarter exceed its gross
income for that calendar quarter. The net loss allocable to any Residual
Certificate will not be deductible by the holder to the extent that such net
loss exceeds such holder's adjusted basis in such Residual Certificate at the
end of the calendar quarter in which such loss arises or the time of
disposition of the Residual Certificate, if earlier, determined without taking
into account the net loss for such quarter. Any net loss that is not currently
deductible by reason of this limitation may be carried forward indefinitely,
but may be used only to offset taxable income of the same REMIC Fund
subsequently allocated to such certificateholder. The ability of holders of
Residual Certificate that are individuals or closely-held corporations to
deduct net losses may be subject to additional limitations under the Code.
Expenses Other Than Interest. Except in the limited circumstance when the
REMIC Fund is considered a "single-class REMIC" as defined above in "--
Taxation of Regular Certificates--Pass-Through of Expenses Other Than
Interest," the REMIC Fund's servicing, administrative and other noninterest
expenses will be allocated entirely to the holders of Residual Certificates.
In the case where the REMIC Fund is considered a single-class REMIC, such
expenses will be allocated proportionately among Regular and holders of
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Residual Certificates. See "--Taxation of Regular Certificates--Pass-Through
of Expenses Other Than Interest" above. In either case, such expenses will be
allocated as a separate item to those holders that are "pass-through interest
holders" as defined above in "--Taxation of Regular Certificates--Pass-Through
of Expenses Other Than Interest." Such a holder would be required to add its
allocable share, if any, of such expenses to its gross income and treat the
same amount as an item of investment expense. Limitations on the deductibility
of such expenses are described above in "--Taxation of Regular Certificates--
Pass-Through of Expenses Other Than Interest." The related pooling and
servicing agreement will require each holder to give the REMIC Fund written
notice upon becoming a holder if it is a pass-through interest holder, or is
holding a Residual Certificate on behalf of a pass-through interest holder.
The REMIC Fund will report quarterly to each holder of a Residual Certificate
during any calendar quarter that has given the REMIC Fund such notice and
others if it is required and to the IRS annually such holder's allocable
share, if any, of the REMIC Fund's non-interest expenses. Such investors
should consult their tax advisors in determining the consequences to them of
the allocation of the REMIC Fund's non-interest expenses.
Prohibited Transactions; Special Taxes. Income from certain transactions by
the REMIC, called prohibited transactions, will not be part of the calculation
of income or loss includible in the federal income tax returns of holders of
Residual Certificates, but rather will be taxed directly to the REMIC at a
100% rate. Prohibited transactions generally include:
(1) the disposition of qualified mortgages other than pursuant to a:
(a) substitution for a defective mortgage within two years or for any
qualified mortgage within three months of the specified Startup
Date;
(b) repurchase of a defective mortgage;
(c) foreclosure, default, or imminent default of a qualified mortgage;
(d) bankruptcy or insolvency of the REMIC; or
(e) a qualified (complete) liquidation of the REMIC;
(2) the receipt of income from assets that are not the type of mortgage
loans or investments that the REMIC is permitted to hold;
(3) the receipt of compensation for services; or
(4) the receipt of gain from disposition of cash flow investments other
than pursuant to a qualified (complete) liquidation of the REMIC.
The REMIC Fund will be subject to a tax equal to 100% of the amount of any
contributions of property made to the REMIC Fund after the Startup Day, except
for certain cash contributions specified in Section 860G(d) of the Code. An
additional tax may be imposed on the REMIC Fund, at the highest marginal
federal corporate income tax rate, on certain net income from foreclosure
property.
It is anticipated that the REMIC Fund will not engage in any prohibited
transactions in which it would recognize a material amount of net income or
receive substantial contributions of property after the Startup Date. However,
if the REMIC Fund is subject to the tax on prohibited transactions or
contributions, such tax would generally be borne by the holders of Residual
Certificates. It is not possible to predict the amount, if any, of net income
from foreclosure property that might be received by a REMIC Fund, because such
amount will depend on the particular delinquency and foreclosure experience of
such REMIC Fund. Accordingly, no assurance can be given that the amount of tax
on such income will not be material.
Excess Inclusions. A portion of the income of the REMIC Fund allocable to a
Holder of a Residual Certificate referred to in the Code as an "excess
inclusion" (as defined below) will be subject to federal income tax in all
events. Thus, for example, an excess inclusion:
(1) may not be offset by any unrelated losses or net operating loss
carryovers of a Holder of a Residual Certificate;
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(2) will be treated as "unrelated business taxable income" within the
meaning of Section 512 of the Code if the Holder of a Residual
Certificate is a pension fund or any other organization that is subject
to tax only on its unrelated business taxable income; and
(3) is not eligible for any reduction in the rate of withholding tax in the
case of a Holder of a Residual Certificate that is a foreign investor,
as further discussed in "--Foreign Investors" below.
In addition, if a REIT, regulated investment company, or certain pass-through
entities own a Residual Certificate, a portion of dividends paid by such
entities would be treated as excess inclusions in the hands of its
shareholders with the same consequences as excess inclusions attributed
directly to a Holder of a Residual Certificate.
Except as discussed in the following paragraph, with respect to any Holder
of a Residual Certificate, the excess inclusion for any calendar quarter will
equal the excess, if any, of:
(1) the amount of the REMIC Fund's taxable income for the calendar quarter
allocable to the Holder of a Residual Certificate; over
(2) the sum of the "daily accruals" (as defined below) for all days during
the calendar quarter on which the certificateholder held such Residual
Certificate.
For this purpose, daily accruals with respect to a Holder of a Residual
Certificate will be calculated by allocating to each day in such calendar
quarter its ratable portion of the product of:
(1) the "adjusted issue price" (as defined below) of the Residual
Certificate at the beginning of such calendar quarter; and
(2) 120% of the "long-term Federal rate" (as defined below), calculated on
the issue date of the Residual Certificate as if it were a debt
instrument and based on quarterly compounding.
For this purpose, the "adjusted issue price" of a Residual Certificate at the
beginning of any calendar quarter will equal its issue price, increased by the
aggregate of the daily accruals for all prior calendar quarters and the amount
of any contributions made to the REMIC Fund with respect to the Residual
Certificates after the Startup Date, and decreased, but not below zero, by the
aggregate amount of distributions made with respect to the Residual
Certificate before the beginning of such calendar quarter. The "long-term
Federal rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by
the IRS. As an exception to the general rule described above, the Treasury has
authority to issue regulations that would treat 100% of the income accruing on
a Residual Certificate as an excess inclusion, if the Residual Certificates,
in the aggregate, are considered not to have "significant value." The REMIC
Regulations, however, do not contain such a rule.
The Small Business Act has eliminated a special rule that formerly permitted
certain financial institutions utilizing the reserve method of accounting for
bad debts pursuant to Section 593 of the Code to use net operating losses and
other allowable deductions to offset their excess inclusions from certain
REMIC residual certificates. In addition, the Small Business Act provides
three rules for determining the effect of excess inclusions on the alternative
minimum taxable income of a holder of a REMIC residual certificate. First,
alternative minimum taxable income for such a residual holder is determined
without regard to the special rule that taxable income cannot be less than
excess inclusions. Second, a residual holder's alternative minimum taxable
income for a tax year cannot be less than the excess inclusions for the year.
Third, the amount of any alternative minimum tax net operating loss deductions
must be computed without regard to any excess inclusions.
Effect of Defaults and Delinquencies. The Residual Certificates of a
multiple-class series may be subordinate to one or more classes of Regular
Certificates, for purposes of this paragraph, "senior certificates," and, in
the event there are defaults or delinquencies on the contracts in the related
contract pool, amounts that would otherwise be distributed on the Residual
Certificates may instead be distributed on the senior certificates. However,
the REMIC Fund will generally be required to report income in respect of
contracts and deductions
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with respect to the Regular Certificates without giving effect to default and
delinquencies, except to the extent it can be established that amounts due on
the contracts are uncollectable. To the extent the income on a delinquent or
defaulted contract is greater than the deduction allowed in respect of
interest on the Regular Certificate that relates to such contract, the REMIC
Fund may recognize net income without making corresponding distributions of
cash on the Residual Certificates, and holders of Residual Certificates will
be required to report their pro rata share of the net income of the REMIC Fund
without regard to the timing and amount of cash distributed on such Residual
Certificates.
Tax on Transfers of Residual Certificates to Certain Organizations. An
entity will 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). Restrictions on the transfer
of the Residual Certificates that are intended to meet this requirement will
be included in the related pooling and servicing agreement and are discussed
more fully in "--Restrictions on Transfer of REMIC Residual Certificates"
below. If, notwithstanding those restrictions, a Residual Certificate is
transferred to a "disqualified organization," a tax would be imposed in an
amount equal to the product of:
(1) the present value of the total anticipated excess inclusions with
respect to such Residual Certificate for periods after the transfer;
and
(2) the highest marginal federal income tax rate applicable to
corporations.
Under the REMIC Regulations, the anticipated excess inclusions must be
determined based on:
(1) events that have occurred up to the time of the transfer; and
(2) the projected payments based on the related mortgage prepayment
assumption.
The REMIC Regulations also provide that the present value of the anticipated
excess inclusions is determined by discounting the anticipated excess
inclusions as of the date of the transfer using the applicable Federal rate
under Section 1274(d)(1) of the Code for the month of the transfer that would
apply to a hypothetical obligation with a term beginning on the date of the
transfer and ending on the date the life of the REMIC is anticipated to expire
as determined under rules described above in "--Excess Inclusions." Such a tax
would generally be imposed on the transferor of the Residual Certificate,
except that where such transfer is through an agent for a disqualified
organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate, or an agent for a disqualified
organization, would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to such transferor (or such agent) an
affidavit that the transferee is not a disqualified organization, and as of
the time of the transfer the transferor or the agent does not have actual
knowledge that such affidavit is false.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of:
(1) the amount of excess inclusions on the Residual Certificate that are
allocable to the interest in the pass-through entity held by such
disqualified organization; and
(2) the highest marginal federal income tax rate imposed on corporations.
However, a pass-through entity will in no event be liable for such tax with
respect to a record holder if the record holder furnishes the pass-through
entity with an affidavit that the record holder is not a disqualified
organization, and, as of the time the record holder becomes such a holder, the
pass-through entity does not have actual knowledge that such affidavit is
false.
For these purposes, the term "disqualified organization" means:
(1) the United States, any State or political subdivision thereof, any
possession of the United States, any foreign government, any
international organization, or any agency or instrumentality of the
foregoing
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(other than an instrumentality that is a corporation if all of its
activities are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of its board of directors is not
selected by an such governmental unit);
(2) an organization (other than a cooperative described in Section 521 of
the Code) which is exempt from federal income tax (including the tax
imposed by Section 511 of the Code on unrelated business taxable
income) on excess inclusions; or
(3) any organization described in Section 1381(a)(2)(C) of the Code.
For these purposes, the term "pass-through entity" means any regulated
investment company, REIT, common trust, partnership, trust, estate and certain
other entities described in Section 860E(e)(6) of the Code. Except as may be
provided in Treasury regulations, 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.
Sale or Exchange. If a Residual Certificate is sold or exchanged, the seller
will recognize gain or loss equal to the difference, if any, between the
amount realized and its adjusted basis in the Residual Certificate at the time
of that sale or exchange, except that the recognition of a loss may be limited
under the "wash sale" rules described below. In general, any such gain or loss
will be capital gain or loss, provided the Residual Certificate is held as a
capital asset as defined in Section 1221 of the Code. However, a Residual
Certificate will be an "evidence of indebtedness" within the meaning of
Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a Residual Certificate by a bank or thrift institution to which such
section applies would be ordinary income or loss.
Section 860F(d) of the Code and the Conference Committee Report to the Tax
Reform Act of 1986 indicate that, except as provided in Treasury regulations,
the wash sale rules of Section 1091 of the Code will apply to dispositions of
Residual Certificates where the seller of the Residual Certificate, during the
period beginning six months before the sale or disposition of the Residual
Certificate and ending six months after that sale or disposition, acquires, or
enters into any other transaction that results in the application of Section
1091 of the Code, any residual interest in any REMIC or any interest in a
"taxable mortgage pool" (such as a non-REMIC owner trust) that is economically
comparable to a Residual Certificate.
Noneconomic Residual Interests. Under the REMIC Regulations, a transfer of a
"noneconomic residual interest" (as defined below) to a residual holder (other
than a Foreign Holder, as discussed below) is disregarded for all federal
income tax purposes if a significant purpose of the transfer is to enable the
transferor to impede the assessment or collection of tax. If a transfer of a
residual interest is disregarded, the transferor would continue to be treated
as the owner of the residual interest and thus would continue to be subject to
tax on its allocable portion of the net income of the REMIC. A residual
interest in a REMIC, including a residual interest with a positive value at
issuance, is a "noneconomic residual interest" unless, at the time of
transfer:
(1) the present value of the expected future distributions on the residual
interest 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
(2) 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.
The anticipated excess inclusions and the present value rate are determined in
the same manner as set forth above. The REMIC Regulations explain that 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 safe harbor is provided if:
(1) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and, as a
result of the investigation, the transferor found that the transferee
had
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historically paid its debts as they came due and found no significant
evidence to indicate that the transferee will not continue to pay its
debts as they come due in the future; and
(2) the transferee represents to the transferor that it understands that,
as the holder of a non-economic residual interest, the transferee may
incur tax liabilities in excess of any cash flows generated by the
interest and that the transferee intends to pay taxes associated with
holding the residual interest as they become due.
The agreement with respect to each series of REMIC Certificates will require
the transferee of a Residual Certificate to certify to the statements in
clause (2) of the preceding sentence as part of the affidavit described below
under "--Restrictions on Transfer of REMIC Residual Certificates."
Termination. The REMIC Fund related to a series of certificates will
terminate shortly following the retirement of certificates in that series. If
a holder of a Residual Certificate's adjusted basis in its Residual
Certificate exceeds the amount of cash distributed to such certificateholder
in final liquidation of its interest, then, although the matter is not
entirely free from doubt, it would appear that the certificateholder is
entitled to a loss equal to the amount of such excess.
Foreign Investors. Unless otherwise provided in the applicable prospectus
supplement, no record or beneficial ownership interest in a Residual
Certificate may be transferred to a Foreign Holder. See "--Restrictions on
Transfer of REMIC Residual Certificates" below. With respect to permitted
transfers to Foreign Holders, any such certificateholders should assume that
payments made on the Residual Certificates they hold will be subject to a 30%
withholding tax, or such a lesser rate as may be provided under any applicable
tax treaty, except that the rate of withholding on any payments made on
Residual Certificates that are excess inclusions will not be eligible for
reduction under any applicable tax treaties. See "--Excess Inclusions" above.
Under the REMIC Regulations, a transfer of a residual interest that has tax
avoidance potential is disregarded for all federal income tax purposes if the
transferee is a Foreign Holder. The REMIC Regulations state that a residual
interest has tax avoidance potential unless, at the time of the transfer, the
transferor reasonably expects that, for each excess inclusion, the REMIC will
distribute to the transferee residual interest holder an amount that will
equal at least 30% of the excess inclusion, and that each such amount will be
distributed at or after the time at which the excess inclusion accrues and not
later than the close of the calendar year following the calendar year of
accrual. See "--Tax on Transfers of Residual Certificates to Certain
Organizations" above for rules regarding the determination of anticipated
excess inclusions. The above rules do not apply to transfers of Residual
Certificates if the transferee's income from the Residual Certificate would be
effectively connected with a United States trade or business of the
transferee. The REMIC Regulations also provide that a transfer of a Residual
Certificate from a Foreign Holder to a United States person or to a Foreign
Holder in whose hands the income from the Residual Certificate would be
effectively connected with a United States trade or business of the transferee
will be disregarded if the transfer has the effect of allowing the transferor
to avoid tax on accrued excess inclusions.
Mark-to-Market Rules. Treasury regulations provided that a Residual
Certificate acquired after January 3, 1995 will not be treated as a security
and therefore generally cannot be marked to market.
Additional Taxable Income of Residual Interests. Any payment received by a
holder of a Residual Certificate in connection with the acquisition of such
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it appears likely that
any such payment would be includible in income immediately upon its receipt or
accrual as ordinary income, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of Residual Certificates should consult
their tax advisors concerning the treatment of such payments for income tax
purposes.
Other Matters Relating to REMIC Certificates; Administrative Matters. Solely
for the purposes of the administrative provisions of the Code, each REMIC Fund
for which a REMIC election is made will be treated as
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a partnership, and the holders of Residual Certificates will be treated as the
partners thereof. The REMIC Fund must maintain its books on a calendar year
basis and must file federal information returns in a manner similar to a
partnership for federal income tax purposes. Certain information on such
returns will be furnished to each holder of a Residual Certificate. The REMIC
Fund also will be subject to the procedural and administrative rules of the
Code applicable to partnerships, including rules for determining any
adjustments to among other things, items of REMIC income, gain, loss,
deduction or credit by the IRS in a unified administrative proceeding. The
holders of Residual Certificates will generally be entitled to participate in
audits of the REMIC Fund by the IRS to the same extent as general partners in
an audit of a partnership. Holders of Regular Certificates will not be
entitled to participate in any such audits.
Each Holder of Residual Certificates is required to treat items on its
return consistently with their treatment on the REMIC Fund's return, unless
the certificateholder either files a statement identifying the inconsistency
or establishes that the inconsistency resulted from incorrect information
received from the REMIC Fund. The IRS may assert a deficiency resulting from a
failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC Fund level. The REMIC Fund does not
intend to register as a tax shelter pursuant to Section 6111 of the Code
because it is not anticipated that the REMIC Fund will have a net loss for any
of the first five taxable years of its existence. Any person that holds a
Residual Certificate as a nominee for another person will be required to
furnish the REMIC Fund, in a manner provided in Treasury regulations, with the
name and address of such person, and other information.
Each holder of a Residual Certificate, by purchasing its Residual
Certificate:
(1) shall be deemed to consent to the appointment of the servicer as:
(a) the "tax matters person" (within the meaning of Section 1.860F-4(d)
of the REMIC Regulations) for the REMIC Fund; and
(b) attorney-in-fact and agent for any person that is the tax matters
person if the servicer is unable to serve as the tax matters
person; and
(2) agrees to execute any documents required to give effect to (1) above.
Non-REMIC Trusts
The discussion under this heading applies only to a series with respect to
which a REMIC election is not made. A non-REMIC trust will be described in the
related prospectus supplement as any of a grantor trust, an indenture trust or
an owner trust.
Characterization of the Trust. Upon the issuance of any series with respect
to which no REMIC election is made and which is described in the related
prospectus supplement as a grantor trust, Orrick, Herrington & Sutcliffe LLP,
special counsel to GreenPoint Credit, will deliver its opinion that, with
respect to each such series of certificates, under then existing law and
assuming compliance by the seller, the servicer and the trustee of a series
with all of the provisions of the related agreement, and the agreement or
agreements, if any, providing for a credit facility or a liquidity facility,
together with any agreement documenting the arrangement through which a credit
facility or a liquidity facility is held outside the related trust, the
agreement or agreements with any underwriter, for federal income tax purposes,
the trust will be classified as a grantor trust and not as a corporation or an
association which is taxable as a corporation and the certificates will be
treated as equity in such trust. Accordingly, each certificateholder in a
grantor trust will be treated for federal income tax purposes as the owner of
an undivided interest in the contracts and other assets included in the trust.
As further described below, each holder of a grantor trust certificate must
therefore report on its federal income tax return the gross income from the
portion of the contracts that is allocable to such grantor trust certificate
and may deduct its share of the expenses paid by the trust that are allocable
to such grantor trust certificate, at the same time and to the same extent as
such items would be reported by such holder if it had purchased and held
directly such interest in the contracts and received directly its share of the
payments on the contracts and paid directly its share of the expenses paid by
the trust when those amounts are received and paid by the trust. A grantor
trust certificateholder
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who is an individual will be allowed deductions for such expenses only to the
extent that the sum of those expenses and certain other of the grantor trust
certificateholder's miscellaneous itemized deductions exceeds 2% of such
individual's adjusted gross income. In addition, the amount of itemized
deductions otherwise allowable for the taxable year of an individual whose
adjusted gross income exceeds certain thresholds will be reduced. Other
potential limitations on deductibility are described above in "--REMIC
Certificates--Taxation of Regular Certificates--Pass-Through of Expenses Other
Than Interest." It appears that expenses paid by the related trust, and the
gross income used to pay such expenses, should be allocated among the classes
of grantor trust certificates in proportion to their respective fair market
values at issuance, but because other reasonable methods of allocation exist
and the allocation of such items has not been the subject of a controlling
court decision, regulation or IRS ruling, no definitive advice concerning the
allocation of such items can be given.
Under current IRS interpretations of applicable Treasury regulations,
GreenPoint Credit would be able to sell or otherwise dispose of any
subordinated grantor trust certificates. Accordingly, GreenPoint Credit
expects to offer subordinated grantor trust certificates for sale to
investors. In general, such subordination should not affect the federal income
tax treatment of either the subordinated or senior certificates, and holders
of subordinated classes of certificates should be able to recognize any losses
allocated to such class when and if losses are realized.
To the extent that any of the contracts comprising a contract pool were
originated on or after March 21, 1984 and under circumstances giving rise to
original issue discount, certificateholders will be required to report
annually an amount of additional interest income attributable to such discount
in such contracts prior to receipt of cash related to such discount. See the
discussion above under "--REMIC Certificates--Taxation of Regular
Certificates--Original Issue Discount." Similarly, Code provisions concerning
market discount and amortizable premium will apply to the contracts comprising
a contract pool to the extent that the loans were originated after July 18,
1984 and September 27, 1985, respectively. See the discussions above under "--
REMIC Certificates--Taxation of Regular Certificates--Market Discount" and "--
REMIC Certificates--Taxation of Regular Certificates--Premium."
Tax Status of Grantor Trust Certificates. In general, grantor trust
certificates, other than "Premium Grantor Trust Certificates" (as defined
below) will be:
. "real estate assets" within the meaning of Section 856(c)(4)(A) of the
Code; and
. assets described in Section 7701(a)(19)(C) of the Code to the extent the
related trust's assets qualify under those Sections of the Code.
Any amount includible in gross income with respect to grantor trust
certificates will be treated as "interest on obligations secured by mortgages
on real property or on interests in real property" within the meaning of
Section 856(c)(3)(B) of the Code to the extent the income on the related
trust's assets qualifies under that Code Section. The IRS has ruled that
obligations secured by permanently installed mobile home units qualify as
"real estate assets" under Section 856(c)(4)(A) of the Code. Assets described
in Section 7701(a)(19)(C) of the Code include loans secured by mobile homes
not used on a transient basis. However, whether manufactured homes would be
viewed as permanently installed for purposes of Section 856 of the Code would
depend on the facts and circumstances of each case, because the IRS rulings on
this issue do not provide facts on which taxpayers can rely to achieve
treatment as "real estate assets." No assurance can be given that the
manufactured homes will be so treated. A REIT will not be able to treat that
portion of its investment in certificates that represents ownership of
contracts on manufactured homes that are not treated as permanently attached
as a "real estate asset" for REIT qualification purposes. In this regard,
investors should note that generally, most contracts prohibit the obligor from
permanently attaching the related manufactured home to its site if it were not
so attached on the date of the contract. If so specified in the related
prospectus supplement, contracts in the related contract pool may permit the
obligor to permanently attach the related manufactured home to its site even
if not attached at the date of the contract. Grantor trust certificates that
represent the right solely to interest payments on the contracts and grantor
trust certificates that are issued at prices that substantially exceed the
portion of the
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principal amount of the contracts allocable to such grantor trust certificates
(both types of non- REMIC certificates, "Premium Grantor Trust Certificates")
should qualify under the foregoing sections of the Code to the same extent as
other Certificates, but the matter is not free from doubt. Prospective
purchasers of certificates who may be affected by the foregoing Code
provisions should consult their tax advisors regarding the status of the
certificates under such provisions.
Taxation of Grantor Trust Certificates Under Stripped Bond Rules. Certain
classes of grantor trust certificates may be subject to the stripped bond
rules of Section 1286 of the Code. In general, a grantor trust certificate
will be subject to the stripped bond rules where there has been a separation
of ownership of the right to receive some or all of the principal payments on
a contract from ownership of the right to receive some or all of the related
interest payments. Grantor trust certificates will constitute stripped
certificates and will be subject to these rules under various circumstances,
including the following:
(1) if any servicing compensation is deemed to exceed a reasonable amount;
(2) if GreenPoint Credit or any other party retains a retained yield with
respect to the contracts comprising a contract pool;
(3) if two or more classes of grantor trust certificates are issued
representing the right to non-pro rata percentages of the interest or
principal payments on the contracts; or
(4) if grantor trust certificates are issued which represent the right to
interest only payments or principal only payments.
Unless the prospectus supplement indicates otherwise, the grantor trust
certificates will be subject to the "stripped bond" rules of Section 1286 of
the Code or, if the application of those rules to a particular series of
grantor trust certificates is uncertain, the trust will take the position that
they apply. There is some uncertainty as to how that section will be applied
to securities such as the grantor trust certificates. Investors should consult
their own tax advisors regarding the treatment of the grantor trust
certificates under the stripped bond rules.
Although the matter is not entirely clear and alternative characterizations
could be imposed, it appears that each stripped grantor trust certificate
should be considered to be a single debt instrument issued on the day it is
purchased for purposes of calculating original issue discount. Thus, in each
month the holder of a grantor trust certificate, whether a cash or accrual
method taxpayer, will be required to report interest income from the grantor
trust certificate equal to the income that accrues on the grantor trust
certificate in such month, calculated, in accordance with the rules of the
Code relating to original issue discount, under a constant yield method. In
general, the amount of such income reported in any month would equal the
product of such holder's adjusted basis in such grantor trust certificate at
the beginning of such month see "--Sales of Certificates" below and the yield
of such grantor trust certificate to such holder. Such yield would be the
monthly rate, assuming monthly compounding, determined as of the date of
purchase that, if used in discounting the remaining payments on the portion of
the contracts that is allocable to such grantor trust certificate, would cause
the present value of those payments to equal the price at which the holder
purchased the grantor trust certificate.
With respect to certain categories of debt instruments, the Code requires
the use of a reasonable prepayment assumption in accruing original issue
discount and provides a method of adjusting those accruals to account for
differences between the assumed prepayment rate and the actual rate. These
rules apply to "regular interests" in a REMIC and are described above under
"--REMIC Certificates--Taxation of Regular Certificates--Original Issue
Discount." Regulations could be adopted applying these rules to the grantor
trust certificates. Although the matter is not free from doubt, it appears
that the Taxpayer Relief Act of 1997 has expanded the requirement of the use
of a reasonable prepayment assumption to instruments such as the grantor trust
certificates. In the absence of regulations interpreting the application of
this requirement to such instruments particularly where such instruments are
subject to the Stripped Bond Rules, it is uncertain whether the assumed
prepayment rate would be determined based on conditions at the time of the
first sale of the grantor trust certificates or, with respect to any holder,
at the time of purchase of the grantor trust certificate by that holder.
Finally, if these rules were
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applied to the grantor trust certificates, and the principles used in
calculating the amount of original issue discount that accrues in any month
would produce a negative amount of original issue discount, it is unclear when
such loss would be allowed.
In the case of a grantor trust certificate acquired at a price equal to the
principal amount of the contracts allocable to such grantor trust certificate,
the use of a reasonable prepayment assumption would not have any significant
effect on the yield used in calculating accruals of interest income. In the
case, however, of a grantor trust certificate acquired at a discount or
premium, that is, at a price less than or greater than such principal amount,
respectively, the use of a reasonable prepayment assumption would increase or
decrease such yield, and thus accelerate or decelerate the reporting of
interest income, respectively.
If the yield used by the holder of a grantor trust certificate in
calculating the amount of interest that accrues in any month is determined
based on scheduled payments on the contracts, that is, without using a
reasonable prepayment assumption, and such grantor trust certificate was
acquired at a discount or premium, then such holder generally will recognize a
net amount of ordinary income or loss if a contract prepays in full in an
amount equal to the difference between the portion of the prepaid principal
amount of the contract that is allocable to the grantor trust certificate and
the portion of the adjusted basis of the grantor trust certificate, see "--
Sales of Certificates" below, that is allocable to the contract. In general,
basis would be allocated among the contracts in proportion to their respective
principal balances determined immediately before such prepayment. It is not
clear whether any other adjustments would be required or permitted to take
account of prepayments of the contracts.
Solely for purposes of reporting income on the grantor trust certificates to
the IRS and to certain holders, as required under the Code, it is anticipated
that, unless provided otherwise in the related prospectus supplement, the
yield of the grantor trust certificates will be calculated based on:
. a representative initial offering price of the grantor trust
certificates to the public; and
. a reasonable assumed prepayment rate, which will be the rate used in
pricing the initial offering of the grantor trust certificates.
Such yield may differ significantly from the yield to any particular holder
that would be used in calculating the interest income of such holder. No
representation is made that the contracts will in fact prepay at the assumed
prepayment rate or at any other rate.
Sales of Certificates. Upon the sale or exchange of a grantor trust
certificate, a grantor trust certificateholder will recognize gain or loss
equal to the difference between the amount realized in the sale and its
aggregate adjusted basis in the contracts represented by the grantor trust
certificate. Generally, the aggregate adjusted basis will equal the grantor
trust certificateholder's cost for the grantor trust certificate increased by
the amount of any previously reported gain with respect to the grantor trust
certificate and decreased by the amount of any losses previously reported with
respect to the grantor trust certificate and the amount of any distributions
received thereon. Except as provided above with respect to the original issue
discount and market discount rules, any such gain or loss would be capital
gain or loss if the grantor trust certificate was held as a capital asset.
Foreign Investors. Generally, interest or original issue discount paid to or
accruing for the benefit of a grantor trust certificateholder who is a Foreign
Holder as defined above in "--REMIC Certificates--Taxation of Regular
Certificates--Taxation of Certain Foreign Investors" will be treated as
"portfolio interest" and therefore will be exempt from the 30% withholding
tax. Such grantor trust certificateholder will be entitled to receive interest
payments and original issue discount on the grantor trust certificates free of
United States federal income tax, but only to the extent the contracts were
originated after July 18, 1984 and provided that such grantor trust
certificateholder periodically provides the trustee, or other person who would
otherwise be required to withhold tax, with a statement certifying under
penalty of perjury that such grantor trust certificateholder is not a United
States person and providing the name and address of such grantor trust
certificateholder. For additional information concerning interest or original
issue discount paid to a Foreign Holder and the treatment of a sale or
exchange of a grantor trust certificate by a Foreign Holder, which will
generally have the same tax consequences
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as the sale of a Regular Certificate, see the discussion above under "--REMIC
Certificates--Taxation of Regular Certificates--Taxation of Certain Foreign
Investors" and "--New Withholding Regulations."
Owner Trust Certificates or Notes
Upon the issuance of any series with respect to which no REMIC election is
made and which is described in the related prospectus supplement as an owner
trust or an indenture trust, Orrick, Herrington & Sutcliffe LLP, special
counsel to GreenPoint Credit, will deliver its opinion that with respect to
each such series of certificates or notes, under then existing law and
assuming compliance by the seller, the servicer and the trustee of a series
with all of the provisions of the related pooling and servicing agreement or
indenture, as applicable, and the agreement or agreements, if any, providing
for a credit facility or a liquidity facility, together with any agreement
documenting the arrangement through which a credit facility or a liquidity
facility is held outside the related trust, and the agreement or agreements
with any underwriter, for federal income tax purposes:
. the trust will not be classified as a corporation or publicly traded
partnership; and
. the owner trust certificates or notes offered by the prospectus will be
treated as indebtedness.
Treatment of the Owner Trust Certificates or Notes as Debt
The Transferor will express in the related agreement the intent that for
federal, state and local income and franchise tax purposes, the owner trust
certificates or notes will be debt secured by the contracts. The Transferor,
by entering into the Agreement, and each investor, by the acceptance of a
beneficial interest in a certificate or note, will agree to treat the owner
trust certificates or notes as debt for federal, state and local income and
franchise tax purposes. However, the agreement may be ambiguous in
characterizing the transfer of contracts, and because different criteria are
used in determining the non-tax accounting treatment of the transaction, the
transferor may treat the agreement for certain non-tax accounting purposes as
causing a transfer of an ownership interest in the contracts and not as
creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers as well as the IRS to treat a transaction in accordance
with its economic substance as determined under federal income tax law, even
though the participants in the transaction have characterized it differently
for non-tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the transferor has relinquished and the transferee has
obtained substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the transferee had the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Based on its analysis of such
factors, special counsel to GreenPoint Credit is of the opinion that, under
current law, although no transaction closely comparable to the ones
contemplated in this prospectus has been the subject of any Treasury
regulation, revenue ruling or judicial decision, for federal income tax
purposes the owner trust certificates or notes will not constitute an
ownership interest in the contracts but will properly be characterized as
debt.
Treatment of the Owner Trust or Indenture Trust
The related agreement permits the issuance of owner trust certificates or
notes and certain other interests in the related trust, each of which may be
treated for federal income tax purposes either as debt or as equity interests
in the trust. If all of the owner trust certificates or notes and other
interests, other than the transferor certificate, in the trust were
characterized as debt, the trust might be characterized as a security
arrangement for debt collateralized by the contracts and issued directly by
the transferor or other holder of the transferor certificate.
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Under such a view, the trust would be disregarded for federal income tax
purposes. Alternatively, if some of those interests were characterized as
equity interests in the trust, the trust might be characterized as a separate
entity owning the contracts, issuing its own debt, and jointly owned by the
transferor or other holder of the transferor certificate and any other holders
of equity interests in the trust. However, special counsel to GreenPoint
Credit is of the opinion that, under current law, any entity constituted by
the trust will not be an association, taxable mortgage pool or publicly traded
partnership taxable as a corporation.
Possible Treatment of the Trust as a Taxable Mortgage Pool. Although, as
described above, special counsel to GreenPoint Credit is of the opinion that
the certificates or notes will properly be treated as debt for federal income
tax purposes and that the trust will not be treated as a taxable mortgage pool
taxable as a corporation, such opinion will not bind the IRS and thus no
assurance can be given that such treatment will prevail. If the IRS were to
contend successfully that the trust were a taxable mortgage pool taxable as a
corporation, that entity would be subject to federal income tax at corporate
tax rates on its taxable income generated by ownership of the related mortgage
loans. That tax could result in reduced distributions to the holders of the
certificates. No distributions from the trust would be deductible in computing
the taxable income of the corporation, except to the extent that any
certificates were treated as debt of the corporation and distributions to the
related beneficial owners of the certificates were treated as payments of
interest thereon. In addition, distributions to beneficial owners of the
certificates not treated as holding debt would be dividend income to the
extent of the current and accumulated earnings and profits of the corporation
and beneficial owners of the certificates or notes may not be entitled to any
dividends received deduction in respect of such income.
Treatment of the Owner Trust Certificates or Notes
Treatment of the Owner Trust Certificates or Notes as Indebtedness. If the
owner trust certificates or notes are treated as indebtedness for federal
income tax purposes, the taxation of holders of such interests generally will
be the same as that described, above, for holders of REMIC Regular Interests
with the following exceptions: Holders not otherwise required to use the
accrual method of accounting for tax purposes would not be required to adopt
that method of accounting for the owner trust certificates or notes. The
treatment described under "--REMIC Certificates--General--Tax Status of REMIC
Certificates" would not apply. Gain on the sale of owner trust certificates or
notes would not be subject to re-characterization as ordinary income solely as
a result of failure of income otherwise accrued on such owner trust
certificates or notes to have accrued at a rate exceeding 110% of the
"applicable federal rate" as described for REMIC Regular Interests in the
second paragraph of "--REMIC Certificates--Taxation of Regular Certificates--
Sales of Certificates." The discussion under "--REMIC Certificates--Taxation
of Regular Certificates--Pass-Through of Expenses Other Than Interest" would
not apply. See "--REMIC Certificates--Taxation of REMIC Regular Certificates"
above.
Possible Treatment of the Owner Trust Certificates or Notes as Partnership
Interests. Although, as described above, special counsel to GreenPoint Credit
is of the opinion that the owner trust certificates or notes will properly be
treated as debt for federal income tax purposes, such opinion will not bind
the IRS and thus no assurance can be given that such treatment will prevail.
If the IRS were to contend successfully that some or all of the owner trust
certificates or notes were equity in the trust for federal income tax
purposes, the owner trust certificates or notes could be classified as
partnership interests for such purposes. Because special counsel to GreenPoint
Credit is of the opinion that the owner trust certificates or notes will be
characterized as debt for federal income tax purposes, no attempt will be made
to comply with any tax reporting requirements that would apply as a result of
such alternative characterizations.
If the trust were treated as a partnership, that partnership would not be
subject to federal income tax. Rather, each item of income, gain, loss and
deduction of the partnership generated computing taxable income of the
transferor or the holder of the transferor certificate and any certificate or
note owners treated as partners in accordance with their respective
partnership interests therein. The amounts, character and timing of income
reportable by any certificate or note owners treated as partners would likely
differ from that reportable by such certificates or note owners had they been
treated as owning debt. In addition, if the trust were treated in whole or in
part as a partnership, income derived from the partnership by any certificates
or note owner that is a pension
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fund or other tax-exempt entity may be treated as unrelated business taxable
income. Also, any certificate or note owner that is a non-United States person
could be subject to withholding at the rate of 30% on its share of the
partnership's income from the contracts. Partnership characterization also may
have adverse state and local income or franchise tax consequences for a
certificate or note owner. If the trust were treated in whole or in part as a
partnership and the number of holders of interest in the publicly offered
owner trust certificates or notes and other interests in the trust treated as
partners equaled or exceeded 100, the transferor may cause the trust to elect
to be an "electing large partnership." The consequence of such election to
investors could include the determination of certain tax items at the
partnership level and the disallowance of otherwise allowable deductions. No
representation is made as to whether such election will be made.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect
of ownership of securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of securities.
Restrictions on Transfer of REMIC Residual Certificates
As discussed in "Federal Income Tax Consequences--Taxation of Residual
Certificates--Tax on Transfers of Residual Certificates to Certain
Organizations," in order for a trust to qualify as a REMIC, there must be
reasonable arrangements designed to ensure that the related Residual
Certificates are not held by disqualified organizations. Further, transfers to
"electing large partnerships" within the meaning of Section 775 of the Code or
persons that are not United States persons raise special tax issues.
Accordingly, unless the related prospectus supplement provides otherwise, no
record or beneficial ownership interest in a Residual Certificate that is sold
under this prospectus may be transferred unless, among other things, the
trustee receives:
(1) an affidavit from the proposed transferee to the effect that it is not
a "disqualified organization" or electing large partnership and is not
purchasing on behalf of a disqualified organization or electing large
partnership, see "Federal Income Tax Consequences--Taxation of Residual
Certificates--Tax on Transfers of Residual Certificates to Certain
Organizations;"
(2) a representation from the proposed transferee to the effect that it is
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, or an estate or trust
whose income from sources without the United States is includible in
gross income for United States federal income tax purposes regardless
of its connection with the conduct of a trade or business within the
United States; and
(3) a covenant of the proposed transferee to the effect that the proposed
transferee agrees to be bound by and to abide by the transfer
restrictions applicable to such Residual Certificate.
Tax-Exempt Investors
A qualified pension plan or other entity that is exempt from federal income
taxation pursuant to Section 501 of the Code (a "Tax-Exempt Investor")
nonetheless will be subject to federal income taxation to the extent that its
income is "unrelated business taxable income" ("UBTI") within the meaning of
Section 512 of the Code. All "excess inclusions" of a "REMIC" allocated to a
"Residual Certificate" held by a Tax-Exempt investor will be considered UBTI
and thus will be subject to federal income tax. See "Federal Income Tax
Consequences--Certificates as REMIC Residual Interests--Excess Inclusions."
Legal Investment
The prospectus supplement for each series of securities will specify which,
if any, of the classes of securities offered thereby constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market
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Enhancement Act of 1984, or SMMEA. Classes of securities that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business
entities (including depository institutions, life insurance companies 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 as, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any such entities. Under SMMEA,
if a state enacted legislation prior to October 4, 1991 specifically limiting
the legal investment authority of any such entities with respect to "mortgage
related securities," securities will constitute legal investments for entities
subject to such legislation only to the extent provided therein. Approximately
twenty-one states adopted such legislation prior to the October 4, 1991
deadline.
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 securities
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.
S. C. Section 24 (Seventh), subject in each case to such regulations as the
applicable federal authority may prescribe. In this connection, federal credit
unions should review the National Credit Union Administration ("NCUA") Letter
to Credit Unions No. 96, as modified by Letter to Credit Unions No. 108, which
includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities, and the NCUAs regulation
"Investment and Deposit Activities" (12 C. F. R. Part 703), which sets forth
certain restrictions on investment by federal credit unions in mortgage
related securities.
All depository institutions considering an investment in the securities,
whether or not the class of securities under consideration for purchase
constitutes a "mortgage related security," should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
securities Activities, to the extent adopted by their respective regulators,
(the "Policy Statement"). The Policy Statement sets forth, in relevant part,
certain securities trading and sales practices deemed unsuitable for an
institution's investment portfolio, and guidelines for, and restrictions on,
investing in mortgage derivative products, including "mortgage related
securities," which are "high-risk mortgage securities" as defined in the
Policy Statement. According to the Policy Statement, such "high-risk mortgage
securities" include securities such as securities not entitled to
distributions allocated to principal or interest, or subordinated securities.
Under the Policy Statement, it is the responsibility of each depository
institution to determine, prior to purchase, and at stated intervals
thereafter, whether a particular mortgage derivative product is a "high-risk
mortgage security," and whether the purchase or retention of such a product
would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to "prudent investor" provisions, percentage-of-assets limits and
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase securities or to
purchase securities representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the securities constitute legal
investments for such investors.
ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended, or ERISA,
imposes certain restrictions on employee benefit and other plans subject to
ERISA and/or Section 4975 of the Code ("Plans") and on persons having certain
specified relationships to a Plan ("Parties in Interest") with respect to such
Plans, including, for this purpose, individual retirement arrangements
described in Section 408 of the Code. Certain
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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 requirements of ERISA, and assets of such plans may be invested in
securities without regard to the ERISA considerations described below, subject
to the provisions of other applicable federal and state law. Any such plan
which is qualified under Section 401(a) of the Code and exempt from taxation
under Section 501(a) of the Code is, however, subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. A fiduciary which decides to invest the assets of a Plan
in securities should consider, among other factors, the sensitivity of the
investments to the rate of principal payments, including prepayments, on the
contracts as discussed in "Prepayment and Yield Considerations" in this
prospectus.
The United States Department of Labor, or the DOL, has issued regulations
concerning the definition of what constitutes the assets of a Plan (DOL Reg.
Section 2510.3-101). Under the DOL regulations, the underlying assets and
properties of corporations, partnerships and certain other entities in which a
Plan makes an "equity" investment could be deemed for purposes of ERISA to be
assets of the investing Plan in certain circumstances. A beneficial interest
in a trust is defined as an "equity" interest under the DOL regulations.
However, the DOL regulations provide that, generally, the assets of an entity
in which a Plan makes an equity investment will not be deemed for purposes of
ERISA to be assets of such Plan if the equity interest acquired by the
investing Plan is a publicly offered security. A publicly offered security, as
defined in DOL Reg. Section 2510.3-101 is a security that is widely held,
freely transferable and either registered under the Exchange Act or sold to
the Plan as part of a public offering under the Securities Act of 1933, as
amended, that then becomes so registered. There can be no assurance that any
class of security will qualify for this or any other exception under the DOL
regulations.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving "plan assets" and Parties in Interest, and imposes additional
prohibitions where Parties in Interest are fiduciaries with respect to such
Plan. To the extent that the contracts may be deemed "plan assets" of each
Plan that purchases securities, an investment in the securities by a Plan
could result in a prohibited transaction under ERISA Sections 406 and 407 and
be subject to an excise tax under Section 4975 of the Code unless a statutory
or administrative exemption applies.
In DOL Prohibited Transaction class Exemption ("PTCE") 83-1, which amended
PTCE 81-7, the DOL exempted from ERISA's prohibited transaction rules certain
transactions relating to the operation of residential mortgage pool investment
trusts and the purchase, sale and holding of "mortgage pool pass-through
securities" in their initial issuance. However, PTCE 83-1 does not apply to
trusts that hold contracts.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold securities must make its
own determination as to the availability of any prohibited transaction
exemptions under ERISA. Each Plan fiduciary should also determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the securities is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Several underwriters of asset-backed securities have applied for and
obtained ERISA prohibited transaction exemptions which are in some respects
broader than PTCE 83-1 and the exceptions to the DOL regulations referred to
above. The exemptions referred to in the previous sentence can only apply to
securities backed by certain receivables, loans and other obligations that are
secured and, among other conditions, are sold in an offering with respect to
which the underwriter holding the exemption serves as the sole or a managing
underwriter, or as a selling or placement agent. If such an exemption might be
applicable to a series of securities, the related prospectus supplement will
refer to that possibility.
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Any Plan fiduciary that proposes to cause a Plan to purchase securities
should consult with its legal advisors concerning the impact of ERISA and the
Code, the applicability of any exemption under ERISA and the potential
consequences in its specific circumstances, prior to making the purchase of
securities. Moreover, each Plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in the securities is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
Certain Legal Aspects of the Contracts
The following discussion contains summaries of legal aspects of manufactured
housing contracts, including Land Home Contracts and Land-in-Lieu Contracts,
which are general in nature. Because the legal aspects discussed in the
following paragraphs are governed by applicable state law, which laws may
differ substantially, the summaries should be viewed only as an overview and
therefore do not reflect the laws of any particular state, nor do they
encompass the laws of all states in which the security for the contracts or
Land Home Contracts and Land-in-Lieu Contracts are situated.
The Contracts (Other than Land Home Contracts and Land-in-Lieu Contracts)
General. As a result of the assignment of the manufactured housing contracts
in a contract pool to the trustee, the related trust will succeed collectively
to all of the rights, including the right to receive payment on the contracts,
and will assume the obligations of the obligee, under the contracts. Each
contract evidences both (1) the obligation of the obligor to repay the loan
evidenced thereby, and (2) the grant of a security interest in the
manufactured home, and, in the case of a Land Home Contract or Land-in-Lieu
Contract, the real estate on which the related manufactured home is located,
to secure repayment of such loan. Certain aspects of both features of the
contracts are described more fully below.
The following discussion focuses on issues relating generally to the
seller's or any lender's interest in manufactured housing contracts. See "Risk
Factors--Security Interests of a Trust in the Manufactured Homes" in this
prospectus for a discussion of certain issues relating to the transfer to a
trust of contracts and the related security interests in the manufactured
homes comprising the related contract pool.
Security Interests of the Seller in the Manufactured Homes. Each contract
generally will be "chattel paper" as defined in the UCC as in effect in
California and the jurisdiction in which the related manufactured home was
located at origination. The seller's chief executive offices are located in
California. Under the UCC as in effect in California and each jurisdiction in
which the related manufactured home was located at origination, the sale of
chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. The seller will make or cause to be made
appropriate filings of UCC-1 financing statements to give notice of the
trustee's ownership of the contracts sold by it. The trustee's interest in the
contracts could be defeated if a subsequent purchaser were able to take
physical possession of the contracts without notice of the assignment to the
trustee. If so specified in the applicable prospectus supplement, the seller
will be required under the related agreement to stamp or cause to be stamped
each contract sold by it to indicate its transfer to the trustee. To the
extent the contracts do not constitute "chattel paper" within the meaning of
the UCC as in effect in California and the jurisdictions in which the related
manufactured homes were located at origination, these steps may not be
sufficient to protect the trustee's interest in the contracts against the
claims of the seller's or an affiliate of the seller's creditors, a trustee in
bankruptcy of the seller or a receiver, conservator or trustee in bankruptcy
of an affiliate thereof that sold such contracts to the seller.
The manufactured homes securing the contracts in a contract pool may be
located in all 50 states. Security interests in manufactured homes similar to
the ones securing the contracts generally may be perfected either by notation
of the secured party's lien on the certificate of title or by delivery of the
required documents and payment of a fee to the state motor vehicle authority,
depending on state law. In some non-title states, perfection pursuant to the
provisions of the UCC is required.
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Generally, with respect to manufactured housing contracts individually
originated or purchased by the seller, the seller effects the notation or
delivery of the required documents and fees, and obtains possession of the
certificate of title or a lien security, as appropriate, under the laws of the
state in which any manufactured home securing a manufactured housing contract
is registered. If the seller and its affiliates fails, due to clerical errors
or otherwise, to effect the notation or delivery, or files the security
interest under the wrong law, for example, under a motor vehicle title statute
rather than under the UCC, in a few states, the seller, for itself, or as
agent of the secured lender, may not have a first-priority security interest
in the manufactured home securing a contract.
As manufactured homes have become larger and often have been attached to
their sites without any apparent intention to move them, courts in many states
have held that manufactured homes, under certain circumstances, may become
subject to real estate title and recording laws. As a result, a security
interest in a manufactured home could be rendered subordinate to the interests
of other parties claiming an interest in the home under applicable state real
estate law. In order to perfect a security interest in a manufactured home
under real estate laws, the holder of the security interest must file either a
"fixture filing" under the provisions of the UCC or a real estate mortgage
under the real estate laws of the state where the home is located. These
filings must be made in the real estate records office of the county where the
home is located.
If so specified in the related prospectus supplement, most of the contracts
in any contract pool will contain provisions prohibiting the obligor from
permanently attaching the manufactured home to its site if it was not so
attached on the date of the contract. As long as each manufactured home was
not so attached on the date of the contract and the obligor does not violate
this agreement, a security interest in the manufactured home will be governed
by the certificate of title laws or the UCC. Under the certificate of title
laws or the UCC, the notation of the security interest on the certificate of
title or the filing of a UCC financing statement will be effective to maintain
the priority of the seller's security interest in the manufactured home. If
any manufactured home does become attached after the date of the related
contract, the related contract provides that such attachment constitutes an
"event of default" that, if unremedied, gives rise to certain discrete
remedies including acceleration of the unpaid principal balance of the
contract plus accrued interest and repossession of the manufactured home.
Regardless of whether a full recovery is obtained from an obligor whose
manufactured home becomes attached, the seller will represent that, at the
date of the initial issuance of securities in any series, it had obtained a
perfected first-priority security interest in each of the manufactured homes
securing the related contracts sold by it. The representation described in the
previous sentence, however, will not be based upon an inspection of the site
of any manufactured home to determine if the manufactured home had become
permanently attached to its site. See "Description of the Securities--
Conveyance of Contracts" in this prospectus. The seller will not be required
to make fixture filings or to file mortgages with respect to any of the
manufactured homes, except in the case of Land Home Contracts and Land-in-Lieu
Contracts, as described below. Consequently, if a manufactured home is deemed
subject to real estate title or recording laws because the owner attaches it
to its site or otherwise, the trustee's interest therein may be subordinated
to the interests of others that may claim an interest therein under applicable
real estate laws.
In addition, a federal circuit court decision may adversely affect a
trustee's interest in the contract pool related to a series of securities even
if the related contracts constitute chattel paper. In Octagon Gas Systems,
Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), the court's decision included
language to the effect that accounts sold by an entity which subsequently
became bankrupt remained property of the debtor's bankruptcy estate. Sales of
chattel paper, like sales of accounts, are governed by Article 9 of the UCC.
If the seller is subject to the federal bankruptcy code and becomes a debtor
under the federal bankruptcy code, and a court were to follow the reasoning of
the Tenth Circuit and apply such reasoning to chattel paper, securityholders
for such series could experience a delay in, or reduction of, distributions as
to the contracts that constitute chattel paper and were sold to the related
trust.
In the absence of fraud, forgery or permanent affixation of a manufactured
home to its site by the manufactured home owner, or administrative error by
state recording officials, the notation of the lien of the seller on the
certificate of title or delivery of the required documents and fees, or if
applicable, perfection under
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the UCC, will be sufficient to protect the seller against the rights of
subsequent purchasers of a manufactured home or subsequent lenders who take a
security interest in the manufactured home. If there are any manufactured
homes as to which the security interest in favor of the seller is not
perfected, the unperfected security interest would be subordinate to the
claims of, among others, subsequent purchasers for value of and holders of
perfected security interests in the related manufactured homes.
In the event that the owner of a manufactured home moves it to a state other
than the state in which such manufactured home initially is registered, under
the laws of most states, the perfected security interest in the manufactured
home would continue for four months after the relocation and thereafter until
the owner registers the manufactured home in the new state. If the owner were
to relocate a manufactured home to another state and were to re-register the
manufactured home in the new state, and if steps are not taken to re-perfect
an existing security interest in such state, the security interest in the
manufactured home would cease to be perfected. A majority of states generally
require surrender of a certificate of title to re-register a manufactured
home. The seller must therefore surrender possession of the certificate of
title if it holds the certificate of title to a manufactured home which has
been relocated to another state and re-registered or, in the case of
manufactured homes registered in states which provide for notation of lien,
the seller would receive notice of surrender if its security interest in the
manufactured home is noted on the certificate of title. Accordingly, the
seller would have the opportunity to re-perfect its security interest in the
manufactured home in the state of relocation. In states which do not require a
certificate of title for registration of a manufactured home, re-registration
could defeat the perfection. In the ordinary course of servicing manufactured
housing contracts, the seller takes steps to effect the re-perfection
discussed in this paragraph upon receipt of notice of re-registration or
information from the obligor as to relocation. Similarly, when an obligor
under a contract sells a manufactured home, the seller must surrender
possession of the certificate of title or the seller will receive notice as a
result of its lien noted thereon; accordingly, the seller will have an
opportunity to require satisfaction of the related contract before release of
the lien. Such protections generally would not be available in the case of
security interests in manufactured homes located in non-title states where
perfection of such security interest is achieved by appropriate filings under
the UCC as in effect in such state. Consequently, the security interest in the
manufactured home could cease to be perfected.
Under the laws of most states, liens for repairs performed on a manufactured
home and liens for personal property taxes take priority over a perfected
security interest in the manufactured home. The seller will warrant in the
agreement with respect to each series of securities that, as of the date of
initial issuance of a series of securities, no manufactured home relating to a
contract it sold was, to its knowledge, subject to any such lien. However,
such warranty will not be based on any lien searches or other review. The
prospectus supplement related to a series of securities will contain a
description of the remedies for a breach of the representations and warranties
made by the seller under the related agreement. In addition, liens could arise
after the date of initial issuance of the securities. Notice may not be given
to the seller, the servicer, the trustee or securityholders in the event a
lien arises subsequent to the date of initial issuance of the securities.
Enforcement of Security Interests in Manufactured Homes. If so specified in
the applicable prospectus supplement, the servicer on behalf of the trustee,
to the extent required by the related agreement, may take action to enforce
the trustee's security interest with respect to contracts in default by
repossession and resale of the manufactured homes securing such defaulted
contracts. In general, as long as a manufactured home has not become subject
to the real estate law, a creditor can repossess a manufactured home by
voluntary surrender, by "self-help" repossession that is "peaceful" (i.e.,
without breach of the peace) or, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. The
holder of a manufactured housing contract generally must give the obligor a
number of days' notice prior to commencement of any repossession. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the obligor and commercial
reasonableness in effecting a repossession sale. The law in most states also
requires that the obligor be given notice of any sales prior to resale of the
unit so that the obligor may redeem at or before resale.
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Under the laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from an obligor for any deficiency on repossession and
resale of the manufactured home securing the related obligor's contract.
However, some states impose prohibitions or limitations on deficiency
judgments, and in many cases the defaulting obligor would have no assets with
which to pay a judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay the
seller's ability to repossess and resell any manufactured home or enforce a
deficiency judgment.
Land Home Contracts and Land-in-Lieu Contracts
General. To the extent described in the applicable prospectus supplement,
the related contract pool may contain Land Home Contracts or Land-in-Lieu
Contracts. The Land Home Contracts and the Land-in-Lieu Contracts will be
secured by either first mortgages or deeds of trust, depending upon the
prevailing practice in the state in which the underlying property is located.
A mortgage creates a lien upon the real property described in the mortgage.
There are two parties to a mortgage: the mortgagor, who is the borrower, and
the mortgagee, who is the lender. In a mortgage state, the mortgagor delivers
to the mortgagee a note or bond evidencing the loan and the mortgage. Although
a deed of trust is similar to a mortgage, a deed of trust has three parties:
the borrower, a lender as beneficiary, and a third-party grantee called the
trustee. Under a deed of trust, the borrower grants the property, irrevocably
until the debt is paid, in trust, generally with a power of sale, to the
trustee to secure payment of the loan. The trustee's authority under a deed of
trust and the mortgagee's authority under a mortgage are governed by the
express provisions of the deed of trust or mortgage, applicable law, and, in
some cases, with respect to the deed of trust, the directions of the
beneficiary.
Foreclosure. Foreclosure of a mortgage is generally accomplished by judicial
action. Generally, the action is initiated by the service of legal pleadings
upon all parties having an interest of record in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties defendants. When the mortgagee's right to
foreclosure is contested, the legal proceedings necessary to resolve the issue
can be time-consuming and expensive. After the completion of a judicial
foreclosure proceeding, the court may issue a judgment of foreclosure and
appoint a receiver or other officer to conduct the sale of the property. In
some states, mortgages may also be foreclosed by advertisement, pursuant to a
power of sale provided in the mortgage. Foreclosure of a mortgage by
advertisement is essentially similar to foreclosure of a deed of trust by non-
judicial power of sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell property to a third party upon any default by the borrower
under the terms of the note or deed of trust. In certain states, such
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and the notice of sale.
In addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within any
applicable cure period, 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. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest of
record in the property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In
general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a reinstatement period, cure the default by paying
the entire amount in arrears plus the costs and expenses incurred in enforcing
the obligation. Certain state laws control the amount of foreclosure expenses
and costs, including attorneys' fees, that may be recovered by a lender.
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In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the receiver or other designated officer, or by the trustee, is a
public sale. However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is not common for a third party to purchase the property at
the foreclosure sale. Rather, the lender generally purchases the property from
the trustee or receiver for an amount equal to the unpaid principal amount of
the note, accrued and unpaid interest and the expenses of foreclosure.
Thereafter, subject to the right of the borrower in some states to remain in
possession during the redemption period, the lender will assume the burdens of
ownership, including obtaining hazard insurance and making such repairs at its
own expense as are necessary to render the property suitable for sale. The
lender commonly will obtain the services of a real estate broker and pay the
broker a 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.
Because of certain requirements of the REMIC Provisions, a trust as to which
a REMIC election has been made generally must dispose of any related
manufactured homes acquired pursuant to repossession, foreclosure, or similar
proceedings within three years after acquisition. Consequently, if the
servicer, acting on behalf of the trust, is unable to sell a manufactured home
in the course of its ordinary commercial practices within 33 months after its
acquisition thereof, or a longer period as permitted by the related agreement,
the servicer will auction such manufactured home to the highest bidder, which
bidder may be the servicer, in an auction reasonably designed to produce a
fair price. There can be no assurance that the price for any manufactured home
would not be substantially lower than the unpaid principal balance of the
contract relating thereto. In fact, manufactured homes, unlike site-built
homes, generally depreciate in value, and it has been industry experience
that, upon repossession and resale, the amount recoverable on a manufactured
home securing an installment sales contract is generally lower than the
principal balance of the contract.
Rights of Redemption. In some states, after sale pursuant to a deed of trust
or foreclosure of a mortgage, the borrower and certain foreclosed junior
lienholders or other parties are given a statutory period in which to redeem
the property from the foreclosure sale. In certain other states, this right of
redemption applies only to sale following judicial foreclosure, and not sale
pursuant to a non-judicial power of sale. In most states where the right of
redemption is available, statutory redemption may occur upon payment of the
foreclosure purchase price, accrued interest and taxes. In some states the
right to redeem is an equitable right. The effect of a 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 at a
foreclosure sale, or of any purchaser from the lender subsequent to judicial
foreclosure 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 expense of ownership until the expiration of the redemption period.
Anti-Deficiency Legislation and Other Limitations on Lenders. Certain states
have imposed statutory restrictions that limit the remedies of a beneficiary
under a deed of trust or a mortgagee under a mortgage relating to a single
family residence. In some states, statutes limit the right of the beneficiary
or mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment is a personal
judgment against the borrower equal in most cases to the difference between
the amount due to the lender and the net amount realized upon the foreclosure
sale.
Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting the
security afforded under a deed of trust or mortgage; 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. Consequently, the practical effect of the election
requirement, when applicable, is that lenders will usually proceed first
against the security rather than bringing a personal action against the
borrower.
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Other statutory provisions may limit any deficiency judgment against the
former borrower following a foreclosure sale to the excess of the outstanding
debt over the fair market value of the property at the time of that sale. The
purpose of these statutes is to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result
of low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security and/or enforce a
deficiency judgment. For example, with respect to a Land Home Contract, in a
proceeding under the federal Bankruptcy Code, the court may prevent a lender
from foreclosing on the home, and when a court determines that the value of a
home is less than the principal balance of the loan, the court may reduce the
amount of the secured indebtedness to the value of the home as it exists at
the time of the proceeding, leaving the lender as a general unsecured creditor
for the difference between that value and the amount of outstanding
indebtedness. A bankruptcy court may grant the debtor a reasonable time to
cure a payment default, reduce the monthly payments due under such mortgage
loan, change the rate of interest and/or alter the mortgage loan repayment
schedule.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien mortgage or deed of trust. Numerous federal and some
state consumer protection laws impose substantive requirements upon mortgage
lenders in connection with the origination, servicing and the enforcement of
mortgage loans. These laws include the federal Truth in Lending Act, Real
Estate Settlement Procedures Act, Equal Credit Opportunity, Fair Credit
Billing Act, Fair Credit Reporting Act, and related statutes and regulations.
These federal laws and state laws impose specific statutory liabilities upon
lenders who originate or service mortgage loans and who fail to comply with
the provisions of the law. In some cases, this liability may affect assignees
of the contracts.
Matters Relating to Insolvency
The seller intends that each transfer of securities to the related trust
constitutes a sale, rather than a pledge of the contracts to secure
indebtedness of the seller. However, if the seller were to become a debtor
under the federal bankruptcy code, it is possible that a creditor or trustee
in bankruptcy of the seller or the seller as debtor-in-possession may argue
that the sale of the contracts by the seller could be recharacterized as a
borrowing secured by a pledge of the contracts. Such an attempt, even if
unsuccessful, could result in delays in or reductions of distributions on the
securities.
Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission is
intended to defeat the ability of the transferor of a consumer credit contract
which is the seller of goods which gave rise to the transaction, and certain
related lenders and assignees, to transfer such contract free of notice of
claims by the obligor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the obligor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under such a contract; however, the obligor also may be able to
assert the rule to set off remaining amounts due as a defense against a claim
brought by the assignee against such obligor. Generally, this rule will apply
to any contracts conveyed to the trustee and to any claims made by the
servicer on behalf of the trustee, as the seller's assignee. Numerous other
federal and state consumer protection laws impose requirements applicable to
the origination and lending pursuant to the contracts, including the Truth in
Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Equal Credit Opportunity Act,
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the Fair Debt Collection Practices Act and the Uniform Consumer Credit Code.
In the case of some of these laws, the failure to comply with their provisions
may affect the enforceability of the related contract or create liability for
the trust.
The Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief
Act") could, under certain circumstances, cap the amount of interest that may
be charged on certain contracts at 6% and may hinder the ability of the
servicer to foreclose on the contracts thus capped in a timely fashion. Under
the terms of the Relief Act, if so required by an obligor under a manufactured
housing contract who enters military service after the origination of such
obligor's contract, including an obligor who is a member of the National Guard
or is in reserve status at the time of the origination of the contract and is
later called to active duty, such obligor may not be charged interest above an
annual rate of 6% during the period of such obligor's active duty status,
unless a court orders otherwise upon application of the lender. In addition,
the Relief Act imposes limitations which would impair the ability of any
lender to foreclose on an affected contract during the obligor's period of
active duty status and within three months thereafter. It is possible that
application of the Relief Act to certain of the contracts could have an
effect, for an indeterminate period of time, on the ability of the servicer to
collect full amounts of interest or foreclose on such contract, and could
result in delays in payment or losses to the holders of the securities. The
seller will not make any representation or warranty as to whether any contract
is or could become subject to the Relief Act.
Transfers of Manufactured Homes; Enforceability of Restrictions on Transfer
If so specified in the related prospectus supplement, the contracts
comprising any contract pool generally will prohibit the sale or transfer of
the related manufactured homes without the consent of the obligee and permit
the acceleration of the maturity of the contracts by the obligee upon any sale
or transfer to which the seller has not consented. If so specified in the
related prospectus supplement, the seller will be required under the related
agreement for a series of securities to consent to a transfer as described in
the previous sentence and to permit the assumption of the related contract if:
. the proposed buyer meets the servicer's underwriting standards and
enters into an assumption agreement;
. the servicer determines that permitting such assumption will not
materially increase the risk of nonpayment of the contract;
. and such action will not adversely affect or jeopardize any coverage
under any insurance policy required by the related agreement.
If the servicer determines that these conditions have not been fulfilled,
then it will be required to withhold its consent to the transfer, but only to
the extent permitted under the contract and applicable law and governmental
regulations and only to the extent that such action will not adversely affect
or jeopardize any coverage under any insurance policy required by the related
agreement. In certain cases, a delinquent obligor may attempt to transfer a
manufactured home in order to avoid a repossession proceeding with respect to
such manufactured home.
In the case of a transfer of a manufactured home after which the obligee
desires to accelerate the maturity of the related contract, the obligee's
ability to do so will depend on the enforceability under state law of the
clause permitting acceleration on transfer. The Garn-St. Germain Depository
Institutions Act of 1982 preempts, subject to certain exceptions and
conditions, state laws prohibiting enforcement of such clauses applicable to
manufactured homes. To the extent such exceptions and conditions apply in some
states, the servicer may be prohibited from enforcing such a clause in respect
of certain manufactured homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Controls
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan
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which is secured by a first lien on certain kinds of manufactured housing. The
contracts related to any series of securities would be covered under Title V
if, among other things, they satisfy certain conditions governing the terms of
any prepayments, late charges and deferral fees and contain a requirement of a
30-day notice period prior to instituting any action leading to repossession
of the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejected application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V was not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on loans covered
by Title V. The seller will represent, in the agreement for a series of
securities, if so specified in the related prospectus supplement, that the
contracts sold by it comply with applicable usury laws.
Ratings
It is a condition to the issuance of the securities of each series offered
hereby that at the time of issuance they shall have been rated in one of the
four highest rating categories by the nationally recognized statistical rating
agency or agencies specified in the related prospectus supplement.
Ratings on manufactured housing contract pass-through certificates or
manufactured housing contract-backed notes address the likelihood of the
receipt by securityholders of their allocable share of principal and interest
on the underlying manufactured housing contract assets. These ratings address:
. structural and legal aspects associated with the securities;
. the extent to which the payment stream on such underlying assets is
adequate to make payments required by such securities; and
. the credit quality of the credit facility provider or guarantor, if any.
Ratings on the securities do not, however, constitute a statement regarding:
. the likelihood of principal prepayments by obligors under the contracts
in the related contract pool;
. the degree by which prepayments made by such obligors might differ from
those originally anticipated; or
. whether the yield originally anticipated by investors of any series of
securities may be adversely affected as a result of such prepayments.
As a result, investors of any series of securities might suffer a lower than
anticipated yield.
A rating on any or all of the securities of any series by certain other
rating agencies, if assigned at all, may be lower than the rating or ratings
assigned to the securities by the rating agency or agencies specified in the
related prospectus supplement. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating agency. Each security rating should be
evaluated independently of any other security rating.
Method of Distribution
The issuer or seller, as applicable, may sell securities of each series to
or through underwriters by a negotiated firm commitment underwriting and
public reoffering by the underwriters, and also may sell and place securities
directly to other purchasers or through agents. The issuer or seller, as
applicable, intends that securities be offered through various methods from
time to time and that offerings may be made concurrently through more than one
of these methods or that an offering of a particular series of securities may
be made through a combination of methods.
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The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so specified in the prospectus supplement relating to a series of
securities, the issuer, the seller, or any affiliate of either of them, may
purchase some or all of one or more classes of securities of that series from
the underwriter or underwriters at a price specified in the related prospectus
supplement. The purchaser may thereafter from time to time offer and sell,
pursuant to this prospectus, some or all of the securities so purchased
directly, through one or more underwriters to be designated at the time of the
offering of the securities or through broker-dealers acting as agent and/or
principal. The offering may be restricted in the manner specified in the
related prospectus supplement. Transactions may be effected at market prices
prevailing at the time of sale, at negotiated prices or at fixed prices.
In connection with the sale of the securities, underwriters may receive
compensation from the issuer or seller, as applicable, or from purchasers of
securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell the securities of a series
to or through dealers and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of the securities of a series may
be deemed to be underwriters, and any discounts or commissions received by
them from the seller and any profit on the resale of the securities by them
may be deemed to be underwriting discounts and commissions, under the
Securities Act of 1933, as amended. Any such underwriters or agents will be
identified, and any compensation received from the seller will be described,
in the prospectus supplement.
Under agreements which may be entered into by the seller, underwriters and
agents who participate in the distribution of the securities may be entitled
to indemnification by the seller against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The underwriters may, from time to time, buy and sell securities, but there
can be no assurance that an active secondary market will develop and there is
no assurance that any such market, if established, will continue.
Use of Proceeds
If so specified in the applicable prospectus supplement, substantially all
of the net proceeds to be received from the sale of the securities will be
used by the seller, for general corporate purposes, including the payment of
expenses in connection with pooling the contracts and issuing the securities.
Legal Matters
Certain legal matters relating to the securities, including legal matters
relating to material federal income tax consequences concerning the
securities, will be passed upon for GreenPoint Credit and GreenPoint Asset by
Orrick, Herrington & Sutcliffe LLP, Los Angeles, California.
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Glossary
Below are abbreviated definitions of significant capitalized terms used in
this prospectus. The agreement for the related series may contain more
complete definitions of the terms used herein and reference should be made to
the agreement for the related series for a more complete understanding of all
such terms.
"Annual Servicing Rate" means 1.00% per annum or such other amount pursuant
to the related servicing agreement.
"Available Distribution Amount" means, with respect to each distribution
date, the amount available for distribution to the securityholders as
described in the related prospectus supplement.
"Bulk Sellers" means lenders or finance companies with whom GreenPoint
Credit may have or may establish referral arrangements, governmental agencies
or instrumentalities or the portfolios of other entities that purchase and
hold manufactured housing contracts.
"Code" means the Internal Revenue Code of 1986, as it may be modified or
amended from time to time.
"Collection Period" means, with respect to any distribution date, the
calendar month preceding the month of the distribution date or such other
period as may be specified in the related prospectus supplement.
"Cut-off Date" means, the date specified in the related prospectus
supplement from which principal and interest payments on the related contracts
are included in the trust for the related series.
"Cut-off Date Pool Principal Balance" means the aggregate Scheduled
Principal Balances of the contracts as of the Cut-off Date.
"Definitive Securities" means securities that are issued in registered form.
"Determination Date" means the third business day prior to the distribution
date specified in the related agreement.
"Eligible Institution" means a depository institution acceptable to the
applicable rating agency.
"Excess Interest" means the amount, if any, by which the interest collected
on non-defaulted contracts during the same Collection Period exceeds the
interest distribution due to the holders of the securities for the related
series and, if so specified in the related prospectus supplement and if
GreenPoint Credit is acting as servicer, the Monthly Servicing Fee.
"Formula Principal Distribution Amount" means, with respect to each
distribution date, an amount that equals the sum of:
. the Total Regular Principal Amount for the related distribution date;
and
. any previously undistributed shortfalls in the distribution of the Total
Regular Principal Amount in respect of prior distribution dates.
"Fractional Interests" means, as to any security, the product of:
. the Percentage Interest evidenced by such security; and
. the amount derived from dividing the security balance of the class
represented by such security by the aggregate security balance of each
class.
"Global Security" means one or more global securities that are initially
registered in the name of Cede & Co., as nominee of DTC, on behalf of the
beneficial owners of the securities.
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"GreenPoint Asset" means GreenPoint Asset LLC its successors and assigns.
"GreenPoint Credit" means GreenPoint Credit, LLC its successors and assigns.
"Indirect Participants" means banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly.
"Land Home Contract" or "Land-in-Lieu Contract" means the obligor owns the
real estate on which the related manufactured home is located and provides a
mortgage on the real estate in lieu of all or part of any required down
payment for its contract. If so specified in the related prospectus
supplement, all Land-in Lieu Contracts and Land Home Contracts will have
financed the purchase of the related manufactured home together with the real
estate on which the manufactured home is located.
"Minimum Termination Amount" means, for each outstanding class, an amount
equal to the aggregate security balance for each outstanding class together
with any shortfall in interest due to such securityholders in respect of prior
distribution dates and one month's interest on the aggregate security balance
for each outstanding class at the respective Security Rates for each
respective class and any other amounts specified in the related prospectus
supplement.
"Monthly Servicing Fee" means, as of any distribution date, an amount equal
to the product of (1) one-twelfth of the Annual Servicing Rate and (2) the
aggregate Scheduled Principal Balances of the contracts in the related
contract pool for that distribution date.
"Note Rate" means the rate of interest payable on each note as described in
the applicable prospectus supplement.
"OID Regulations" means Sections 1271-1273 and 1275 of the Code and in the
Treasury Regulations issued thereunder.
"Participants" means securities brokers and dealers, banks and trust
companies and clearing corporations and may include certain other
organizations that are DTC participating organizations.
"Pass-Through Rate" means the rate of interest payable on each certificate
as described in the applicable prospectus supplement.
"Payment Account" means the separate account created and initially
maintained by the trustee at an Eligible Institution pursuant to the related
agreement for the benefit of the holders of the securities.
"Percentage Interest" means, as to any security of any class other than a
residual interest, the percentage interest evidenced thereby in distributions
required to be made on the securities of such class, such percentage interest
being equal to the percentage, for the residual interests, the percentage set
forth on the face thereof, and for all other securities, to be obtained by
dividing:
. the original denomination of such security, by
. the aggregate of the original denominations of all of the securities of
such class.
"Pool Principal Balance" means, with respect to any distribution date and a
series, the aggregate principal balances of the contracts relating to that
series.
"Pool Scheduled Principal Balance" means, with respect to any distribution
date and a series, an amount that is equal to the Cut-off Date Pool Principal
Balance of that series , less the aggregate of the Total Regular Principal
Amounts for that series for all prior distribution dates.
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"Rate Period" means the time period between Security Rate adjustments.
"Regular Certificates" means the certificates of any series identified in
the related prospectus supplement as "regular interests" in the related REMIC.
"REMIC" means a "real estate mortgage investment conduit" within the meaning
of Section 860D(a) of the Code.
"REMIC Fund" means, with respect to a series identified in the related
prospectus supplement as being subject to an election to be treated as a REMIC
for federal income tax purposes, those assets of the trust related to that
series with respect to which an election to be treated as a REMIC will be
made, as described in the related prospectus supplement.
"REMIC Provisions" means Sections 860A through 860G of the Code.
"Reserve Regulations" means the REMIC Provisions and the Treasury
regulations issued thereunder.
"Residual Certificates" means the certificates of any series identified in
the related prospectus supplement as "residual interests" in the related
REMIC.
"Scheduled Principal Balance" means, with respect to each contract and any
distribution date, its unpaid scheduled principal balance as of the Cut-off
Date reduced by all previous partial prepayments, all previous scheduled
principal payments, whether or not paid, and the scheduled principal payment
due on the due date in the Collection Period immediately preceding such
distribution date.
"Security Balance" means, for any class of securities as of any distribution
date, the initial Security Balance of that class less all amounts previously
distributed to securityholders of that class on account of principal.
"Security Rate" means the Note Rate or Pass-Through Rate, as applicable.
"Startup Day" means the close of business of the third month beginning after
the day on which a REMIC issues all of its regular and residual interests.
"Step-Up Rate Contracts" means actuarial or simple interest contracts
bearing a contract interest rate that is fixed or variable and increases in
specified increments on particular dates.
"Termination Auction" the purchase at an auction of the contracts remaining
in the trust for a particular series as described in the related prospectus
supplement.
"Total Regular Principal Amount" is the total amount by which the aggregate
outstanding principal balance of the contracts in the related contract pool is
reduced during one or more Collection Periods prior to the related
distribution date designated in the related prospectus supplement. The
reduction described in the previous sentence may occur as a result of
actuarially predetermined scheduled principal reductions, receipt of principal
prepayments, liquidation of contracts, repurchases of contracts under certain
conditions, losses on contracts, the failure of a third party credit support
provider, if any, to make a required payment, or a combination of any of the
foregoing events.
"WAC" means the weighted average contract interest rate of a particular
contract pool as of the first day of the month of the sale of the contract
pool.
"WAM" means the weighted average remaining term to maturity of the contracts
in a particular contract pool as of the first day of the month of the sale of
the contract pool.
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$260,000,000
(Approximate)
[GREENPOINT LOGO]
Seller and Servicer
Manufactured Housing Contract Trust
Pass-Through Certificates, Series 2000-7,
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PROSPECTUS SUPPLEMENT
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Underwriter
Credit Suisse First Boston
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the offered certificates in any state where the offer is
not permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the accompanying prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the offered certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the offered
certificates will deliver a prospectus supplement and prospectus until March
18, 2001.
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