SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to __________
Commission file number: 000-29810
CIT HOME EQUITY LOAN TRUST 1998-1
(Exact name of registrant as specified in its charter)
Delaware 22-3599147
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o The CIT Group Securitization Corporation III
650 CIT Drive
Livingston, New Jersey 07039
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 740-5000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE>
PART I
Item 1. Business.
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On August 10, 1998 The CIT Group Securitization Corporation III (the
"Company") sold $61,000,000 aggregate principal amount of Class A-1 5.88% Asset
Backed Certificates; $38,000,000 aggregate principal amount of Class A-2 6.01%
Asset Backed Certificates; $45,000,000 aggregate principal amount of Class A-3
6.08% Asset Backed Certificates; $25,000,000 aggregate principal amount of Class
A-4 6.20% Asset Backed Certificates; $11,000,000 aggregate principal amount of
Class A-5 6.36% Asset Backed Certificates; $10,872,000 aggregate principal
amount of Class A-6 6.70% Asset Backed Certificates; $19,000,000 aggregate
principal amount of Class A-7 6.30% Asset Backed Certificates; $51,317,000
aggregate principal amount of Class A-8 Asset Backed Certificates; $23,046,000
aggregate principal amount of Class M-1 6.44% Asset Backed Certificates;
$19,632,000 aggregate principal amount of Class M-2 6.72% Asset Backed
Certificates; and $11,950,000 aggregate principal amount of Class B-1 7.37%
Asset Backed Certificates (the "Public Certificates"). The Public Certificates
were offered for sale to the public pursuant to a Prospectus Supplement dated
July 31, 1998 to a Prospectus dated April 8, 1997 (the "Prospectus"). In
addition, the company sold $10,242,000 aggregate certificate balance of B-2
Certificates,$6,829,000 aggregate certificate balance of B-3 Certificates,
$8,536,000 aggregate certificate balance of B-4 Certificates, Class R-I
Certificates, Class R-II Certificates, Class IO-X1 Certificates, and Class IO-X2
Certificates (the "Private Certificates" and, together with the Public
Certificates, the "Certificates").
The Certificates represent the entire beneficial ownership interest in CIT
Home Equity Loan Trust 1998-1 (the "Trust"). The Trust was created, and the
Certificates were issued, pursuant to a Pooling and Servicing Agreement, dated
as of July 1, 1998 (the "Pooling and Servicing Agreement"), between the Company
and The Bank of New York, as trustee (the "Trustee").
The Trust's only business is to act as a passive conduit to permit
investment in a pool of retail consumer receivables.
Year 2000 Compliance
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The Year 2000 compliance issue arises out of the inability of computers,
software and other equipment using microprocessors to recognize and properly
process date fields containing a two digit year. Because The CIT Group/Sales
Financing, Inc. ("Servicer") is dependent upon the proper functioning of
computer systems, failure of its systems or vendor systems to be Year 2000
compliant could have a material adverse effect on the Securityholders.
Significant Year 2000 failures in the Servicer's systems or in the systems of
third parties (or third parties upon whom they depend) could have a material
adverse effect on its financial condition and results of operations. Failure of
this kind could, for example, result in problems with collecting or processing
payments on the Contracts and payments to Securityholders; incomplete or
inaccurate accounting or reporting; and generation of erroneous results.
The Servicer continues to address the Year 2000 issue as it relates to its
systems and business. The Servicer has developed a comprehensive Year 2000
project to remediate its information technology systems and to address Year 2000
issues in its non-information technology systems. The scope of this project
includes, among other things, the assessment of "at risk" applications and
systems, an assessment of the interdependencies of various systems and the
relative importance of each system to the business, the design and execution of
required modifications to achieve Year 2000 compliance, and the plans for
testing of modifications to verify Year 2000 compliance. The process of
remediation includes the following phases: planning, assessing, designing,
programming and testing and validation. The Servicer's Year 2000 project is
expected to be substantially completed by March 31, 1999.
<PAGE>
The Servicer depends upon the proper functioning of third party computer
and non-information technology systems. The Servicer has been communicating with
those parties with whom it has important financial, supplier or operational
relationships to determine the extent to which those parties are vulnerable to
the Year 2000 issue. As part of the process of evaluating its options and
attempting to mitigate third party risks, the Servicer is collecting and
analyzing information from third parties. It is difficult to predict the effect
of such third party non-readiness on its business.
The Servicer continues to formulate a contingency plan for business
continuation in the event of Year 2000 systems failures. The Servicer expects to
complete its information technology systems Year 2000 contingency plan by June
30, 1999, and to test this contingency plan thereafter.
While the Servicer has made and will continue to make certain investments
related to the Year 2000 project, the financial impact to the Servicer of such
investments has not been, and is not anticipated to be, material to its
financial position or results of operations.
All Year 2000 information provided herein is a "Year 2000 Readiness
Disclosure" as defined in the Year 2000 Information and Readiness Disclosure Act
and is subject to the terms thereof. This Year 2000 information is provided
pursuant to securities law requirements and it may not be taken as a form of
covenant, warranty, representation or guarantee of any kind.
Item 3. Legal Proceedings.
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The Registrant knows of no material legal proceeding with respect to or
involving the Trustee, the Company or CITCF.
Item 4. Submission of Matters to a Vote of Security Holders.
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No matter was submitted to a vote of Certificateholders during the fiscal
year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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The Public Certificates are held and delivered in book-entry form through
the facilities of The Depository Trust Company ("DTC"), a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended.
As of January 5, 1999, 100% of the Class A-1 Certificates were held in the
nominee name of Cede & Co. for 5 beneficial owners, 100% of the Class A-2
Certificates were held in the nominee name of Cede & Co. for 4 beneficial
owners, 100% of the Class A-3 Certificates were held in the nominee name of Cede
& Co. for 5 beneficial owners, 100% of the Class A-4 Certificates were held in
the nominee name of Cede & Co. for 1 beneficial owner, 100% of the Class A-5
Certificates were held in the nominee name of Cede & Co. for 2 beneficial
owners, 100% of the Class A-6 Certificates were held in the nominee name of Cede
& Co. for 1 beneficial owner, 100% of the Class A-7 Certificates were held in
the nominee name of Cede & Co. for 2 beneficial owners; 100% of the Class A-8
Certificates were held in the nominee name of Cede & Co. for 8 beneficial
owners; 100% of the Class M-1 Certificates were held in the name of Cede & Co.
for 4 beneficial owners; 100% of the Class M-2 Certificates were held in the
nominee name of Cede & Co. for 10 beneficial owners; and 100% of the Class B-1
Certificates were held in the nominee name of Cede & Co. for 1 beneficial owner.
As of August 10, 1998, 100% of the Class B-2 and Class B-3 Certificates were
held by Teachers Insurance and Annuity Association as registered owner and 100%
of the Class B-4, Class IO-X1, Class IO-X2, Class R-I, and Class R-II
Certificates were held in the form of a definitive Certificate by an affiliate
of the Company.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
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Financial Disclosure.
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None.
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management.
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Not Applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
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(a) Exhibits:
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Exhibit Number Description
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19 Annual Accountants' Report with respect to the
servicing of the loans by the Master Servicer,
pursuant to the Pooling and Servicing
Agreement.
99.1 Annual Officer's Certificate.
99.2 Management's Assertion.
99.3 1998 Annual Statement of Trust.
(b) Reports on Form 8-K:
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Current Reports on Form 8-K are filed each month. The
reports include as an exhibit, the Monthly Reports to
Certificateholders. Current Reports on Form 8-K dated
August 17, 1998, September 15, 1998, October 15, 1998,
November 16, 1998, December 15, 1998 and January 15, 1999
were filed with the Securities and Exchange Commission.
(c), (d) Omitted.
<PAGE>
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CIT HOME EQUITY LOAN TRUST 1998-1
(Registrant)
By: The CIT Group/Consumer Finance, Inc.,
as Master Servicer
Dated: March 30, 1999 By: /s/ Frank Garcia
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Name: Frank Garcia
Title: Vice President
Exhibit 19
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Annual report of Accountants with respect to the servicing of the
contracts by the Servicer, pursuant to the Pooling and Servicing Agreement
Independent Auditors' Report
The Board of Directors
The CIT Group, Inc.:
We have examined management's assertion about The CIT Group/Sales Financing,
Inc. and The CIT Group/Consumer Finance, Inc.'s (the Companies), both
wholly-owned subsidiaries of The CIT Group, Inc., compliance with the minimum
servicing standards identified in the Mortgage Bankers Association of America's
Uniform Single Attestation Program for Mortgage Bankers as of and for the year
ended December 31, 1998 included in the accompanying management assertion.
Management is responsible for the Companies' compliance with those minimum
servicing standards. Our responsibility is to express an opinion on management's
assertion about the Companies' compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Companies' compliance with the
minimum servicing standards and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on the Companies' compliance with the minimum servicing
standards.
In our opinion, management's assertion that the Companies have complied in all
material respects with the aforementioned minimum servicing standards as of and
for the year ended December 31, 1998 is fairly stated, in all material respects.
March 5, 1999
/s/ KPMG LLP
Exhibit 99.1
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CIT HOME EQUITY LOAN TRUST 1998-1
ANNUAL OFFICER'S CERTIFICATE
COMPLIANCE WITH AGREEMENT
The undersigned certifies that he is a Vice President of The CIT Group/
Consumer Finance, Inc., a corporation organized under the laws of the
state of Delaware ("CITCF"), and that as such he is duly authorized to
execute and deliver this certificate on behalf of CITCF in connection with
Section 6.06 (a) of the Pooling and Servicing Agreement dated as of July 1,
1998 (the "Agreement") among CITCF, as Seller and Master Servicer, The
CIT Group Securitization Corporation III, as Depositor, and The Bank of New
York, as Trustee for CIT Home Equity Loan Trust 1998-1 (all capitalized
terms used herein without definition having the respective meanings
specified in the Agreement). The undersigned further certifies to the
Trustee that a review of the activities of CITCF during the preceding
calendar year and of its performance under the Agreement has been made under
his supervision and to the best of his knowledge, based on such review, CITCF
has fulfilled its obligations under the Agreement during the preceding calendar
year.
IN WITNESS WHEREOF, I have affixed hereto my signature this 10th day
of March, 1999.
/s/ Frank J. Madeira
--------------------------
Name: Frank J. Madeira
Title: Vice President
Exhibit 99.2
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March 5, 1999
MANAGEMENT'S ASSERTION
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As of and for the year ended December 31, 1998, The CIT Group/Sales Financing,
Inc. and The CIT Group/Consumer Finance, Inc. (the Companies), both wholly owned
subsidiaries of The CIT Group, Inc., have complied in all material respects with
the minimum servicing standards as set forth in the Mortgage Bankers Association
of America's Uniform Single Attestation Program for Mortgage Bankers. As of and
for this same period, the Companies had in effect a fidelity bond and errors and
omissions policy in the amount of $50 million and $5 million, respectively.
THE CIT GROUP/SALES FINANCING, INC.
/s/James J. Egan, Jr.
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President and Chief Executive Officer
THE CIT GROUP/CONSUMER FINANCE, INC.
/s/ Thomas Hallman
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President and Chief Executive Officer
<PAGE>
MINIMUM SERVICING STANDARDS
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I. CUSTODIAL BANK ACCOUNTS
1. Reconciliations shall be prepared on a monthly basis for all custodial
bank accounts and related bank clearing accounts. These reconciliations shall:
o be mathematically accurate;
o be prepared within forty-five (45) calendar days after the cutoff date;
o be reviewed and approved by someone other than the person who prepared the
reconciliation; and
o document explanations for reconciling items. These reconciling
items shall be resolved within ninety (90) calendar days of their
original identification.
2. Funds of the servicing entity shall be advanced in cases where there is
an overdraft in an investor's or a mortgagor's account.
3. Each custodial account shall be maintained at a federally insured
depository institution in trust for the applicable investor.
4. Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage loan.
II. MORTGAGE PAYMENTS
1. Mortgage payments shall be deposited into the custodial bank accounts
and related bank clearing accounts within two business days of receipt (with the
exception of securitization servicing contracts for which custodial accounts are
not applicable).
2. Mortgage payments made in accordance with the mortgagor's loan
documents shall be posted to the applicable mortgagor records within two
business days of receipt.
3. Mortgage payments shall be allocated to principal, interest, insurance,
taxes or other escrow items in accordance with the mortgagor's loan documents.
4. Mortgage payments identified as loan payoffs shall be allocated in
accordance with the mortgagor's loan documents.
III. DISBURSEMENTS
1. Disbursements made via wire transfer on behalf of a mortgagor or
investor shall be made only by authorized personnel.
2. Disbursements made on behalf of a mortgagor or investor shall be posted
within two business days to the mortgagor's or investor's records maintained by
the servicing entity.
3. Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and insurance
premium notices, respectively, provided that such support has been received by
the servicing entity at least thirty (30) calendar days prior to these dates.
<PAGE>
4. Any late payment penalties paid in conjunction with the payment of any
tax bill or insurance premium notice shall be paid from the servicing entity's
funds and not charged to the mortgagor, unless the late payment was due to the
mortgagor's error or omission.
5. Amounts remitted to investors per the servicer's investor reports shall
agree with the canceled checks, or other form of payment, or custodial bank
statements.
6. Unissued checks shall be safeguarded so as to prevent unauthorized
access.
IV. INVESTOR ACCOUNTING AND REPORTING
1. The servicing entity's investor reports shall agree with, or reconcile
to, investors' records on a monthly basis as to the total unpaid principal
balance and number of loans serviced by the servicing entity.
V. MORTGAGOR LOAN ACCOUNTING
1. The servicing entity's mortgage loan records shall agree with, or
reconcile to, the records of mortgagors with respect to the unpaid principal
balance on a monthly basis.
2. Adjustments on ARM loans shall be computed based on the related
mortgage note and any ARM rider.
3. Escrow accounts shall be analyzed, in accordance with the mortgagor's
loan documents, on at least an annual basis.
4. Interest on escrow accounts shall be paid, or credited, to mortgagors
in accordance with the applicable state laws.
VI. DELINQUENCIES
1. Records documenting collection efforts shall be maintained during the
period a loan is in default and shall be updated at least monthly. Such records
shall describe the entity's activities in monitoring delinquent loans including,
for example, phone calls, letters and mortgage payment rescheduling plans in
cases where the delinquency is deemed temporary (e.g., illness or unemployment).
VII. INSURANCE POLICIES
1. A fidelity bond and errors and omissions policy shall be in effect on
the servicing entity throughout the reporting period in the amount of coverage
represented to investors in management assertion.
Exhibit 99.3
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CIT Home Equity Loan Trust 1998-1
Home Equity Loan Asset Backed Certificates,
Series 1998-1
Exhibit to 10K
For The Year Ending 12/31/98
A. Principal collected on Mortgage Loans 32,439,518.36
B. Interest collected on Mortgage Loans 16,216,146.32
C. All Liquidation Proceeds with respect to Principal 0.00
D. All Liquidation Proceeds with respect to Interest 0.00
E. Recoveries on previously Liquidated Mortgages 0.00
F. Principal portion of Purchase Price on Repurchased 223,274.24
Mortgage Loans
G. Interest portion of Purchase Price on Repurchased 1,348.95
Mortgage Loans
H. Master Servicer Monthly Advances (net of Compensating 2,545,533.58
Interest)
I. Reimbursement of prior months Servicer Advances (1,024,863.37)
J. Compensating Interest 31,034.86
K. Investment Earnings on Certificate Account 0.00
L. Aggregate Distribution made in respect of
Interest:
1. Class A-1 @ applicable Pass-Through Rate 1,276,307.36
2. Class A-2 @ applicable Pass-Through Rate 995,990.57
3. Class A-3 @ applicable Pass-Through Rate 1,193,200.00
4. Class A-4 @ applicable Pass-Through Rate 675,972.24
5. Class A-5 @ applicable Pass-Through Rate 305,103.33
6. Class A-6 @ applicable Pass-Through Rate 317,673.80
7. Class A-7 @ applicable Pass-Through Rate 522,025.00
8. Class A-8 @ applicable Pass-Through Rate 1,207,009.25
9. Class IOX1 1,566,711.86
10. Class IOX2 784,490.45
11. Class M-1 @ applicable Pass-Through Rate 647,259.71
12. Class M-2 @ applicable Pass-Through Rate 575,348.48
13. Class B-1 @ applicable Pass-Through Rate 384,089.61
14. Class B-2 @ applicable Pass-Through Rate 357,332.00
15. Class B-3 @ applicable Pass-Through Rate 238,256.24
16. Class B-4 @ applicable Rate 297,811.57
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Total Interest Distributions 11,344,581.47
M. Aggregate Distribution made in respect of Principal:
Class A Principal Distribution Amount
1. Class A-1 26,019,204.19
2. Class A-2 0.00
3. Class A-3 0.00
4. Class A-4 0.00
5. Class A-5 0.00
6. Class A-6 0.00
7. Class A-7 0.00
8. Class A-8 6,643,588.41
9. Class A-9 0.00
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Total Class A Principal Distribution 32,662,792.60
Class M Principal Distribution Amount
1. Class M-1 0.00
2. Class M-2 0.00
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Total Class M Principal Distribution 0.00
Class B Principal Distribution Amount
1. Class B-1 0.00
2. Class B-2 0.00
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Total Class B Principal Distribution 0.00
N. Aggregate Master Servicer Distribution 1,239,502.13
O. Aggregate Class R Distribution 4,409,897.38
<PAGE>
P. Delinquency Information as of 12/31/98 Account Number
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(a) 31-59 Days 11,273,196.69 190
(b) 60-89 Days 3,864,985.92 70
(c) 90-119 Days 2,417,865.39 40
(d) 120 + Days 3,315,022.45 60
Q. Contracts Liquidated in 1998 0.00
