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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from to .
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Commission File Number: 333-46019-2
Headlands Mortgage Securities Inc. (as Sponsor under a Pooling and Servicing
Agreement dated as of October 1, 1998 providing for the issuance of the Mortgage
Pass-Through Certificates, Series 1998-2)
HEADLANDS MORTGAGE SECURITIES INC.
(Exact Name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 68-0397342
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
1100 Larkspur Landing Circle, Suite 101, 94939
Larkspur, California (Zip code)
(Address of principal executive offices)
</TABLE>
(415) 461-6790
(Registrant's telephone number, including area code)
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(g) of the Act:
None None
(Title of class) (Title of class)
</TABLE>
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. [ X ]
State the aggregate market value of the voting stock held by non-affiliates of
Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of specified date within 60 days prior to the date of filing:
Not Applicable
Documents incorporated by reference:
Not Applicable
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HEADLANDS MORTGAGE SECURITIES INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1998-2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C><C> <C>
PART I ............................................................. 3
ITEM 1 - BUSINESS...................................... 3
ITEM 2 - PROPERTIES.................................... 3
ITEM 3 - LEGAL PROCEEDINGS............................. 3
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 3
PART II ............................................................. 3
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS................... 3
ITEM 6 - SELECTED FINANCIAL DATA....................... 3
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 3
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA... 3
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........ 3
PART III ............................................................. 4
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT................................ 4
ITEM 11 - EXECUTIVE COMPENSATION........................ 4
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 4
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 6
PART IV ............................................................. 6
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K........................... 6
SIGNATURES............................................................ 7
INDEX TO EXHIBITS..................................................... 8
</TABLE>
2
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PART I
ITEM 1 - BUSINESS
Not Applicable.
ITEM 2 - PROPERTIES
Headlands Mortgage Securities Inc. (the "Sponsor") will furnish
information regarding the Mortgaged Properties by reference to the Annual
Compliance Certificates to be filed herein under Item 14.
ITEM 3 - LEGAL PROCEEDINGS
The Sponsor is not aware of any material pending legal proceedings
involving either the Mortgage Pass-Through Certificates Series 1998-2 Trust (the
"Trust"), established pursuant to the Pooling and Servicing Agreement (the
"Agreement") dated October 1, 1998 among The Bank of New York, as trustee (the
"Trustee"), Headlands Mortgage Securities Inc., as Sponsor and Headlands
Mortgage Company, as servicer (the "Servicer"); the Trustee; the Sponsor; or the
Servicer which relates to the Trust.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of the holders of beneficial
interests in the Trust through the solicitation of proxies or otherwise.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
To the best knowledge of the Sponsor, there is no established public
trading market for the Certificates.
All of the Class A Certificates, Class B Certificates, Class R
Certificates and Class PO Certificates issued by the Trust are held by the
Depository Trust Company ("DTC") which in turn maintains records of holders of
beneficial interests in such Certificates. Based on information obtained by the
Trust from DTC, as of December 31, 1998, there were 12 holders of Class A-1
Certificates, and one holder of each of the Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6, Class R and Class PO Certificates.
ITEM 6 - SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Not Applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Not Applicable.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes of accountants or disagreements on accounting
or financial disclosures between the Sponsor and its accountants.
3
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not Applicable.
ITEM 11 - EXECUTIVE COMPENSATION
Not Applicable.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth (i) the name and address of each
entity owning more than 5% of the outstanding principal amount of each Class of
Certificates of the Trust; (ii) the principal amount of the Class of
Certificates owned by each and (iii) the percent that the principal amount of
the Class of Certificates owned by such entity represents of the outstanding
principal amount of such Class of Certificates. The information set forth in the
table for the Certificates is based upon information obtained by the Trust from
DTC and represents ownership of beneficial interest in the Certificates held by
DTC. The Sponsor is not aware of any Schedules 13D or 13G filed with the
Securities and Exchange Commission in respect of the Certificates.
Class A-1
<TABLE>
<CAPTION>
Name and Address Principal Amount % of Class
<S> <C> <C>
Chase Manhattan Bank 34,563,000 9.1%
4 New York Plaza
13th Floor
New York, NY 10004
State Street Bank and Trust Company 55,200,000 14.48%
Global Corp Action Dept JAB5W
P.O. Box 1631
Boston, MA 02105-1631
Bankers Trust Company 41,779,000 10.96%
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
Boston Safe Deposit and Trust Company 55,809,000 14.64%
c/o Mellon Bank N.A.
Three Mellon Bank Center, Room 153-3015
Pittsburgh, PA 15259
Citibank, N.A. 66,075,000 17.33%
P.O. Box 30576
Tampa, FL 33630-3576
Investors Fiduciary Trust Company/SSB 57,943,100 15.2%
Global Corp Action Dept JAB5W
P.O. Box 1631
Boston, MA 02105-1631
The Northern Trust Company 39,035,000 10.24%
801 S. Canal C-IN
Chicago, IL 60607
</TABLE>
4
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Class B-1
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 8,002,800 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class B-2
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 3,601,300 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class B-3
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 2,400,900 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class B-4
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 1,400,500 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class B-5
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 1,200,400 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class B-6
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 1,400,577 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
5
<PAGE>
Class R
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
Class PO
<TABLE>
<CAPTION>
Name and Address Notional Amount % of Class
<S> <C> <C>
Headlands Mortgage Securities, Inc. 931,678 100%
1100 Larkspur Landing Circle, Suite 101
Larkspur, CA 94939
</TABLE>
6
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Not applicable.
2. Financial Statement Schedules:
Not applicable.
3. Exhibits:
Exhibit No. Description
----------- -----------
99.1 Statement of Compliance of the Master
Servicer.
99.2 Annual Report of Independent Accountant
with respect to the Master Servicer's
overall servicing operations.
7
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Sponsor has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: HEADLANDS MORTGAGE SECURITIES INC.,
as Sponsor
By: /s/ Gilbert J. MacQuarrie
---------------------------------------
Name: Gilbert J. MacQuarrie
Title: Vice President, Treasurer and
Secretary
Date: May 5, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Sponsor
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Position Date
- --------- -------- ----
<S> <C> <C>
/s/ Peter T. Paul
- ------------------------------------ President and Director May 5, 1999
Peter T. Paul (Principal Executive Officer)
/s/ Becky S. Poisson
- ------------------------------------ Vice President and Director May 5, 1999
Becky S. Poisson
/s/ Gilbert J. MacQuarrie
- ------------------------------------ Vice President, Treasurer, Secretary May 5, 1999
Gilbert J. MacQuarrie and Director
(Principal Financial Officer and Principal
Accounting Officer)
/s/ Steven M. Abreu
- ------------------------------------ Vice President and Director May 5, 1999
Steven M. Abreu
/s/ Kristen Decker
- ------------------------------------ Vice President May 5, 1999
Kristen Decker
</TABLE>
8
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INDEX TO EXHIBITS
Item 14(C)
Exhibit No. Description
- ----------- -----------
99.1 Statement of Compliance of the Master Servicer.
99.2 Annual Report of Independent Accountant with respect to the Master
Servicer's overall servicing operations.
9
<PAGE>
EXHIBIT 99.1
HEADLANDS MORTGAGE SECURITIES INC.
Mortgage Pass-Through Certificates Series 1998-2
Officer's Certificate
In connection with the above-referenced trust and pursuant to Section 3.13 of
the related Pooling and Servicing Agreement ("Agreement"), Headlands Mortgage
Company (as "Master Servicer") hereby confirms the following:
(i) a review of the activities of the Master Servicer during 1998 and of
performance under the Agreement has been made under the undersigned's
supervision; and
(ii) to the best of the undersigned's knowledge, based on such review, the
Master Servicer has fulfilled all of its obligations under the Agreement
for the calendar year 1998.
HEADLANDS MORTGAGE SECURITIES INC.
By:
--------------------------------
Kristen Decker
Vice President
10
<PAGE>
EXHIBIT 99.2
[KPMG Peat Marwick LLP Letterhead]
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Headlands Mortgage Company:
We have examined management's assertion about Headlands Mortgage Company's (the
Company) compliance with the minimum servicing standards set forth in the
Mortgage Bankers Association of America's (MBA's) Uniform Single Attestation
Program for Mortgage Bankers (USAP) as of and for the year ended December 31,
1998 included in the accompanying management assertion. Management is
responsible for the Company's compliance with those minimum servicing standards.
Our responsibility is to express an opinion on management's assertion about the
Company's 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 Company's 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 Company's compliance with the minimum servicing
standards.
In our opinion, management's assertion that the Company has 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.
San Francisco, California
February 2, 1999
/s/ KPMG Peat Marwick LLP
11
<PAGE>
[HEADLANDS MORTGAGE SECURITIES INC. LETTERHEAD]
As of and for the year ended December 31, 1998, Headlands Mortgage Company (the
"Company") has complied in all material respects with the minimum servicing
standards 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 Company had in effect a fidelity bond and errors and omissions
policy both in the amount of $6.6 million.
HEADLANDS MORTGAGE COMPANY
By: /s/ Dennis Tussey
------------------------------------------
Dennis Tussey
Senior Vice President, Loan Administration
12
