SUPPLEMENT TO
PROSPECTUS SUPPLEMENT DATED NOVEMBER 6, 1998
(TO PROSPECTUS DATED AUGUST 18, 1998)
$12,261,000
(APPROXIMATE)
VANDERBILT MORTGAGE AND FINANCE, INC.
SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT
SENIOR/SUBORDINATE PASS-THROUGH CERTIFICATES, SERIES 1998D
CAREFULLY CONSIDER THE RISK FACTORS IN THE PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS.
The offered certificates represent obligations of the trust only and do not
represent an interest in or obligation of Vanderbilt Mortgage and Finance, Inc.,
The Chase Manhattan Bank or any of their affiliates (except to the extent of the
limited guarantee of the Class I B-2 and Class II B-3 Certificates by Clayton
Homes, Inc.)
This Supplement to the Prospectus Supplement may be used to offer and sell the
certificates only if accompanied by the Prospectus Supplement and the
Prospectus.
CLASS I B-2 CERTIFICATES
THE CERTIFICATES:
This Supplement relates to the offering of the Class I B-2 Certificates of
the Series referenced above. This Supplement does not contain complete
information about the offering of the Class I B-2 Certificates. Additional
information is contained in the accompanying Prospectus Supplement dated
November 6, 1998 prepared in connection with the offering of Series 1998D
Certificates and in the related Prospectus dated August 18, 1998. You are urged
to read this Supplement, the Prospectus Supplement and the Prospectus in full.
As of December 7, 1998 the Original Class Principal Balance of the Class I
B-2 Certificates was approximately $12,261,000.
ORIGINAL PRICE TO UNDERWRITING PROCEEDS
CERTIFICATE PUBLIC DISCOUNT TO
BALANCE COMPANY
Class I B-2 $12,261,000 96.71875% 0.500% $11,797,380.94
Certificates(1)
(1) Plus accrued interest, if any, at the applicable rate from December 23,
1998
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRUDENTIAL SECURITIES INCORPORATED
December 9, 1998
This Supplement is qualified in its entirety by reference to the
detailed information appearing in the accompanying Prospectus Supplement and
Prospectus. Certain capitalized terms used in this Supplement are defined in the
Prospectus Supplement or the Prospectus.
THE CONTRACT POOL
As of November 26, 1998 (the "Reference Date"), the Contract Pool
included approximately 8,155 Contracts having an aggregate principal balance of
approximately $284,547,776 and the Group I Contracts included approximately
5,848 Contracts having an aggregated outstanding principal balance of
approximately $201,633,763.
The following table summarizes the delinquency and foreclosure
experience of the Contracts as of the Reference Date.
<TABLE>
<CAPTION>
As of
November 26, 1998
<S> <C>
Total Number of Contracts Outstanding................................................. 8,155
Total Delinquencies as a Percent of Contracts Outstanding at Period End (1)...........
30-59 days................................................................... 1.10%
60-89 days................................................................... 0.10%
90 days or more (excluding pending foreclosures)............................. 0.00%
Total Delinquencies................................................................... 1.20%
(1) As a percentage of the total number of Contracts as of the Reference Date.
</TABLE>
DESCRIPTION OF THE CLASS I B-2 CERTIFICATES
The Class I B-2 Certificates are Subordinate Certificates. See
"Description of the Certificates--Group I Certificates and the
Senior/Subordinate Structure" in the Prospectus Supplement. To the extent funds
are available therefor, the Class I B-2 Certificates will be entitled to receive
interest and principal in the amount of the Group I Available Distribution
Amount for such Class as described in the Prospectus Supplement under
"Description of the Certificates--Distributions". It is unlikely that the
holders of the Class I B-2 Certificates will receive distributions of principal
on any Remittance Date prior to the Remittance Date on which the Class I B
Principal Distribution Test is met. Additional information relating to
distributions of certain payments in respect of principal with respect to the
Class I B-2 Certificates are set forth in the Prospectus Supplement under
"Description of the Certificates--Distributions".
Losses on Liquidated Contracts in Group I will be allocated to the
Class I B-2 Certificates as described in the Prospectus Supplement under
"Description of the Certificates--Losses on Liquidated Contracts". However, the
Class I B-2 Certificates will have the benefit of the Limited Guarantee from
Clayton Homes, Inc. ("CHI") or the Alternate Credit Enhancement. See
"Description of the Certificates--Limited Guarantee of CHI" in the Prospectus
Supplement.
As of the December 7, 1998 (the "Certificate Date"), the Certificate
Principal Balance of the Class I B-2 Certificates was approximately $12,261,000,
evidencing an undivided interest of approximately 6.00% in the current principal
balance of the Group I Contracts. As of the Certificate Date, the Group I Senior
Certificates had an aggregate principal balance of approximately $161,779,217
and evidenced in the aggregate a beneficial ownership interest of approximately
80.00% in the current principal balance of the Group I Contracts.
REPORTS TO CERTIFICATEHOLDERS
The most recent monthly statement that has been furnished to
Certificateholders of record on the most recent Remittance Date is included
herein as Exhibit 1.
YIELD AND PREPAYMENT CONSIDERATIONS
The Group I assumptions are set forth in "Yield and Prepayment
Considerations-Group I Assumptions" in the Prospectus Supplement. For the
purposes of this Supplement it is assumed that the Class I B-2 Certificates are
purchased on December 23, 1998. This assumption does not alter the information
set forth under "Percent of the Original Principal Balance of the Class I B-2
Certificates at the Respective Percentages of the Prepayment Model Set Forth
Below" under "Yield and Prepayment Considerations--Group I Assumptions" in the
Prospectus Supplement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Class I B-2 Certificates will be treated for federal income tax
purposes as having been issued with original issue discount ("OID") in an amount
equal to the difference between the principal balance of such certificates and
their issue price. See "Certain Federal Income Tax Consequences" in the
Prospectus and Prospectus Supplement. For purposes of determining the amount and
the rate of accrual of OID, the Company intends to assume that there will be
prepayments on the Contracts at a rate equal to 200% of the Prepayment Model.
If the method for computing OID described in the Prospectus results in
a negative amount of OID for any period with respect to a holder of a Class I
B-2 Certificate, the amount of OID allocable to such period would be zero and
such holder will be permitted to offset such negative amount only against future
OID (if any) attributable to such certificates.
Prospective purchasers of the Class I B-2 Certificates should consider
carefully the income tax consequences of an investment in the Class I B-2
Certificates discussed under "Certain Federal Income Tax Consequences" in the
Prospectus Supplement and in the Prospectus. Such purchasers should also consult
their own tax advisors with respect to those consequences.
ERISA CONSIDERATIONS
Prospective purchasers of the Class I B-2 Certificates should consider
carefully the ERISA consequences of an investment in the Class I B-2
Certificates discussed under "ERISA Considerations" in the Prospectus, the
Prospectus Supplement and herein, and should consult their own advisors with
respect to those consequences. As described in the Prospectus Supplement, the
Class I B-2 Certificates originally did not qualify for any exemption under
ERISA.
RATINGS
The Class I B-2 Certificates are currently rated "BBB" by Standard &
Poor's, a division of the McGraw Hill Companies, Inc. and "BBB" by Fitch IBCA,
Inc. See "Certificate Rating" in the Prospectus Supplement.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of
the Class I B-2 Certificates will be added to the general funds of the Company.
LEGAL INVESTMENT CONSIDERATIONS
The Class I B-2 Certificates will not constitute "mortgage related
securities" under the Secondary Mortgage Market Enhancement Act of 1984. "See
Legal Investment Considerations" in the Prospectus Supplement.
UNDERWRITING
Subject to the terms and conditions set forth in an agreement (the
"Underwriting Agreement") between the Company and the Prudential Securities
Incorporated (the "Underwriter"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company the
Class I B-2 Certificates. In the Underwriting Agreement, the Underwriter has
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Class I B-2 Certificates offered hereby, if any, Class I B-2 Certificates
are purchased. In connection with the sale of the Class I B-2 Certificates, the
Underwriter may be deemed to have received compensation from the Company in the
form of underwriting discounts.
The Company has been advised by the Underwriter that they propose
initially to offer the Class I B-2 Certificates to the public at the respective
offering price set forth on the cover page hereof and to certain dealers at such
price less concessions not to exceed 0.300% of the Class Principal Balance of
the Class I B-2 Certificates.
With respect to the Class I B-2 Certificates, the Underwriter may allow,
and such dealers may reallow, a concession not to exceed 0.200% of such Class
Principal Balance.
The Underwriter intends to make a secondary market in the Class I B-2
Certificates, but has no obligation to do so. There can be no assurance that a
secondary market for the Class I B-2 Certificates will develop or, if it does
develop, that it will continue.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Pursuant to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities including civil
liabilities under the Securities Act of 1933, as amended, or contribute to
payments which the Underwriter may be required to make in respect thereof.
<PAGE>
$12,261,000
(APPROXIMATE)
VANDERBILT MORTGAGE AND FINANCE, INC.
SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT
SENIOR/SUBORDINATE PASS-THROUGH CERTIFICATES, SERIES 1998D
CLASS I B-2 CERTIFICATES
SUPPLEMENT TO PROSPECTUS SUPPLEMENT
PRUDENTIAL SECURITIES INCORPORATED
You should rely only on the information contained or incorporated by
reference in this supplement to the prospectus supplement, the prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with different information.
We are not offering the Series 1998D Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates in any state where the offer is not
permitted.
We do not claim that the information in this supplement to the
prospectus supplement, the prospectus supplement and prospectus is accurate as
of any date other than the dates stated on the respective covers.
Dealers will deliver a supplement to the prospectus supplement,
prospectus supplement and prospectus when acting as underwriters of the Series
1998D Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Class I B-2 Certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the Series 1998D
Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
Class I B-2 Certificates will be required to deliver a supplement to the
prospectus supplement, prospectus supplement and prospectus for ninety days
following the date of this supplement to the prospectus supplement.
December 9, 1998
