SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
Commission File Numbers 333-65215-01 and 333-65215-02
BLOCK MORTGAGE FINANCE ASSET BACKED CERTIFICATES SERIES 1999-1 TRUST
(under a Pooling and Servicing Agreement dated as of January 1, 1999,
which Trust is the issuer of Block Mortgage Finance
Asset Backed Certificates, Series 1999-1)
(Exact name of Registrant as specified in its Charter)
New York 33-470815
- ---------------------------- --------------------------
State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization
Bank One, National Association
1 Bank One Plaza, Suite IL1-0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration, Block Mortgage
Finance Asset Backed Certificates, Series 1999-1
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 407-0192
Securities registered pursuant to Section 12(b) of the Act: Not applicable.
Securities registered pursuant to Section 12(g) of the Act Not applicable.
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 (section 229.405 of this chapter) 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]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1999: Not applicable.
Number of shares of common stock as of December 31, 1999: Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1. BUSINESS.
The Registrant issued Asset Backed Certificates, Series 1999-1 (the
"Securities") pursuant to a Pooling and Servicing Agreement dated as of January
1, 1999 (the "Cut-off Date") among Block Mortgage Finance, Inc., as Depositor,
Block Financial Corporation, as Master Servicer, Companion Mortgage Corporation,
as Seller, and First National Bank of Chicago (n/k/a Bank One, National
Association), as Trustee. The assets of the Trust consist primarily of a pool of
fixed rate and adjustable rate mortgage loans (the "Mortgage Loans") having an
aggregate principal balance as of the Cut-off Date of approximately
$400,000,000. The Mortgage Loans are secured by one- to four-family residential
properties (each, a "Mortgaged Property"). Certificateholders receive monthly
Statements to Certificateholders regarding distributions.
Further information with respect to the performance of the Trust is
summarized in the monthly Statements to Certificateholders, which are filed on
Form 8-K.
ITEM 2. PROPERTIES.
Information regarding the Mortgaged Properties securing the Mortgage Loans
is set forth in the Prospectus Supplement and the monthly Statements to
Certificateholders, which are filed on Form 8-K. The Trust will acquire title to
real estate only upon default of the mortgagors under the Mortgage Loans.
All real estate acquired and held by the Trust as of February 29, 2000 is
improved with single family dwellings. The following table describes real estate
acquired and held by the Trust as of February 29, 2000:
FIXED RATE MORTGAGE LOANS
- -------------------------------------------------------------------------------
PRINCIPAL BALANCE $2,887,884.77
PERCENTAGE OF POOL BALANCE 2.0299%
- -------------------------------------------------------------------------------
NUMBER OF LOANS 51
PERCENTAGE OF LOANS IN POOL 2.261%
- -------------------------------------------------------------------------------
ADJUSTABLE RATE MORTGAGE LOANS
- -------------------------------------------------------------------------------
PRINCIPAL BALANCE $2,732,693.74
PERCENTAGE OF POOL BALANCE 1.646%
- -------------------------------------------------------------------------------
NUMBER OF LOANS 38
PERCENTAGE OF LOANS IN POOL 2.8787%
- -------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings involving the Trust or,
with respect to the Trust or the Mortgage Loans, the Trustee, the Master
Servicer or the Depositor, other than ordinary routine litigation incidental to
the Trustee's, the Master Servicer's or the Depositor's duties under the Pooling
and Servicing Agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Certificateholders during the
fiscal year covered by this report.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) The Registrant's Asset Backed Certificates, Series 1999-1 represent
non-recourse obligations of the Trust, such Trust having assets which
consist of the Mortgage Loans. Strictly speaking, Registrant has no
"common equity," but for purposes of this Item only, Registrant's
Asset Backed Certificates, Series 1999-1 are treated as "common
equity."
(i) Market Information. There is no established public trading
market for Registrant's Securities.
(ii) Certificateholders. The approximate number of registered holders
of all class of Certificates as of February 29, 2000 was less
than 50.
(iii) Dividends. Not applicable. The information regarding dividends
required by sub-paragraph (c) of Item 201 of Regulation S-K is
inapplicable because the Trust does not pay dividends. However,
information as to distributions to Certificateholders is
provided in the monthly Statements to Certificateholders for
each month of the fiscal year in which a distribution to
Certificateholders was made.
(iv) Sales of Unregistered Securities. One Class R Certificate was
retained by the Trustee. The other Class R Certificate was
transferred to Companion Mortgage Corporation as part of the
consideration for its sale of the Mortgage Loans. At the time of
such transfer, Companion Mortgage Corportion was an
institutional accredited investor.
(b) Not applicable.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable. Because of the limited activities of the Trust,
information with respect to the performance of the Trust is summarized in the
monthly Statements to Certificateholders, which are filed on a monthly basis on
Form 8-K. However, certain selected aggregate information with respect to the
Trust for 1999 is filed as an exhibit to this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Not Applicable. The information required by Item 303 of Regulation S-K is
not meaningful in light of the nature of the Trust. Information concerning the
Mortgage Loans and distributions to the Certificateholders is contained in the
monthly Statements to Certificateholders which are filed on Form 8-K.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable. The Trust does not engage in the types of transactions
required to be disclosed under this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Not Applicable. Information with respect to the Trust is contained in
the monthly Statements to Certificateholders filed on a monthly basis on
Form 8-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Not Applicable. The Trust does not have officers or directors.
ITEM 11. EXECUTIVE COMPENSATION.
Not Applicable. The Trust does not have officers or directors to whom
compensation needs to be paid.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners. Not Applicable. Under
the Pooling and Servicing Agreement governing the Trust, the holders
of the Certificates generally do not have the right to vote and are
prohibited from taking part in management of the Trust.
(b) Security ownership of management. Not Applicable. The Trust does not
have any officers or directors.
(c) Changes in control. Not Applicable. Because Certificateholders do not
possess, directly or indirectly, the power to direct or cause the
direction of the management and policies of the Trust, other than with
respect to certain required consents to amendments to the Pooling and
Servicing Agreement and the ability to act as a group in the event of
the occurrence of certain events which if continuing would constitute
events of default under the Pooling and Servicing Agreement, the
information requested with respect to Item 403(c) of Regulation S-K is
inapplicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable. The Trust does not have officers or directors and under
the Pooling and Servicing Agreement governing the Trust. In addition, the
Registrant does not have knowledge of any transaction required to be disclosed
by Items 404(a)(3) or (a)(4) of Regulation S-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following is a list of documents filed as part of this report:
EXHIBITS
*4.1 Pooling and Servicing Agreement dated as of January 1, 1999 (hereby
incorporated herein by reference as Exhibit 4 to Depositor's Current
Report on Form 8-K dated January 21, 1999).
<PAGE>
99.1 Master Servicer Annual Officer's Certificate dated March 30, 2000.
99.2 Report of Independent Accountants pertaining to The Provident Bank,
dated March 31, 2000.
99.3 Management's Report of Compliance of The Provident Bank for the year
ended December 31, 1999.
99.4 Report of Independent Accountants pertaining to Fairbanks Capital
Corp., dated August 26, 1999.
99.5 Management's Report of Compliance of Fairbanks Capital for the year
ended June 30, 1999.
99.6 Aggregate Information from Statements to Certificateholders Relating
to 1999 Distributions to Holders of Block Mortgage Finance Asset
Backed Certificates, Series 1999-1.
*99.7 Consolidated financial statements of MBIA Insurance Corporation and
its subsidiaries as of December 31, 1999 and 1998 and for the three
years ended December 31, 1999 (hereby incorporated herein by reference
to the Annual Report on Form 10-K of MBIA Inc. for the year ended
December 31, 1999 under Commission file number 001-09583).
-------------
* Asterisk indicates exhibits incorporated by reference as indicated.
(b) Reports on Form 8-K
Current Report on Form 8-K dated October 25, 1999 (filing monthly
Statements to Certificateholders)
Current Report on Form 8-K dated November 26, 1999 (filing monthly
Statements to Certificateholders)
Current Report on Form 8-K dated December 27, 1999 (filing monthly
Statements to Certificateholders)
(c) The exhibits required to be filed by Registrant pursuant to Item 601
of Regulation S-K are listed above and in the Exhibit Index that
immediately follows the signature page hereof.
(d) Not Applicable. The Trust does not have any subsidiaries or
affiliates. Therefore, no financial statements are filed with respect
to subsidiaries or affiliates.
SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(D)
BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No Annual report, proxy statement, form of proxy or other soliciting
material has been sent to Security Holders, and the Registrant does not
contemplate sending any such materials subsequent to the filing of this report.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Block Financial Corporation, not in its individual capacity but
solely as a duly authorized agent of the Registrant pursuant to
Section 8.17 of the Pooling and Servicing Agreement dated as of
January 1, 1999.
By: /s/ Bret G. Wilson
Name: Bret G. Wilson
Title: Vice President, Mortgage Operations
Date: March 31, 2000
<PAGE>
EXHIBIT INDEX
EXHIBIT DOCUMENT
*4.1 Pooling and Servicing Agreement dated as of January 1, 1999 (hereby
incorporated herein by reference as Exhibit 4 to Depositor's Current
Report on Form 8-K dated January 21, 1999).
99.1 Master Servicer Annual Officer's Certificate dated March 30, 2000.
99.2 Report of Independent Accountants pertaining to The Provident Bank,
dated March 31, 2000.
99.3 Management's Report of Compliance of The Provident Bank for the year
ended December 31, 1999.
99.4 Report of Independent Accountants pertaining to Fairbanks Capital
Corp., dated August 26, 1999.
99.5 Management's Report of Compliance of Fairbanks Capital Corp. for the
year ended June 30, 1999.
99.6 Aggregate Information from Statements to Certificate-holders
Relating to 1999 Distributions to Holders of Block Mortgage Finance
Asset Backed Certificates, Series 1999-1.
*99.7 Consolidated financial statements of MBIA Insurance Corporation and
its subsidiaries as of December 31, 1999 and 1998 and for the three
years ended December 31, 1999 (hereby incorporated herein by
reference to the Annual Report on Form 10-K of MBIA Inc. for the year
ended December 31, 1999 under Commission file number 001-09583).
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* Asterisk indicates exhibits incorporated by reference as indicated.
BLOCK MORTGAGE FINANCE, INC.
ASSET BACKED CERTIFICATES, SERIES 1999-1
MASTER SERVICER ANNUAL OFFICER'S CERTIFICATE
March 30, 2000
Pursuant to the provisions of Section 8.16 of the Pooling and Servicing
Agreement dated as of January 1, 1999, by and between BLOCK MORTGAGE FINANCE,
INC., as Depositor, COMPANION MORTGAGE CORPORATION, as Seller, BLOCK FINANCIAL
CORPORATION, as Master Servicer, and FIRST NATIONAL BANK OF CHICAGO, as Trustee
(the "PSA"), I, Bret G. Wilson, Vice President of the Master Servicer, hereby
certify as follows:
(i) a review of the activities of the Master Servicer during the preceding
calendar year and of performance under the PSA has been made under my
supervision;
(ii) to the best of my individual knowledge based on such review, the
Master Servicer has fulfilled all of its obligations under the PSA for such
year; and
(iii)the Master Servicer's short-term commercial paper is rated is A1 by
Standard & Poor's and P-1 by Moody's.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the PSA.
BLOCK FINANCIAL CORPORATION
By: /s/ Breg G. Wilson
Bret G. Wilson, Vice President
Report of Independent Accountants
Board of Directors
Provident Financial Group, Inc.
We have examined management's assertion, included in the accompanying report
titled Report of Management, that The Provident Bank (Provident) complied with
the minimum servicing standards set forth in the Mortgage Bankers Association of
America's Uniform Single Attestation Program for Mortgage Bankers (USAP) during
the year ended December 31, 1999. Management is responsible for Provident's
compliance with those requirements. Our responsibility is to express an opinion
on management's assertion about Provident'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 Bank's compliance with those
requirements 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
Provident's compliance with specified requirements.
In our opinion, management's assertion that Provident complied with the
aforementioned requirements during the year ended December 31, 1999, is fairly
stated, in all material respects.
/s/ Ernst & Young LLP
March 31, 2000
Report of Management
We, as members of management of The Provident Bank (Provident), are responsible
for complying with the minimum servicing standards as set forth in the Mortgage
Bankers Association of America's Uniform Single Attestation Program for Mortgage
Bankers (USAP). We are also responsible for establishing and maintaining
effective internal control over compliance with these standards. We have
performed an evaluation of Provident's compliance with the minimum servicing
standards as set forth in the USAP as of December 31, 1999 and for the year then
ended. Based on this evaluation, we assert that during the year ended December
31, 1999, Provident complied, in all material respects, with the minimum
servicing standards set forth in the USAP.
As of and for this same period, Provident in effect a fidelity bond and errors
and omissions policy in the amount of $27,500,000.
/s/ Richard Gravino /s/ Joseph Smith II
Richard Gravino Joseph Smith II
Executive Vice President Senior Vice President
Consumer Finance National Servicing Operations
March 31, 2000
ARTHUR ANDERSON LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Fairbanks Capital Corp:
We have examined management's assertion about Fairbanks Capital Corp.'s
compliance with the minimum servicing standards identified in the Mortgage
Bankers Association of America's Uniform Single Attestation Program for Mortgage
Bankers ("USAP") as of and for the year ended June 30, 1999, included in the
accompanying management assertion. Management is responsible for Fairbanks
Capital Corp.'s compliance with those minimum servicing standards. Our
responsibility is to express an opinion on management's assertion about the
entity'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 Fairbanks Capital Corp.'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 Fairbanks Capital Corp's compliance with the minimum
servicing standards.
In our opinion, management's assertion that Fairbanks Capital Corp. complied
with the aforementioned minimum servicing standards as of and for the year ended
June 30, 1999 is fairly stated, in all material respects.
/s/ Arthur Anderson LLP
Salt Lake City, Utah
August 26, 1999
FAIRBANKS CAPITAL CORP.
As of and for the year ended June 30, 1999, Fairbanks Capital Corp. 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, Fairbanks Capital Corp. had in
effect a fidelity bond and errors and omissions policy in the amount of
$2,500,000.
August 26, 1999
/s/ Mark S. Finston
------------------------------
Mark S. Finston
President
/s/ Kim A. Stevenson
------------------------------
Kim A. Stevenson
Vice President
/s/ Lee Ervin
------------------------------
Lee Ervin
Senior Operations Manager
<TABLE>
<CAPTION>
Block Mortgage Finance
Asset Backed Certificates
Series 1999-1
Aggregate Information
Original Cert. Principal Interest Total Ending
Class Face Value Distribution Distribution Distribution Certificate Balance
<S> <C> <C> <C> <C> <C>
A-1 82,000,000.00 43,223,832.76 3,778,809.41 47,002,642.17 38,776,167.24
A-2 45,000,000.00 0.00 2,700,000.00 2,700,000.00 45,000,000.00
A-3 17,000,000.00 0.00 1,055,700.00 1,055,700.00 17,000,000.00
A-4 18,000,000.00 0.00 1,188,000.00 1,188,000.00 18,000,000.00
A-5 18,000,000.00 0.00 1,114,200.00 1,114,200.00 18,000,000.00
A-6 165,000,000.00 61,253,930.87 8,202,355.69 69,456,286.56 103,746,069.13
A-7 55,000,000.00 0.00 3,206,499.96 3,206,499.96 55,000,000.00
R 0.00 0.00 0.00 0.00
Total 400,000,000.00 104,477,763.63 21,245,565.06 125,723,328.69 295,522,236.37
Group I (Fixed Group II (Adjustable
Rate Loans) Rate Loans)
----------------------------------------
Sec. 7.09 (a) (i) Scheduled Principal 1,517,520.71 913,722.75
Principal Prepayments 33,982,748.42 52,576,166.67
Net Liquidation Proceeds 69,710.73 0.00
Paid Principal Carry Forward Amt 0.00 0.00
Remaining Unpaid Prin Carry Forward 0.00 0.00
Sec. 7.09 (a) (ii) Compensating Interest 0.00 0.00
Paid Int Carryforward Amt 0.00 0.00
Remaining unpaid interest Carry Forw 0.00 0.00
A-6 Basis Risk Carryover 0.00 0.00
A-6 Basis Risk Carryover amt Remaining 0.00 0.00
Group I (Fixed Group II (Adjustable
Rate Loans) Rate Loans) Total
------------------------------------------------------
Sec. 7.09 (a) (iv) Aggregate Loan Balance 147,666,779.15 174,199,629.41 321,866,408.56
Sec. 7.09 (a) (v) Servicing Fees 1,836,740.86 0.00
Insurance Premium Amount 622,487.00 0.00
Trustee Fee 47,755.24 0.00
Sec. 7.09 (a) (vii)Current Delin. Advances 18,574,996.63 0.00
Current Serv. Advances 0.00 0.00
Total Unreimb. Del. Advances 0.00 0.00
Total Unreimb. Serv. Advances 0.00 0.00
Not in In
Forclosure or Reo Foreclosure Prin.
Sec 7.09 (a) (viii) (A), (B) Delinquencies Period Number Prin. Balance Number Balance
Fixed Group 1-29 Days 858.00 45,701,977.88 0.00 0.00
<PAGE>
30-59 Days 252.00 13,217,817.63 1.00 29,900.27
60-89 Days 96.00 5,686,644.44 4.00 427,987.17
90+ Days 133.00 7,109,507.55 164.00 10,088,831.84
1-29 Days 705.00 63,734,328.02 2.00 139,753.52
Adj Group 30-59 Days 153.00 14,034,593.55 0.00 0.00
60-89 Days 81.00 7,324,644.96 5.00 275,014.13
90+ Days 101.00 9,165,958.89 99.00 7,711,369.55
Sec 7.09 (a) (ix) 30 REO Properties with an aggregate loan balance of $2,058,533.03 as of December 31, 1999.
Sec 7.09 (a) (x) Mortgage Group Loan Number Principal Balance
----- ----------- -----------------
Loans Becoming REO I 783120 138,383.37
Property during the preceding I 782839 42,407.58
Month I 782810 73,079.99
I 782603 34,858.94
I 702751 45,493.89
II 1009591 55,137.18
II 809540 144,192.90
II 704415 47,387.17
II 704233 81,627.61
Group I (Fixed Group II (Adjustable
Rate Loans) Rate Loans)
----------------------------------------
Sec 7.09 (a) (xi) Insured Payment 0.00 0.00
Class A-1 Allocation 0.00 0.00
Class A-2 Allocation 0.00 0.00
Class A-3 Allocation 0.00 0.00
Class A-4 Allocation 0.00 0.00
Class A-5 Allocation 0.00 0.00
Class A-6 Allocation 0.00 0.00
Class A-7 Allocation 0.00 0.00
Sec 7.09 (a) (xii) Subordinated Amount 7,011,419.00 10,389,688.64
Subordination Deficit 0.00 0.00
Specified Subordinated Amount 16,912,919.94 18,544,680.46
Sec 7.09 (a) (xiv) Substitution Adjustments 0.00 0.00
Loan Purchase Price Amounts 0.00 0.00
Sec. 7.09 (a) (xv) Weighted Average Coupon 11.25% 10.21%
Weighted Average Remaining Term 228.00 334.00
Sec. 7.09 (a) (xvi) Largest Loan Balance Outstanding 375,319.47 664,230.68
Sec 7.09 (a) (xvii) Available Funds 3,834,481.09 5,768,109.59
Total Available Funds 4,422,737.20 6,318,484.22
</TABLE>
