<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-53859
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD AND OFFERS TO BUY MAY NOT BE ACCEPTED
UNTIL A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS IS DELIVERED. THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS ARE NOT AN OFFERING TO SELL THESE
SECURITIES AND ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED OCTOBER 4, 1999.
Prospectus Supplement to Prospectus dated October 4, 1999.
$693,269,000 (Approximate)
COMMERCIAL MORTGAGE ASSET TRUST ("CMAT")
Commercial Mortgage Pass-Through Certificates, Series 1999-C2
-------------------------------------------------
Asset Securitization Corporation (the "Depositor") will establish the
"Trust Fund." The Trust Fund will issue the eight classes of "Offered
Certificates" described in the table below, together with additional classes of
"Private Certificates." The Private Certificates are subordinated to, and some
will provide credit enhancement for, the Offered Certificates. The Private
Certificates are not being offered by this Prospectus Supplement.
The Assets of the Trust Fund will include a pool of 81 fixed-rate mortgage
loans with original terms to maturity of generally not more than thirty years
secured by first liens on 103 commercial and multifamily residential
properties. The mortgage pool will have an "Initial Pool Balance" of
approximately $781,148,433. The characteristics of such mortgage loans and the
related mortgaged properties are more fully described in this Prospectus
Supplement.
Neither the Offered Certificates nor the underlying mortgage loans are
insured or guaranteed by any governmental agency or instrumentality. The
Offered Certificates will represent interests in the Trust Fund only and will
not represent interests in or obligations of any other party.
This Prospectus Supplement may be used to offer and sell the Offered
Certificates only if accompanied by the Depositor's Prospectus dated October 4,
1999.
You should carefully consider the risk factors beginning on page S-31 of
this Prospectus Supplement and on page 13 of the Prospectus.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
Approximate Assumed
Initial Initial Ratings Final
Certificate Pass-Through (Fitch IBCA/ Distribution
Offered Certificates Balance Rate Description Moody's/S&P) CUSIP No. Date(3)
- ---------------------- --------------- -------------- --------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1(1) ......... $127,000,000 % Fixed Rate AAA/Aaa/AAA December 17, 2007
Class A-2(1) ......... $322,800,000 % (2) AAA/Aaa/AAA December 17, 2009
Class A-3(1) ......... $108,721,000 % (2) AAA/Aaa/AAA October 17, 2012
Class B .............. $ 39,057,000 % (2) AA/Aa2/AA April 17, 2013
Class C .............. $ 39,057,000 % (2) A/A2/A July 17, 2013
Class D .............. $ 11,718,000 % (2) A-/A3/A- December 17, 2013
Class E .............. $ 29,293,000 % (2) BBB/Baa2/BBB January 17, 2014
Class F .............. $ 15,623,000 % (2) BBB-/Baa3/BBB- January 17, 2014
</TABLE>
(footnotes to table on page S-2)
---------------------
Goldman, Sachs & Co., Nomura Securities International, Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation (collectively, the "Underwriters")
will purchase each Class of the Offered Certificates from the Depositor, in the
proportions set forth under "Underwriting" herein, subject to the satisfaction
of certain conditions. Goldman, Sachs & Co. and Nomura Securities
International, Inc. will act as co-lead managers and joint bookrunners. Each
Underwriter intends to sell its allocation of the Offered Certificates from
time to time in individually negotiated transactions or otherwise at varying
prices to be determined at the time of sale. The Depositor expects to receive
proceeds from the sale of the Offered Certificates of approximately % of
the initial aggregate principal balance thereof as of the date on which the
Certificates are issued, plus accrued interest from October 11, 1999 as
described in this Prospectus Supplement, before deducting expenses payable by
the Depositor. The Underwriters expect to deliver the Offered Certificates in
book-entry form only through the facilities of The Depository Trust Company
against payment in New York, New York on or about October , 1999.
Co-Lead Managers and Joint Bookrunners
GOLDMAN, SACHS & CO. NOMURA SECURITIES INTERNATIONAL, INC.
------------------------------------------
DONALDSON, LUFKIN & JENRETTE
---------------------
Prospectus Supplement dated October , 1999.
<PAGE>
COMMERCIAL MORTGAGE ASSET TRUST ("CMAT")
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C2
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
Nebraska Massachusetts Louisiana
1 property 4 properties 1 property
$1,289,256 $36,864,777 $7,885,913
0.2% of total 4.7% of total 1.0% of total
Kansas Connecticut Texas
2 properties 1 property 8 properties
$13,449,098 $6,415,759 $40,477,078
1.7% of total 0.8% of total 5.2% of total
Iowa New York Colorado
3 properties 13 properties 2 properties
$10,704,639 $74,647,892 $56,608,131
1.4% of total 9.6% of total 7.2% of total
Minnesota Maryland New Mexico
1 property 2 properties 1 property
$2,059,091 $32,647,005 $1,089,995
0.3% of total 4.2% of total 0.1% of total
Illinois Washington, D.C. Arizona
6 properties 1 property 1 property
$69,793,291 $29,000,000 $1,278,516
8.9% of total 3.7% of total 0.2% of total
Wisconsin Virginia Utah
1 property 4 properties 1 property
$6,851,529 $13,938,360 $2,954,581
0.9% of total 1.8% of total 0.4% of total
Michigan North Carolina Nevada
4 properties 1 property 1 property
$15,127,794 $7,915,749 $28,479,885
1.9% of total 1.0% of total 3.6% of total
Indiana Tennessee California
7 properties 5 properties 9 properties
$32,977,736 $11,293,144 $151,238,176
4.2% of total 1.4% of total 19.4% of total
Ohio Florida Alaska
10 properties 1 property 4 properties
$41,540,228 $3,100,000 $4,076,770
5.3% of total 0.4% of total 0.5% of total
Pennsylvania Mississippi Oregon
5 properties 1 property 2 properties
$66,198,491 $4,158,283 $7,087,267
8.5% of total 0.5% of total 0.9% of total
Allocated Loan Amount by Property Type
Retail 29.3%
Multifamily 11.9%
Hotel 10.9%
Industrial 4.6%
Movie Theater 3.2%
Convention 2.8%
Mobile Home Park 0.4%
Office 36.9%
<PAGE>
[GRAPHIC OMITTED]
[Picture of a large hotel in downtown Denver.]
Westin Denver Hotel (Tabor Center), Denver, Co
[GRAPHIC OMITTED]
[Picture of a large office building with trees in front.]
Bank of America - Vegas, Las Vegas, NV
[GRAPHIC OMITTED]
[Picture of a two-story hotel in a suburban area.]
Accor, Glenview, IL
[GRAPHIC OMITTED]
[Picture of a large Circuit City store in a suburban area.]
Circuit City - Indianapolis, IN
[GRAPHIC OMITTED]
[Picture of a medium-sized office building.]
Sports Park Plaza, Salt Lake City, UT
[GRAPHIC OMITTED]
[Picture of an outdoor mall and parking lot.]
Euless Town Center, Euless, TX
[GRAPHIC OMITTED]
[Picture of a three-story apartment complex.]
Westbury Lake Apartments, Lansing, MI
<PAGE>
[GRAPHIC OMITTED]
[Picture of a large pre-war office building in the downtown area.]
208 South LaSalle, Chicago, IL
[GRAPHIC OMITTED]
[Picture of an outdoor mall with a Staples store.]
Congressional North Plaza, Rockville, MD
[GRAPHIC OMITTED]
[Picture of an outdoor mall and palm tree studded parking lot.]
Marina Pacifica, Long Beach, CA
[GRAPHIC OMITTED]
[Picture of a large office building in the downtown area.]
Henry W. Oliver - Exterior, Pittsburgh, PA
[GRAPHIC OMITTED]
[Picture of the lobby and elevator bank of an office building.]
Henry W. Oliver - Interior, Pittsburgh, PA
[GRAPHIC OMITTED]
[Picture of a residential home complex.]
Signature Place Overland, Overland Park, KS
[GRAPHIC OMITTED]
[Picture of a four story building.]
Flatiron, Omaha, NE
<PAGE>
FOOTNOTES TO TABLE ON COVER OF PROSPECTUS SUPPLEMENT
(1) In addition to distributions of principal and interest, holders of certain
Classes of the Offered Certificates will be entitled to receive a portion
of the Prepayment Premiums received from the borrowers of the underlying
mortgage loans. See "Description of the Offered
Certificates--Distributions" in this Prospectus Supplement.
(2) The Pass-Through Rate for the Class A-2, Class A-3, Class B, Class C, Class
D, Class E and Class F Certificates will be equal to the lesser of (x) the
per annum rate for such Class specified in the following table and (y) the
Weighted Average Net Mortgage Pass-Through Rate for the related
Distribution Date.
<TABLE>
<CAPTION>
CLASS RATE
- ------- -----
<S> <C>
A-2 %
A-3
B
C
D
E
F
</TABLE>
(3) The "Assumed Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date on which the final payment of
principal would occur for such Class of Certificates assuming (i) a 0% CPR
(as defined under "Prepayment and Yield Consideration--Weighted Average
Life of Offered Certificates"); (ii) each ARD Loan prepays in full on its
respective Anticipated Repayment Date; and (iii) the Mortgage Loan
Assumptions (as defined under "Prepayment and Yield
Considerations--Weighted Average Life of the Offered Certificates"). The
actual performance and experience of the Mortgage Loans will likely differ
from such assumptions. See "Prepayment and Yield Considerations" herein.
The Rated Final Distribution Date is November 17, 2031.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the Offered Certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus dated October 4, 1999 (the "Prospectus"), which provides general
information, some of which may not apply to the Offered Certificates; and (b)
this prospectus supplement dated October , 1999 (the "Prospectus
Supplement"), which describes the specific terms of the Offered Certificates.
IF THE DESCRIPTIONS OF THE OFFERED CERTIFICATES VARY BETWEEN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT. Further, you should rely only on the
information contained in this Prospectus Supplement and the accompanying
Prospectus. The Depositor has not authorized anyone to provide you with
information that is different.
This Prospectus Supplement and the accompanying Prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this Prospectus Supplement and the
Prospectus identify the pages where these sections are located.
Capitalized terms used in this Prospectus Supplement are defined under the
caption "Index of Significant Definitions" beginning on page S-150 in this
Prospectus Supplement. Capitalized terms used in the Prospectus are defined
under the caption "Index of Principal Definitions" beginning on page 95 in the
Prospectus.
--------------
The Depositor has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (of which this Prospectus Supplement forms a
part) under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Offered Certificates. This Prospectus Supplement and the
Prospectus do not contain all of the information set forth in the registration
statement. For further information regarding the documents referred to in this
Prospectus Supplement and the accompanying Prospectus, you should refer to the
registration statement and the exhibits thereto. The registration statement and
exhibits can be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its
S-2
<PAGE>
Regional Offices located at: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, New York, New York 10048.
--------------
The distribution of this Prospectus Supplement and the Prospectus, and the
offer or sale of the Offered Certificates, may be restricted by law in certain
jurisdictions. Persons into whose possession this Prospectus Supplement and the
Prospectus or any Offered Certificates come must inform themselves about, and
observe, any such restrictions. See "Underwriting" in this Prospectus
Supplement.
The Depositor does not intend to register the Offered Certificates under
the Securities and Exchange Law of Japan (the "SEL"). Accordingly, the Offered
Certificates may not be offered or sold directly or indirectly in Japan, and
this Prospectus Supplement and the Prospectus may not be distributed or
circulated in Japan, except in circumstances that do not constitute an offer to
the public within the meaning of the SEL.
--------------
The Underwriters are offering the Offered Certificates subject to prior
sale and the Underwriters' right to reject orders in whole or in part, when, as
and if issued, delivered to and accepted by the Underwriters.
There is currently no secondary market for the Offered Certificates. As
described in this Prospectus Supplement, the Underwriters currently expect to
make a secondary market in the Offered Certificates, but have no obligation to
do so. There can be no assurance that such a market will develop or, if it does
develop, that it will continue. See "Underwriting" in this Prospectus
Supplement.
FORWARD-LOOKING STATEMENTS
If and when used in this Prospectus Supplement or the accompanying
Prospectus, the words "expects," "intends," "anticipates," "estimates" and
analogous expressions are intended to identify forward-looking statements. Such
statements, which may include statements contained in "Risk Factors and Other
Special Considerations," are subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those projected. Such
risks and uncertainties include, among others, general economic and business
conditions, competition, changes in political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, and
various other events, conditions and circumstances, many of which are beyond
the control of the Depositor, the Underwriters, the Trustee, the Fiscal Agent,
the Servicer, the Special Servicer and the Originators. Any forward-looking
statements speak only as of their date. The Depositor expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statement contained in this Prospectus Supplement to reflect
any change in events, conditions or circumstances on which any such statement
is based.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Important Notice About Information
Presented in this Prospectus Supplement
and the Accompanying Prospectus ............. S-2
Forward-Looking Statements ..................... S-3
Table of Contents .............................. S-4
Executive Summary .............................. S-7
Summary of Prospectus Supplement ............... S-9
Relevant Parties ............................ S-9
Important Dates and Periods ................. S-11
Overview of the Certificates ................ S-12
The Certificates: Structural Summary ........ S-17
The Mortgage Loans: Collateral Overview ..... S-21
Risk Factors and Other Special
Considerations .............................. S-31
Risks Related to the Mortgage Loans ......... S-31
Risks Related to the Certificates ........... S-49
Description of the Mortgage Pool ............... S-53
General ..................................... S-53
Security for the Mortgage Loans ............. S-54
The Mortgage Loan Program--
Underwriting Standards .................... S-54
Premium Loans ............................... S-56
Credit Tenant Loans ......................... S-57
Dual Amortization Loans ..................... S-61
80 John Street Note ......................... S-61
Certain Terms and Conditions of the
Mortgage Loans ............................ S-62
Significant Mortgage Loans .................. S-68
The Westin Denver Tabor Center Loan and
Property .................................. S-68
The 208 South LaSalle Loan and Property S-70
The ACCOR-M-Six-III Credit Tenant Loan
and Properties ............................ S-72
Additional Mortgage Loan Information ........ S-75
Changes in Mortgage Pool Characteristics S-86
Description of the Offered Certificates ........ S-87
General ..................................... S-87
Distributions ............................... S-87
Realized Losses ............................. S-94
Prepayment Interest Shortfalls .............. S-95
Subordination ............................... S-96
Appraisal Reductions ........................ S-96
Delivery, Form and Denomination ............. S-97
Book-Entry Registration ..................... S-98
Definitive Certificates ..................... S-100
Transfers and Exchanges; Transfer
Restrictions .............................. S-100
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Notices ..................................... S-101
Prepayment and Yield Considerations ............ S-102
Yield ....................................... S-102
Rated Final Distribution Date ............... S-103
Weighted Average Life of Offered
Certificates .............................. S-103
Price/Yield Tables .......................... S-109
The Mortgage Loan Sellers ...................... S-114
Recent Developments ......................... S-114
The Pooling and Servicing Agreement ............ S-114
General ..................................... S-114
Assignment of the Mortgage Loans ............ S-114
Representations and Warranties;
Repurchase ................................ S-115
Servicing of the Mortgage Loans;
Collection of Payments .................... S-118
Advances .................................... S-119
Accounts .................................... S-120
Withdrawals from the Collection Account ..... S-122
Enforcement of "Due-on-Sale" and
"Due-on-Encumbrance" Clauses .............. S-123
Inspections ................................. S-124
Insurance Policies .......................... S-124
Evidence as to Compliance ................... S-125
Certain Matters Regarding the Depositor,
the Servicer and the Special Servicer ..... S-126
Events of Default; Termination Events ....... S-127
Rights upon Event of Default ................ S-127
Amendment ................................... S-128
Voting Rights ............................... S-129
Realization upon Mortgage Loans ............. S-129
Modifications ............................... S-132
Optional Termination ........................ S-133
Purchase of ARD Loans by the Most
Subordinate Certificateholders ............ S-133
The Trustee ................................. S-134
Duties of the Trustee ....................... S-135
The Fiscal Agent ............................ S-135
Duties of the Fiscal Agent .................. S-135
The Servicer ................................ S-135
Servicing Compensation and Payment of
Expenses .................................. S-136
Special Servicing ........................... S-136
Servicer and Special Servicer Permitted to
Buy Certificates .......................... S-138
Reports to Certificateholders; Available
Information ............................... S-139
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Certain Legal Aspects of Mortgage Loans for
Mortgaged Properties Located In California S-142
Use of Proceeds ............................. S-142
Certain Federal Income Tax Consequences ..... S-142
Certain ERISA Considerations ................ S-145
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Legal Investment ............................ S-147
Legal Matters ............................... S-147
Rating ...................................... S-148
Underwriting ................................ S-149
</TABLE>
INDEX OF TABLES
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Certificate Summary ................................ S-7
Mortgage Loan Sellers .............................. S-9
Originators ........................................ S-10
Assumed Final Distribution Date .................... S-11
The Offered Certificates--Certificate
Balances and Pass-Through Rates ................. S-12
The Private Certificates--Certificate
Balances and Pass-Through Rates ................. S-12
Ratings ............................................ S-16
General Characteristics ............................ S-21
Cut-Off Date Principal Balances .................... S-24
Significant State Concentration .................... S-24
Debt Service Coverage Ratios ....................... S-25
Loan-to-Value Ratios ............................... S-25
Proceeds-to-Value Ratios ........................... S-25
Mortgage Loans by Property Type .................... S-25
Maturity Date or Anticipated Repayment Date
by Year ......................................... S-26
Security for the Mortgage Loans .................... S-26
Overview of Lock-out Periods ....................... S-29
Cut-Off Date Principal Balances and
Concentration of Mortgage Loans ................. S-35
Preferred Equity Investments in Borrowers
and Affiliates .................................. S-42
Weighted Average Remaining Term to
Maturity or Anticipated Repayment Date for
Mortgage Loans Secured By Various
Property Types .................................. S-43
Amortization Characteristics of the Notes .......... S-46
Premium Loans ...................................... S-57
Credit Tenant Loans ................................ S-58
Amortization Characteristics of the Notes .......... S-63
General Mortgage Loan Characteristics .............. S-75
Range of Debt Service Coverage Ratios .............. S-79
Range of Loan-To-Value Ratios ...................... S-80
Range of Loan-To-Value Ratios At Earlier of
Anticipated Repayment Date or Maturity .......... S-81
Mortgaged Properties By State ...................... S-81
Range of Years Built ............................... S-82
Cut-Off Date Principal Balance By Property
Type ............................................ S-83
Range of Cut-Off Date Principal Balances ........... S-84
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Range of Anticipated Remaining Terms ............... S-84
Range of Months Remaining to Maturity .............. S-84
Range of Anticipated Years of Repayment ............ S-85
Range of Mortgage Rates ............................ S-85
Range of Remaining Lock-Out Periods ................ S-85
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class A-1 Certificates .......................... S-105
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class A-2 Certificates .......................... S-105
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class A-3 Certificates .......................... S-106
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class B Certificates ............................ S-106
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class C Certificates ............................ S-107
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class D Certificates ............................ S-107
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class E Certificates ............................ S-108
Percentage of Initial Certificate Balance
Outstanding at the Respective CPR for the
Class F Certificates ............................ S-108
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
A-1 Certificates at the Specified CPRs .......... S-110
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
A-2 Certificates at the Specified CPRs .......... S-110
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
A-3 Certificates at the Specified CPRs .......... S-111
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
B Certificates at the Specified CPRs ....... S-111
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
C Certificates at the Specified CPRs ....... S-112
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
D Certificates at the Specified CPRs ....... S-112
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
E Certificates at the Specified CPRs ....... S-113
Pre-Tax Yield to Maturity (CBE), Weighted
Average Life, First Principal Payment Date,
Last Principal Payment Date for the Class
F Certificates at the Specified CPRs ....... S-113
</TABLE>
INDEX OF ANNEXES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Characteristics of the Notes ........................................... Annex A
Characteristics of the Mortgaged Properties. ........................... Annex B
Characteristics of the Premium Loans ................................... Annex C
Global Clearance, Settlement and Tax Documentation Procedure. .......... Annex D
Structural and Collateral Term Sheet ................................... Annex E
Form of Trustee Reports. ............................................... Annex F
Form of Servicing Reports. ............................................. Annex G
</TABLE>
S-6
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary highlights selected information regarding the
Offered Certificates. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES AND THE UNDERLYING MORTGAGE LOANS, YOU
SHOULD READ THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
CAREFULLY.
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
Approx. Approx. Approx. Initial
% of % of Credit Certificate
Total Support Balance Ratings (Fitch IBCA/Moody's/S&P)
<S> <C> <C> <C> <C> <C>
16.26% 28.50% CLASS X CLASS A-1 $ 127,000,000 (AAA/Aaa/AAA)
---------------------- ------------- ------------------- -----
41.32% 28.50% $ 781,148,433 CLASS A-2 $ 322,800,000 (AAA/Aaa/AAA)
---------------------- ------------- ------------------- -----
13.92% 28.50% CLASS A-3 $ 108,721,000 (AAA/Aaa/AAA)
---------------------- ------------- ------------------- -----
5.00% 23.50% (approx. CLASS B $ 39,057,000 (AA/Aa2/AA)
---------------------- ------------- ------------------- -----
5.00% 18.50% Notional) CLASS C $ 39,057,000 (A/A2/A)
---------------------- ------------- ------------------- -----
1.50% 17.00% (AAA/Aaa/AAAr) CLASS D $ 11,718,000 (A-/A3/A-)
---------------------- ------------- ------------------- -----
3.75% 13.25% CLASS E $ 29,293,000 (BBB/Baa2/BBB)
---------------------- ------------- -------------------- -----
2.00% 11.25% CLASS F $ 15,623,000 (BBB-/Baa3/BB-)
---------------------- ------------- --------------------- -----
PRIVATE CERTIFICATES $ 87,879,433
Certificates Offered Hereby
Certificates Not Offered
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
CERTIFICATE WEIGHTED
RATINGS BALANCE APPROX. INITIAL AVG.
(FITCH IBCA/ OR NOTIONAL % OF PASS-THROUGH LIFE PRINCIPAL
CLASS MOODY'S/S&P) AMOUNT TOTAL DESCRIPTION RATE (YRS)(1) WINDOW(1)
- ------- -------------------- --------------- ----------- --------------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
- ------------------------------------------------------------------------------------------------------------------------
A-1 (AAA/Aaa/AAA) $127,100,000 16.26% Fixed Rate % 5.73 11/99-12/07
- ----- ------- ------------ ----- --------------------- -------------- ----- -----------
A-2 (AAA/Aaa/AAA) $322,800,000 41.32% (2) % 9.20 12/07-12/09
- ----- ------- ------------ ----- --------------------- -------------- ----- -----------
A-3 (AAA/Aaa/AAA) $108,721,000 13.92% (2) % 11.55 12/09-10/12
- ----- ------- ------------ ----- --------------------- -------------- ----- -----------
B (AA/Aa2/AA) $ 39,057,000 5.00% (2) % 13.41 10/12-4/13
- ----- --------- ------------ ----- --------------------- -------------- ----- -----------
C (A/A2/A) $ 39,057,000 5.00% (2) % 13.58 4/13-7/13
- ----- ---------- ------------ ----- --------------------- -------------- ----- -----------
D (A-/A3/A-) $ 11,718,000 1.50% (2) % 13.93 7/13-12/13
- ----- ---------- ------------ ----- --------------------- -------------- ----- -----------
E (BBB/Baa2/BBB) $ 29,293,000 3.75% (2) % 14.14 12/13-1/14
- ----- ----------- ------------ ----- --------------------- -------------- ----- -----------
F (BBB-/Baa3/BBB-) $ 15,623,000 2.00% (2) % 14.22 1/14-1/14
- ----- ------------- ------------ ----- --------------------- -------------- ----- -----------
Non-Offered Private Certificates(3)
- ------------------------------------------------------------------------------------------------------------------------
X AAA/Aaa/AAAr $781,148,433 N/A Variable Rate IO % N/A N/A
- ----- ------------- ------------ ----- --------------------- -------------- ----- -----------
Other Private $ 87,879,433 11.25% (5) %
Certificates(4)
- -----
</TABLE>
- ---------
(1) Assuming (i) a 0% CPR (as definied under "Prepayment and Yield
Considerations--Weighted Average Life of Offered Certificates"), (ii)
each ARD Loan pays in full on its Anticipated Repayment Date (as defined
under "Summary of Prospectus Supplement--The Mortgage Loans: Collateral
Overview--The Mortgage Pool--General Characteristics" in this Prospectus
Supplement) and (iii) the Mortgage Loan Assumptions (as defined under
"Prepayment and Yield Considerations--Weighted Average Life of the
Offered Certificates"). See "Prepayment and Yield Considerations" in this
Prospectus Supplement.
(2) The Pass-Through Rate for the Class A-2, Class A-3, Class B, Class C,
Class D, Class E and Class F Certificates will be equal to the lesser of
(x) the per annum rate for such Class specified in the following table
and (y) the Weighted Average Net Mortgage Pass-Through Rate for the
related Distribution Date.
<TABLE>
<CAPTION>
CLASS RATE
- ------- -----
<S> <C>
A-2 %
A-3
B
C
D
E
F
</TABLE>
(3) Not offered by this Prospectus Supplement.
(4) The Private Certificates, other than the Class X, Class R and Class LR
Certificates, are referred to in this Prospectus Supplement as the "Other
Private Certificates."
(5) The Pass-Through Rate on the Other Private Certificates will be equal to
the lesser of (x) % and (y) the Weighted Average Net Mortgage
Pass-Through Rate for the related Distribution Date.
S-8
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary highlights selected information from this Prospectus
Supplement. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, YOU SHOULD CAREFULLY READ THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN FULL. Capitalized terms used and
not otherwise defined in this Prospectus Supplement have the respective
meanings assigned to them in the Prospectus. See "Index of Significant
Definitions" in this Prospectus Supplement and "Index of Principal Definitions"
in the Prospectus.
RELEVANT PARTIES
DEPOSITOR............... Asset Securitization Corporation, a Delaware
corporation and a subsidiary of The Capital Company
of America LLC, a Delaware limited liability company
("CCA"). The Depositor is also affiliated with Nomura
Securities International, Inc. ("NSI"), the Mortgage
Loan Sellers and the Originators. See "The Depositor"
in the Prospectus.
SERVICER................ BNY Asset Solutions LLC, a Delaware limited
liability company. Although the Servicer may employ
agents, including sub-servicers, the Servicer will
remain liable for its servicing obligations under the
Pooling and Servicing Agreement. See "Risk Factors
and Other Special Considerations--Risks Related to
the Certificates--Servicer or Special Servicer May
Purchase Certificates; Conflict of Interest,"
"--Risks Related to the Mortgage Loans--Risks Related
to Conflicts of Interest" and "The Pooling and
Servicing Agreement--The Servicer" in this Prospectus
Supplement.
SPECIAL SERVICER........ Lennar Partners, Inc., a Florida corporation. See
"Risk Factors and Other Special Considerations--Risks
Related to the Certificates--Servicer or Special
Servicer May Purchase Certificates; Conflict of
Interest" and "The Pooling and Servicing
Agreement--Special Servicing" in this Prospectus
Supplement and "Description of the
Agreements--Special Servicers" in the Prospectus.
TRUSTEE................. LaSalle Bank National Association, a nationally
chartered bank. See "The Pooling and Servicing
Agreement--The Trustee" in this Prospectus
Supplement.
FISCAL AGENT............ ABN AMRO Bank N.V. See "The Pooling and Servicing
Agreement--The Fiscal Agent" in this Prospectus
Supplement.
UNDERWRITERS............ Goldman, Sachs & Co. ("Goldman Sachs"), NSI and
Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"). Goldman Sachs and NSI will act as co-lead
managers and joint bookrunners. See "Underwriting" in
this Prospectus Supplement.
THE MORTGAGE
LOAN SELLERS............ Nomura Holding America Inc., a Delaware corporation
("NHA"), and CCA. Both of the Mortgage Loan Sellers
are affiliates of NSI and the Depositor. All of the
Mortgage Loans were sold or contributed to the
Depositor as shown on the following table:
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
MORTGAGE LOAN SELLERS POOL BALANCE MORTGAGE LOANS
- ----------------------- -------------- ---------------
<S> <C> <C>
NHA ................. 96.3% 79
CCA ................. 3.7% 2
</TABLE>
In connection with its sale or contribution of
Mortgage Loans, each Mortgage Loan Seller will make
certain representations and warranties to the
Depositor regarding its respective Mortgage Loans
and may be required to repurchase one or more of its
respective Mortgage Loans in connection with any
uncured breach of such a representation or warranty,
as described in this Prospectus Supplement under
"The Pooling and Servicing
Agreement--Representations
S-9
<PAGE>
and Warranties; Repurchase." NHA, THE INDIRECT
PARENT OF CCA, WILL BE REQUIRED TO PURCHASE ANY
MORTGAGE LOAN THAT CCA IS REQUIRED TO REPURCHASE BUT
FAILS TO DO SO IN CONNECTION WITH A BREACH OF
REPRESENTATIONS AND WARRANTIES.
See "The Mortgage Loan Sellers--Recent Developments"
herein.
ORIGINATORS............. (1) CCA; (2) Nomura Asset Capital Corporation, a
Delaware corporation ("NACC") and an affiliate of
CCA, the Depositor and NSI; and (3) Bloomfield
Acceptance Company, LLC, a Michigan limited liability
company that is not an affiliate of CCA, the
Depositor or NSI ("Bloomfield").
As of June 26, 1998, NACC transferred, among other
things, its commercial mortgage loan origination
business to CCA. As of June 26, 1998, CCA began to
originate mortgage loans using the same loan
origination personnel, underwriting procedures and
other personnel and procedures as had been used by
NACC prior to that date. NACC continues to be the
100% parent of CCA. Solely for purposes of this
Prospectus Supplement, references to "NACC/CCA" mean
"NACC" prior to June 26, 1998 and "CCA" on and after
June 26, 1998.
All of the Mortgage Loans were originated by
NACC/CCA or Bloomfield, as shown in the following
table:
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
ORIGINATORS POOL BALANCE MORTGAGE LOANS
- ---------------------- -------------- ---------------
<S> <C> <C>
NACC/CCA ........... 99.6% 80
Bloomfield ......... 0.4% 1
</TABLE>
S-10
<PAGE>
IMPORTANT DATES AND PERIODS
CUT-OFF DATE............ October 11, 1999.
CLOSING DATE............ On or about October , 1999.
DISTRIBUTION DATE....... The 17th day of each month or, if the 17th day is
not a Business Day, the following Business Day. The
first Distribution Date will be November 17, 1999.
RECORD DATE............. The close of business on the 10th day of the month
in which the Distribution Date occurs. If such 10th
day is not a Business Day, the Record Date will be
the preceding Business Day.
INTEREST ACCRUAL
PERIOD.................. The 11th day of the month preceding the month in
which the Distribution Date occurs through the 10th
day of the month in which the Distribution Date
occurs. Each Interest Accrual Period is assumed to
consist of 30 days.
<TABLE>
<CAPTION>
ASSUMED FINAL DISTRIBUTION
DATE....................
ASSUMED FINAL
CLASS DISTRIBUTION DATE
- --------------------- ------------------
<S> <C>
Class A-1 ......... December 17, 2007
Class A-2 ......... December 17, 2009
Class A-3 ......... October 17, 2012
Class B ........... April 17, 2013
Class C ........... July 17, 2013
Class D ........... December 17, 2013
Class E ........... January 17, 2014
Class F ........... January 17, 2014
</TABLE>
The "Assumed Final Distribution Date" with respect
to any Class of Certificates is the Distribution
Date on which the final payment of principal would
occur for such Class of Certificates assuming (i) a
0% Constant Prepayment Rate; (ii) each ARD Loan pays
in full on its respective Anticipated Repayment
Date; and (iii) the Mortgage Loan Assumptions. The
actual performance and experience of the Mortgage
Loans will likely differ from such assumptions. See
"Prepayment and Yield Considerations" herein.
RATED FINAL DISTRIBUTION
DATE.................... November 17, 2031
COLLECTION PERIOD....... With respect to a Distribution Date, the period
beginning on the day after the expiration of the
preceding Collection Period (generally the 12th day
of the month preceding such Distribution Date), and
ending at the close of business on the 11th day of
the month in which such Distribution Date occurs (or,
if such day is not a Business Day, the following
Business Day). The first Collection Period begins the
day after the Cut-Off Date.
DUE DATE................ Except with respect to the Mortgage Loan secured by
the ACCOR-M-Six-III Credit Tenant Lease Property (as
defined under "Description of the Mortgage
Pool--Credit Tenant Loans" in this Prospectus
Supplement), which has a Due Date on the 1st day of
the month, the Due Date for the Mortgage Loans is the
11th day of the month (or if such 1st day or 11th day
is not a business day, either the following business
day or the first preceding business day).
S-11
<PAGE>
OVERVIEW OF THE CERTIFICATES
THE OFFERED CERTIFICATES--
CERTIFICATE BALANCES AND
PASS-THROUGH RATES...... The Depositor is offering the following eight
Classes of Commercial Mortgage Asset Trust ("CMAT")
Commercial Mortgage Pass-Through Certificates to you
as part of Series 1999-C2. Each Class of Offered
Certificates will have the approximate aggregate
initial Certificate Balance as set forth below,
subject to an aggregate variance of plus or minus 5%,
and will accrue interest at an annual rate (the
"Pass-Through Rate") as set forth below:
<TABLE>
<CAPTION>
APPROXIMATE INITIAL PASS-THROUGH
CLASS CERTIFICATE BALANCE RATE
- --------------------- --------------------- -------------
<S> <C> <C>
Class A-1 ......... $127,000,000 %
Class A-2 ......... $322,800,000 (1)
Class A-3 ......... $108,721,000 (1)
Class B ........... $ 39,057,000 (1)
Class C ........... $ 39,057,000 (1)
Class D ........... $ 11,718,000 (1)
Class E ........... $ 29,293,000 (1)
Class F ........... $ 15,623,000 (1)
</TABLE>
----------
(1) The Pass-Through Rate for the Class A-2, Class
A-3, Class B, Class C, Class D, Class E and Class
F Certificates will be equal to the lesser of (x)
the per annum rate specified in the following
table and (y) the Weighted Average Net Mortgage
Pass-Through Rate for the related Distribution
Date.
CLASS RATE
- ------- ------
A-2 %
A-3
B
C
D
E
F
THE PRIVATE CERTIFICATES--
CERTIFICATE BALANCES AND
PASS-THROUGH RATES...... In addition to the Offered Certificates, the
Commercial Mortgage Pass-Through Certificates Series
1999-C2 will also include certain Classes of Private
Certificates (together with the Offered Certificates,
the "Certificates"). None of the Private Certificates
is being offered to you by this Prospectus
Supplement. The Private Certificates will have the
approximate aggregate initial Certificate Balance or
Notional Amount set forth below, subject to a
variance of plus or minus 5%, and will accrue
interest at the Pass-Through Rates as set forth
below.
<TABLE>
<CAPTION>
APPROXIMATE INITIAL
CERTIFICATE BALANCE
OR NOTIONAL
CLASS AMOUNT PASS-THROUGH RATE
- -------------------------------------- -------------------- ------------------
<S> <C> <C>
Class X ............................ $ 781,148,433(1) %(2)
Other Private Certificates ......... $ 87,879,433 %
</TABLE>
----------
(1) The notional amount ("Notional Amount") of the Class X Certificates will
equal the aggregate Certificate Balance of the Certificates outstanding from
time to time.
(2) The Pass-Through Rate for the Class X Certificates specified in the table is
the rate for the
S-12
<PAGE>
Distribution Date occurring in November 1999. The
Pass-Through Rate for such Class for each
subsequent Distribution Date will be determined
pursuant to a formula described under "Description
of the Offered Certificates--Distributions," and
will generally equal the excess, if any, of the
weighted average of the interest rates on the
Mortgage Loans (net of the rates applicable to the
calculations of certain fees and other amounts as
described in this Prospectus Supplement) over the
weighted average of the Pass-Through Rates of the
Sequential Certificates.
(3) The Pass-Through Rate on the Other Private
Certificates will be equal to the lesser of (x)
% and (y) the Weighted Average Net Mortgage
Pass-Through Rate for the related Distribution
Date.
DENOMINATIONS........... The Offered Certificates will be issuable in
book-entry form, in minimum denominations of $10,000
initial Certificate Balance and integral multiples of
$1 in excess thereof.
CLEARANCE AND
SETTLEMENT.............. You will hold your Certificates through either The
Depository Trust Company ("DTC") (in the United
States) or Cedelbank ("Cedel") or The Euroclear
System ("Euroclear") (in Europe). Transfers within
DTC, Cedel or Euroclear, as the case may be, will be
in accordance with the usual rules and operating
procedures of the relevant system. Crossmarket
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through
Cedel or Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of Cedel or
Euroclear. The Depositor or the Trustee, with the
consent of the Underwriters, may elect to terminate
the book-entry system through DTC with respect to all
or any portion of any Class of the Offered
See "Description of the Offered
Certificates--Delivery, Form and Denomination,"
"--Book-Entry Registration" and "--Definitive
Certificates" in this Prospectus Supplement and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the
Prospectus.
OPTIONAL TERMINATION.... Certain specified persons may terminate the Trust
Fund when less than 1% of the Initial Pool Balance is
outstanding. See "The Pooling and Servicing
Agreement--Optional Termination" in this Prospectus
Supplement.
FEDERAL TAX STATUS...... The Trustee will elect to treat designated portions
of the Trust Fund, exclusive of the Excess Interest,
as two separate "real estate mortgage investment
conduits" (each, a "REMIC"). The REMICs are referred
to as the "Lower-Tier REMIC," which holds the
Mortgage Loans and any REO Properties, and the
"Upper-Tier REMIC," which holds interests in the
Lower-Tier REMIC. The Offered Certificates will
represent (i) "regular interests" in the Upper-Tier
REMIC and (ii) a right (other than in the case of the
Class A-1 Certificates) to receive distributions of
Excess Interest. The Class R Certificates will be the
residual interest in the Upper-Tier REMIC, and the
Class LR Certificates will be the residual interest
in the Lower-Tier REMIC. The Offered Certificates
will be treated as newly originated debt instruments
for federal income tax purposes to the extent of
their interest in the related regular interests. You
will be required to report income on the Offered
Certificates other than in respect of Excess Interest
in accordance with the accrual method of accounting
even if you are otherwise on the cash method. It is
anticipated that the Class Certificates will, and
the Class Certificates will not, be issued with
original issue discount for federal income tax
purposes. Although not free from doubt, you should be
required to report Excess Interest as it accrues
after the Anticipated Repayment Date of the related
Mortgage Loan.
For a further discussion of tax issues and
consequences as they relate to the Offered
Certificates, see "Certain Federal Income Tax
Consequences" in this
S-13
<PAGE>
Prospectus Supplement and "Federal Income Tax
Consequences--REMIC Certificates" in the Prospectus.
Although not entirely free from doubt, it is
anticipated that any Prepayment Premiums allocable
to your Offered Certificates will be ordinary income
to you, as a Certificateholder, as such amounts
accrue to the Trust Fund. See "Description of the
Offered Certificates--Distributions" in this
Prospectus Supplement.
ERISA................... Subject to important considerations described under
"Certain ERISA Considerations" in this Prospectus
Supplement, if you are the fiduciary of any
retirement plan or other employee benefit plan or
arrangement subject to ERISA or Section 4975 of the
Code, generally you can buy the following Classes of
Offered Certificates:
o Class A-1
o Class A-2
o Class A-3
However, transfers of the Offered Certificates to
any such plan or arrangement are subject to the
restrictions described in this Prospectus Supplement
under "Certain ERISA Considerations." A fiduciary of
any retirement plan or other employee benefit plan
or arrangement should review carefully with its
legal advisors whether the purchase or holding of
any Class of Offered Certificates could give rise to
a transaction that is not permitted under applicable
law or whether there exists any statutory or
administrative exemption applicable to an
investment. This Prospectus Supplement describes
certain exemptions that may be available, including
the prohibited transaction exemptions granted by the
United States Department of Labor to Goldman Sachs
and NSI described in this Prospectus Supplement
under "Certain ERISA Considerations." If you use
insurance company general account funds to purchase
Offered Certificates, you should consider the
availability of Sections I and III of Prohibited
Transaction Class Exemption 95-60 (60 Fed. Reg.
35925, July 12, 1995) issued by the U.S. Department
of Labor. See "Certain ERISA Considerations" and
"Description of the Offered Certificates--Transfers
and Exchanges; Transfer Restrictions" in this
Prospectus Supplement and "ERISA Considerations" in
the Prospectus.
SMMEA................... The following Classes of Offered Certificates will
constitute "mortgage related securities" within the
meaning of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"), for so long as
such Certificates continue to be rated at least in
the category of "AA" by any Rating Agency:
o Class A-1
o Class A-2
o Class A-3
o Class B
See "Legal Investment" in this Prospectus
Supplement.
REPORTS TO
CERTIFICATEHOLDERS...... On each Distribution Date, the following reports will
be available to you from the Trustee upon request:
o Distribution Date Statement
o Comparative Financial Status Report
S-14
<PAGE>
o Delinquent Loan Status Report
o Historical Loan Modification Report
o Historical Loss Estimate Report
o REO Status Report
o Watch List
o Loan Payoff Notification Report
o Premium Loan Report
The Distribution Date Statement is described in this
Prospectus Supplement under "The Pooling and
Servicing Agreement--Reports to Certificateholders;
Available Information--Trustee Reports." The other
reports listed above are more fully described in
this Prospectus Supplement under "The Pooling and
Servicing Agreement--Reports to Certificateholders;
Available Information--Servicer Reports." Forms of
the reports listed above are included as Annexes F
and G to this Prospectus Supplement.
A copy of the Pooling and Servicing Agreement will
be filed under Form 8-K ("Form 8-K") with the SEC
within 15 days after the initial issuance of the
Offered Certificates. Such Form 8-K is available to
you from the SEC. In addition, in the event Mortgage
Loans are removed from the Trust Fund prior to the
Closing Date, such information will be contained in
the Form 8-K.
You may review a loan-by-loan listing electronically
in the form of the standard CSSA loan file and CSSA
property file or may request from the Trustee a
written copy of such report. The form of the
standard CSSA loan and property file is attached as
an exhibit to the Pooling and Servicing Agreement.
Upon reasonable prior notice, you will also be
permitted to review, at the Trustee's offices during
normal business hours, a variety of information
concerning each Mortgaged Property, including, to
the extent available, operating statements, rent
rolls, retail sales information and inspection
reports, as well as all modifications, waivers and
amendments of the terms of any of the Mortgage
Loans.
See "The Pooling and Servicing Agreement--Reports to
Certificateholders; Available Information--Other
Information" in this Prospectus Supplement.
DEAL INFORMATION/ANALYTICS Certain information concerning the Mortgage Loans
and the Offered Certificates may be available
following the Closing Date from the following
services:
o Bloomberg, L.P.
o the Trustee's website at www.lnbabs.com
o the Servicer's website at
www.bnyassetsolutions.com
RATINGS................. It is a condition to the issuance of the Offered
Certificates that they be rated as follows:
S-15
<PAGE>
<TABLE>
<CAPTION>
RATINGS
CLASS (FITCH IBCA/MOODY'S/S&P)
- --------------- -------------------------
<S> <C>
A-1 ......... AAA/Aaa/AAA
A-2 ......... AAA/Aaa/AAA
A-3 ......... AAA/Aaa/AAA
B ........... AA/Aa2/AA
C ........... A/A2/A
D ........... A-/A3/A-
E ........... BBB/Baa2/BBB
F ........... BBB-/Baa3/BBB-
</TABLE>
The Rating Agencies' ratings of the Offered
Certificates address the likelihood of the timely
payment of interest and the ultimate repayment of
principal by the Rated Final Distribution Date. A
security rating does not address the likelihood or
frequency of prepayments (either voluntary or
involuntary) or the possibility that
Certificateholders might suffer a lower than
anticipated yield due to prepayments, nor does a
security rating address the likelihood of receipt of
Prepayment Premiums or Excess Interest. See
"Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans" and "Description
of the Offered Certificates--Distributions" in this
Prospectus Supplement. With respect to Credit Tenant
Loans, a qualification, withdrawal or downgrade in
the credit rating of the related Credit Tenants or
Guarantors or in the claims paying rating of any
insurer under a residual value insurance policy may
have a related adverse effect on the rating of the
Offered Certificates.
For a description of the limitations of the ratings
of the Offered Certificates, see "Rating" in this
Prospectus Supplement.
A security rating is not a recommendation to buy,
sell or hold securities and may be subject to
revision, qualification, suspension, review or
withdrawal at any time by the assigning rating
organization. Any such revision, qualification,
suspension, review or withdrawal could have a
material adverse effect on the value and
marketability of the affected Class of Certificates.
See "Risk Factors and Other Special Considerations"
and "Rating" in this Prospectus Supplement and
"Yield Considerations" in the Prospectus.
S-16
<PAGE>
THE CERTIFICATES: STRUCTURAL SUMMARY
DISTRIBUTIONS
A. GENERAL.............. Distributions of interest and principal will be
made to the holders of the various Classes of
Certificates entitled thereto, sequentially based
upon their relative seniority as generally depicted
in the chart under "Subordination" below. See
"Description of the Offered
Certificates--Distributions--Payment Priorities" in
this Prospectus Supplement.
B. DISTRIBUTIONS
OF INTEREST............. Each Class of Certificates (other than the Class R
and Class LR Certificates) will bear interest. In the
case of each such Class, such interest will accrue
during each such Interest Accrual Period based upon:
o the Pass-Through Rate for such Class for the
related Distribution Date;
o the Certificate Balance or Notional Amount, as the
case may be, of such Class as of the commencement
of such Interest Accrual Period (reductions in a
Certificate Balance that occur on any Distribution
Date are deemed to occur as of the first day of
such Interest Accrual Period for purposes of the
accrual of interest); and
o the assumption that each year consists of twelve
30-day months.
On each Distribution Date, subject to available
funds and the payment priorities described in this
Prospectus Supplement, the holders of the various
Classes of Certificates will be entitled to receive
their proportionate share of all unpaid
distributable interest accrued in respect of the
applicable Class of Offered Certificates through the
end of the related Interest Accrual Period.
See "Description of the Offered
Certificates--Distributions--Excess Interest,"
"--Distributions--Payment Priorities" and
"--Realized Losses" in this Prospectus Supplement.
C. DISTRIBUTIONS
OF PRINCIPAL............ In general, subject to available funds and the
payment priorities described in this Prospectus
Supplement, the holders of each of the Classes of
Sequential Certificates will be entitled to receive
an aggregate amount of principal over time equal to
the related Certificate Balance. However, the Pooling
and Servicing Agreement will require the Trustee to
make such distributions of principal in a specified
sequential order such that:
o No distributions of principal will be made to the
holders of any Class of Private Certificates until
the Certificate Balance of each Class of Offered
Certificates is reduced to zero.
o No distributions of principal will be made to the
holders of the Class B, Class C, Class D, Class E
or Class F Certificates until, in the case of each
such Class, the Certificate Balance of each more
senior Class of Offered Certificates (including
each of the Class A-1 through Class A-3
Certificates) is reduced to zero.
o No distributions of principal will be made to the
Holders of the Class A-2 or Class A-3 Certificates
until either:
(i) the Certificate Balance of the Class A-1
Certificates is reduced to zero and, in the
case of the Class A-3 Certificates, the
Certificate Balance of each of the Class A-1
and the Class A-2 Certificates is reduced to
zero; or
S-17
<PAGE>
(ii) because of losses on the Mortgage Loans
and/or certain default-related or other
unanticipated expenses of the Trust, the
Certificate Balances of the Class B, Class C,
Class D, Class E, Class F and Other Private
Certificates (collectively, the "Subordinate
Sequential Certificates") have been reduced to
zero (in which case, any distributions of
principal on the Class A-1 through Class A-3
Certificates will be made on a pro rata basis).
In general, unless and until the Certificate
Balances of the Classes of the Subordinate
Sequential Certificates have been reduced to zero
because of losses on the Mortgage Loans and/or
certain default-related or other unanticipated
expenses of the Trust Fund, all payments (or
advances in lieu thereof) and other collections of
principal received in respect of the Mortgage Loans
will be applied to make distributions of principal:
o on the Class A-1 Certificates prior to being
applied to making any distributions of principal
on the Class A-2 Certificates or the Class A-3
Certificates; and
o on the Class A-2 Certificates prior to being
applied to making any distribution of principal on
the Class A-3 Certificates.
The aggregate distributions of principal to be made
on the respective Classes of Sequential Certificates
on any Distribution Date will be a function of:
o the amounts of all scheduled payments of principal
due (or, with respect to any delinquent Balloon
Payment, the Assumed Scheduled Payment deemed due)
on the Mortgage Loans during the related
Collection Period that are either received as of
such Collection Period or advanced by the
Servicer; and
o the amounts of any prepayments and other
unscheduled collections of previously unadvanced
principal in respect of the Mortgage Loans that
are received during the related Collection Period.
See "Description of the Offered
Certificates--Distributions--Payment Priorities" in
this Prospectus Supplement.
D. DISTRIBUTIONS OF
EXCESS INTEREST...... Any interest collected on an ARD Loan after its
Anticipated Repayment Date in excess of interest at
the Mortgage Rate for such loan will be distributed
to the holders of the Classes of Sequential
Certificates (other than the Class A-1 Certificates)
pro rata in accordance with the initial Certificate
Balances of such Classes. Pursuant to the terms of
each ARD Loan, interest in excess of interest at the
Mortgage Rate for each such loan is not collected
until all other amounts due under such ARD Loan have
been paid in full. See "Description of the Offered
Certificates--Distributions--Excess Interest" in this
Prospectus Supplement.
E. DISTRIBUTIONS OF
PREPAYMENT PREMIUMS.. Any prepayment premium and/or yield maintenance
charge (including, in the case of any Premium Loan,
the unamortized portion of the premium as described
under "Description of the Mortgage Pool--Premium
Loans" in this Prospectus Supplement net of any
portion of a prepayment premium received on a
Specially Serviced Mortgage Loan that is paid to the
Special Servicer as part of the Work Out Fee, as
described under "The Pooling and Servicing
Agreement--Special Servicing") collected in respect
of a Mortgage Loan will be distributed, in the
amounts and priorities described in this Prospectus
Supplement, to the holders of one or more of the
Class X, Class A-1, Class A-2 and Class A-3
Certificates. The holders of any of the Class A-1,
Class A-2 or Class
S-18
<PAGE>
A-3 Certificates will not be entitled to receive any
prepayment premiums after the Certificate Balance of
such Class has been reduced to zero. Any prepayment
premiums remaining following the distributions
described above shall be distributed to holders of
the Private Certificates in accordance with the
Pooling and Servicing Agreement. See "Description of
the Offered Certificates--Distributions--Prepayment
Premiums" in this Prospectus Supplement. However,
because all of the Mortgage Loans are locked out
from prepayment, it is unlikely that any prepayment
premiums or yield maintenance charges will be
received by the Trust Fund.
SUBORDINATION
A. GENERAL.............. The chart below describes the general manner in
which the rights of various Classes of Certificates
will be senior to the rights of other Classes of
Certificates. The priority of entitlement of the
various Classes of Certificates to receive principal
and interest on any Distribution Date is depicted in
descending order. The manner in which Mortgage Loan
losses are allocated to the various Classes of
Certificates is depicted in ascending order.
NO OTHER FORM OF CREDIT ENHANCEMENT WILL BE
AVAILABLE FOR THE BENEFIT OF THE HOLDERS OF THE
OFFERED CERTIFICATES.
See "Description of the Offered Certificates" in
this Prospectus Supplement.
Class A-1, Class A-2, Class A-3 and Class X
Class B
Class C
Class D
Class E
Class F
Certain Classes of Private Certificates
B. SHORTFALLS IN AVAILABLE
FUNDS................. The following types of shortfalls in available
funds will be allocated in the same fashion as
Mortgage Loan losses:
(i) shortfalls resulting from special servicing
compensation paid to the Special Servicer;
(ii) shortfalls resulting from interest on P&I
Advances made by the Servicer,
S-19
<PAGE>
the Trustee or the Fiscal Agent (to the extent
not covered by default interest paid by a
borrower);
(iii) shortfalls resulting from extraordinary
expenses of the Trust Fund;
(iv) shortfalls resulting from a reduction of a
Mortgage Loan's interest rate by a bankruptcy
court;
(v) shortfalls resulting from other unanticipated
or default-related expenses of the Trust Fund
incurred with respect to the Mortgage Loans; or
(vi) shortfalls in Mortgage Loan interest as a
result of the timing of prepayments on Mortgage
Loans (net of, in the case of non-Specially
Serviced Mortgaged Loans that permit
prepayments to be made only on a Due Date, the
Servicer's servicing fee payable on the related
Distribution Date and certain other items
allocable to cover such shortfalls).
See "Description of the Offered
Certificates--Distributions--Payment Priorities" in
this Prospectus Supplement.
ADVANCES................ In general, the Servicer is required to make
advances (each such amount, a "P&I Advance") for
delinquent Monthly Payments (and Assumed Scheduled
Payments in the case of defaulted Balloon Loans) on
the Mortgage Loans. If the Servicer fails to make
such advance, the Trustee will be required to make
the advance. If both the Servicer and the Trustee
fail to make the advance, the Fiscal Agent will be
required to make the advance. In each case, the
applicable entity will be required to make a P&I
Advance only if it determines that such advance will
be recoverable from the proceeds of the related
Mortgage Loan. With respect to the CMAT Pari Passu
Notes, all of which relate to Credit Tenant Loans (as
described below under "Description of the Mortgage
Pool--Credit Tenant Loans"), the Servicer will only
be required to advance delinquent Monthly Payments
due on the Notes included in the Trust Fund.
In addition to P&I Advances, the Servicer will also
be obligated (subject to the limitations described
in the Pooling and Servicing Agreement) to make
advances (each, a "Property Advance") to pay certain
costs and expenses related to the Mortgaged
Properties.
See "The Pooling and Servicing Agreement--Advances"
in this Prospectus Supplement.
APPRAISAL REDUCTIONS.... Certain adverse events affecting a Mortgage Loan,
called "Appraisal Reduction Events," will require the
Special Servicer to obtain a new appraisal on the
related Mortgaged Property. Based on the new
appraised value, it may be necessary to calculate an
"Appraisal Reduction Amount." The amount of any P&I
Advance required to be advanced in respect of a
Mortgage Loan that has been subject to an Appraisal
Reduction Event will be reduced in the same
proportion that the Appraisal Reduction Amount bears
to the principal balance of such Mortgage Loan. Due
to the payment priorities, this will reduce the funds
available to pay interest on the most subordinate
Class or Classes then outstanding. See "Description
of the Offered Certificates--Appraisal Reductions" in
this Prospectus Supplement.
S-20
<PAGE>
THE MORTGAGE LOANS: COLLATERAL OVERVIEW
THE MORTGAGE POOL....... For a more complete description of the Mortgage
Loans and the Notes, see the following sections in
this Prospectus Supplement:
o Description of the Mortgage Pool;
o Annex A (Characteristics of the Notes);
o Annex B (Characteristics of the Mortgaged
Properties); and
o Annex C (Characteristics of the Premium Loans).
A. GENERAL CHARACTERISTICS(1)....................................... . .
<TABLE>
<S> <C>
Initial Pool Balance(2) ............................... $ 781,148,433
Number of Mortgage Loans .............................. 81
% of Initial Pool Balance Represented by Largest
Mortgage Loan ....................................... 5.7%
Number of Mortgaged Properties ........................ 103
Average Cut-Off Date Principal Balance ................ $ 9,643,808
Weighted Average Mortgage Rate ........................ 7.897%
Weighted Average Remaining Term to the Earlier of
Maturity or Anticipated Repayment Date .............. 141
Number of ARD Notes and % of Initial Pool Balance
Represented by ARD Notes(3) ......................... 73/89.7%
Number of Fully Amortizing Notes (other than ARD Notes)
and % of Initial Pool Balance Represented by Fully
Amortizing Notes (other than ARD Notes) ............... 1/2.3%
Number of Balloon Notes and % of Initial Pool Balance
Represented by Balloon Notes ........................ 7/7.9%
Number of Premium Loans and % of Initial Pool Balance
Represented by Premium Loans ........................ 12/23.6%
Number of Credit Tenant Loans and % of Initial Pool
Balance Represented by Credit Tenant Loans(4) ....... 8/10.3%
Weighted Average Original Premium of all Mortgage
Loans ............................................... 1.6%
Weighted Average DSCR(5)(6) ........................... 1.36x
Weighted Average LTV as of Cut-Off Date(6)(7) ......... 66.4%
Weighted Average PTV as of Cut-Off Date(6)(7) ......... 67.6%
Weighted Average Anticipated Repayment Date
LTV/PTV(7)(8) ....................................... 54.4%
</TABLE>
----------
(1) Unless otherwise indicated, based on the Cut-Off
Date Principal Balance of the related Mortgage
Loan or Loans.
(2) Subject to a permitted variance of plus or minus
5%.
(3) An "ARD Note" is a Note evidencing an ARD Loan
that substantially amortizes by its stated
maturity date (the "Maturity Date"), but provides
for an "Anticipated Repayment Date" following
which, if the borrower does not prepay the
Mortgage Loan in full on or prior to such date,
the interest rate that accrues on such ARD Loan
will increase and the borrower will be required
to deposit excess cash flow from the Mortgaged
Property into a lockbox account controlled by the
lender and apply such cash flow to pay principal
on the ARD Loan. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans--Excess Interest" and "The Pooling
and Servicing Agreement--Modifications" in this
Prospectus Supplement.
(4) All of the Credit Tenant Loans also represent
all of the CMAT Pari Passu Notes.
S-21
<PAGE>
(5) Debt Service Coverage Ratio ("DSCR") for any
Mortgage Loan is equal to the Net Cash Flow from
the related Mortgaged Property divided by the
Annual Debt Service for such Mortgaged Property.
(6) Credit Tenant Loans are excluded from
calculation.
(7) "LTV" or "Loan-to-Value Ratio"Loan-to-Value
Ratio means, with respect to any Mortgage Loan,
the Cut-Off Date Principal Balance of such
Mortgage Loan (that is, the principal amount of
the Mortgage Loan against which the principal
amount of the Certificates is issued) divided by
the Appraised Value of the Mortgaged Property or
Properties securing such Mortgage Loan. For
purposes of determining LTV with respect to a
CMAT Pari Passu Note, LTV was calculated giving
effect to the related Other Pari Passu Note(s)
secured by the related Mortgaged Property. The
Credit Tenant Loans were excluded from the
weighted average calculations.
(8) Proceeds-to-value ratio ("PTV") for any Mortgage
Loan, as of any date of determination, is equal
to the total amount of such Mortgage Loan as of
such date of determination, plus any
then-remaining unamortized Premium, if any, as of
the Cut-Off Date, divided by the Appraised Value
of the related Mortgaged Property. See
"Description of the Mortgage Pool--Premium Loans"
in this Prospectus Supplement.
B. RESERVES............. Capital Replacement and Furniture, Fixture and
Equipment ("FF&E") Reserves. In connection with the
origination of the Mortgage Loans, a licensed
engineer inspected each Mortgaged Property (other
than the Credit Tenant Properties) and such engineer
estimated the annual amount that would be required to
maintain such Mortgaged Property on an ongoing basis.
Based on the engineer's estimate, the Originators
deducted from Underwritten NOI for each Mortgaged
Property an amount generally equal to or greater than
the amount suggested by the engineer. In addition, to
cover such costs, the Originators generally required
each borrower to fund capital replacement or FF&E
reserves on a monthly basis. Such reserves can be
drawn on by the respective borrowers to reimburse
themselves for the cost of such maintenance.
Deferred Maintenance Reserves. In connection with
the origination of the Mortgage Loans, an engineer
also estimated the amount required to correct any
deferred maintenance conditions for each Mortgaged
Property (other than Credit Tenant Properties).
Approximately 48.1% of the Mortgage Loans, by
Cut-Off Date Principal Balance, require the related
borrower to post reserves in excess of 100% of the
engineer's recommended amount if the work was not
completed prior to the closing of the Mortgage Loan.
With respect to approximately 45% of the Mortgage
Loans, no amount was recommended or the engineer's
recommended amount was considered insignificant by
such Originator.
Tenant Improvement and Leasing Commission
Reserves. The Originators required reserves for
tenant improvement and leasing commissions on 49.0%
of the Retail Properties (excluding Credit Tenant
Properties), 43.2% of the Office Properties
(excluding Credit Tenant Properties) and 57.1% of
the Industrial Properties (excluding Credit Tenant
Properties) (each by Cut-Off Date Principal
Balance). Such reserves were either deposited at
closing, required to be deposited on an ongoing
basis or are required to be deposited at some point
in the future to help mitigate a significant tenant
rollover concentration. The reserves are in the form
of cash or letters of credit from investment grade
entities.
Real Estate Tax Reserves. Approximately 79.5% of the
Mortgage Loans (excluding Credit Tenant Loans), by
Cut-Off Date Principal Balance, require reserves for
real estate taxes.
S-22
<PAGE>
Insurance Reserves. Approximately 65.6% of the
Mortgage Loans (excluding Credit Tenant Loans), by
Cut-Off Date Principal Balance, require reserves for
insurance.
Seasonality Reserves. The Westin Denver Tabor Center
Loan, which represents approximately 5.7% of the
Initial Pool Balance, has a seasonality reserve
which serves to capture revenues during peak periods
of occupancy, which revenues will be available to
pay debt service during slower periods. The Bayside
Exposition Center Loan, which represents
approximately 2.8% of the Initial Pool Balance, also
has a seasonality reserve.
Ground Lease Reserves. All of the Mortgage Loans
secured by leasehold interests provide for escrows
to make ground lease payments.
Environmental Reserves. All of the Mortgaged
Properties have been subject to Phase I
environmental site assessments and/or updates. To
the extent issues have been identified by regulatory
agencies or otherwise, in some cases the related
borrowers have made deposits into environmental
reserve accounts to the extent required by the
related Mortgage Loan. However, such reserve amounts
may not be sufficient to remediate such
environmental conditions and all such environmental
conditions may not have been identified. See "Risk
Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Risks Under
Environmental Laws" and "--Environmental Risks
Related to the Mortgaged Properties" in this
Prospectus Supplement.
C. LOCKBOXES............ 72.8% of the Mortgage Loans (by Cut-Off Date
Principal Balance) have hard lockboxes. 7.5% of the
Mortgage Loans (by Cut-Off Date Principal Balance)
have soft lockboxes. A hard lockbox is one under
which the tenants (and, in the case of cash receipts
received by the property manager for a hotel or
exposition center Mortgaged Property, the property
manager) at a Mortgaged Property deposit rents
directly into an account controlled by the lender.
The hard lockboxes in place with respect to certain
Mortgage Loans specify that amounts deposited therein
are remitted to the related borrowers on a daily
basis until certain trigger events have occurred.
Such trigger events include, generally, among other
things, that an event of default under the related
Mortgage Loan has occurred or a certain percentage of
rents has not been remitted to the hard lockbox by
the tenants of the related Mortgaged Property. The
operation of such trigger events may result in
amounts being remitted to borrowers during a
Collection Period preceding the occurrence or
discovery of a trigger event to which such borrowers
are not entitled. The occurrence of the Anticipated
Repayment Date, if any, under the ARD Loans is a
trigger event with respect to the related hard
lockboxes, after which the related borrowers will not
be entitled to daily remittances therefrom. A soft
lockbox is one under which the borrower or property
manager at a Mortgaged Property receives rents from
tenants and then deposits such rents into an account
controlled by the lender. See "The Pooling and
Servicing Agreement--Accounts--Lockbox Accounts" in
this Prospectus Supplement.
D. INFORMATION CONCERNING
THE TABLES BELOW... o All percentages of Initial Pool Balance are based
upon the Cut-Off Date Principal Balances of the
related Mortgage Loans or, with respect to Mortgage
Loans secured by more than one Mortgaged Property
(each, a "Pool Loan"), the Allocated Loan Amount of
the related Mortgaged Property.
o All weighted average information regarding the
Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-Off Date Principal Balances or,
S-23
<PAGE>
with respect to Pool Loans, Allocated Loan Amounts.
o The "Cut-Off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid principal
balance thereof as of the Cut-Off Date, after
application of all payments of principal due on or
before such date, whether or not received.
o All numerical information provided in this
Prospectus Supplement with respect to the Mortgage
Loans is provided on an approximate basis.
o Certain statistical information set forth in
this Prospectus Supplement may change prior to the
date of issuance of the Certificates due to changes
in the composition of the Mortgage Pool prior to
the Closing Date.
o The Credit Tenant Loans were excluded from the
calculation of Weighted Average DSCR.
o The Credit Tenant Loans were excluded from the
aggregation of LTV and PTV in the LTV Ratio Table
and the PTV Ratio Table, and are instead included
in a separate entry on such tables.
o The DSCR for any Dual Amortization Loan which is
included in the "Debt Service Coverage Ratios"
table below is based on the longer amortization
term for such Dual Amortization Loan. See "Risk
Factors and Other Special Considerations--Risks
Related to the Certificates--Risks Associated with
Dual Amortization Loans" in this Prospectus
Supplement.
See "Description of the Mortgage Pool--Changes in
Mortgage Pool Characteristics" in this Prospectus
Supplement.
<TABLE>
<CAPTION>
E. CUT-OFF DATE PRINCIPAL
BALANCES.................
NUMBER OF
RANGE OF CUT-OFF DATE % OF INITIAL MORTGAGE
PRINCIPAL BALANCES POOL BALANCE LOANS
- ----------------------------------- -------------- ----------
<S> <C> <C>
Less than $2,500,000 ............ 4.6% 24
$2,500,000-4,999,999 ............ 6.7% 15
$5,000,000-7,499,999 ............ 10.5% 13
$7,500,000-9,999,999 ............ 6.6% 6
$10,000,000-14,999,999 .......... 9.7% 6
$15,000,000-19,999,999 .......... 11.9% 5
$20,000,000-29,999,999 .......... 16.6% 5
$30,000,000-39,999,999 .......... 17.1% 4
$40,000,000-50,000,000 .......... 16.3% 3
</TABLE>
<TABLE>
<CAPTION>
F. SIGNIFICANT STATE
CONCENTRATION..............
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- ------------------------- -------------- -----------
<S> <C> <C>
California ............ 19.4% 9
New York .............. 9.6% 13
Illinois .............. 8.9% 6
Pennsylvania .......... 8.5% 5
Colorado .............. 7.2% 2
Ohio .................. 5.3% 10
Texas ................. 5.2% 8
</TABLE>
S-24
<PAGE>
<TABLE>
<CAPTION>
G. DEBT SERVICE COVERAGE RATIOS (AS
OF THE CUT-OFF DATE)....................
NUMBER OF
% OF INITIAL MORTGAGE
DSCR POOL BALANCE LOANS
- ------------------------ -------------- ----------
<S> <C> <C>
1.100-1.199 .......... 6.1% 6
1.200-1.299 .......... 33.0% 21
1.300-1.399 .......... 22.5% 14
1.400-1.499 .......... 12.8% 12
1.500-1.599 .......... 4.3% 4
1.600-1.699 .......... 4.4% 11
1.700-1.799 .......... 6.4% 4
1.800-1.899 .......... 0.2% 1
CTLs ................. 10.3% 8
</TABLE>
<TABLE>
<CAPTION>
H. LOAN-TO-VALUE RATIOS (AS OF THE
CUT-OFF DATE).............................
NUMBER OF
% OF INITIAL MORTGAGE
RANGE OF LOAN-TO-VALUE RATIOS POOL BALANCE LOANS
- ------------------------------- -------------- ----------
<S> <C> <C>
40.00%-49.99% ............... 3.4% 4
50.00%-59.99% ............... 20.5% 13
60.00%-64.99% ............... 13.8% 13
65.00%-69.99% ............... 19.0% 17
70.00%-74.99% ............... 18.6% 12
75.00%-79.99% ............... 10.8% 11
80.00%-89.99% ............... 2.1% 2
90.00%-100% ................. 1.4% 1
CTLs. ....................... 10.3% 8
</TABLE>
<TABLE>
<CAPTION>
I. PROCEEDS-TO-VALUE RATIOS (AS OF THE
CUT-OFF DATE)..............................
NUMBER OF
% OF INITIAL MORTGAGE
RANGE OF PROCEEDS-TO-VALUE RATIOS POOL BALANCE LOANS
- ----------------------------------- -------------- ----------
<S> <C> <C>
40.00%-49.99% ................... 3.4% 4
50.00%-59.99% ................... 15.5% 10
60.00%-69.99% ................... 35.3% 32
70.00%-79.99% ................... 29.3% 22
80.00%-89.99% ................... 4.8% 4
90.00%-99.99% ................... 1.4% 1
CTLs ............................ 10.3% 8
</TABLE>
<TABLE>
<CAPTION>
J. MORTGAGE LOANS BY
PROPERTY TYPE..............................
NUMBER OF
% OF INITIAL MORTGAGED
PROPERTY TYPE(1) POOL BALANCE(2) PROPERTIES
- ------------------------------ ----------------- -----------
<S> <C> <C>
Office ..................... 36.8% 26
Retail ..................... 29.3% 29
Hotel ...................... 10.9% 15
Multifamily ................ 11.9% 21
Industrial ................. 4.6% 7
Exposition Center .......... 2.8% 1
Movie Theatre .............. 3.2% 3
Mobile Home ................ 0.4% 1
</TABLE>
----------
(1) Includes Credit Tenant Loans.
(2) For Mortgage Loans secured by more than one
Mortgaged Property, the percent of Initial Pool
Balance is based on the Allocated Loan Amount for
each Mortgaged Property.
S-25
<PAGE>
<TABLE>
<CAPTION>
K. MATURITY DATE OR ANTICIPATED
REPAYMENT DATE BY YEAR................
% OF INITIAL NUMBER OF
YEAR(1) POOL BALANCE NOTES
- ----------------- -------------- -----------
<S> <C> <C>
2007 .......... 5.5% 6
2008 .......... 17.2% 21
2009 .......... 28.7% 24
2010 .......... 7.4% 3
2012 .......... 4.3% 1
2013 .......... 12.5% 7
2014 .......... 13.2% 10
2018 .......... 7.5% 2
2019 .......... 0.9% 1
2020 .......... 2.7% 6
</TABLE>
----------
(1) For any Note, the year shown is the related
Maturity Date or, if the Note is an ARD Note, the
year in which the related Anticipated Repayment
Date occurs.
L. DELINQUENCY STATUS AS
OF THE CUT-OFF DATE.. As of the Cut-Off Date there have been no
delinquencies of 30 days or more with respect to any
Mortgage Loan since its origination.
SECURITY FOR THE
MORTGAGE LOANS........... Each Mortgage Loan is secured by one or more first
priority mortgages, deeds of trust or other similar
security instruments on the borrower's fee or
leasehold interest (as set forth below) in the
Mortgaged Property.
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF MORTGAGED
INTEREST OF BORROWER POOL BALANCE(1) PROPERTIES
- -------------------------------- ----------------- --------------------
<S> <C> <C>
Fee Simple Estate(2) ......... 91.2% 100
Leasehold Estate(3) .......... 8.8% 3
</TABLE>
----------
(1) Based on the Cut-Off Date Principal Balance of
the Mortgage Loan or, for any Pool Loan, the
Cut-Off Date Allocated Loan Amount of the related
Mortgaged Property.
(2) For any Mortgaged Property that is subject to a
ground lease where the ground lessee and ground
lessor are both parties to the Mortgage, the
Mortgaged Property is categorized as a fee simple
estate.
(3) Includes any Mortgaged Property where a material
portion of such property is subject to a ground
lease and the ground lessor is not a party to the
Mortgage.
PREMIUM LOANS........... 12 Mortgage Loans, which represent 23.6% of the
Initial Pool Balance, are "Premium Loans." Premium
Loans are Mortgage Loans under which the related
borrower received a premium in the form of proceeds
in excess of the principal balance of the Mortgage
Loan. In exchange for such premium, the borrower
agreed to pay an above market interest rate on the
Mortgage Loan. In the event of an involuntary
prepayment, the borrower is required to repay the
unamortized portion of the premium as an obligation
secured by the related mortgage separate from any
obligation of the borrower to pay a yield maintenance
premium. The unamortized portion of the premium is
secured by a first lien on the respective Mortgaged
Property. The Pooling and Servicing Agreement will
require that amounts collected on a Premium Loan in
connection with an event of default under a Mortgage
Loan be applied to interest, principal, Default
Interest, Prepayment Premium (excluding unamortized
Premium), Excess Interest and reimbursement of
expenses incurred in collecting any such amounts,
before being applied as unamortized Premium. See
"Risk Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Risks Relating to
Premium Loans," "Description of the Mortgage
Pool--Premium Loans" and Annex C in this Prospectus
Supplement.
S-26
<PAGE>
CREDIT TENANT LOANS..... 8 Mortgage Loans, which represent 10.3% of the
Initial Pool Balance, are "Credit Tenant Loans."
Credit Tenant Loans are Mortgage Loans with respect
to which the related Mortgaged Property is subject to
a net lease obligation of a tenant, which possesses,
or whose parent or affiliate that guarantees the
lease obligations possesses, either (A) a ratings
estimate by S&P, or (B) an unsecured long term debt
rating of at least "BB-" by S&P and, with respect to
the Cinemark Credit Tenant Loan, a long term
unsecured debt rating of "Ba3" by Moody's. The
scheduled monthly payments under such lease are
sufficient to pay in full and on a timely basis all
scheduled payments (other than Balloon Payments)
under the related Mortgage Loan. Each of the Credit
Tenant Loans (other than the Mortgage Loan identified
on Annex A as Loan Number 16 (the "Cinemark Credit
Tenant Loan") which is interest only for its first
ten years and then fully amortizes during its term)
requires a payment of principal on the Maturity Date
in excess of its constant Monthly Payment. The
related borrowers have obtained residual value
insurance policies that require the insurer, in
certain circumstances, to pay an amount not in excess
of the insured value of the related Mortgaged
Property (equal to the amount of the Balloon Payment
on the related Credit Tenant Loan). See "Risk Factors
and Other Special Considerations--Risks Related to
the Mortgage Loans--Credit Tenant Loans Have Special
Risks," "--Reliance on Credit Quality of Credit
Tenants and Guarantors Has Special Risks,"
"--Reliance on Residual Value Insurance Policies Has
Special Risks" and "Description of the Mortgage
Pool--Credit Tenant Loans" in this Prospectus
Supplement.
All of the Credit Tenant Loans are represented by
two or more notes (each such note owned by the Trust
Fund being referred to in this Prospectus Supplement
as a "CMAT Pari Passu Note" and each such note not
owned by the Trust Fund being referred to in this
Prospectus Supplement as an "Other Pari Passu
Note"), each originated by NACC/CCA and each secured
by a Mortgage on the same Mortgaged Property or
Mortgaged Properties. The CMAT Pari Passu Note or
Notes and the related Other Pari Passu Note or Notes
are referred to herein collectively as the "Total
Credit Tenant Loan." Each Other Pari Passu Note has
been deposited into a separate trust fund created in
connection with a commercial mortgage-backed
securitization of an affiliate of the Depositor,
Commercial Mortgage Pass-Through Certificates,
Series 1998-D7 (the "D7 Securitization") and the
holder of such Other Pari Passu Note is the trustee
under such D7 Securitization.
With respect to each CMAT Pari Passu Note, the
Trustee, on behalf of the Trust Fund, will be party
to a co-lender agreement with the trustee of the D7
Securitization. Under the terms of the co-lender
agreement with respect to each CMAT Pari Passu Note,
the Trustee, on behalf of the Trust Fund, will be
lead lender.
The CMAT Pari Passu Notes are Balloon Notes which do
not amortize until after payments of interest only
for a fixed period of time following the Cut-Off
Date (other than the Note related to the Cinemark
Credit Tenant Loan, which is interest only for its
first ten years and then fully amortizes during its
term). The related Other Pari Passu Notes are fully
amortizing notes. In the event of the occurrence and
during the continuance of an event of default under
any Total Credit Tenant Loan, all amounts received
in respect thereof that are allocable to principal
will be applied pro rata in accordance with the
outstanding principal balances of the related notes
without regard to the amortization schedules
thereof. The Trustee, on behalf of the Trust Fund,
will have the ability to exercise
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<PAGE>
any rights or powers of the lender under the loan
documents of Total Credit Tenant Loans, including
acceleration thereof and foreclosure on the related
Mortgaged Property.
The Trustee will be the mortgagee of record of the
Total Credit Tenant Loans.
The Servicer will make all servicing decisions with
respect to the Total Credit Tenant Loans and the
Special Servicer will specially service any such
Total Credit Tenant Loans in the event that they
become Specially Serviced Mortgage Loans.
The Servicer will be required to service the Total
Credit Tenant Loans for the benefit of the holders
of the related CMAT Pari Passu Note (or CMAT Pari
Passu Notes) and Other Pari Passu Note (or Other
Pari Passu Notes) with a view to maximizing recovery
to all such holders.
DUAL AMORTIZATION
LOANS................... 13 Mortgage Loans, which represent 6.0% of the
Initial Pool Balance, are "Dual Amortization Loans."
Dual Amortization Loans provide for two amortization
schedules, one longer and one shorter. The related
borrower must apply all net cash flow from the
related Mortgaged Property to pay (to the maximum
extent possible) the relatively larger monthly
payments required by the shorter amortization
schedule. However, the related borrower will not be
in default, and the lender may not accelerate the
Dual Amortization Loan, unless the borrower fails to
make monthly payments in accordance with the longer
amortization schedule despite using all such net cash
flow. Instead, in the event the borrower fails to
make payments consistent with the shorter
amortization schedule on any Due Date, all cash flow
from the related Mortgaged Property on future Due
Dates in excess of current debt service on the loan
will be kept in a lockbox account controlled by the
lender and applied to make payments due under the
shorter amortization schedule. If the cash flow from
the Mortgaged Property is sufficient to return the
Mortgage Loan to performance on the shorter schedule
and payments continue on such schedule for three
sequential Due Dates, future excess property cash
flow is released to the borrower. See "Risk Factors
and Other Special Considerations--Risks Related to
the Certificates--Risks Associated with Dual
Amortization Loans" and "Description of the Mortgage
Dual Amortization Loans" in this Prospectus
Supplement.
PAYMENT TERMS........... All of the Mortgage Loans provide for monthly
scheduled payments of principal and interest or, in
certain cases, interest only. Each Mortgage Loan
accrues interest at the annual rate for such Mortgage
Loan set forth on Annex A (the "Mortgage Rate"). The
Mortgage Rate is fixed for the entire term of each
Mortgage Loan, except as otherwise noted below.
ARD Loans accrue interest at 2% above the applicable
Mortgage Rate, as described under "Description of
the Mortgage Pool--Certain Terms and Conditions of
the Mortgage Loans--Excess Interest" herein,
beginning on a specified date (that is, the
"Anticipated Repayment Date") if such ARD Loans are
not paid in full on or before such date; however, in
the event that an ARD Loan is purchased from the
Trust Fund on or after its Anticipated Repayment
Date, as provided herein, the interest rate will
increase to a higher rate, generally equal to the
greater of (i) the sum of the Mortgage Rate plus,
generally, 5% or (ii) the sum of the then current
applicable Treasury rate plus, generally, 5%. See
"Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans--Excess Interest"
and "The Pooling and Servicing
Agreement--Modifications" in this Prospectus
Supplement. The holder of the majority of the most
subordinate Class of Sequential Certificates
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<PAGE>
(other than the Class N-2 Certificates), has the
right, but not the obligation, to purchase the ARD
Loans from the Trust Fund on the Anticipated
Repayment Date (subject to certain conditions
specified in the Pooling and Servicing Agreement).
As used in this Prospectus Supplement, the term
"Mortgage Rate" does not include the portion of the
interest rate of an ARD Loan that is attributable to
the rate increase; the excess of interest at such
higher rate over interest at the Mortgage Rate
(together with interest thereon) is referred to in
this Prospectus Supplement as "Excess Interest."
Prior to the Anticipated Repayment Date, borrowers
under ARD Notes for which a hard lockbox is not
already in place will be required to enter into a
lockbox agreement pursuant to which all revenue will
be deposited directly into a lockbox account
controlled by the lender. See "--The Mortgage Loans:
Collateral Overview--Lockboxes" above. From and
after the Anticipated Repayment Date, in addition to
paying interest (at the Mortgage Rate) and principal
(based on the amortization schedule) (together, the
"Monthly Debt Service Payment"), the related
borrower generally will be required to apply all
monthly cash flow from the related Mortgaged
Property or Properties to pay the following amounts
generally in the following order of priority: (i)
required payments to the tax and insurance reserve
fund and any ground lease reserve fund, (ii) payment
of Monthly Debt Service, (iii) payments to any other
required reserve funds, (iv) payment of operating
expenses pursuant to the terms of an annual budget
approved by the Servicer, (v) payment of approved
extraordinary operating expenses or capital expenses
not set forth in the approved annual budget or
allotted for in any reserve fund, (vi) principal on
the Mortgage Loan until such principal is paid in
full and (vii) Excess Interest.
See "Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans--Excess
Interest" and "The Pooling and Servicing Agreement--
Modifications" in this Prospectus Supplement.
LOCK-OUT CHARACTERISTICS
OF THE MORTGAGE LOANS... Each of the Mortgage Loans prohibits voluntary
prepayment during a period (each, a "Lock-out
Period") commencing on the date of origination and
ending on the date that is on, or one month to six
months prior to, its Anticipated Repayment Date or
Maturity Date, as applicable.
See "Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans--Prepayment
Provisions" and "--Property Releases" in this
Prospectus Supplement.
OVERVIEW OF LOCK-OUT PERIODS (IN MONTHS)
<TABLE>
<S> <C>
Minimum Remaining Lock-out Period ............... 86
Maximum Remaining Lock-out Period. .............. 244
Weighted Average Remaining Lock-out Period ...... 138.6
</TABLE>
No Mortgage Loan imposes a fee or premium
("Prepayment Premium") for voluntary prepayments
made after the expiration of the related Lock-out
Period (except for the Premium Loans which generally
require the remaining unamortized Premium to be
repaid if the loan is repaid prior to the Maturity
Date or the Anticipated Repayment Date). However,
Prepayment Premiums may be due in connection with
certain involuntary prepayments.
See "Risk Factors and Other Special
Considerations--Risks Related to the
Certificates--Risks Related to Prepayments" and
"--Risks Related to Yield" in this Prospectus
Supplement.
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<PAGE>
DEFEASANCE.............. Each of the Mortgage Loans permits the applicable
borrower at any time after a specified date, which is
generally at least two years from the Closing Date,
to obtain a release of a Mortgaged Property from the
lien of the related Mortgage, subject to certain
conditions. Those conditions include, among other
things, that the borrower pay an amount sufficient to
purchase direct, non-callable obligations of the
United States of America that will provide payments
equal to the scheduled payments due on the Mortgage
Loan, or the defeased amount thereof in the case of a
partial defeasance.
See "Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans--Property
Releases" in this Prospectus Supplement.
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<PAGE>
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS
You should consider the following factors in deciding whether to purchase
the Offered Certificates. In particular, distributions on your Certificates
will depend on payments received on and other recoveries with respect to the
Mortgage Loans. Therefore, you should carefully consider the risk factors
relating to the Mortgage Loans and the Mortgaged Properties. In addition, you
should consider the risk factors discussed in the Prospectus under the heading
"Risk Factors."
RISKS RELATED TO THE MORTGAGE LOANS
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED. The
Mortgage Loans are not insured or guaranteed by any person or entity. Each
Mortgage Loan is a nonrecourse loan. Therefore, if a default occurs, recourse
generally may be had only against the specific properties and other assets that
have been pledged to secure the loan and not against any other assets of the
borrower or its affiliates. Consequently, payment depends primarily on the
sufficiency of the net operating income of the Mortgaged Property and the
market value of the property or the borrower's ability to refinance such
property.
45.9% of the Mortgage Loans were originated within 18 months prior to the
Cut-Off Date. No loan was originated more than 28 months prior to the Cut-Off
Date. Consequently, the majority of the Mortgage Loans do not have a long
payment history.
RISKS ASSOCIATED WITH COMMERCIAL AND MULTIFAMILY LENDING GENERALLY.
Commercial and multifamily lending is generally thought to expose a lender to a
greater risk of loss than one-to-four-family residential lending because
commercial and multifamily lending involves larger loans to single borrowers and
repayments of such Mortgage Loans are dependent upon the cash flow of the
related Mortgaged Property, which can be unpredictable. Even the liquidation
value of a commercial property is determined, in substantial part, by the
capitalization of the property's cash flow. The Mortgage Loans are secured by
the following income-producing property types:
o office buildings;
o anchored and unanchored retail properties;
o full and limited service hotels;
o multifamily residential housing;
o industrial properties;
o an exposition center;
o movie theatres; and
o a mobile home park.
Each property type has its own risks, described below.
COMMERCIAL LENDING DEPENDS UPON NET OPERATING INCOME. Net operating income
can be volatile and may be insufficient to cover debt service on a loan at any
given time. The net operating income and property value of the Mortgaged
Properties may be adversely affected by a large number of factors. Some of
these factors relate to the property itself, such as:
o the age, design and construction quality of the property;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o the proximity and attractiveness of competing properties;
o new construction of competing properties;
o the adequacy of the property's management and maintenance;
o an increase in operating expenses;
o an increase in the capital expenditures needed to maintain the property
or make improvements;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with new
tenants.
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<PAGE>
Other factors that may adversely affect the net operating income and
consequently the ability of tenants to meet lease obligations and property
value of the Mortgaged Properties are more general in nature, such as:
o national, regional or local economic conditions (including plant
closings, industry slowdowns and unemployment rates);
o local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
o demographic factors;
o consumer confidence;
o consumer tastes and preferences; and
o retroactive changes in building codes that require substantial
corrective maintenance.
The volatility of net operating income will be influenced by many of the
foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o the rate at which new rentals occur;
o the percentage of total property expenses in relation to revenue;
o the ratio of fixed operating expenses to those that vary with revenues;
and
o the level of capital expenditures required to maintain the property and
to maintain or replace tenants.
Therefore, properties with short-term or less creditworthy sources of
revenue and/or relatively high operating costs, such as exposition centers and
hotels and motels, can be expected to have more volatile cash flows than
properties with medium- to long-term leases from creditworthy tenants and/or
relatively low operating costs. A decline in the real estate market will tend
to have a more immediate effect on the net operating income of such properties
with short-term revenue sources and may lead to higher rates of delinquency or
default.
The borrower (the "Marina Pacifica Borrower") under one Mortgage Loan,
identified on Annex A as the Marina Pacifica Shopping Center Loan, which
represents 4.3% of the Initial Pool Balance, is entitled under certain
circumstances to payments from the City of Long Beach, California in amounts
calculated by reference to the amount of sales tax generated at the Mortgaged
Property for up to 15 years starting from the base year in 1995. The payment
arrangement was granted by the City of Long Beach in connection with the
redevelopment of the property. The payment period will end in 2010. Based on
the payment formula, the Marina Pacifica Borrower was paid $259,999 for the
year ended December 31, 1998 by the City of Long Beach. However, there can be
no assurance that the Mortgaged Property will continue to generate sufficient
sales tax to result in comparable payments.
PROPERTY VALUE MAY BE ADVERSELY AFFECTED EVEN WHEN CURRENT OPERATING
INCOME IS NOT. The value of any Mortgaged Property may decline over the term of
the related Mortgage Loan. Various factors may adversely affect the value of
the Mortgaged Properties without affecting such properties' current net
operating income, including:
o changes in interest rates;
o the availability of refinancing;
o changes in governmental regulations and fiscal policy;
o changes in consumer preferences;
o economic changes;
o changes in zoning or tax laws; and
o potential environmental legislation or liabilities or other legal
liabilities.
PROPERTY MANAGEMENT MAY AFFECT PROPERTY VALUE AND NET OPERATING
INCOME. The successful operation of a real estate project may depend upon the
property manager's performance and viability. The property manager generally is
responsible for the following:
o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out in a
timely fashion.
Properties deriving revenues primarily from short-term sources are
generally more management intensive than properties leased to tenants under
long-term leases. There is no assurance regarding the adequacy of the skills of
any
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<PAGE>
present or future managers. Additionally, there is no assurance that the
property managers will be in a financial condition to fulfill their management
responsibilities throughout the terms of their respective management
agreements. The property managers are operating companies and, unlike limited
purpose entities, may not be restricted from incurring debt and other
liabilities in the ordinary course of business or otherwise. Moreover, a
majority of the Mortgaged Properties are managed by affiliates of the
applicable borrower. Such relationships could further complicate management of
a Mortgaged Property if the related Mortgage Loan is in default or undergoing
special servicing. In addition, a dispute between the partners or members of a
borrower could disrupt the management of the underlying property, which may
cause an adverse effect on cash flow. However, many of the Mortgage Loans
permit the lender to remove the manager upon the occurrence of an event of
default, a decline in cash flow below specified levels or other specified
triggers.
TENANT CONCENTRATION ENTAILS RISK. A deterioration in the financial
condition of a tenant can be particularly significant if a Mortgaged Property
is leased to a single tenant or a small number of tenants. 12.0% of the
Mortgage Loans, by Cut-Off Date Principal Balance, are secured by single tenant
properties; 10.3% of such single-tenant Mortgage Loans, by Cut-Off Date
Principal Balance, are also Credit Tenant Loans, which have one primary obligor
under the related leases. Mortgaged Properties leased to a single tenant, or a
small number of tenants, also are more susceptible to interruptions of cash
flow if a tenant fails to renew its lease. This is so because the financial
effect of the absence of rental income may be severe, more time may be required
to re-lease the space and substantial capital costs may be incurred to make the
space appropriate for replacement tenants. There can be no assurance that any
tenant will renew its lease.
Mortgage Loans secured by one or more retail, office or industrial
properties also may be adversely affected if there is a concentration of
particular tenants or of tenants in a particular business or industry at the
related property or properties and that particular business or industry is
adversely affected.
In addition, a concentration of any single tenant among the Mortgaged
Properties that secure the Mortgage Loans also increases the negative effect
that any deterioration in the financial condition of such tenant could have on
the performance of the overall portfolio of Mortgage Loans. As an example,
Office Max is a tenant at the Mortgaged Properties securing 4 different
Mortgage Loans, representing 4.1% of the Initial Pool Balance and Staples is a
tenant at the Mortgaged Properties securing 3 different Mortgage Loans,
representing 5.5% of the Initial Pool Balance.
MORTGAGED PROPERTIES LEASED TO MULTIPLE TENANTS ALSO HAVE RISKS. If a
Mortgaged Property has multiple tenants, re-leasing expenditures may be more
frequent than in the case of Mortgaged Properties with fewer tenants, thereby
reducing the cash flow available for debt service payments.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS. The income from and the
market value of the Mortgaged Properties would be adversely affected if:
o space in the Mortgaged Properties could not be leased;
o tenants were unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case; or
o rental payments could not be collected for any other reason.
Expiration of Major Tenant Leases. Repayment of the Mortgage Loans,
particularly those secured by retail, industrial and office properties, will be
affected by the expiration of leases and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements and leasing commissions, could be substantial and
could reduce cash flow from the Mortgaged Properties. Moreover, if a tenant
defaults on its obligations to a borrower, the borrower may incur substantial
costs and experience significant delays associated with enforcing its rights
and protecting its investment, including costs incurred in renovating and
reletting the property.
TENANT BANKRUPTCY ENTAILS RISKS. The bankruptcy or insolvency of a major
tenant, or a number of smaller tenants, may adversely affect the income
produced by a Mortgaged Property. Under the United States Bankruptcy Code, a
tenant has the option of assuming or rejecting any unexpired lease. If the
tenant rejects the lease, the landlord's claim for breach of the lease would be
a general unsecured claim against the tenant (absent collateral securing the
claim). The claim would be limited to the unpaid rent reserved under the lease
for the periods prior to the bankruptcy petition (or earlier surrender of the
leased premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining reserved rent (but not more than three
years' rent). There can be no assurance that any tenant will not file a
petition in bankruptcy.
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<PAGE>
HomePlace Stores Inc. and Loehmann's, Inc., each a major tenant of a
separate Retail Property, have each filed bankruptcy under Chapter 11 of the
United States Bankruptcy Code--
o On January 8, 1998, HomePlace Stores Inc., a major tenant of the
Mortgaged Property identified on Annex A as Warminster Town Center (the
"Warminster Town Center Property"), with an aggregate 53,470 square feet
of the Warminster Town Center Property's leaseable square footage
representing 25% of the Warminster Town Center Property's total annual
base rent, filed for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. The United States Bankruptcy Court has adjusted the terms of the
lease, permitting the Borrower, as landlord under such lease, to recapture
and release up to 16,000 square feet of the leaseable space. On June 6,
1999, the United States Bankruptcy Court approved HomePlace Stores Inc.'s
reorganization plan, enabling the company to emerge from Chapter 11
bankruptcy and complete its merger with Waccamaw Corp. The new company
will be called HomePlace of America Inc. and will operate out of
Waccamaw's corporate headquarters in South Carolina.
o On May 18, 1999, Loehmann's, Inc., a major tenant of the Mortgaged
Property identified on Annex A as Marina Pacifica Shopping Center (the
"Marina Pacifica Shopping Center Property"), with an aggregate 24,080
square feet of the Marina Pacifica Shopping Center Property's leaseable
square footage representing 8.6% of the Marina Pacifica Shopping Center
Property's total annual base rent, filed for reorganization under Chapter
11 of the United States Code in the United States Bankruptcy Court for the
District of Delaware. On June 7, 1999, Loehman's, Inc. was approved by the
United States Bankruptcy Court for $75,000,000 debtor-in-possession
financing with Congress Financial Corporation to finance its working
capital expenditure requirements. As of September 17, 1999, Loehmann's,
Inc. closed 14 retail stores and the U.S. Bankruptcy Court appointed
Hilco/Great American Group as the agent/trustee to dispose of those
assets. However, to date, Loehmann's, Inc. has not rejected nor affirmed
its lease with respect to the related Mortgaged Property.
THE BANKRUPTCY OF THE BORROWER UNDER THE LA JOLLA VILLAGE LOAN ENTAILS
RISK. The borrower (the "La Jolla Borrower") under one Mortgage Loan,
identified on Annex A as the La Jolla Village Loan, which represents 1.7% of
the Initial Pool Balance, filed for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of California on April 23, 1996 (In re La Jolla Village Professional
Center Associates, a California limited partnership, Debtor, United States
Bankruptcy Court, Southern District of California, Case No. 96-05533-JM). The
bankruptcy case arose as a result of a default on a previous second priority
mortgage. The La Jolla Borrower was in the process of negotiating a
modification of this second mortgage with the lender, during which time the
lender sold the note. The new holder of the second mortgage commenced
foreclosure proceedings. The La Jolla Borrower then filed for bankruptcy. The
holder's claims were disallowed in their entirety and on March 25, 1998, the
bankruptcy court entered its order confirming the La Jolla Borrower's Fifth
Amended Plan of Reorganization As Modified (And As Further Modified February
19, 1998) (the "La Jolla Plan"). The assets of the La Jolla Borrower have
revested in the reorganized La Jolla Borrower and the La Jolla Plan has been
substantially consummated and is not subject to modification. The La Jolla
Village Loan was originated by CCA and the proceeds of such loan were used to
repay the existing first and second mortgage loans. There are no pending
matters in the bankruptcy case, and bankruptcy counsel for the La Jolla
Borrower has informed the Depositor that it is not aware of any matters that
may be commenced in the future. There is no assurance that additional claims in
the bankruptcy case will not be made in the future.
LOAN CONCENTRATION ENTAILS RISKS. In general, concentrations in a mortgage
pool in which one or more loans have outstanding principal balances that are
substantially larger than the other mortgage loans in such pool can result in
losses that are more severe, relative to the size of the pool, than would be
the case if the aggregate balance of such pool were distributed more evenly
among the mortgage loans in such pool. Several of the Mortgage Loans have
Cut-Off Date Principal Balances that are substantially higher than the average
Cut-Off Date Principal Balance, which is $9,643,808. The following table sets
forth Cut-Off Date Principal Balances for the 3 largest Mortgage Loans. In
total, the 3 largest Mortgage Loans have Cut-Off Date Principal Balances that
represent, in the aggregate, approximately 16.3% of the Cut-Off Date Principal
Balance.
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<PAGE>
CUT-OFF DATE PRINCIPAL BALANCES AND CONCENTRATION OF MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF DATE % OF INITIAL
MORTGAGE LOAN PRINCIPAL BALANCE POOL BALANCE
- ----------------------------------------------- ------------------- -------------
<S> <C> <C>
Westin Denver Tabor Center Loan ............... $44,593,725 5.7%
208 South LaSalle Loan ........................ $42,788,119 5.5%
ACCOR-M-Six-III Credit Tenant Loan(1) ......... $40,308,831 5.2%
</TABLE>
- ---------
(1) The Cut-Off Date Principal Balance for the Total ACCOR-M-Six-III Credit
Tenant Loan is $49,407,752. Only the CMAT Pari Passu Note in the amount
of the Cut-Off Date Principal Balance listed above will be included in
the Trust Fund. See "Description of the Mortgage Pool--Significant
Mortgage Loans--The ACCOR-M-Six-III Credit Tenant Loan and Properties" in
this Prospectus Supplement.
See "Description of the Mortgage Pool--Significant Mortgage Loans" in this
Prospectus Supplement for a description of each of the Mortgage Loans listed on
the preceding table.
GEOGRAPHIC CONCENTRATION ENTAILS RISKS. Repayments by borrowers and the
market value of the Mortgaged Properties could be adversely affected by the
following:
o economic conditions generally or in regions where the borrowers and the
Mortgaged Properties are located;
o conditions in the real estate markets where the Mortgaged Properties are
located;
o changes in governmental rules and fiscal policies;
o acts of nature (which may result in uninsured losses); and
o other factors beyond the control of the borrowers.
The Mortgaged Properties are located throughout 29 states and the District
of Columbia. The following states have concentrations of 5% or greater as
listed below:
<TABLE>
<CAPTION>
CUT-OFF DATE PRINCIPAL
BALANCE OF MORTGAGE LOANS % OF INITIAL
STATE SECURED BY PROPERTIES IN STATE(1) POOL BALANCE
- ---------------------- ----------------------------------- -------------
<S> <C> <C>
California ........... $151,238,176 19.4%
New York ............. $ 76,647,892 9.6%
Illinois ............. $ 69,793,291 8.9%
Pennsylvania ......... $ 66,198,491 8.5%
Colorado ............. $ 56,608,131 7.2%
Ohio ................. $ 41,540,228 5.3%
Texas ................ $ 40,477,078 5.2%
</TABLE>
- ---------
(1) With respect to Mortgage Loans secured by multiple Mortgaged Properties,
the Cut-Off Date Principal Balance refers to the Allocated Loan Amount
for such property, as of the Cut-Off Date.
For a discussion of legal aspects related to Mortgage Loans secured by
Mortgaged Properties located in California, see "Certain Legal Aspects of
Mortgage Loans for Mortgaged Properties Located in California" in this
Prospectus Supplement.
RISKS RELATED TO PROPERTY INSPECTIONS. Licensed engineers inspected all of
the Mortgaged Properties (except the Mortgaged Properties securing the Credit
Tenant Loans) to assess the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements. If conditions requiring repair or
replacement were identified, the related borrower was generally required to
fund reserves to cover such expenses. However, there is no assurance that all
conditions requiring repair or replacement were identified or that the reserves
will be adequate.
RESERVES MAY BE INSUFFICIENT. Most of the Mortgage Loans require that
reserves be funded on a monthly basis from cash flow to fund ongoing monthly,
semi-annual or annual expenses such as taxes and insurance. Most of the
Mortgage Loans also required reserves to be established upon the closing of the
Mortgage Loan to fund identified capital expenditure items, certain leasing
costs, identified environmental remediation costs or identified engineering
remediation costs when such needs were identified. See "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Escrows" in
this Prospectus Supplement. The reserve amounts may not be sufficient to offset
the
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<PAGE>
actual costs of the items for which the reserves were established. In addition,
cash flow from the Mortgaged Properties may not be sufficient to fund fully the
ongoing monthly reserve requirements.
SOME OF THE MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO
ALTERNATIVE USES. Some of the Mortgaged Properties may not be easily converted
to alternative uses because, in general, converting certain types of commercial
properties (including Mobile Home Park Properties) to alternate uses requires
substantial capital expenditures. If a Mortgaged Property is not readily
adaptable to other uses, the liquidation value of such Mortgaged Property may
be substantially less than would be the case if the property were readily
adaptable to other uses.
OFFICE PROPERTIES HAVE SPECIAL RISKS. 36.8% of the Mortgage Loans, by
Cut-Off Date Principal Balance, are secured by Office Properties. See
"Description of the Mortgage Pool--Additional Mortgage Loan
Information--Cut-Off Date Principal Balance by Property Type" in this
Prospectus Supplement for certain statistical information on the Office
Properties and Office Loans. A number of factors may adversely affect the value
of office properties, including:
o the quality of the tenants in the building;
o the physical attributes of the building in relation to competing
buildings;
o access to transportation;
o the strength and stability of the local economy;
o whether tax benefits are available;
o the strength and stability of business for the particular type of tenant
or tenants currently in the building;
o the desirability of the location for business; and
o the cost of refitting office space for a new tenant (which is often
significantly higher than the cost of refitting other types of properties
for new tenants).
Such risks may be increased if revenue depends on a single tenant or if there
is a significant concentration of tenants in a particular business or industry.
0.8% of the Mortgage Loans secured by Office Properties, by Cut-Off Date
Principal Balance, are secured by single-tenant properties.
RETAIL PROPERTIES HAVE SPECIAL RISKS. 29.3% of the Mortgage Loans, based
on Initial Pool Balance, are secured by Retail Properties. See "Description of
the Mortgage Pool--Additional Mortgage Loan Information--Cut-Off Date Principal
Balance by Property Type" in this Prospectus Supplement.
The quality and success of a retail property's tenants significantly
affect the property's value. For example, if the sales of retail tenants were
to decline, rents tied to a percentage of gross sales may decline and those
tenants may be unable to pay their rent or other occupancy costs. The presence
or absence of an "anchor tenant" in a shopping center also can be important,
because anchors play a key role in generating customer traffic and making a
center desirable for other tenants. An "anchor tenant" is a retail tenant whose
space is large in size as compared to that of other tenants and the total size
of the retail center, and such retail tenant is vital in attracting customers
to the property. 20% of the Mortgage Loans secured by Retail Properties, based
on Initial Pool Balance, are "anchored" Retail Properties, 4.2% are secured by
"quasi-anchored" Retail Properties and 5.1% are secured by "unanchored" Retail
Properties. A "quasi-anchored" Retail Property is a Retail Property which has a
national or large regional tenant that attracts customers to the property but
that is not large enough to be an anchor tenant.
Consequently, the economic performance of an "anchored" Retail Property or
a "quasi-anchored" Retail Property will be adversely affected by various
factors, including:
o an anchor tenant's failure to renew its lease;
o termination of an anchor tenant's lease;
o the bankruptcy or economic decline of an anchor tenant or self-owned
anchor;
o the cessation of the business of a self-owned anchor or of an anchor
tenant (notwithstanding its continued payment of rent);
o a shift in shopping patterns or loss of an anchor tenant's ability to
attract shoppers; or
o a co-tenancy clause in the leases and/or operating agreements of other
tenants which permits those tenants to cease operating their stores if the
anchor tenant ceases operations at the same location.
Such risks may be increased if revenue is dependent on a single-tenant.
2.7% of the Retail Properties, by Cut-Off Date Principal Balance, are secured
by single-tenant properties, 100% of which, based on the Initial Pool Balance,
are Credit Tenant Loans. See "Description of the Mortgage Pool--Credit Tenant
Loans" in this Prospectus Supplement.
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Retail Properties also face competition from sources outside a given real
estate market. For example, all of the following compete with more traditional
retail properties for consumer dollars:
o discount shopping centers and clubs;
o catalogue retailers;
o home shopping networks;
o internet web sites; and
o telemarketing.
Continued growth of these alternative retail outlets (which often have
lower operating costs) could adversely affect the rents collectible at the
Retail Properties included in the Mortgage Pool, as well as the income from,
and market value of, the Mortgaged Properties. Moreover, additional competing
retail properties may be built in the areas where the Retail Properties are
located.
HOTEL PROPERTIES HAVE SPECIAL RISKS. 10.9% of the Mortgage Loans, based on
Initial Pool Balance, are secured by full service hotels, limited service
hotels or motels. See "Description of the Mortgage Pool--Additional Mortgage
Loan Information--Cut-Off Date Principal Balance by Property Type" in this
Prospectus Supplement for certain statistical information on the Hotel
Properties and Hotel Loans. The Hotel Properties include hotels associated with
national franchise chains, hotels associated with regional franchise chains and
hotels that are not affiliated with any franchise chain but may have their own
brand identity. 47.5% of the Hotel Loans, by Cut-Off Date Principal Balance,
are Credit Tenant Loans where the credit tenant's obligations under the related
credit lease are guaranteed by ACCOR, a French corporation ("ACCOR"), which has
a long-term unsecured debt rating of "BBB" by S&P. On July 13, 1999, S&P
revised its outlook of ACCOR from "stable" to "negative."
Various factors may adversely affect the economic performance of a hotel,
including:
o adverse economic or social conditions, either local, regional or
national (which may limit the amount that can be charged for a room and
reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives (to satisfy such costs, Hotel Loans generally require the borrowers
to fund reserves for furniture, fixtures and equipment);
o a deterioration in the financial strength or managerial capabilities of
the owner and operator of a hotel; and
o changes in travel patterns caused by changes in access, energy prices,
labor strikes, relocation of highways, the construction of additional
highways or other factors.
In addition, because hotel rooms generally are rented for short periods of
time, hotels tend to respond more quickly to adverse economic conditions and
competition than do other commercial properties. Moreover, the hotel and
lodging industry is generally seasonal in nature. This seasonality can be
expected to cause periodic fluctuations in a hotel property's revenues,
occupancy levels, room rates and operating expenses. In connection with such
concerns, certain of the Hotel Loan borrowers are required to fund seasonality
reserves.
Risks Relating to Affiliation with a Franchise or Hotel Management
Company. All of the Hotel Properties are affiliated with a franchise. The
performance of a Hotel Property affiliated with a franchise or hotel management
company depends in part on:
o the continued existence and financial strength of the franchisor or
hotel management company;
o the public perception of the franchise or hotel chain service mark; and
o the duration of the franchise licensing or management agreements.
Any provision in a franchise agreement or management agreement providing for
termination because of a bankruptcy of a franchisor or manager generally will
not be enforceable, but termination for failure to comply with certain
requirements of the franchise agreement due to financial distress may be
enforceable. Franchise agreements for certain of the Mortgaged Properties may
terminate prior to the related Maturity Date. Replacement franchises may
require significantly higher fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to use
the franchise license without the franchisor's consent. Conversely, in the case
of certain Mortgage Loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to
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replace following a foreclosure. Further, in the event of a foreclosure, the
Trustee or a purchaser of such Mortgaged Property probably would not be
entitled to the rights under any liquor license for the Mortgaged Property.
Such party would be required to apply in its own right for such a license, and
it is possible that a new license would not be obtained.
In addition, in some states, liquor licenses must be held by a natural
person and, consequently, liquor licenses for Hotel Properties in such
jurisdictions are held by an individual affiliated with the related borrower or
property manager, rather than the borrower itself. In addition, certain states
prohibit the transfer of liquor licenses to any person without the prior
approval of the relevant licensing authority. In the event of a foreclosure of
a Hotel Property, it is unlikely that the Trustee (or Servicer or Special
Servicer) or purchaser in any such sale would be entitled to the rights under
the liquor license for such Hotel Property and such party would be required to
apply in its own right for such a license. It is possible that a new liquor
license could not be obtained.
MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS. 11.9% of the Mortgage Loans,
based on Initial Pool Balance, are secured by multifamily apartment buildings.
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information--Cut-Off Date Principal Balance by Property Type" in this
Prospectus Supplement for certain statistical information on the Multifamily
Properties and Multifamily Loans. Factors that may adversely affect the value
and successful operation of a multifamily property include:
o the physical attributes of the apartment building (e.g., its age,
appearance and construction quality);
o the location of the property (e.g., a change in the neighborhood over
time);
o the ability of management to provide adequate maintenance and insurance;
o the types of amenities the property provides;
o the property's reputation;
o the level of mortgage interest rates (which may encourage tenants to
purchase rather than lease housing);
o the presence of competing properties;
o adverse local or national economic conditions (which may limit the
amount that may be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels); and
o state and local regulations (which may affect the building owner's
ability to increase rent to the market rent for an equivalent apartment).
Governmental Regulation Regarding Multifamily Properties. Certain states
regulate the relationship between owner and tenants and require a written
lease, good cause for eviction, disclosure of fees and notification to
residents of changed land use. Certain states also prohibit retaliatory
evictions, limit the reasons for which a landlord may terminate a tenancy,
limit the reasons for which a landlord may increase rent and prohibit a
landlord from terminating a tenancy solely because the building has been sold.
In addition, numerous counties and municipalities impose rent control
regulations on apartment buildings. These regulations may limit rent increases
to fixed percentages, to percentages of increases in the consumer price index,
to increases set or approved by a governmental agency, or to increases
determined through mediation or binding arbitration. In many cases, the rent
control laws do not permit vacancy decontrol. Any limitations on a borrower's
ability to raise property rents may impair such borrower's ability to repay its
Mortgage Loan from its net operating income or the proceeds of a sale or
refinancing of the related Mortgaged Property.
CREDIT TENANT LOANS HAVE SPECIAL RISKS. 10.3% of the Mortgage Loans, based
on Initial Pool Balance, are Credit Tenant Loans. The Credit Tenant Loans
benefit from net lease obligations (a "Credit Tenant Lease") of a publicly or
privately rated tenant or guarantor. In reliance on such ratings, the Credit
Tenant Loans were generally underwritten to lower DSCRs and/or higher LTVs than
would have been acceptable had the related Mortgaged Properties been leased to
less creditworthy tenants. In the event that a Credit Tenant defaults in its
obligations under a Credit Tenant Lease, the related borrower may not be able
to re-let the Mortgaged Property for sufficiently high rent to support debt
service on the related Credit Tenant Loan or funds received in liquidation of
such Mortgaged Property may not be sufficient to satisfy the borrower's
obligations under such Credit Tenant Loan. See "Description of the Mortgage
Pool--Credit Tenant Loans" in this Prospectus Supplement.
Each of the Credit Tenant Loans is also a CMAT Pari Passu Note which is an
interest-only Balloon Note (other than the Cinemark Credit Tenant Loan which is
interest only for its first ten years and then fully amortizes during the
remainder of its term) for the first ten years of its term (which terms range
from 20 to 22 years) and each of the related Other Pari Passu Notes has an
amortization schedule that fully amortizes its principal balance by the end of
the tenth year. However, in the event of the occurrence of a continuing event
of default under any Credit Tenant Loan, all amounts received in
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respect thereof that are allocable to principal will be applied pro rata in
accordance with the outstanding principal balances of the related notes without
regard to the amortization schedules thereof. See "Description of the Mortgage
Pool--Credit Tenant Loans" in this Prospectus Supplement.
Any rating assigned to a credit tenant or guarantor, as applicable, by a
rating agency or NAIC will reflect only such rating agency's or NAIC's
assessment of the long-term unsecured debt obligations of such entity. Such
rating is not an assessment of the likelihood that the Credit Tenant Leases
will not be terminated (pursuant to their terms or otherwise), that the Credit
Tenant Loans will not be prepaid, or that any Prepayment Premium will be paid
or, if paid, will be sufficient to provide the anticipated yield.
Reliance on Credit Quality of Credit Tenants and Guarantors Has Special
Risks. With respect to each Credit Tenant Loan, monthly payments are dependent
upon the payment of monthly rent and other payments due from the related credit
tenant or guarantor. A downgrade, withdrawal or qualification in the credit
rating of a credit tenant or guarantor may have a related adverse effect on the
rating of your Certificates even if there is no default under the related
Credit Tenant Loan. See "Rating" in this Prospectus Supplement.
If a credit tenant or guarantor defaults on its obligation to make monthly
payments or other payments due under a Credit Tenant Lease or the related
guaranty, as the case may be, the borrower under the related Credit Tenant Loan
may not have the ability to make the required payments on such Credit Tenant
Loan. If a payment default on a Credit Tenant Loan occurs, the Special Servicer
may be entitled to foreclose upon or otherwise realize upon the related
Mortgaged Property to recover amounts due under the Credit Tenant Loan, and
will also be entitled (as successor to the borrower), after appointment of a
receiver or purchase of the property at foreclosure, to pursue any available
remedies against the defaulting credit tenant and any guarantor, which may
include rights to all future monthly rental payments. If the default occurs
before significant amortization of a Credit Tenant Loan has occurred and no
recovery is available from the related borrower or the credit tenant or
guarantor, it is unlikely that the Special Servicer will be able to recover in
full the amounts then due under such Credit Tenant Loan.
The Ability of Credit Tenants to Reject Credit Tenant Leases in a
Bankruptcy. To the extent that any of the tenants of properties which are
subject to Credit Tenant Loans were to become a debtor in a bankruptcy
proceeding under the Bankruptcy Code, such lessee or its bankruptcy trustee
could reject the lease. If a lease were rejected, rental payments thereunder
would terminate as to the related property, thereby leaving the owner without a
source of rental payments to support its debt service and other obligations
under the applicable Credit Tenant Loans and with a claim for damages as a
source of payment of amounts due under such lease under section 502(b)(6) of
the Bankruptcy Code. A claim by a lessor for damages resulting from the
rejection by a debtor of a lease of real property (or rejection of a guarantee
of a lease upon the bankruptcy of a guarantor) is limited to an amount equal to
the rent reserved under the lease, without acceleration, for the greater of one
year or 15 percent (but not more than three years) of the remaining term of the
lease, plus rent already due but unpaid. There can be no assurance that any
such claim for damages (or any recovery on the underlying mortgaged real
estate) would be sufficient to provide for the repayment of amounts then due
under the lease.
Reliance on Residual Value Insurance Policies Has Special Risks. With
respect to the Credit Tenant Loans that require balloon payments at maturity,
the related borrowers have obtained residual value insurance policies ("RVI
Policies") that require the insurer, in the event that a liquidation of the
related Mortgaged Property is required in connection with a default in the
balloon payment, to pay an amount equal to the amount of any deficiency between
the proceeds of the sale of such Mortgaged Property and the lesser of:
(i) the insured value of the Mortgaged Property; and
(ii) any indebtedness remaining under the Credit Tenant Loan which is
not paid by the borrower, or if the sale of such Mortgaged
Property does not take place, to pay the full amount of the
remaining indebtedness under the Credit Tenant Loan that is not
paid by the borrower,
but not in excess of the insured value of the Mortgaged Property. The "insured
value" of a Credit Tenant Property is at least the amount of the Balloon
Payment due on the related Credit Tenant Loan. The RVI Policies were issued by
R.V.I. America Insurance Company ("R.V.I. America") and Financial Structures
Limited ("FSL"). As of the Cut-Off Date, R.V.I. America had a claims paying
rating or financial strength rating of "A" by S&P and "AA-" by Duff & Phelps
Credit Rating Co. FSL does not have a claims paying rating or financial
strength rating from a nationally recognized rating agency; however, the RVI
Policies issued by FSL have been reinsured with Royal Indemnity Company, which
as of the Cut-Off Date had a claims paying rating or financial strength rating
of "AA-" by S&P.
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Each RVI Policy Contains Certain Exclusions to Coverage That Could Limit
Recovery. See "Description of the Mortgage Pool--Credit Tenant Loans" in this
Prospectus Supplement. The reinsurance by Royal Indemnity Company for each RVI
Policy issued by FSL is subject to the same exclusions from coverage.
Generally, a claim for payment under an RVI Policy issued by R.V.I. America
must be filed no more than one year and no less than 10 days prior to the
policy termination date, while a claim for payment under an RVI Policy issued
by FSL must be filed no earlier than ten days prior to the policy termination
date and no later than thirty days after such policy termination date. The
policy termination date in each case is no earlier than the date on which the
Balloon Payment is due on the related Credit Tenant Loan. No RVI Policy
requires that the related Credit Tenant Property be sold prior to payment of
the claim. However, if the related Credit Tenant Property has not been sold by
the date the claim is paid in accordance with the procedures, if any, set forth
in the related RVI Policy, then the related Note will be transferred to the
related RVI policy insurer.
Distributions in respect of your Certificates may be reduced if there is a
failure of the RVI Policy insurer to pay under the terms of its policy. In
addition, a downgrade, withdrawal or qualification in the claims paying rating
or financial strength rating of the insurer under an RVI Policy may have a
related adverse effect on the rating of your Certificates, even if there is no
default under the related Credit Tenant Loan. See "Rating" in this Prospectus
Supplement.
For a more complete description of the Credit Tenant Loans, see
"Description of the Mortgage Pool--Credit Tenant Loans" in this Prospectus
Supplement.
LOANS TO AFFILIATED BORROWERS ENTAIL RISKS. Concentrations of Mortgage
Loans with the same borrower or affiliated borrowers can also pose increased
risks. For example, if a person that owns or controls several Mortgaged
Properties experiences financial difficulty at one Mortgaged Property, it could
defer maintenance at another Mortgaged Property in order to satisfy current
expenses with respect to the troubled Mortgaged Property, or it could attempt
to avert foreclosure by filing a bankruptcy petition that might have the effect
of interrupting Monthly Payments (subject to the Servicer's, the Trustee's and
the Fiscal Agent's respective obligations to make Advances) for an indefinite
period on all of the related Mortgage Loans.
There are 11 groups, each consisting of between four to nine Mortgage
Loans that were made to affiliated borrowers but which are not
cross-collateralized or cross-defaulted. None of such groups of Mortgage Loans
to affiliated borrowers represents more than approximately 5.1% of the Initial
Pool Balance. 2.7% of the Mortgage Loans to affiliated borrowers that are not
cross-collateralized or cross-defaulted, by Cut-Off Date Principal Balance, are
Credit Tenant Loans.
RISKS RELATED TO LIMITATIONS ON ENFORCEABILITY OF CROSS-COLLATERALIZATION.
The Cinemark Credit Tenant Loan, which represents approximately 2.3% of the
Initial Pool Balance, is secured by two Mortgaged Properties owned by different
borrowers and is cross-collateralized. These arrangements seek to reduce the
risk that the inability of a Mortgaged Property securing each such Mortgage Loan
to generate net operating income sufficient to pay debt service will result in
defaults and ultimate losses.
Cross-collateralization arrangements involving more than one borrower
could be challenged as fraudulent conveyances by creditors of a borrower in an
action brought outside a bankruptcy case or, if such borrower were to become a
debtor in a bankruptcy case, by the borrower's representative. A lien granted
by a borrower under a cross-collateralized Mortgage Loan could be avoided if a
court were to determine that: (i) such borrower was insolvent when it granted
the lien, was rendered insolvent by the granting of the lien or was left with
inadequate capital, or was not able to pay its debts as they matured; and (ii)
such borrower did not receive fair consideration or reasonably equivalent value
when it allowed its Mortgaged Property or Properties to be encumbered by a lien
securing the entire indebtedness. Among other things, a legal challenge to the
granting of the liens may focus on the benefits realized by such borrower from
the respective Mortgage Loan proceeds, as well as the benefit to it from the
cross-collateralization. If a court were to conclude that the granting of the
liens was an avoidable fraudulent conveyance, that court could nullify the lien
or mortgage effecting the cross-collateralization and nullify or subordinate
all or part of the pertinent Mortgage Loan to existing or future indebtedness
of that borrower. The court could also allow the borrower to recover payments
it made pursuant to the avoided cross-collateralization.
AUTHORITY TO INCUR ADDITIONAL DEBT ENTAILS RISKS. 1 of the Mortgage Loans,
representing 3.6% of the Initial Pool Balance, permit the borrower to incur
additional indebtedness other than in the ordinary course of business. Each of
the BGK Loans (which have an aggregate Cut-off Date Principal Balance of
$40,020,964, representing approximately 5.1%
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of the Initial Pool Balance) permits the related borrower, subject to the
lender's discretion, to incur debt in connection with re-tenanting costs
related to its Mortgaged Property, in an amount up to 5% of the outstanding
principal balance of such loan. Such indebtedness is required to be subordinate
to the Mortgage Loan and not secured by the Mortgaged Property.
Substantially all of the Mortgage Loans also permit the related borrower
to incur limited indebtedness in the ordinary course of business (however, such
additional indebtedness is generally required to be paid within 60 to 90 days).
When a borrower (or its constituent members) has one or more other outstanding
loans (even if they are subordinate or mezzanine loans), the Trust Fund may be
subjected to additional risk because the borrower may have difficulty servicing
and repaying multiple loans. The existence of another loan generally also will
make it more difficult for the borrower to obtain refinancing of the Mortgage
Loan and may thereby jeopardize repayment of the Mortgage Loan. Moreover, the
need to service additional debt may reduce the cash flow available to the
borrower to operate and maintain the Mortgaged Property.
Additionally, if the borrower defaults on the Mortgage Loan and/or any
other loan, actions taken by other lenders could impair the security available
to the Trust Fund. If a default to a junior lender leads to a bankruptcy
petition being filed by or against the borrower, the Trust Fund's ability to
foreclose would be automatically stayed, and principal and interest payments
might not be made during the course of the bankruptcy case. The bankruptcy of a
junior lender with a lien on the Mortgaged Property may also operate to stay
foreclosure by the Trust Fund.
See "Certain Additional Risks Related to Mezzanine Financings" below and
"Certain Legal Aspects of Mortgage Loans--Subordinate Financing" in the
Prospectus.
CERTAIN ADDITIONAL RISKS RELATED TO MEZZANINE FINANCINGS. Pursuant to a
side letter entered into in connection with the Mortgage Loan identified on
Annex A hereto as Loan Number 4 (the "Bank of America Loan"), the direct
parents of the borrower under the Bank of America Loan are permitted to borrow
amounts secured by a pledge of equity in the borrower. Pursuant to the terms of
such side letter, the mezzanine loan must be in a form acceptable to the senior
lender. In addition, the mezzanine lender is required to execute a standstill
agreement that will provide, among other things, that it will not transfer the
mezzanine loan without the consent of the Rating Agencies and will not be
permitted to become the holder of the pledged interests unless it has delivered
a non-consolidation opinion in a form satisfactory to the lender and the Rating
Agencies. Auerbach Realty Group, LLC (the "Auerbach Mezzanine Borrower"), the
99% limited partner of the borrower (the "Auerbach Borrower") under the
Mortgage Loan identified on Annex A as Loan Number 22 (the "Auerbach Loan")
borrowed $9,500,000 from Far East National Bank and Hawthorne Savings Bank (the
"Auerbach Mezzanine Loan"). The Auerbach Mezzanine Loan is secured by a pledge
of equity in the Auerbach Mezzanine Borrower along with equity in nine other
entities. In addition, $5,000,000 of the Auerbach Mezzanine Loan is guaranteed
by a principal of the Auerbach Mezzanine Borrower. The Auerbach Mezzanine Loan
is not secured by the Mortgaged Property that secures the Auerbach Loan nor any
direct equity interest in the Auerbach Borrower.
The existence of mezzanine other indebtedness could adversely affect the
financial viability of a borrower or the value of the equity in the borrower
held by the sponsoring entities of the borrower. There is a risk that any
holder of mezzanine debt may attempt to use its rights as owner of the
mezzanine loan to protect itself against an exercise of rights by the lender
under the Mortgage Loan.
The holder of mezzanine debt may have rights similar to those of a
Preferred Interest Holder (as defined below under "Certain Risks Relating to
Preferred Equity Investments"). See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans--Preferred Equity Investments" in
this Prospectus Supplement.
CERTAIN RISKS RELATED TO PREFERRED EQUITY INVESTMENTS. Certain affiliates
of NACC and/or CCA (each, a "Preferred Interest Holder") have acquired a
preferred equity interest in 4 borrowers with respect to Mortgage Loans (the
"Preferred Equity Loans"), which represents approximately 13.3% of the Initial
Pool Balance, as set forth in the following table:
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PREFERRED EQUITY INVESTMENTS IN BORROWERS AND AFFILIATES
<TABLE>
<CAPTION>
CUT-OFF DATE INITIAL
PRINCIPAL PREFERRED EQUITY
MORTGAGE LOAN BALANCE INVESTMENT
- ---------------------------------------- -------------- -----------------
<S> <C> <C>
Mall of Orange Loan .................... $15,500,000 $10,916,618
Congressional North Loan ............... $32,647,005 $ 1,538,389
Henry W. Oliver Loan ................... $33,523,888 $ 100,000
Bayside Exposition Center Loan ......... $22,069,624 $ 941,111
</TABLE>
Preferred equity is similar to mezzanine financing in that it provides
additional funds for the borrower without further encumbering the Mortgaged
Property, and without necessarily granting the Preferred Interest Holder a
share in the increased value of the borrower. The existence of preferred equity
held by the Preferred Interest Holder may adversely affect the financial
viability of the related borrower or the value in the equity of the borrower
held by the sponsoring entities of the borrower in that the Preferred Interest
Holder receives payments before other members or partners in the borrower. In
addition, the preferred equity investment may create a conflict between the
Trust Fund and affiliates of the Depositor.
See "Risks Relating to Conflicts of Interest--Conflicts between the Trust
Fund and Affiliates of the Depositor" below. For a description of the Preferred
Interest Holder's rights with respect to the preferred equity investment, see
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans--Preferred Equity Investments" in this Prospectus Supplement.
TAX CONSIDERATIONS RELATED TO FORECLOSURE. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. Among other things, the independent contractor
would not be permitted to perform construction work on the Mortgaged Property
unless such construction generally was at least 10% complete at the time
default on the related Mortgage Loan becomes imminent. In addition, any net
income from such operation and management, other than qualifying "rents from
real property" (as defined in Section 856(d) of the Code), or any rental income
based on the net profits of a tenant or sub-tenant or allocable to a service
that is non-customary in the area and for the type of building involved, will
subject the Trust Fund to federal (and possibly state or local) tax on such
income at the highest marginal corporate tax rate (currently 35%), thereby
reducing net proceeds available for distribution to Certificateholders.
See "The Pooling and Servicing Agreement--Realization upon Mortgage
Loans--Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans" in this Prospectus Supplement and "Federal Income Tax
Consequences--REMIC Certificates--Taxes That May Be Imposed on the REMIC
Pool--Net Income from Foreclosure Property" in the Prospectus.
DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION POSES CERTAIN RISKS. If and
as principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Pool will be subject to more concentrated risk with respect to the
diversity of properties, types of properties, geographic concentration of
properties (see "--Geographic Concentration Entails Risks" above) and the
number of borrowers. Because principal on the Certificates will be paid in
sequential order, and no holder of a Class of Certificates will be entitled to
distributions of principal until the Certificate Balance of the preceding Class
or Classes so entitled has been reduced to zero, Classes that have a later
sequential designation are more likely to be exposed to the risk of
concentration discussed in the preceding sentence than Classes with higher
sequential priority. The following table shows the weighted average terms to
maturity of the Mortgage Loans by types of Mortgaged Property.
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WEIGHTED AVERAGE REMAINING TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR MORTGAGE LOANS SECURED BY VARIOUS PROPERTY TYPES
<TABLE>
<CAPTION>
% OF
CUT-OFF DATE WEIGHTED AVERAGE REMAINING TERM TO
PRINCIPAL EARLIER OF MATURITY DATE OR ANTICIPATED
PROPERTY TYPE BALANCE REPAYMENT DATE (MONTHS)
- --------------------------- -------------- ----------------------------------------
<S> <C> <C>
Office Properties ......... 36.8% 130
Retail .................... 29.3% 136
Multifamily ............... 11.9% 128
Hotel(1) .................. 10.9% 195
Industrial ................ 4.6% 125
Movie Theatre ............. 3.2% 226
Exposition Center ......... 2.8% 111
Mobile Home Park .......... 0.4% 94
</TABLE>
- ---------
(1) 93.3% of the Hotel Properties secure Mortgage Loans guaranteed by ACCOR,
which has a credit rating of "BBB" by S&P. On July 13, 1999, S&P revised
its outlook of ACCOR from "stable" to "negative."
RISKS UNDER ENVIRONMENTAL LAWS. Various environmental laws may make a
current or previous owner or operator of real property liable for the costs of
removal or remediation of hazardous or toxic substances on, under or emanating
from such property and for natural resource damages. These laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In addition, certain laws
impose liability for release of asbestos-containing materials ("ACMs") into the
air or require the removal or containment of ACMs. The owner's liability for
any required removal or remediation generally is not limited by law and
accordingly could exceed the value of the property and/or the aggregate assets
of the owner. In addition, the presence of hazardous or toxic substances, or
the failure to clean up such property, may adversely affect the owner's or
operator's ability to use such property as collateral for a loan. In certain
states, contamination of a property may give rise to a lien on the property for
the costs of cleanup. In some states this lien has priority over the lien of an
existing mortgage. In addition, third parties may seek recovery from owners or
operators of real property for personal injury associated with exposure to
hazardous or toxic substances. Persons who arrange for the disposal or
treatment of hazardous or toxic substances at third-party sites may also be
liable for the costs of removal or remediation of such substances at those
sites.
Pursuant to the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), as well as
certain other federal and state laws, a secured lender (such as the Trust Fund)
may be liable, as an "owner" or "operator," of the real property regardless of
whether the borrower or a previous owner caused the environmental damage, if
(i) agents or employees of a lender are deemed to have participated in the
management of the borrower or (ii) under certain conditions the Trust Fund
actually takes possession of a borrower's property or control of its day-to-day
operations, as for example, through the appointment of a receiver or
foreclosure. Although recently enacted legislation attempts to clarify the
activities in which a lender may engage without becoming subject to liability
under CERCLA and similar federal laws, the recent legislation also contains
terms and conditions that have not been clarified by the courts. Moreover, the
recent legislation has no applicability to state environmental laws.
The definition of "hazardous substances" under CERCLA excludes certain
petroleum products. However, the federal Resource Conservation and Recovery Act
("RCRA") and related state laws govern the operation, management and cleanup of
underground petroleum storage tanks. Under RCRA, the holders of security
interests in underground storage tanks or properties containing such tanks are
accorded qualified protections similar to the qualified protections accorded to
lenders under CERCLA. It should be noted, however, that lender liability
protection has important conditions and limitations and that liability for
cleanup of petroleum contamination may be governed by state law, which may not
provide for any specific protection for secured creditors.
See "Certain Legal Aspects of the Mortgage Loans--Environmental
Legislation" in the Prospectus.
ENVIRONMENTAL RISKS RELATED TO THE MORTGAGED PROPERTIES. All of the
Mortgaged Properties have been subject to environmental site assessments,
including Phase I site assessments or updates of previously performed Phase I
site assessments within the 18 months preceding the Cut-Off Date (other than 1
Mortgage Loan representing 0.5% of the
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Initial Pool Balance and the Credit Tenant Loans). Although those assessments
involved site visits and other types of review, we cannot assure you that the
assessments identified all environmental conditions or risks. Certain of the
environmental assessments identified environmental conditions which have
affected, or may affect, certain of the Mortgaged Properties. Those conditions
include the presence of ACMs, abandoned wells, lead in drinking water,
lead-based paint, and leaks or spills from nearby off-site and on-site chemical
or petroleum storage tanks ("USTs"). In the case of certain of the Mortgaged
Properties, factories, oil wells, gasoline stations or dry cleaning businesses
are or were formerly located on or near the property. To the extent issues have
been identified by regulatory agencies or otherwise, corrective action has been
undertaken, and in some cases, the related borrowers have made deposits into
environmental reserve accounts. However, such reserve amounts may not be
sufficient to remediate such environmental conditions and all such
environmental conditions may not have been identified.
There may be material environmental liabilities with respect to certain
Mortgaged Properties. Moreover, future laws, ordinances or regulations could
impose material environmental liability or the current environmental condition
of the Mortgaged Properties could be adversely affected by tenants or by the
condition of land or operations in the vicinity of the Mortgaged Properties
(such as underground storage tanks). Other responsible parties with respect to
any adverse environmental condition at a Mortgaged Property may not have
sufficient funds to remediate the problem.
Risks Related to Lead. Federal law requires sellers or lessors of
residential housing constructed prior to 1978 to disclose to potential
residents or purchasers any lead-based paint hazards. Ingestion of lead-based
paint chips and/or the inhalation of dust particles from lead-based paint by
children can cause permanent injury. Property owners can be held liable for
injuries to their tenants resulting from exposure under various laws that
impose affirmative obligations. The environmental assessments revealed the
existence or suspected existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have
implemented operations and maintenance programs. Additionally, the
environmental assessments revealed the existence of lead in mini-blinds in
certain of the multifamily residential properties. In these cases, the
borrowers have planned to replace the blinds during normal repair and
maintenance operations or at tenant turnover. However, there can be no
assurance the borrowers will replace the mini-blinds or that funds will be
available to replace such mini-blinds. Based on information received from the
environmental consultant, the Depositor believes that the presence of
lead-based paint or mini-blinds containing lead at the Mortgaged Properties
will not have a material adverse effect on the value of the related Mortgaged
Property or ability of the related borrowers to repay their loans.
At several of the Mortgaged Properties, lead has been detected in the
water samples by environmental consultants. Although lead found at these
Mortgaged Properties is not expected to present a significant risk as long as
the related Mortgaged Property continues to be properly managed, the related
borrowers have agreed to establish and maintain operations and maintenance or
abatement programs and/or have funded environmental reserves for such programs.
Nonetheless, there can be no assurance that the value of a Mortgaged Property
as collateral for the Mortgage Loan will not be adversely affected by the
presence of lead in the water.
Risks Related to Off-Site LUSTs. Certain of the Mortgaged Properties are
in the vicinity of third-party sites containing leaking underground storage
tanks ("LUSTs") or other potential sources of groundwater contamination. If the
contamination should emanate onto a Mortgaged Property and require an on-site
cleanup, the enforcement of rights against the third parties responsible for
the contamination may result in additional transaction costs.
Risks Related to Radon. At several of the Mortgaged Properties, some
elevated levels of radon gas in the air have been detected through sampling by
environmental consultants. Although radon levels found at these Mortgaged
Properties are not expected to present a significant risk, the related
borrowers have agreed to future testing and potential mitigation systems.
Nonetheless, there can be no assurance that the value of a Mortgaged Property
as collateral for the Mortgage Loan will not be adversely affected by the
presence of elevated radon levels.
Risks Related to ACMs. At several of the Mortgaged Properties, ACMs have
been detected in samples by environmental consultants. Although ACMs found at
these Mortgaged Properties are not expected to present a significant risk as
long as the related Mortgaged Property continues to be properly managed, the
related borrowers have agreed to establish and maintain operations and
maintenance or abatement programs and/or have funded environmental reserves.
Nonetheless, there can be no assurance that the value of a Mortgaged Property
as collateral for the Mortgage Loan will not be adversely affected by the
presence of ACMs.
Risks Related to the Special Servicer Obtaining an Environmental
Assessment Prior to Taking Remedial Action. Before the Special Servicer
acquires title to a Mortgaged Property on behalf of the Trust Fund or assumes
operation of
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such Mortgaged Property, the Pooling and Servicing Agreement requires it to
obtain an environmental assessment of the property. This requirement will
decrease the likelihood that the Trust Fund will become liable under any
environmental law. However, this requirement may effectively preclude
foreclosure until a satisfactory environmental assessment is obtained (or until
any required remedial action is thereafter taken or a determination is made
that such action need not be taken or need not be taken prior to foreclosure).
There is, accordingly, some risk that the Mortgaged Property will decline in
value while this assessment is being obtained. Moreover, there is no assurance
this requirement will effectively insulate the Trust Fund from potential
liability under environmental laws. See "The Pooling and Servicing Agreement--
Realization upon Mortgage Loans--Standards for Conduct Generally in Effecting
Foreclosure or the Sale of Defaulted Loans" in this Prospectus Supplement and
"Certain Legal Aspects of Mortgage Loans--Environmental Legislation" in the
Prospectus.
RISKS RELATING TO EARTHQUAKE, FLOOD AND HURRICANES. The Mortgaged
Properties may suffer casualty losses due to risks associated with acts of
nature, including earthquakes, floods and hurricanes, for which certain
Mortgaged Properties may not be adequately insured. 13 Mortgaged Properties,
representing 21.2% of the Initial Pool Balance (by Cut-Off Date Principal
Balance or Allocated Loan Amount, as applicable), are located in areas
generally considered to be locations of high seismic activity for which seismic
evaluations were conducted in connection with their origination. However, in
many cases the scope of such analyses are not in accordance with industry
standard, and as a result may underestimate the severity of property damage and
reconstruction costs. In addition, 3 Mortgaged Properties, representing 1.3% of
the Initial Pool Balance (by Cut-Off Date Principal Balance or Allocated Loan
Amount, as applicable), are located in areas of high seismic activity for which
no seismic evaluations were conducted in connection with their origination.
Approximately 35% of the properties that are located in areas of high seismic
activity (by Cut-Off Date Principal Balance or Allocated Loan Amount, as
applicable) currently have seismic insurance in place. In addition, certain
areas of the country have recently, and may in the future, experience
hurricanes and/or floods and, consequently, certain of the Mortgaged Properties
may experience damage as a result thereof.
There is no assurance that borrowers will be able to maintain adequate
insurance covering all potential risks, or that if the Mortgaged Properties
sustain damage they will be able to be completely restored. Moreover, if
construction or any major repairs are required, changes in laws may materially
affect the borrower's ability to effect such reconstruction or major repairs or
may materially increase the cost thereof. As a result of any of the foregoing,
the amount available to make distributions on the Certificates could be
reduced.
BORROWER MAY BE UNABLE TO MAKE A BALLOON PAYMENT OR PREPAY AN ARD LOAN. 7
of the Notes representing 7.9% of the Initial Pool Balance, provide for
substantial payments of principal ("Balloon Payments") due at their Maturity
Dates unless previously prepaid. 73 of the Notes ("ARD Notes"), representing
89.7% of the Initial Pool Balance, have Anticipated Repayment Dates (which
operate as effective Maturity Dates), and have substantial amounts of principal
outstanding on such date. See "Amortization Characteristics of the Notes"
below. For a more complete discussion of ARD Loans, see "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Excess
Interest" in this Prospectus Supplement. There can be no assurance that any
borrower under a Balloon Loan or an ARD Loan will have the ability to repay the
remaining principal balances on the relevant date. The ability of such a
borrower to pay off its Mortgage Loan on the Maturity Date or Anticipated
Repayment Date, as applicable, will typically depend upon its ability either to
refinance the Mortgage Loan or to sell the related Mortgaged Property at a
price sufficient to permit the borrower to make the payment. This will be
affected by a number of factors, including:
o the availability of, and competition for, credit for commercial and
multifamily real estate projects;
o the prevailing interest rates;
o the fair market value of the related properties;
o the borrower's equity in the related properties;
o the borrower's financial condition;
o the operating history and occupancy level of the property;
o the tax laws; and
o the prevailing general and regional economic conditions.
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AMORTIZATION CHARACTERISTICS OF THE NOTES
<TABLE>
<CAPTION>
% OF INITIAL NUMBER OF
TYPE OF NOTE POOL BALANCE MORTGAGE NOTES
- ----------------------------------------------------------- -------------- ---------------
<S> <C> <C>
ARD Notes ................................................. 89.7% 73
Balloon Notes(1) .......................................... 7.9% 7
Fully Amortizing Notes (other than the ARD Notes) ......... 2.3% 1
</TABLE>
- ---------
(1) A "Balloon Note" is a Note that provides for Monthly Payments requiring
payment of interest only or an amortization schedule at least 12 months
longer than the remaining stated term of such Mortgage Loan, such that
substantial amounts of principal are due and payable on the respective
Maturity Date, unless prepaid prior to the Maturity Date.
BORROWER DEFAULT. In order to maximize recoveries on defaulted Mortgage
Loans, the Special Servicer may, under certain limited circumstances, modify
Mortgage Loans that are in default or as to which a payment (in particular, a
Balloon Payment) default is reasonably foreseeable. While the Special Servicer
will have a duty to determine that any such modification is likely to produce a
greater recovery on a net present value basis than liquidation, there can be no
assurance that such flexibility with respect to modifications will increase the
net present value of receipts from or proceeds of Mortgage Loans that are in
default or as to which a default is reasonably foreseeable.
RISKS RELATING TO ENFORCEABILITY. All of the Mortgage Loans (other than
certain Credit Tenant Loans, which permit the assumption thereof by a special
purpose affiliate of the Credit Tenant in connection with a purchase of their
related Mortgaged Property by the Credit Tenant) contain due-on-sale clauses,
each of which permits the lender to accelerate the maturity of the Mortgage
Loan if, with limited exception, the borrower sells, transfers or conveys the
related Mortgaged Property or its interest in the Mortgaged Property without
the consent of the lender. Foreclosure by the lender on a mezzanine loan will
not result in enforcement of the due-on-sale clause of the related Mortgage
Loan. All of the Mortgage Loans also include debt-acceleration clauses, each of
which permits the lender to accelerate the debt upon specified monetary or
non-monetary defaults by the borrower. The courts of all states will enforce
acceleration clauses in the event of a material payment default. The equity
courts of any state, however, may refuse the foreclosure of a mortgage or deed
of trust or refuse to permit the acceleration of the indebtedness as a result
of a default deemed to be immaterial or if the exercise of such remedies would
be inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related borrower assigned its right, title and interest
as landlord under the leases on the related Mortgaged Property and the income
derived therefrom to the lender as further security for the related Mortgage
Loan, while retaining a license to collect rents for so long as there is no
default. In the event the borrower defaults, the license terminates and the
lender is entitled to collect rents. In some cases, such assignments may not be
perfected as security interests prior to actual possession of the cash flow. In
some cases, state law may require that the lender take possession of the
Mortgaged Property and obtain a judicial appointment of a receiver before
becoming entitled to collect the rents. In addition, if bankruptcy or similar
proceedings are commenced by or in respect of the mortgagor, the lender's
ability to collect the rents may be adversely affected. See "Certain Legal
Aspects of Mortgage Loans--Leases and Rents" in the Prospectus.
RISKS RELATING TO PREMIUM LOANS. 12 of the Mortgage Loans, which represent
23.6% of the Cut-Off Date Principal Balance, are Premium Loans. "Premium
Loans," which are more fully described in this Prospectus Supplement under
"Description of the Mortgage Pool--Premium Loans," are Mortgage Loans under
which the related borrower received additional proceeds in excess of the
principal balance of the Mortgage Loan (such excess, a "Premium") in exchange
for agreeing to pay an above-market interest rate on the Mortgage Loan
sufficient to "amortize" the Premium through the Anticipated Repayment Date or
Maturity Date, as applicable, of such Mortgage Loan. The borrowers acknowledged
the receipt of such Premiums in the related loan documents. Under the related
loan documents, in the event of a prepayment (which may occur as a result of a
voluntary prepayment or an involuntary prepayment from a casualty or
condemnation event or a default) of a Premium Loan, the borrower is required to
repay the unamortized portion of the Premium (the "Return of Premium Amount").
The obligation to pay such amount upon prepayment is separate from any
obligation of the borrower to pay a yield maintenance premium which is intended
to compensate the lender for loss of interest and is expressly undertaken by
the borrower in consideration for its receipt of the Premium.
In analyzing the risk of default on Premium Loans, investors should take
into account the PTV and the "amortization" of Premium to assess the likelihood
of repayment. Set forth below is a comparison of PTVs and DSCRs for Premium
Loans with LTVs and DSCRs of the other Mortgage Loans (exclusive of Credit
Tenant Loans).
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<TABLE>
<CAPTION>
PREMIUM OTHER
NUMBER LOANS MORTGAGE LOANS(1)
- ------------------------------------------------------------ ------------- ------------------
<S> <C> <C>
Number and % of Initial Pool Balance ....................... 12/23.6% 69/76.4%
Maximum PTV/LTV as of the Cut-Off Date(1) .................. 84.4% 91%
Minimum PTV/LTV as of the Cut-Off Date(1) .................. 56.2% 41.9%
Weighted Average PTV/LTV as of the Cut-Off Date(1) ......... 70.3% 66.6%
Maximum DSCR as of the Cut-Off Date(1) ..................... 1.38x 1.88x
Minimum DSCR as of the Cut-Off Date(1) ..................... 1.16x 1.13x
Weighted Average DSCR as of the Cut-Off Date(1) ............ 1.28x 1.39x
</TABLE>
- ---------
(1) Exclusive of Credit Tenant Loans.
In addition, the legal characterization of a Return of Premium under state
law is unclear. If it is treated like other prepayment premiums, there may be
certain limitations on the enforceability of such premium in certain
jurisdictions, especially in the case of involuntary prepayments. See "Certain
Legal Aspects of the Mortgage Loans--Default Interest, Prepayment Charges and
Prepayments" in the Prospectus. Furthermore, if a borrower perceives that it
can default on its Premium Loan and avoid its obligation to repay the Return of
Premium Amount, it may be more likely to default in order to get a market rate
of interest under a new mortgage loan. Any increase in defaults on the Mortgage
Loans will have the effect of accelerating the amortization of the Classes of
Certificates to which the related liquidation proceeds are distributed, even in
the event that the Special Servicer recovers the full amounts due under such
defaulted loans. See "Prepayment and Yield Considerations--Weighted Average
Life of Offered Certificates" in this Prospectus Supplement.
RISKS CONCERNING STATES WITH ONE ACTION RULES. Several states (including
California) have laws prohibiting more than one "judicial action" to enforce a
mortgage obligation. Some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Special Servicer to obtain advice of counsel prior to enforcing any of the
Trust Fund's rights under any of the Mortgage Loans that are secured by
properties where the rule could be applicable. In addition, in the case of a
Pool Loan secured by Mortgaged Properties located in multiple states, the
Special Servicer may be required to foreclose first on properties located in
states where such "one action" rules apply (and where non-judicial foreclosure
is permitted) before foreclosing on properties located in states where judicial
foreclosure is the only permitted method of foreclosure. See "Certain Legal
Aspects of Mortgage Loans--Foreclosure" in the Prospectus. As a result, the
ability to realize upon the Mortgage Loans may be limited by the application of
state laws.
LIMITATIONS OF APPRAISALS. Appraisals were obtained for all of the
Mortgaged Properties. Other than for Credit Tenant Loans, such appraisals were
obtained within 18 months prior to the Cut-Off Date. None is dated more than 28
months prior to the Cut-Off Date. Appraisals represent the analysis and opinion
of an appraiser. They are not guaranties of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser would
not have arrived at a different valuation, even if such appraiser used the same
general approach to, and same method of, appraising the property. Moreover,
appraisals seek to establish the amount a typically motivated buyer would pay a
typically motivated seller. Such amount could be significantly higher than the
amount obtained from the sale of a Mortgaged Property under a distress or
liquidation sale. Information regarding the appraised values of the Mortgaged
Properties as of the Cut-Off Date is presented under "Description of the
Mortgage Pool" in this Prospectus Supplement for illustrative purposes only.
RISKS ASSOCIATED WITH GROUND LEASES. Three of the Mortgaged Properties,
representing security for approximately 8.7% of the Initial Pool Balance,
constitute, in whole or in part, the borrower's leasehold interest under a
material ground lease. A material ground lease is one which constitutes the
material portion of the Mortgaged Property and where the ground lessor is not a
party to the Mortgage (that is, has not mortgaged its fee simple interest as
security for the Mortgage Loan). Any Mortgaged Property where the ground lessee
and ground lessor are both parties to the Mortgage has been categorized as a
fee simple estate. Each of the Mortgage Loans secured by Mortgages on leasehold
estates was underwritten taking into account payment of the ground lease rent,
except in cases where the Mortgage is a lien on both the ground lessor's and
ground lessee's interest in the Mortgaged Property. See "Description of the
Mortgage Pool--Security for the Mortgage Loans" and "The Pooling and Servicing
Agreement--Representations and Warranties; Repurchase" in this Prospectus
Supplement.
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Upon the bankruptcy of a lessor or a lessee under a ground lease, the
debtor entity has the right to assume (continue) or reject (breach and vacate
the premises) the ground lease. If a debtor lessor rejects the lease, the
lessee has the right to remain in possession of its leased premises under the
rent reserved in the lease for the term (including renewals). Furthermore, if a
debtor lessee/borrower rejects any or all of its leases, the borrower's lender
may not be able to succeed to the lessee/borrower's position under the lease
unless the lessor has specifically granted the lender such right. If both the
lessor and the lessee/borrowers are involved in bankruptcy proceedings, the
Trustee may be unable to enforce the bankrupt lessee/borrower's obligation to
refuse to treat as terminated a ground lease rejected by a bankrupt lessor. In
such circumstances it is possible that the Trustee could be deprived of its
security interest in the leasehold estate, notwithstanding any lender
protection provisions contained in the lease or mortgage. See "Certain Legal
Aspects of Mortgage Loans" in the Prospectus.
Additionally, the terms of all but one of the ground leases provide that
the Trustee is permitted a reasonable opportunity to cure any default under
such lease following notice of default. In the case of the exception, the
ground lessor will be permitted to terminate the ground lease immediately upon
default thereby terminating the Trustee's security interest in the leasehold
estate. See "Certain Legal Aspects of Mortgage Loans" in the Prospectus.
RISKS ASSOCIATED WITH ZONING COMPLIANCE. Due to changes in zoning
requirements after certain Mortgaged Properties were constructed, certain of
the Mortgaged Properties may not comply with current zoning laws, including
density, use, parking and set back requirements. The operation of these
properties is considered to be a "permitted non-conforming use." This means
that the borrower is not required to alter its structure to comply with the new
law; however, the borrower may be limited in its ability to rebuild the
premises "as is" in the event of a substantial casualty loss. This may
adversely affect the cash flow available following such loss. If a substantial
casualty were to occur, insurance proceeds may not be sufficient to pay the
Mortgage Loan in full. In addition, if the Mortgaged Property were repaired or
restored in conformity with the current law, the value of the Mortgaged
Property or the revenue-producing potential of the Mortgaged Property may not
be equal to that which existed before the casualty.
COSTS ASSOCIATED WITH COMPLIANCE WITH ADA. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public accommodations are required to
meet certain federal requirements related to access and use by disabled
persons. To the extent the Mortgaged Properties do not comply with the ADA, the
borrowers may incur costs to comply with the ADA. In addition, noncompliance
could result in the imposition of fines by the federal government or an award
of damages to private litigants.
RISKS RELATED TO LITIGATION. There may be legal proceedings pending and,
from time to time, threatened against the borrowers and their affiliates
relating to the business of or arising out of the ordinary course of business
of the borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on payments due under the
related Mortgage Loans and, therefore, on the distributions to your
Certificates.
RISKS RELATED TO THE 80 JOHN STREET LOAN. One Mortgage Loan, identified as
Loan Number 8 on Annex A hereto, representing approximately 3.4% of the Initial
Pool Balance (the "80 John Street Loan"), was made to WSA Equities LLC (the "80
John Street Borrower") in which Ms. Carol Achenbaum owns a 90% direct interest
in the New York limited liability company and her husband, Mr. William
Achenbaum, is the president of WSA Management, LTD, which is the managing
member of WSA Equities, LLC ("Mr. Achenbaum") and which manages the related
Mortgaged Property (the "80 John Street Property"). In connection with the
underwriting of the 80 John Street Loan, the Originator learned that Mr.
Achenbaum has been involved in breach of contract disputes, several loan
defaults and breach of guaranty obligations under certain loan documents of
borrowers other than the 80 John Street Borrower. In each case, Mr. Achenbaum
has reached settlement agreements under the complaints and (i) either is
currently making fixed monthly payments which are current to date or (ii) has
paid in full the judgments issued against him. The 80 John Street Borrower is
structured as a single-purpose, bankruptcy remote entity. The loan documents
require an independent director, and a non-consolidation opinion was delivered
in connection with the funding. Moreover, a hard lockbox has been established
with respect to the 80 John Street Loan for collection of rent. The 80 John
Street Loan gives the lender the right to terminate the related property
manager if certain minimum net operating income and DSCR requirements are not
met.
RISKS RELATED TO LOANS TO BGK EQUITIES, INC. 9 Mortgage Loans, identified
as Loan Numbers 25, 30, 36, 37, 41, 57, 70, 74 and 75 on Annex A hereto,
representing in the aggregate approximately 5.12% of the Initial Pool Balance
(the "BGK Loans"), were made to limited partnerships in which Edward M. Gilbert
("Gilbert") owns direct or indirect interests. See "Loans to Affiliated
Borrowers Entail Risks" above. In connection with the underwriting of the BGK
Loans, the Originators learned that Gilbert plead guilty in 1964 and 1967 to
devising a scheme to defraud and to obtain money by
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<PAGE>
false pretenses and grand larceny. In addition, in 1981 he was convicted of
conspiracy and fraud in trading stock on the NYSE and was sentenced to a jail
term of four years. Each of the borrowers under the BGK Loans is structured as
a single-purpose entity. None of such borrowers is required to have an
independent director and no non-consolidation opinion was delivered in
connection with funding. However, a hard lockbox has been established with
respect to each BGK Loan, provided that prior to the occurrence of certain
trigger events, including an event of default under the related BGK Loan, gross
receipts from related Mortgaged Property deposited in the Lockbox Account are
remitted to the respective borrower on a daily basis. Except for the BGK Loans
known as the 36, 37 and 41, none of the BGK Loans is a Premium Loan. Each BGK
Loan requires ongoing tax and insurance reserves and gives the lender the right
to terminate the related property manager if certain minimum NOI and DSCR
requirements are not met.
RISKS RELATED TO CONFLICTS OF INTEREST
Conflicts Between Property Managers and Borrowers. Many of the property
managers are affiliated with the related borrower. Most of the property
managers (or their affiliates) also manage other properties and many property
managers may own other properties. Thus, a property manager may manage or own
properties that compete with the Mortgaged Property it manages. Accordingly,
the manager of the Mortgaged Properties may experience conflicts of interest in
the management of such properties that could result in a decrease in net
operating income, or the value of such Mortgaged Property, thereby having an
adverse effect on the payment of the Certificates.
Conflicts Between the Servicer or Special Servicer and the Trust Fund. The
Depositor has been advised by each of the Servicer and the Special Servicer
that in the future it intends to service existing and new loans for third
parties, including portfolios of loans similar to the Mortgage Loans, in the
ordinary course of its business. The properties securing these mortgage loans
may be in the same markets or have common owners, obligors and/or property
managers as certain of the Mortgage Loans and the related Mortgaged Properties.
Consequently, certain personnel of the Servicer or the Special Servicer, as
applicable, may, on behalf of the Servicer or Special Servicer, respectively,
perform services with respect to the Mortgage Loans at the same time as they
are performing services, on behalf of other persons, with respect to other
mortgage loans secured by properties in the same markets as the Mortgaged
Properties. In such a case, the interests of the Servicer or the Special
Servicer, as applicable, and their other clients may differ from and compete
with the interests of the Trust Fund and the resulting performance by such
competing properties may adversely affect the performance of the Mortgaged
Properties, and therefore, the amount and timing of collections on the Mortgage
Loans.
Conflicts Between the Trust Fund and Affiliates of the Depositor. A
conflict between the Trust Fund and an affiliate of the Depositor may exist
when such affiliate is a member or partner in the borrower or a parent of such
borrower, or where such affiliate of the Depositor is a lender to a borrower or
its parent. Specifically, an affiliate of NACC/CCA has acquired a preferred
equity interest in certain of the borrowers or their affiliates, which are the
borrowers (or affiliates) with respect to 4 Mortgage Loans which represent
approximately 13.3% of the Initial Pool Balance (see "--Certain Risks Related
to Preferred Equity Investments" above).
Such a conflict of interest would cause the affiliate of the Depositor to
have an interest favorable to the borrower, and, potentially, adverse to the
lender. Such adverse interests may include, without limitation:
o the prepayment of the related Mortgage Loan in connection with a
refinancing at a lower interest rate; and
o directing the related borrower to make equity disbursements to its
owners rather than spending capital on property improvements that
would enhance the value and performance of the related Mortgaged
Property.
In addition, an affiliate of the Depositor may have other financing
arrangements with affiliates of the borrowers and may enter into additional
financing relationships in the future. Certain current or former officers and
directors of the Depositor and its affiliates may own equity interests in
affiliates of the borrowers. In such capacity, the Depositor's interests may
conflict with those of the Trust Fund.
RISKS RELATED TO THE CERTIFICATES
RISKS RELATED TO PREPAYMENTS. The yield to maturity on your Certificates
will depend, in significant part, upon the rate and timing of principal
payments on the Mortgage Loans. For this purpose, principal payments include
voluntary prepayments, if permitted, or involuntary prepayments resulting from
(i) casualty or condemnation, (ii) defaults and liquidations, (iii) repurchases
upon breaches of representations and warranties (as further described under
"The Pooling and Servicing Agreement--Representations and Warranties;
Repurchase" in this Prospectus Supplement) or (iv) the purchase of the Mortgage
Loans by the holders of the Class LR Certificates or the most subordinate Class
of Certificates
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then outstanding (as further described under "The Pooling and Servicing
Agreement--Optional Termination" and "--Purchase of ARD Loans by the Most
Subordinate Certificateholders" in this Prospectus Supplement). In situations
reflected in (iii) and (iv) listed above, the price paid in connection with
such a purchase or repurchase would be passed through to you, as holder of a
Certificate, with the same effect as if such Mortgage Loan or Mortgage Loans
had been prepaid in full (except for any distribution of any Prepayment Premium
that would otherwise be payable with respect to a default or prepayment by the
borrower). No representation is made as to the anticipated rate of prepayments
(voluntary or involuntary) on the Mortgage Loans. See "Prepayment and Yield
Considerations" in this Prospectus Supplement.
RISKS RELATED TO YIELD. The yield on your Certificates, particularly a
subordinate Certificate, will be sensitive to the timing of prepayments,
repurchases or purchases of Mortgage Loans, and the magnitude of losses on the
Mortgage Loans due to liquidations. In general, if you purchase your
Certificates at a premium and principal distributions thereon occur at a rate
faster than you anticipated at the time of your purchase, to the extent that
the required Prepayment Premiums are not received, your actual yield to
maturity may be lower than the yield you expected at the time of purchase.
Conversely, if you purchase your Certificate at a discount and principal
distributions thereon occur at a rate slower than you anticipated at the time
of your purchase, your actual yield to maturity also may be lower than you
assumed at the time of purchase.
The investment performance of your Certificates may vary materially and
adversely from your expectations due to prepayments on the Mortgage Loans that
are higher or lower than you anticipated. The actual yield to you, as a holder
of an Offered Certificate, may not be equal to the yield you anticipated at the
time of your purchase or, notwithstanding that the actual yield is equal to the
yield anticipated at that time, the total return on investment that you
expected or the expected weighted average life of your Certificate may not be
realized. In deciding whether to purchase any Offered Certificates, you should
make an independent decision as to the appropriate prepayment assumptions to be
used. See "Prepayment and Yield Considerations" in this Prospectus Supplement.
RISKS ASSOCIATED WITH MORTGAGOR DEFAULTS; DELINQUENCIES AND DEFAULTS BY
THE BORROWER MAY DELAY PAYMENTS TO YOU. The rate and timing of delinquencies
and defaults on the Mortgage Loans will affect the amount of distributions on
your Certificates, the yield to maturity of your Certificates, the rate of
principal payments on your Certificates and the weighted average life of your
Certificates. Delinquencies on the Mortgage Loans, unless covered by Advances,
may result in shortfalls in distributions of interest and/or principal on your
Certificates for the current month. See "--Right of Servicer and Others to
Receive Interest on Advances Is Senior to Your Right to Receive Distributions"
below. Although any such shortfalls may be made up on future Distribution
Dates, no interest would accrue on any such shortfalls. Thus, any such
shortfalls would adversely affect the yield to maturity of your Certificates.
If you calculate the anticipated yield for any Class of Certificates based
on an assumed rate of default and amount of losses on the Mortgage Loans that
is lower than the default rate and amount of losses actually experienced and
such losses are allocable to such Class of Certificates, your actual yield to
maturity will be lower than you calculated and could, under certain scenarios,
be negative. The timing of any loss on a liquidated Mortgage Loan allocated to
your Certificates will also affect the actual yield to maturity of your
Certificates, even if the rate of defaults and severity of losses are
consistent with your expectations. In general, the earlier your loss occurs,
the greater the effect on your yield to maturity. Mortgage Loans with higher
interest rates may be more likely to default or result in borrower
bankruptcies. See "Prepayment and Yield Considerations" in this Prospectus
Supplement.
RISKS ASSOCIATED WITH DUAL AMORTIZATION LOANS. 13 of the Mortgage Loans,
which represent 6.0% of the Initial Pool Balance, are "Dual Amortization
Loans." For each of these loans, standard underwriting criteria may have
required an amortization schedule longer than that which was preferred by the
borrower. In order to accommodate the borrower, the Dual Amortization Loans
provide the borrower with two amortization schedules. The borrower is required
to make payments sufficient to amortize the Dual Amortization Loan over the
shorter of the two amortization schedules. Failure of the borrower to make
payments consistent with the shorter amortization schedule does not result in a
default under the Dual Amortization Loan. Instead, in the event the borrower
fails to make payments consistent with the shorter amortization schedule on any
Due Date, all excess cash flow from the related Mortgaged Property on future
Due Dates is deposited in a lockbox account and used to make payments due under
the shorter amortization schedule. If the cash flow from the Mortgaged Property
is sufficient to make such payments for three sequential Due Dates, future
excess property cash flow is released to the borrower. Dual Amortization Loans
are not in payment default unless the borrower fails to make payments in
accordance with the longer amortization schedule, and such loans may not be
accelerated or foreclosed upon as a result of the failure of the borrower to
make the relatively larger payments required by the shorter
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amortization schedules. DSCRs disclosed herein with respect to the Dual
Amortization Loans are calculated based on such Mortgage Loans' longer
amortization schedules. However, the tables set forth in this Prospectus
Supplement under "Prepayment and Yield Considerations--Weighted Average Life of
the Offered Certificates" assume that the Dual Amortization Loans will amortize
in accordance with the shorter amortization schedules. Failure of the Dual
Amortization Loans to amortize in accordance with the shorter amortization
schedules may result in the extension of the lives of some Classes of
Certificates and may adversely affect the yields to maturity of any such
Classes purchased at a discount. For a further description of Dual Amortization
Loans, see "Description of the Mortgage Pool--Dual Amortization Loans" in this
Prospectus Supplement.
THE CERTIFICATES ARE SUPPORTED BY LIMITED ASSETS. If the Trust Fund is
insufficient to make payments on your Certificates, no other assets will be
available to you for payment of the deficiency.
LOSSES AFFECT WEIGHTED AVERAGE LIFE AND YIELD TO MATURITY. Even if losses
on the Mortgage Loans are not borne by an investor in a particular Class of
Offered Certificates, such losses may affect the weighted average life and
yield to maturity of such investor's Certificates. See "--Different Timing of
Mortgage Loan Amortization Poses Certain Risks" above and "Prepayment and Yield
Considerations--Weighted Average Life of Offered Certificates" in this
Prospectus Supplement.
RIGHT OF SERVICER AND OTHERS TO RECEIVE INTEREST ON ADVANCES IS SENIOR TO
YOUR RIGHT TO RECEIVE DISTRIBUTIONS. Under certain circumstances, as more fully
described in this Prospectus Supplement under "The Pooling and Servicing
Agreement--Advances," the Servicer, the Trustee or the Fiscal Agent, as
applicable, will be entitled to receive interest on unreimbursed Advances at
the time such Advances are made until such Advances (a) are recovered out of
amounts received on the Mortgage Loan as to which such Advances were made or
(b) are determined to be nonrecoverable Advances. Such interest will accrue
from (and including) the date on which the related Advance is made, or the
related expense is incurred, up to (but excluding) the date on which such
amounts are recovered. The Servicer's, the Trustee's or the Fiscal Agent's
right, as applicable, to receive such payments of interest is prior to your
right, as holder of Certificates, to receive distributions on your Certificates
and, consequently, may result in delays in distributions on, or in losses being
allocated to, your Certificates that would not have resulted absent the accrual
of such interest.
COMPENSATION TO THE SPECIAL SERVICER IS SENIOR TO YOUR RIGHT TO RECEIVE
DISTRIBUTIONS. Certain circumstances, including delinquencies in the payment of
principal and interest, may result in a Mortgage Loan being specially serviced.
The Special Servicer is entitled to additional compensation for special
servicing activities which may result in delays in distributions on, or in
losses being allocated to, your Certificates that would not otherwise have
resulted absent such compensation. See "The Pooling and Servicing
Agreement--Special Servicing" in this Prospectus Supplement.
SERVICER OR SPECIAL SERVICER MAY PURCHASE CERTIFICATES; CONFLICT OF
INTEREST. The Servicer or Special Servicer or an affiliate thereof will be
permitted to purchase the Certificates of any Class. Following any such
purchase of Certificates, the Servicer or Special Servicer will have rights as
a holder of Certificates, including certain Voting Rights and, in the case of
the Special Servicer, the rights of the Directing Holder (if the Special
Servicer is the purchaser of the Class N-1 Certificates), which are in addition
to such entity's rights as Servicer or Special Servicer under the Pooling and
Servicing Agreement. Consequently, any purchase of Certificates by the Servicer
or Special Servicer, as the case may be, could cause a conflict between such
entity's duties pursuant to the Pooling and Servicing Agreement and its
interest as a holder of a Certificate, especially to the extent that certain
actions or events have a disproportionate effect on one or more Classes of
Certificates. In addition, the Directing Holders can replace the Special
Servicer.
CONSENTS. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate Certificate Balance of the
outstanding Certificates will be required to direct, consent to or approve, and
will be sufficient to bind all Certificateholders to, certain actions,
including amending the Pooling and Servicing Agreement in certain
circumstances. See "The Pooling and Servicing Agreement--Amendment" in this
Prospectus Supplement. Such actions, including amending the Pooling and
Servicing Agreement, may not be in the best interest of all Certificateholders.
Therefore, certain actions might be taken, at the direction of a specified
percentage of Certificateholders, that could have a negative effect on the
remaining Certificateholders.
RISKS ASSOCIATED WITH LIQUIDITY AND MARKET VALUE. There is currently no
secondary market for the Offered Certificates. While the Underwriters have
advised the Depositor that they currently intend to make a secondary market in
the Offered Certificates, they are under no obligation to do so. Accordingly,
there can be no assurance that a secondary market for the Offered Certificates
will develop. Moreover, even if a secondary market does develop, it may not
provide
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you with liquidity of investment and such market may not continue for the life
of your Certificates. The Offered Certificates will not be listed on any United
States securities exchange. Lack of liquidity could result in a precipitous
drop in the market value of your Certificates. In addition, the market value of
your Certificates at any time may be affected by many factors, including then
prevailing interest rates, the spreads over the applicable U.S. Treasury rate
for commercial mortgage-backed securities, and the volatility of commercial
mortgage-backed securities and fixed income securities generally. No
representation is made by any person or entity as to the market value of any
Offered Certificate at any time.
PASS-THROUGH RATE CONSIDERATIONS. As described in this Prospectus
Supplement under "Description of the Offered Certificates--Distributions," the
Pass-Through Rates on the Class B, Class C, Class D, Class E and Class F
Certificates are, in each case, equal to the lesser of a certain fixed rate and
the Weighted Average Net Mortgage Pass-Through Rate of the Mortgage Loans.
Because the Mortgage Loans amortize principal at different rates and may be
prepaid at the expiration of their respective Lock-out Periods, the Weighted
Average Net Mortgage Rate will fluctuate over the lives of such Classes of
Certificates. See "Prepayment and Yield Considerations--Yield" in this
Prospectus Supplement.
RISKS RELATED TO THE YEAR 2000
General. The Depositor is aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"year 2000 problem" is pervasive and complex; virtually every computer
operation will be affected in some way by the rollover of the two digit year
value to 00. The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Depositor has been advised by the Servicer and the Trustee that they
will take action reasonably necessary to either (i) implement modifications to
their respective existing systems to the extent required to cause them to be
year 2000 compliant or (ii) acquire computer systems that are year 2000
compliant, in each case prior to January 1, 2000. However, neither the
Depositor nor any affiliate of the Depositor has made any independent
investigation of the computer systems of the Servicer or the Trustee. In the
event that computer problems arise out of a failure of such efforts to be
completed on time, or in the event that the computer systems of the Servicer or
the Trustee are not fully year 2000 compliant, the resulting disruptions in the
collection or accounting of receipts on the Mortgage Loans could adversely
affect distributions on the Certificates.
The Depository Trust Company. DTC has informed members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and interest payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately on and
after January 1, 2000. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes
a testing phase, which is expected to be completed within appropriate
timeframes.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, its participating
organizations (through which Certificateholders will hold their Offered
Certificates), as well as the computer systems of third-party service
providers. DTC has informed the financial community that it is contacting (and
will continue to contact) third-party vendors from whom DTC acquires services
to: (i) impress upon them the importance of such services being year 2000
compliant and (ii) determine the extent of their efforts with respect to
remediation of year 2000 problems with (and, as appropriate, testing of) their
services. In addition, DTC has stated that it is in the process of developing
such contingency plans as it deems appropriate.
If problems associated with the year 2000 issue were to occur with respect
to DTC and the services described above, distributions to Certificateholders
could be delayed or otherwise adversely affected.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The assets of Commercial Mortgage Asset Trust ("CMAT" or the "Trust Fund")
consist of 81 fixed-rate mortgage loans (each, a "Mortgage Loan" and,
collectively, the "Mortgage Pool") secured by first liens on 103 multifamily
and commercial properties (the "Mortgaged Properties"). The Mortgage Pool has
an aggregate principal balance as of the Cut-Off Date of approximately
$781,148,433 (the "Initial Pool Balance"), subject to a variance of plus or
minus 5%. All numerical information provided in this Prospectus Supplement with
respect to the Mortgage Loans is provided on an approximate basis. All
percentages of the Mortgage Pool, or of any specified sub-group thereof,
referred to in this Prospectus Supplement without further description are
approximate percentages by aggregate Cut-Off Date Principal Balance.
Descriptions of the terms and provisions of the Mortgage Loans are generalized
descriptions of the terms and provisions of the Mortgage Loans in the
aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgaged Property consists of real property constituting any one of
(i) an office property (an "Office Property," and any Mortgage Loan secured
thereby, an "Office Loan"), (ii) a retail property (a "Retail Property," and
any Mortgage Loan secured thereby, a "Retail Loan"), (iii) a full or limited
service hotel or motel property (a "Hotel Property," and any Mortgage Loan
secured thereby, a "Hotel Loan"), (iv) an apartment building or complex
consisting of five or more rental units (a "Multifamily Property," and any
Mortgage Loan secured thereby, a "Multifamily Loan"), (v) an industrial
property (an "Industrial Property," and any Mortgage Loan secured thereby, an
"Industrial Loan"), (vi) an exposition center (the "Exposition Center
Property," and the Mortgage Loan secured thereby, the "Exposition Center
Loan"), (vii) a movie theater (the "Movie Theater Property" and the Mortgage
Loan secured thereby, a "Movie Theater Loan"), or (viii) a mobile home
community (the "Mobile Home Park Property" and the Mortgage Loan secured
thereby, the "Mobile Home Park Loan"). Certain statistical information relating
to the various types of Mortgaged Properties is set forth below under
"--Additional Mortgage Loan Information--Cut-Off Date Principal Balance by
Property Type."
6 of the Mortgage Loans (the "Pool Loans"), representing 9.1% of the
Initial Pool Balance, are secured by two or more Mortgaged Properties, either
pursuant to cross-collateralization with other Mortgage Loans in the Mortgage
Pool or pursuant to a single Note by a single borrower secured by multiple
Mortgaged Properties. See "Risk Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Loan Concentration Entails Risks" in this
Prospectus Supplement.
None of the Mortgage Loans is insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or by
the Depositor, the Mortgage Loan Sellers, the Originators, the Underwriters,
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent or any of
their respective affiliates. All of the Mortgage Loans are non-recourse loans
so that, in the event of a borrower default on any Mortgage Loan, recourse may
generally be had only against the specific Mortgaged Property or Mortgaged
Properties securing such Mortgage Loan and such limited other assets as have
been pledged to secure such Mortgage Loan, and not against the borrower's other
assets. However, generally, the Mortgage Loans may become recourse upon the
occurrence of certain events of default under the Mortgage Loans, including, in
certain cases, the transfer or voluntary encumbrance of the Mortgaged Property
without the consent of the lender.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described below under "--The Mortgage Loan
Program--Underwriting Standards." The Depositor will purchase the Mortgage
Loans on or before the Closing Date from the Mortgage Loan Sellers pursuant to
Mortgage Loan Purchase and Sale Agreements (each, a "Mortgage Loan Purchase and
Sale Agreement") to be dated as of the Cut-Off Date. Each Mortgage Loan Seller
will be obligated under its Mortgage Loan Purchase and Sale Agreement to
repurchase a Mortgage Loan in the event of a material breach of a
representation or warranty of a Mortgage Loan Seller with respect to such
Mortgage Loan as described under "The Pooling and Servicing
Agreement--Representations and Warranties; Repurchase" herein. NHA, the
indirect parent of CCA, will be required to purchase any Mortgage Loan that CCA
is required, but fails, to repurchase in connection with a breach of
representations and warranties. The Depositor will assign the Mortgage Loans,
together with the Depositor's rights and remedies against the Mortgage Loan
Sellers in respect of breaches of representations or warranties regarding the
Mortgage Loans, to LaSalle Bank National Association, as Trustee, for the
benefit of the Certificateholders, pursuant to the Pooling and Servicing
Agreement. BNY Asset Solutions LLC, in its capacity as Servicer, will service
the Mortgage Loans pursuant to the Pooling and Servicing Agreement. The
Depositor will make no representations or warranties with respect to the
Mortgage Loans and will have no obligation to repurchase or replace
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Mortgage Loans with deficient documentation or which are otherwise defective.
Each Mortgage Loan Seller will sell its Mortgage Loans without recourse, and,
accordingly, will have no obligations with respect to the Certificates other
than pursuant to the limited representations, warranties and covenants made by
it to the Depositor and assigned by the Depositor to the Trustee for the
benefit of the Certificateholders. See "The Pooling and Servicing Agreement--
Assignment of the Mortgage Loans" herein and "Description of the
Agreements--Representations and Warranties; Repurchases" in the Prospectus.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally nonrecourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Mortgaged Properties. Each Mortgage Loan is also secured
by an assignment of the related borrower's interest in the leases, rents,
issues and profits of the related Mortgaged Property. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more reserve or escrow
accounts for, among other things, necessary repairs, replacements and
environmental remediation, real estate taxes and insurance premiums, deferred
maintenance and/or scheduled capital improvements, re-leasing reserves and
seasonal working capital reserves (such accounts, "Reserve Accounts"). See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans--Escrows" in this Prospectus Supplement.
Each Mortgage Loan is evidenced by one or more promissory notes (each, a
"Note") and secured by one or more mortgages, deeds of trust or other similar
security instruments (a "Mortgage"). Each of the Mortgages creates a first
priority lien on the interests of the related borrower in the related Mortgaged
Property subject to any Permitted Encumbrances (as defined below), as set forth
on the following table:
SECURITY FOR THE MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
% OF INITIAL MORTGAGED
INTEREST OF BORROWER ENCUMBERED POOL BALANCE(1) PROPERTIES
- --------------------------------- ----------------- -----------
<S> <C> <C>
Fee Simple Estate(2) ............ 91.2% 100
Leasehold Estate(3)(4) .......... 8.8 3
----- ---
Total ........................... 100.0% 103
===== ===
</TABLE>
- ---------
(1) Based on the Cut-Off Date Principal Balance or Cut-Off Date Allocated
Loan Amount of the related Mortgaged Property.
(2) For any Mortgaged Property where the ground lessee and ground lessor are
both parties to the Mortgage, the Mortgaged Property was categorized as a
fee simple estate.
(3) Leasehold estates are noted on Annex B under the heading "Ground Lease."
(4) Includes any Mortgaged Property where a material portion of such property
is subject to a ground lease and the ground lessor is not a party to the
Mortgage.
"Permitted Encumbrances" include: (i) liens for real estate and other
taxes and special assessments not yet due and payable, (ii) covenants,
conditions, restrictions, rights of way, easements, liens and other
encumbrances whether or not of public record as of the date of recording of the
related Mortgage, such exceptions having been acceptable to the applicable
Mortgage Loan Seller in connection with the purchase or origination of the
related Mortgage Loan and (iii) such other exceptions and encumbrances on
Mortgaged Properties as are reflected in the related title insurance policies.
THE MORTGAGE LOAN PROGRAM--UNDERWRITING STANDARDS
Each Mortgage Loan was originated by NACC/CCA or Bloomfield (the
"Originators"), as set forth above under "Summary of Prospectus
Supplement--Relevant Parties--Originators," and is generally consistent with
the underwriting standards applied by NACC/CCA in connection with the purchase
or origination of each of the Mortgage Loans, as described below.
NACC/CCA purchased the Mortgage Loan that it did not originate pursuant to
a purchase and sale agreement with Bloomfield.
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NACC/CCA's underwriting process with respect to each Mortgage Loan
involves calculations of Net Cash Flow reflecting certain adjustments. This Net
Cash Flow calculation is used to determine DSCR. "Net Cash Flow" with respect
to a given Mortgage Loan or Mortgaged Property means cash flow available for
debt service, as determined by NACC/CCA based upon borrower-supplied
information for a recent period that is generally the twelve months prior to
the origination of such Mortgage Loan, adjusted for stabilization. Net Cash
Flow does not reflect debt service, subordinated ground rent, or non-cash items
such as depreciation or amortization, and does not reflect actual capital
expenditures, and may have been adjusted by, among other things:
(i) in the case of Multifamily Properties and the Mobile Home Park
Property, annualizing rental revenue shown on a recent rent roll
before applying a vacancy factor without further regard to the
terms (including expiration dates) of the leases shown thereon;
(ii) in the case of certain Office Properties, Industrial Properties
and Retail Properties, determining current revenues from leases
in place;
(iii) assuming the occupancy rate for the Mortgaged Property or pool
of Mortgaged Properties was less than the actual occupancy rate,
including in the case of certain of the Hotel Properties, to
account for an above-market occupancy rate or to reflect new
construction in the market;
(iv) in the case of the Retail Properties, excluding certain
percentage rent;
(v) excluding certain non-recurring income and/or expenses;
(vi) assuming that a management fee of 3% to 5% of revenue and a
franchise fee of 3.5% to 6% of room revenue (for Hotel Properties
only) was payable with respect to the Mortgaged Property;
(vii) taking into account new tax assessments and utility savings from
the installation of new energy efficient equipment;
(viii) in certain cases, assuming that operating and/or capital
expenses with respect to the Mortgaged Property were greater than
actual expenses;
(ix) subtracting from net operating income replacement or capital
expenditure reserves;
(x) in the case of the Retail Properties, Industrial Properties and
Office Properties (other than such properties securing a Credit
Tenant Loan), subtracting from net operating income an assumed
allowance for tenant improvements and leasing commissions; and
(xi) in the case of the Credit Tenant Loans, assuming the Net Cash
Flow is equal to the rental obligations of the tenants under the
Credit Tenant Leases for the term of the Credit Tenant Loan.
"Net Cash Flow" reflects the calculations and adjustments used by NACC/CCA
for its underwriting process and may or may not reflect the amounts calculated
and adjusted by the Rating Agencies for their own analysis. In addition, "Net
Cash Flow" and the DSCRs derived therefrom are not a substitute for cash flow
as determined in accordance with generally accepted accounting principles as a
measure of the results of the property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and expenditures
on the actual net operating income, Net Cash Flow and debt service coverage
ratios of the Mortgage Loans.
No representation is made as to the future net cash flow of the
properties, nor is "Net Cash Flow" set forth in this Prospectus Supplement
intended to represent such future net cash flow.
In underwriting each Mortgage Loan and in connection with the origination
or acquisition thereof, income information provided by the related borrower was
examined by NACC/CCA. In addition, the operating history of the property,
industry data regarding the local real estate market and the appraiser's
analysis were reviewed and, if conditions warranted, net operating income with
respect to the related Mortgaged Property was adjusted for purposes of
determining whether the Mortgaged Property satisfied the debt service coverage
ratio required by NACC/CCA's underwriting guidelines. In
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accordance with the underwriting guidelines, net operating income of any
Mortgaged Property may have been adjusted by, among other things, the
adjustments listed in the definition of "Net Cash Flow" described under
"--Additional Mortgage Loan Information" below. In connection with the
underwriting, net operating income was based upon information provided by the
borrower and neither the Depositor nor NACC/CCA makes any representation as to
the accuracy of such information; provided, however, that, with respect to
certain of the Mortgage Loans, NACC/CCA or the borrower engaged independent
accountants to review or perform certain procedures to verify such information.
At the time of origination, each Originator caused each Mortgaged Property
(other than Mortgaged Properties securing certain Credit Tenant Loans) to be
inspected to determine whether it was in acceptable physical condition. The
inspection included a review of ongoing maintenance programs, common area
upkeep, mechanical systems and grounds maintenance. In addition, an engineering
study and an environmental review were prepared by appropriate consultants.
With respect to environmental matters, a Phase I environmental assessment was
conducted for each Mortgaged Property. A credit investigation was completed for
all prospective borrowers, in connection with which a credit report generally
not more than 30 days old as of the date of the loan application and current
financial statements were obtained. The borrowers with respect to 8 of the
Mortgaged Properties representing, in the aggregate, 22.4% of the Initial Pool
Balance, excluding the portion of the Initial Pool Balance representing Credit
Tenant Loans, provided audited financial statements, agreed upon procedures or
statements certified by an independent accountant. The cash flow and NOI
information presented in Annex B may not correspond to the comparable
information included in the accountants' reports because of adjustments made by
NACC/CCA as part of its underwriting procedures.
PREMIUM LOANS
12 of the Mortgage Loans, which represent 23.6% of the Initial Pool
Balance, are "Premium Loans." A lender that makes a Premium Loan advances to
the borrower at closing an amount in excess of the principal balance of such
Premium Loan (such excess amount, the "Premium"); that is, the face amount of
the note is less than the amount advanced to the borrower. In return for its
receipt of the Premium, the borrower agrees to pay an above-market rate of
interest on the Premium Loan. The "excess" interest generated by the spread of
the higher rate over a market rate (the "Base Interest Rate") is sufficient to
"amortize" the Premium over the term of the loan or, in the case of an ARD
Loan, the loan term through the Anticipated Repayment Date. The Premium Loan
borrower is not required to repay the Premium as part of principal. However,
the borrower is required to pay a Prepayment Premium to compensate the Trust
Fund for the unamortized portion of the Premium (a "Return of Premium Amount")
upon any prepayment of the loan (generally by reason of default, casualty or
condemnation). See "Risk Factors and Other Special Considerations--Risks
Relating to Premium Loans" and "Description of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans--Prepayment Provisions" in this Prospectus
Supplement and "Certain Legal Aspects of Mortgage Loans--Default Interest,
Prepayment Charges and Prepayments" in the Prospectus.
With respect to Premium Loans, (i) loan-to-value ratio ("LTV") means the
principal amount as of the Cut-Off Date of such Premium Loan, exclusive of the
Premium, divided by the Appraised Value of the related Mortgaged Property and
(ii) proceeds-to-value ratio ("PTV") means the principal amount as of the
Cut-Off Date of such loan plus the unamortized portion of the Premium as of the
Cut-Off Date, divided by the Appraised Value of the related Mortgaged Property.
The weighted average of the Premiums (expressed as a percentage of the initial
principal balances of the Mortgage Loans, exclusive of the Premium) as of the
respective dates of origination (including Mortgage Loans that were originated
at par) is 1.6% and the weighted average of the Premiums at which the Premium
Loans were originated is 6.9%, with a range of 4.3% to 11.1%.
For the characteristics of each Premium Loan, see Annex A and Annex C.
S-56
<PAGE>
PREMIUM LOANS
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED AVERAGE WEIGHTED
RANGE OF PREMIUMS AS CUT-OFF CUT-OFF AVERAGE WEIGHTED CUT-OFF DATE AVERAGE
A % OF ORIGINAL LOAN NUMBER DATE DATE ARD AVERAGE PRINCIPAL UNAMORTIZED
BALANCE OF NOTES LTV PTV LTV/PTV DSCR BALANCE PREMIUM
- -------------------------------- ---------- ---------- --------- ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Less than 5.0% ................. 3 64.4% 67.4% 59.0% 1.22x $ 38,369,133 4.6%
5.0--9.9% ...................... 8 67.1 72.0 56.1 1.30x 132,782,154 7.2
10.0--15.0% .................... 1 55.4 61.6 26.9 1.24x 12,850,396 11.1
- ---- ---- ---- ---- ------------ ----
Total/Weighted Average ......... 12 65.7% 70.3% 54.7% 1.28x $184,001,683 6.9%
</TABLE>
CREDIT TENANT LOANS
Eight of the Mortgage Loans (the "Credit Tenant Loans"), representing
10.3% of the Initial Pool Balance, are secured by Mortgages on Mortgaged
Properties ("Credit Tenant Properties") that are, in each case, subject to a
net lease obligation (a "Credit Tenant Lease") of a tenant (a "Credit Tenant"),
which possesses or whose parent or affiliate that guarantees the lease
obligations (a "Guarantor") possesses either (A) a ratings estimate by S&P or
(B) an unsecured debt rating of at least "BB-" by S&P and, with respect to the
Cinemark Credit Tenant Loan, a long term unsecured debt rating of "Ba3" from
Moody's. Scheduled monthly payments under each Credit Tenant Lease are
sufficient to pay in full and on a timely basis, all interest and principal and
other sums scheduled to be paid with respect to the related Credit Tenant Loan
(except for any Balloon Payment due on such loan). No Credit Tenant Loan is a
Premium Loan. See "Risk Factors and Other Special Considerations--Risks Related
to the Mortgage Loans--Credit Tenant Loans Have Special Risks" in this
Prospectus Supplement.
All of the Credit Tenant Leases are "Bondable Leases," which means that
the related Credit Tenant has no right to terminate or abate rent, even in the
event of a casualty or condemnation or the failure of the related borrower to
perform required maintenance, repairs or replacement with respect to the
related Credit Tenant Property. However, under each of the Credit Tenant
Leases, the related Credit Tenant is permitted to terminate (or, in certain
cases, permitted to offer to terminate which may be rejected by the borrower
at, other than with respect to the ACCOR-M-Six-III Credit Tenant Loan, the
direction of the lender) the related Credit Tenant Lease only upon a full or
partial condemnation that would be substantially and materially adverse to the
related Credit Tenant's business operations, provided that during such Credit
Tenant Lease's Primary Term, the related Credit Tenant makes an offer to
purchase the related Credit Tenant Property for an amount not less than that
required to pay the outstanding principal balance of the Mortgage Loan plus
accrued interest. If an offer to purchase a Credit Tenant Property is rejected
by the related borrower, the related Credit Tenant Lease will, in most cases,
be terminated.
In addition, in the case of the ACCOR-M-Six-III Credit Tenant Lease, in
the event of a casualty or condemnation, the related Credit Tenant may offer to
substitute the Credit Tenant Property with a new property which the Credit
Tenant intends to operate as a motel upon the satisfaction of certain
conditions specified in the Credit Tenant Lease, including written confirmation
from each Rating Agency that such substitution would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. If such offer is rejected, the related Credit Tenant Lease
will remain in effect.
Each of the Credit Tenant Loans is a portion of a larger loan (each such
larger loan, the "Total Credit Tenant Loan"), consisting of two notes (referred
to in this Prospectus Supplement as the "CMAT Pari Passu Note" and the "Other
Pari Passu Note"), each originated by NACC/CCA and secured by a mortgage on the
same Mortgaged Property or Mortgaged Properties. With respect to such Credit
Tenant Loans, each CMAT Pari Passu Note is being deposited in this Trust Fund
and each Other Pari Passu Note has been deposited in a securitization sponsored
by an affiliate of the Depositor, the Commercial Mortgage Pass-Through
Certificates, Series 1998-D7 (the "D7 Securitization"). With respect to each
Total Credit Tenant Loan, the Trustee, on behalf of the Trust Fund, will be
party to a co-lender agreement with the trustee of the D7 Securitization into
which the related Other Pari Passu Note was deposited. The Trustee, on behalf
of the Trust Fund, will be lead lender (the "Lead Lender"), in which case the
trustee of the D7 Securitization will be the co-lender (the "Co-Lender"). Each
of the related Other Pari Passu Notes has an amortization schedule that fully
amortizes its principal balance within 10 years of September 11, 1998 (the "D7
Cut-Off Date"). The related CMAT Pari Passu Notes require payments of interest
only for the first 10 years following the D7 Cut-Off Date, and thereafter, if
the related Other Pari Passu Notes have fully amortized in accordance with
their amortization schedules, the related CMAT Pari Passu Notes will receive
all of the remaining principal payable with respect to the Total Credit Tenant
Loan.
S-57
<PAGE>
In the event of the occurrence of a continuing event of default under any
Total Credit Tenant Loan, principal will be paid pro rata based on the
respective principal amounts outstanding on the CMAT Pari Passu Note and the
Other Pari Passu Note. In the event that such event of default is cured and a
Credit Tenant is performing under a lease with respect to the related Mortgaged
Property, which lease provides sufficient rent to make all required payments of
principal and interest under the related Mortgage Loan, then the original
amortization schedules will be restored. As Lead Lender, the Trustee, on behalf
of the Trust Fund, will have the ability to exercise any rights or powers of
the lead lender under the loan documents, including acceleration of the
applicable Total Credit Tenant Loans and foreclosure on the related Mortgaged
Property or Mortgaged Properties.
The Trustee will be the mortgagee of record with respect to each Total
Credit Tenant Loan on behalf of the holders of both the CMAT Pari Passu Note
and the related Other Pari Passu Note.
The Servicer will make all servicing decisions with respect to each CMAT
Pari Passu Note and the related Other Pari Passu Note or Other Pari Passu Notes
and the Special Servicer will specially service each such CMAT Pari Passu Note
and the related Other Pari Passu Note or Other Pari Passu Notes in the event
that it becomes a Specially Serviced Mortgage Loan. The Servicer, the Trustee
or Fiscal Agent will be required to make all Property Advances with respect to
Total Credit Tenant Loans and will be entitled to immediate reimbursement from
the servicer of the D7 Securitization for its allocable pro rata share of such
Property Advance. If such allocable pro rata share is not immediately
reimbursed by the servicer of the D7 Securitization, such amount can be netted
from amounts collected on the Total Credit Tenant Loan and otherwise payable to
the holder of the Other Pari Passu Note. If such amounts are deemed
non-recoverable, then the Servicer, the Trustee or the Fiscal Agent, as
applicable, may reimburse itself from amounts in the Collection Account. The
Trust Fund's allocable pro rata share of such Property Advance shall be payable
from amounts collected on the Total Credit Tenant Loan, and if such amount is
deemed a non-recoverable Advance, then from amounts in the Collection Account.
The Servicer will only be required to make P&I Advances with respect to the
amounts due on the CMAT Pari Passu Notes. See "The Pooling and Servicing
Agreement--Advances" in this Prospectus Supplement.
The Servicer will be required to service for the benefit of the holders of
the related CMAT Pari Passu Note and the holder of the Other Pari Passu Note
with a view to maximizing recovery to all such holders.
The aggregate Cut-Off Date Principal Balance of the Credit Tenant Loans is
$80,120,927, which represents 10.3% of the Initial Pool Balance. The aggregate
principal balance of the Total Credit Tenant Loans as of the Cut-Off Date is
$101,228,078. Unless otherwise specified, references in this Prospectus
Supplement to Credit Tenant Loans that are evidenced by CMAT Pari Passu Notes
refer only to the portion of the Total Credit Tenant Loan and the related CMAT
Pari Passu Note deposited in this Trust Fund. Proceeds and losses will be
applied pro rata between the CMAT Pari Passu Note and the related Other Pari
Passu Notes.
CREDIT TENANT LOANS
<TABLE>
<CAPTION>
CMAT PARI TOTAL CREDIT
PASSU NOTE % OF TENANT LOAN
CUT-OFF DATE INITIAL CUT-OFF DATE
PRINCIPAL POOL PRINCIPAL
PROPERTY NAME BALANCE BALANCE BALANCE(1)
- -------------------------------- -------------------- --------- --------------
<S> <C> <C> <C>
ACCOR-M-Six-III ................ $ 40,308,831(2) 5.2% $49,407,752
Cinemark ....................... $ 18,355,354(2) 2.3% $26,562,402
Circuit City-Philadelphia ...... $ 5,821,598(2) 0.7% $ 6,856,245
Circuit City-Ridgeland ......... $ 4,158,283(2) 0.5% $ 4,892,538
Circuit City-Indianapolis ...... $ 3,742,455(2) 0.5% $ 4,403,285
Circuit City-Jackson ........... $ 2,744,467(2) 0.4% $ 3,229,076
Circuit City-Wichita Falls ..... $ 2,494,969(2) 0.3% $ 2,938,390
Circuit City-Kingsport ......... $ 2,494,969(2) 0.3% $ 2,938,390
<CAPTION>
BALLOON
BALLOON PAYMENT/ TENANT/LEASE
PROPERTY NAME BALANCE RVI POLICY GUARANTOR
- -------------------------------- ------------- ------------ --------------------------
<S> <C> <C> <C>
ACCOR-M-Six-III ................ $9,938,713 Yes ACCOR
Cinemark ....................... $ 0 No Cinemark USA, Inc.
Circuit City-Philadelphia ...... $2,803,968 Yes Circuit City Stores, Inc.
Circuit City-Ridgeland ......... $2,002,830 Yes Circuit City Stores, Inc.
Circuit City-Indianapolis ...... $1,802,547 Yes Circuit City Stores, Inc.
Circuit City-Jackson ........... $1,321,869 Yes Circuit City Stores, Inc.
Circuit City-Wichita Falls ..... $1,201,696 Yes Circuit City Stores, Inc.
Circuit City-Kingsport ......... $1,201,696 Yes Circuit City Stores, Inc.
</TABLE>
- ---------
(1) Only the Cut-Off Date Principal Balance of the Credit Tenant Loan is
included in the Mortgage Pool. The remaining amount of the Total Credit
Tenant Loan is not included in the Trust Fund.
(2) CMAT Pari Passu Note.
Each of the Credit Tenant Leases (except for the Circuit City Credit
Tenant Leases) has a primary lease term (the "Primary Term") which expires on
or after the Maturity Date of the related Total Credit Tenant Loan. The Primary
Term of the Circuit City Credit Tenant Leases expires 11 days before the
maturity date of the Total Circuit City Credit Tenant Loans. The Credit Tenant
Loans in this Mortgage Pool are scheduled to be repaid from the scheduled
payment of rent under the related Credit Tenant Leases (the "Monthly Rental
Payments") made during the Primary Term of such Credit Tenant Lease. With
respect to 1 of the Credit Tenant Loans, representing 5.2% of the Initial Pool
Balance, the rent due
S-58
<PAGE>
under the related Credit Tenant Lease increases during the Primary Term of such
Credit Tenant Lease, and such increase will be applied in its entirety to pay
the scheduled payment of principal and interest owed with respect to the
related Credit Tenant Loan.
Each of the Credit Tenant Loans (other than the Mortgage Loan identified
on Annex A as Loan Number 16 (the "Cinemark Credit Tenant Loan")) is a Balloon
Loan. In order to minimize the risks associated with the related Balloon
Payments, each of the related borrowers has obtained an RVI Policy. The RVI
Policies, issued by R.V.I. America and FSL, indemnify the insureds against any
loss incurred as a result of a decline in the value of the related Credit
Tenant Properties upon sale of such property as a result of changes in market
conditions. Upon the maturity of a Credit Tenant Loan, if the borrower does not
pay the Balloon Payment and the related Credit Tenant Property cannot be sold
or the proceeds from the disposition of such property are insufficient to repay
the indebtedness secured by such Credit Tenant Property, the insurer will be
required to pay an amount equal to such remaining indebtedness, up to the
insured value of the Mortgaged Property. No RVI Policy requires that the
related Credit Tenant Property be sold prior to payment of the claim. The
"insured value" of a Credit Tenant Property is at least the amount of the
Balloon Payment due on the related Credit Tenant Loan. The premium for each RVI
Policy was fully paid at the time of the issuance of such policy and such
policy is non-cancelable. The related Originator, and its successors and
assigns, is the loss payee or additional named insured, as applicable, of each
RVI Policy. Each RVI Policy issued by R.V.I. America relating to the Credit
Tenant Lease relating to the Mortgaged Properties identified on Annex B hereto
as ACCOR-M-Six-III (the "ACCOR-M-Six-III Credit Tenant Lease," and such
Mortgaged Properties, the "ACCOR-M-Six-III Credit Tenant Lease Properties")
contains certain exclusions to coverage, including (i) the modification,
amendment, waiver or termination of the note evidencing the Credit Tenant Loan
without the consent of R.V.I. America and (ii) the sale, assignment or other
transfer of the Credit Tenant Property to a person other than the named loss
payee (or an affiliate) pursuant to a foreclosure or similar proceeding without
the consent of R.V.I. America. Each RVI Policy issued by FSL relating to the
Credit Tenant Leases relating to the Mortgaged Properties identified on Annex B
hereon as Circuit City-Philadelphia, Circuit City-Ridgeland, Circuit
City-Indianapolis, Circuit City-Jackson, Circuit City-Wichita Falls and Circuit
City-Kingsport (collectively, the "Circuit City Credit Tenant Leases") contains
certain exclusions to coverage, including (i) the continuation of an event of
default (under the related Credit Tenant Lease) by the Credit Tenant as of the
lease termination date, or a termination of the Credit Tenant Lease prior to
the lease termination date; (ii) the sale or transfer of all or a substantial
part of the Credit Tenant Property, or an interest in the entity or entities
which own, directly or indirectly, the Credit Tenant Property, on or prior to
the lease termination date without the prior written consent of FSL (which
consent will not be unreasonably withheld, conditioned or delayed); (iii) the
Credit Tenant Property not being in compliance with the certain property return
conditions as of the lease termination date; (iv) the written amendment or
written modification of the Credit Tenant Lease without the prior written
consent of FSL (which consent will not be unreasonably withheld, conditioned or
delayed); (v) the additional named insured shall have consented to any
modifications or additions to the Credit Tenant Property where such consent is
required under the Credit Tenant Loan without the prior written consent of FSL
(which consent of FSL will not be unreasonably withheld, conditioned or
delayed); (vi) the assignment of the interest of the Credit Tenant, or its
permitted successors or assigns, in the Credit Tenant Lease which was consented
to by the additional named insured without the prior written consent of FSL
(which consent will not be unreasonably withheld, conditioned or delayed);
(vii) the mortgage on the Credit Tenant Property shall not be in full force and
effect as a lien on the Credit Tenant Property on the lease termination date;
and (viii) the Credit Tenant has become the subject of a bankruptcy or
insolvency proceeding and has rejected (or is deemed to have rejected) its
obligations under the Credit Tenant Lease. Each RVI Policy issued by FSL has
been reinsured by Royal Indemnity Company, subject to the same exclusions from
coverage.
Generally, a claim for payment under an RVI Policy issued by R.V.I.
America must be filed no more than one year and no less than 10 days prior to
the policy termination date, while a claim for payment under an RVI Policy
issued by FSL must be filed no earlier than ten days prior to the policy
termination date and no later than thirty days after such policy termination
date. The policy termination date in each case is no earlier than the date on
which the Balloon Payment is due on the related Credit Tenant Loan. No RVI
Policy requires that the related Credit Tenant Property be sold prior to
payment of the claim. However, if the related Credit Tenant Property has not
been sold by the date the claim is paid in accordance with the procedures, if
any, set forth in the related RVI Policy, then the related Note will be
transferred to the related RVI Policy insurer. See "Risk Factors and Other
Special Considerations--Risks Related to the Mortgage Loans--Borrower May Be
Unable to Make a Balloon Payment or Prepay an ARD Loan" and "--Credit Tenant
Loans Have Special Risks--Reliance on Residual Value Insurance Policies Has
Special Risks" in this Prospectus Supplement.
Generally, each Credit Tenant Loan provides that if the related Credit
Tenant has defaulted in the performance of any covenant or agreement of the
related Credit Tenant Lease and remains in default beyond the applicable notice
and grace
S-59
<PAGE>
periods, then the lender may have the right as successor to the related
borrower, or may require the related borrower or, in the case of each Circuit
City Credit Tenant Loan the related borrower has covenanted, either (i) to
exercise any of its rights under such Credit Tenant Lease or (ii) to terminate
such Credit Tenant Lease. A default under a Credit Tenant Lease will constitute
a default under the related Credit Tenant Loan.
Each borrower under a Credit Tenant Loan has assigned to the lender of the
related Credit Tenant Loan, as security for such borrower's obligations
thereunder, such borrower's rights under the related Credit Tenant Lease(s) and
its rights to all income and profits to be derived from the operation and
leasing of the related Credit Tenant Property, including, but not limited to,
an assignment of its rights under any guaranty with respect to the Credit
Tenant's obligations under the related Credit Tenant Lease and an assignment of
the right to receive all Monthly Rental Payments due under the related Credit
Tenant Lease. Repayment of the Credit Tenant Loans (other than Balloon
Payments) and other obligations of the borrowers will be funded from such
Monthly Rental Payments (except for the Balloon Payments). Notwithstanding the
foregoing, the borrowers will remain liable for all obligations under the
Credit Tenant Loans (subject to the non-recourse provisions thereof).
Each Credit Tenant Lease provides that the related Credit Tenant must pay
all real property taxes and assessments levied or assessed against the related
Credit Tenant Property, and all charges for utility services, insurance and
other operating expenses incurred in connection with the operation of such
Credit Tenant Property. The Monthly Rental Payments are deposited directly into
a Lockbox Account controlled by the lender. Although each Credit Tenant Lease
requires the Credit Tenant to fulfill its payment and maintenance obligations
during the term of the Credit Tenant Lease, in some cases the Credit Tenant has
not covenanted to operate the related Credit Tenant Property for the term of
the Credit Tenant Lease, and the Credit Tenant may at any time cease actual
operations at the Credit Tenant Property, but it remains obligated to continue
to meet all of its obligations under the Credit Tenant Lease.
The Circuit City Credit Tenant Leases and the ACCOR-M-Six-III Credit
Tenant Lease permit the related Credit Tenant, at its own expense, and
generally without the consent of the borrower (except in certain cases with
respect to certain material alterations), to make such alterations and
construct additional buildings or improvements on the Credit Tenant Property as
the Credit Tenant may deem necessary or desirable, or to demolish any part of a
building, provided that such alterations will not materially reduce the value
of the building, and except in certain cases, material alterations will require
consent of the related borrower. Such actions, if undertaken by the Credit
Tenant, will not affect the Credit Tenant's obligations under the Credit Tenant
Lease.
The Credit Tenant Leases having Cinemark USA, Inc. as the Credit Tenant
(the "Cinemark Credit Tenant Leases") provide that at any time after the tenth
anniversary of the commencement of such Credit Tenant Leases, if the related
Credit Tenant determines in its good faith judgment that the operation of the
related Credit Tenant Property is economically obsolete, such Credit Tenant may
purchase the related Credit Tenant Property and terminate the Cinemark Credit
Tenant Lease. In order to effect such a purchase, certain terms and conditions
must be satisfied, including, among other things, written confirmation from the
Rating Agencies that such purchase will not result in a qualification,
downgrade or withdrawal of the then current rating of any Class of
Certificates. The Cinemark Credit Tenant Leases further provide that at any
time after the second anniversary of the commencement of such Credit Tenant
Leases, but no more than once during any consecutive twelve month period and no
more than a total of five times over the term of the loan, the related Credit
Tenant may substitute the related Credit Tenant Property with a new property by
conveying such new property to the related landlord and substituting a new
lease for the existing Credit Tenant Lease. In order to effect such a
substitution, certain terms and conditions must be satisfied, including, among
other things, receipt of written confirmation from the Rating Agencies that
such substitution will not result in a qualification, downgrade or withdrawal
of the then current rating on any Class of Certificates.
The ACCOR-M-Six-III Credit Tenant Leases provide that the related Credit
Tenant may offer to purchase or substitute the related ACCOR-M-Six-III Credit
Tenant Properties under certain specified circumstances, including economic
obsolescence of an ACCOR-M-Six-III Credit Tenant Property. Such offers may be
rejected by the landlord and are also subject to certain other conditions set
forth in the ACCOR-M-Six-III Credit Tenant Leases, including, but not limited
to, written confirmation from each Rating Agency that such substitution would
not cause a downgrade, qualification or withdrawal of the then-current ratings
assigned to any Class of Certificates. In addition, the ACCOR-M-Six-III Credit
Tenant Leases provide that the related Credit Tenant has an unrestricted right
to substitute two of the properties relating to the Total ACCOR-M-Six-III
Credit Tenant Loan for other properties which the Credit Tenant intends to
operate as a motel upon the satisfaction of certain conditions specified in the
Credit Lease, including confirmation from each Rating
S-60
<PAGE>
Agency that such substitution would not cause a downgrade, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates.
Such offers may be rejected by the landlord. In the event of a substitution,
the substituted property is required to have a fair market value at least equal
to that of the replaced property. Under the ACCOR-M-Six-III Credit Tenant
Leases, the related Credit Tenant also has an option to purchase the
ACCOR-M-Six-III Credit Tenant Properties during certain specified periods
during the primary term of the leases for an amount not less than that required
to pay the outstanding principal balance of the ACCOR-M-Six-III Credit Tenant
Loan. See "Description of the Mortgage Loans--Significant Mortgage Loans--The
ACCOR-M-Six-III Credit Tenant Loans and Properties" in this Prospectus
Supplement. Upon purchase of the Mortgaged Property by the Credit Tenant, the
respective Credit Tenant Loan becomes fully due and payable, subject to the
defeasance provisions of the related Credit Tenant Loan.
At the end of the term of a Credit Tenant Lease, a Credit Tenant generally
is obligated to surrender the Credit Tenant Property in good order and in its
original condition received by the Credit Tenant, except for ordinary wear and
tear and repairs required to be performed by the Mortgagor.
DUAL AMORTIZATION LOANS
The Mortgage Loans secured by Mortgaged Properties identified on Annex B
as Allied Portfolio, Regal Cinema, Westbury Lakes Apartments, Northridge
Shopping Center, Short Pump Village, 231 & 235 East 117th St., 312, 318 & 326
East 106th St., 234-236 & 238-240 East 116th St., Schram Tech Park, 215 East
117th St., 228 East 116th St., 2371 Second Avenue and 154 East 106th St., which
Mortgage Loans collectively represent 6.1% of the Initial Pool Balance, are
"Dual Amortization Loans." For each of these loans, standard underwriting
criteria may have required an amortization schedule longer than that which was
preferred by the borrower. In order to accommodate the borrower, the Dual
Amortization Loans provide the borrower with two amortization schedules. The
borrower is required to make payments sufficient to amortize the Dual
Amortization Loan over the shorter of the two amortization schedules. However,
failure of the borrower to make payments consistent with the shorter
amortization schedule does not result in a default under the Dual Amortization
Loan. Instead, in the event the borrower fails to make payments consistent with
the shorter amortization schedule on any Due Date, all excess cash flow from
the related Mortgaged Property on future Due Dates is kept in a lockbox account
controlled by the lender and used to make payments due under the shorter
amortization schedule. If the cash flow from the Mortgaged Property is
sufficient to make such payments for three consecutive Due Dates and amortizes
the Dual Amortization Loan to the level consistent with the shorter
amortization schedule, future excess property cash flow is released to the
borrower. Dual Amortization Loans are not in payment default unless the
borrower fails to make payments in accordance with the longer amortization
schedule, and such loans may not be accelerated or foreclosed upon as a result
of the failure of the borrower to make the relatively larger payments required
by the shorter amortization schedules. The shorter amortization schedule is
used for the assumptions made in compiling the numerical data contained
throughout this Prospectus Supplement, except for DSCR calculations, for which
the longer amortization schedule is used. See "Risk Factors and Other Special
Considerations--Risks Related to the Certificates--Risks Associated with Dual
Amortization Loans" in this Prospectus Supplement.
80 JOHN STREET NOTE
The Mortgage Loan secured by the Mortgaged Property identified on Annex B
as 80 John Street (the "80 John Street Loan") (which represents 3.7% of the
Initial Pool Balance) is evidenced by one Note (the "80 John Street Note")
which represents two principal portions (the "A Piece" and the "B Piece") that
have two separate amortization schedules. The A Piece is amortized by cash flow
from the Mortgaged Property with hyperamortization occurring in the tenth year.
The B Piece represents the "excess" cash flow with respect to the difference
between underwritten taxes and actual taxes being paid pursuant to a tax
abatement. The Mortgaged Property is entitled to a tax abatement due to the
enactment of the Revitalization Plan For Lower Manhattan under section 421-g of
the New York Real Property Tax Law which provides a tax exemption and a tax
abatement benefit for the conversion of non-residential buildings located in a
designated area of lower Manhattan to a residential building. A building permit
for the conversion was issued between July 1, 1995 and June 30, 2002, and the
related Mortgaged Property was converted into a residential building. The tax
abatement will provide the 80 John Street Borrower with a tax savings of over
$800,000 per year for the first eight years with such amounts declining 20%
each successive year thereafter. The B Piece fully amortizes by 2012, which
represents the end of the projected benefit period of the tax abatement. Each
portion of the 80 John Street Note evidences a portion of the Mortgage Loan
debt and is cross-defaulted and cross-collateralized and ranks pari passu with
the other portion. See "Additional Mortgage Loan Information" below.
S-61
<PAGE>
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans, on a loan-by-loan basis, see Annex A hereto.
Annex B. For a detailed presentation of the characteristics of the
Mortgage Loans, on a property-by-property basis, see Annex B.
Special Purpose Entities. The borrowers under 81 Mortgage Loans, which
represent 100% of the Initial Pool Balance, are special purpose entities. Thus,
the business activities of these borrowers are generally limited to owning
their respective properties. See "Risk Factors and Other Special
Considerations--Risks Related to Mortgage Loans--Risks Related to Borrowers
that Are Not Special Purpose Entities" in this Prospectus Supplement.
Due Dates. All of the Mortgage Loans provide for scheduled payments of
principal and/or interest ("Monthly Payments") to be due on the eleventh day of
each month or, if the eleventh day is not a business day, then, depending upon
the Mortgage Loan, either the preceding or succeeding business day (except for
the ACCOR-M-Six III Credit Tenant Loan, which provides for Monthly Payments on
the first day of each month, or if the first day is not a business day, the
next business day) ("Due Date"). None of the Mortgage Loans has a grace period
for Monthly Payments, other than the ACCOR-M-Six-III Credit Tenant Loan, which
has a Due Date of the first day of the month with a five-day grace period.
Mortgage Rates; Calculations of Interest. Each of the Mortgage Loans
accrues interest on the basis of a 360-day year consisting of twelve 30-day
months or on the basis of the actual number of days elapsed and a 360-day year.
Each of the Mortgage Loans accrues interest at the Mortgage Rate, which is
fixed for the entire remaining term of such Mortgage Loan, provided, however,
as described below under "Excess Interest," certain of the Mortgage Loans
accrue interest at a higher rate after their respective Anticipated Repayment
Dates. As used in this Prospectus Supplement, the term "Mortgage Rate" does not
include the Excess Rate.
Excess Interest. 73 of the Notes, representing approximately 89.7% of the
Initial Pool Balance, are notes which bear interest at their respective
Mortgage Rates until, or within three months after, their respective
Anticipated Repayment Dates (each such Note, an "ARD Note," and the related
Mortgage Loan, an "ARD Loan"). Commencing within three months after the
respective Anticipated Repayment Date, each such Note will bear interest equal
to, for so long as such Note is in the Mortgage Pool, the Mortgage Rate plus
2.0%; provided, however, in the event that an ARD Loan is purchased from the
Trust Fund on or after its Anticipated Repayment Date, as provided herein, the
interest rate will increase to a higher rate, generally equal to the greater of
(i) the sum of the Mortgage Rate plus, generally, 5.0% or
(ii) the sum of the then current applicable Treasury rate plus, generally,
5.0%. See "The Pooling and Servicing Agreement--Modifications" in this
Prospectus Supplement. Until the principal balance of each such ARD Note has
been reduced to zero, the related borrower will only be required to pay
interest at the Mortgage Rate. Interest accrued at the excess of the related
Revised Rate over the related Mortgage Rate (the "Excess Rate") will be
deferred (such accrued and deferred interest and interest thereon, if any, is
"Excess Interest"). Except where limited by applicable law, Excess Interest so
accrued will earn interest at the Revised Rate. Prior to the Anticipated
Repayment Date, borrowers under ARD Notes will be required to enter into a
lockbox agreement pursuant to which all revenue will be deposited directly into
a Lockbox Account controlled by the Servicer. From and after the Anticipated
Repayment Date, in addition to paying interest (at the Mortgage Rate) and
principal (based on the amortization schedule) (together, the "Monthly Debt
Service Payment"), the related borrower generally will be required to apply all
monthly cash flow from the related Mortgaged Property or Properties to pay the
following amounts in the following order of priority: (i) required payments to
the tax and insurance escrow fund and any ground lease escrow fund, (ii)
payment of the Monthly Debt Service Payment, (iii) payments to any other
required escrow funds, (iv) payment of operating expenses pursuant to the terms
of an annual budget approved by the Servicer, (v) payment of approved
extraordinary operating expenses or capital expenses not set forth in the
approved annual budget or allotted for in any escrow fund, (vi) principal on
the Mortgage Loan until such principal is paid in full and (vii) Excess
Interest. The cash flow from the Mortgaged Property or Properties securing an
ARD Loan after payments of items (i) through (v) above is referred to in this
Prospectus Supplement as "Excess Cash Flow." As described below, ARD Loans
generally provide that the related borrower is prohibited from prepaying the
Mortgage Loan until one to six months prior to the Anticipated Repayment Date
but, upon the commencement of such period, may prepay the loan, in whole or in
part, without payment of a Prepayment Premium. The Anticipated Repayment Date
for each ARD Loan is listed in Annex A.
Subordinate Certificateholders May Purchase ARD Loans After the
Anticipated Repayment Date. The holders of 100% of the Percentage Interests in
the most subordinate Class of Certificates then outstanding will have the
option for
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up to two months after the Anticipated Repayment Date for any ARD Loan to
purchase such ARD Loan at a price equal to its outstanding principal balance
plus accrued and unpaid interest, unreimbursed Property Advances and accrued
and unpaid interest on Advances. As a condition to such purchase, such holders
will be required to deliver an opinion of counsel to the effect that such
purchase would not (i) result in a gain which would be subject to the tax on
net income derived from prohibited transactions imposed by Code Section
860F(a)(1) or otherwise result in the imposition of any other tax on the
Lower-Tier REMIC or Upper-Tier REMIC under the REMIC provisions of the Code or
(ii) cause either of the Lower-Tier REMIC or Upper-Tier REMIC to fail to
qualify as a REMIC.
Amortization of Principal. The Balloon Loans provide for monthly payments
of interest only or for monthly payments of interest and principal based on
amortization schedules at least 12 months longer than their original terms,
thereby leaving substantial principal amounts due and payable on their
respective Maturity Dates, unless previously prepaid. The remaining Mortgage
Loans have remaining amortization terms that are generally the same as their
respective remaining terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE NOTES
<TABLE>
<CAPTION>
% OF
CUT-OFF DATE
TYPE OF NOTE PRINCIPAL BALANCE NUMBER OF NOTES
- ------------------------------------------------------- ------------------- ----------------
<S> <C> <C>
ARD Notes ............................................. 87.7% 73
Balloon Notes ......................................... 7.9% 7
Fully Amortizing Notes (other than ARD Notes) ......... 2.3% 1
</TABLE>
Lockboxes. 37 Mortgage Loans, representing 72.8% of the Initial Pool
Balance, have hard lockboxes. 11 Mortgage Loans, representing 7.5% of the
Initial Pool Balance, have soft lockboxes. Additionally, all of the Mortgage
Loans that have Anticipated Repayment Dates require that a hard lockbox be
established prior to their respective Anticipated Repayment Dates. A hard
lockbox is one under which the tenants (and, in the case of cash receipts
received by the property manager for a hotel or exposition center Mortgaged
Property, the property manager) at a Mortgaged Property deposit rents and other
revenues directly into an account controlled by the lender. The hard lockboxes
in place with respect to certain Mortgage Loans specify that amounts deposited
therein are remitted to the related borrowers on a daily basis until certain
trigger events have occurred. Such trigger events include, generally, among
other things, that an event of default under the related Mortgage Loan has
occurred or a certain percentage of rents has not been remitted to the hard
lockbox by the tenants of the related Mortgaged Property. The operation of such
trigger events may result in amounts being remitted to borrowers during a
Collection Period preceding the occurrence or discovery of a trigger event that
would not have been remitted had daily remittances to the borrower not been
permitted. The occurrence of the Anticipated Repayment Date, if any, under the
ARD Loans is a trigger event with respect to the related hard lockboxes, after
which the related borrowers will not be entitled to daily remittances
therefrom. A soft lockbox is one under which the borrower or property manager
at a Mortgaged Property receives rents from tenants and then deposits such
rents into an account controlled by the lender. See "The Pooling and Servicing
Agreement--Accounts--Lockbox Accounts" in this Prospectus Supplement.
Prepayment Provisions. Each Mortgage Loan prohibits voluntary prepayment
during a period (a "Lock-out Period") ending on a date ranging from
approximately 86 months to 244 months after the Cut-Off Date. The weighted
average Lock-out Period remaining from the Cut-Off Date for the Mortgage Loans
is approximately 138.6 months. No Mortgage Loan imposes a fee or premium
("Prepayment Premium") for voluntary prepayments made after the expiration of
the related Lock-out Period, but Prepayment Premiums may be due in connection
with certain involuntary prepayments and, with respect to the Premium Loans
that permit prepayment prior to the related Anticipated Repayment Date, the
unamortized portion of the Premium will be due with such prepayment. See "Risk
Factors and Other Special Considerations--Risks Related to the
Certificates--Risks Related to Yield" and "--Risks Related to Prepayments" in
this Prospectus Supplement. Generally, the Lock-out Periods for the Balloon
Loans and ARD Loans expire on, or one to six months prior to, their respective
Anticipated Repayment Dates or, with respect to Balloon Loans, their respective
Maturity Dates, and the Lock-out Periods for the fully amortizing Mortgage
Loans (other than ARD Loans) expire on, or one to six months prior to, their
respective Maturity Dates. Certain of the prepayment terms of each of the
Mortgage Loans are described in Annex A.
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The Mortgage Loans provide generally that, in the event of a condemnation
or casualty, the lender may apply the condemnation award or insurance proceeds
to the repayment of debt, which, in the case of some of the Mortgage Loans,
will require payment of any applicable Prepayment Premium. However, in the case
of most of the Mortgage Loans, if certain criteria are satisfied, and
generally, if the award or loss is less than a specified percentage of the
original principal balance of the Mortgage Loan and if in the reasonable
judgment of the lender (i) the Mortgaged Property can be restored within six
months prior to the maturity of the related Note(s) to a state no less valuable
or useful than it was prior to the condemnation or casualty, (ii) after a
restoration the Mortgaged Property would adequately secure the outstanding
balance of the Note and (iii) no event of default has occurred or is
continuing, the proceeds or award may be applied by the borrower to the costs
of repairing or replacing the Mortgaged Property. In general, in the event that
a condemnation award or insurance proceeds are used to prepay a Mortgage Loan,
the constant monthly payment due under the related Note will be reamortized
based on the remaining amortization term and the applicable interest rate. The
Pooling and Servicing Agreement provides that if a Mortgage Loan permits the
lender to apply certain amounts to a prepayment of principal (e.g., by applying
casualty or condemnation proceeds or funds escrowed for improvements not
completed by the required date) prior to the expiration of the related Lock-out
Period, the Servicer cannot apply such funds to such a prepayment unless the
Servicer has received direction from the Special Servicer. If such consent is
not obtained, such funds will be made available to the related borrowers to
restore the related Mortgaged Property. A "Business Day" is any day, other than
a Saturday, Sunday or a day on which banking institutions in Delaware, New
York, Illinois or Texas are authorized or obligated by law, executive order or
governmental decree to close.
Certain Mortgage Loans provide that if casualty or condemnation proceeds
are above a specified amount, the borrower will be permitted to supplement such
proceeds with an amount sufficient to prepay the entire principal balance of
the Mortgage Loan. In such event, no Prepayment Premium would be required to be
paid.
Neither the Depositor nor any Mortgage Loan Seller makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium, or of the collectability of any
Prepayment Premium. See "Risk Factors and Other Special Considerations--Risks
Related to the Certificates--Risks Related to Prepayments" and "--Risks Related
to Yield" in this Prospectus Supplement and "Certain Legal Aspects of Mortgage
Loans--Default Interest, Prepayment Charges and Prepayments" in the Prospectus.
Property Releases. All of the Mortgage Loans permit the applicable
borrower at any time after a specified period (the "Defeasance Lock-out
Period"), which is generally two years from the Closing Date, provided no event
of default exists, to obtain a release of a Mortgaged Property from the lien of
the related Mortgage (a "Defeasance Option"), generally provided that, among
other conditions, the borrower (a) pays on any Due Date (the "Release Date")
(i) all interest accrued and unpaid on the principal balance of the Note to and
including the Release Date, (ii) all other sums, excluding scheduled interest
or principal payments, due under the Mortgage Loan and all other loan documents
executed in connection therewith, (iii) an amount (the "Collateral Substitution
Deposit") that will be sufficient to purchase direct, non-callable obligations
of the United States of America providing payments (1) on or prior to, but as
close as possible to, all successive scheduled payment dates from the Release
Date to the related Maturity Date or, in the case of an ARD Loan, the related
Anticipated Repayment Date and (2) in amounts equal to the scheduled payments
due (through the Anticipated Repayment Date for ARD Loans, plus the assumed
Balloon Payment on ARD Loans) on such dates under the Mortgage Loan or the
defeased amount thereof in the case of a partial defeasance, and (iv) any costs
and expenses incurred in connection with the purchase of such U.S. government
obligations, and (b) delivers a security agreement granting the Trust Fund a
first priority lien on the Collateral Substitution Deposit and the U.S.
government obligations purchased with the Collateral Substitution Deposit and
an opinion of counsel to such effect. The Pool Loans generally require that (i)
prior to the release of a related Mortgaged Property, a specified percentage
(generally 125%) of the Allocated Loan Amount for such Mortgaged Property be
defeased and (ii) that the DSCR with respect to the remaining Mortgaged
Properties after the defeasance be no less than the greater of (x) the DSCR at
origination and (y) the DSCR immediately prior to such defeasance. The Servicer
will oversee and coordinate the purchase of the U.S. government obligations on
behalf of the borrower at the borrower's expense. Simultaneously with such
actions, the related Mortgaged Property will be released from the lien of the
Mortgage Loan and the pledged U.S. government obligations (together with any
Mortgaged Property not released, in the case of a partial defeasance) will be
substituted as the collateral securing the Mortgage Loan.
In general, a successor borrower established by the Depositor will assume
all of the defeased obligations of a borrower exercising a Defeasance Option
under a Mortgage Loan and the borrower will be relieved of all of the defeased
obligations thereunder. If a Mortgage Loan is partially defeased, the related
Note will be split and only the defeased
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portion of the borrower's obligations will be transferred to the successor
borrower. The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. Specifically, there can be no
assurance that a court would not interpret the excess of the Collateral
Substitution Deposit over the principal balance of the related Mortgage Loan as
a form of Prepayment Premium or would not take it into account for usury
purposes. See "Risk Factors and Other Special Considerations--Risks Related to
the Certificates--Risks Related to Prepayments" and "--Risks Related to Yield"
in this Prospectus Supplement and "Certain Legal Aspects of Mortgage
Loans--Default Interest, Prepayment Charges and Prepayments" in the Prospectus.
If the requirement to pay the excess of the Collateral Substitution Deposit
over the principal balance of a Mortgage Loan in connection with the release of
the related Mortgaged Property were held to be unenforceable, the remaining
portion of such Collateral Substitution Deposit would be insufficient to
purchase the requisite amount of U.S. government obligations. Acting in
accordance with the Servicing Standard, the Servicer could apply such reduced
cash amount as a prepayment of the subject Mortgage Loan instead of purchasing
United States government securities.
Escrows:
o Capital Replacement and FF&E Reserves. In connection with the
origination of the Mortgage Loans, a licensed engineer inspected each
Mortgaged Property (other than the Credit Tenant Properties) and such
engineer estimated the annual amount that would be required to maintain
such Mortgaged Property on an ongoing basis. Based on the engineer's
estimate, the Originators generally deducted from Underwritten NOI for
each Mortgaged Property an amount equal to or greater than the amount
suggested by the engineer. In addition, to cover such costs, each
Originator generally required each borrower to fund capital replacement or
Furniture, Fixture and Equipment ("FF&E") reserves on a monthly basis.
Such reserves can be drawn on by the respective borrowers to reimburse
themselves for the cost of such maintenance. See Annex B for
property-by-property detail.
o Deferred Maintenance Reserves. In connection with the origination of
the Mortgage Loans, an engineer also estimated the amount required to
correct any deferred maintenance conditions for each Mortgaged Property
(other than Credit Tenant Properties). Approximately 48.1% of the Mortgage
Loans, by Cut-Off Date Principal Balance, required the related borrower,
at the time of origination, to post reserves in excess of 100% of the
engineer's recommended amount if the work was not completed prior to the
closing of the Mortgage Loan. No reserves were established for 45% of the
Mortgage Loans, by Cut-Off Date Principal Balance because (1) no amount
was recommended for deferred maintenance in the engineer's report; (2) the
engineer's report recommended an amount considered insignificant by the
Originator; or (3) the Mortgage Loan is a Credit Tenant Loan.
o Tenant Improvement and Leasing Commission Reserves. The Originators
required reserves for tenant improvement and leasing commissions on 49.0%
of the Retail Properties (excluding Credit Tenant Properties), 43.2% of
the Office Properties (excluding Credit Tenant Properties) and 57.1% of
the Industrial Properties (excluding Credit Tenant Properties) (each by
Cut-Off Date Principal Balance). Such reserves were either deposited at
closing, required to be deposited on an ongoing basis or are required to
be deposited at some point in the future to help mitigate a significant
tenant rollover concentration. The reserves are in the form of cash or
letters of credit from investment grade entities.
o Real Estate Tax Reserves. Approximately 79.5% of the Mortgage Loans
(excluding Credit Tenant Loans), by Cut-Off Date Principal Balance,
require reserves for real estate taxes.
o Insurance Reserves. Generally, all of the Mortgage Loans, other than
the Credit Tenant Loans, provide for monthly escrows to cover insurance
premiums on the Mortgaged Properties (except in cases where three months
to one year of insurance premiums are escrowed). Approximately 65.6% of
the Mortgage Loans (excluding Credit Tenant Leases), by Cut-Off Date
Principal Balance, require reserves for insurance.
o Seasonality Reserves. The Westin Denver Tabor Center Loan, which
represents approximately 5.7% of the Initial Pool Balance, has a
seasonality reserve which serves to capture revenues during peak periods
of occupancy, which revenues will be available to pay debt service during
slower periods. The Bayside Exposition Center Loan, which represents
approximately 2.8% of the Initial Pool Balance, also has a seasonality
reserve.
o Ground Lease Reserves. All of the Mortgage Loans secured by leasehold
interests provide for escrows to make ground lease payments.
o Environmental Reserves. All of the Mortgaged Properties have been
subject to Phase I environmental site assessments and/or updates. To the
extent issues have been identified by regulatory agencies or otherwise, in
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some cases the related borrowers have made deposits into environmental
reserve accounts to the extent required by the related Mortgage Loan.
However, such reserve amounts may not be sufficient to remediate such
environmental conditions and all such environmental conditions may not
have been identified. See "Risk Factors and Other Special
Considerations--Risks Related to Mortgage Loans--Risks Under Environmental
Laws" and "--Environmental Risks Related to the Mortgaged Properties" in
this Prospectus Supplement.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the borrower sells or otherwise transfers or encumbers the
related Mortgaged Property without the consent of that holder. The Special
Servicer will determine, in a manner consistent with the Servicing Standard,
and, to the extent required under the Pooling and Servicing Agreement, upon
receipt of written confirmation from the Rating Agencies that such action will
not cause a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates, whether to exercise any right the lender
may have under any such clause to accelerate payment of the related Mortgage
Loan upon, or to withhold its consent (where such consent is provided for) to,
any transfer or further encumbrance of the related Mortgaged Property. Certain
of the Mortgage Loans provide that the lender may condition an assumption of
the loan on the receipt of an assumption fee, which is in some cases equal to
one percent of the then unpaid principal balance of the applicable Note, in
addition to the payment of all costs and expenses incurred in connection with
such assumption. Certain of the Mortgage Loans provide that such consent may
not be unreasonably withheld provided that (i) no event of default has
occurred, (ii) the proposed transferee is creditworthy and has sufficient
experience in the ownership and management of properties similar to the
Mortgaged Property, (iii) the Rating Agencies have confirmed in writing that
such transfer or further encumbrance will not result in a qualification,
reduction or withdrawal of the then current rating of the Certificates, (iv)
the transferee has executed and delivered an assumption agreement evidencing
its agreement to abide by the terms of the Mortgage Loan, generally together
with legal opinions and title insurance endorsements and (v) any applicable
assumption fee has been received (which assumption fee will be paid to the
Servicer or the Special Servicer, as provided in the Pooling and Servicing
Agreement, and will not be paid to the Certificateholders). See "Certain Legal
Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance" in the
Prospectus and "Risk Factors and Other Special Considerations--Risks Related to
the Mortgage Loans--Risks Relating to Enforceability" and "The Pooling and
Servicing Agreement--Enforcement of "Due-on-Sale" and "Due-on-Encumbrance"
Clauses" in this Prospectus Supplement. The Depositor makes no representation
as to the enforceability of any due-on-sale or due-on-encumbrance provision in
any Mortgage Loan.
Mortgage Provisions Relating to Servicer's Right to Terminate Management
Agreements. Certain of the Mortgage Loans permit the lender to cause the
related borrowers to terminate the related management agreements upon the
occurrence of certain events. A significant number of Mortgage Loans where an
affiliate of the borrower manages the related Mortgaged Property or Mortgaged
Properties provides that if the DSCR for such Mortgage Loan falls below a
certain level, the lender will have the right to require the termination of the
related management agreement and replace the manager with a manager acceptable
to the lender. The Mortgage Loans generally allow the lender to cause the
termination of the related management agreements upon the occurrence of certain
events of default under the related loan agreements or mortgage documents. In
addition, the lender is generally permitted to require the termination of a
management agreement if the manager breaches certain provisions of the
management agreement which would permit the termination of such agreement
thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage Loans. 7 of
the Mortgage Loans (the "Pool Loans"), representing 11.4% of the Mortgage Pool
by Cut-Off Date Principal Balance, are secured by more than one Mortgaged
Property. However, because certain states require the payment of a mortgage
recording or documentary stamp tax based upon the principal amount of debt
secured by a mortgage, the Mortgages recorded with respect to certain Mortgaged
Properties secure only 150% of the Allocated Loan Amount of such Mortgaged
Properties (rather than the entire initial principal balance of the related
Note or Notes). See "Risk Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Risks Related to Limitations on Enforceability
of Cross-Collateralization" in this Prospectus Supplement and "Loan
Characteristics" in Annex A.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured (a) by a hazard insurance
policy in an amount equal to the greatest of (i) the full replacement cost of
the improvements and equipment without deduction for physical depreciation,
(ii) the outstanding principal balance of the Mortgage Loan (or, with respect
to certain Pool Loans, the full insurable value of the Mortgaged Property) and
(iii) an amount sufficient to prevent the insurer from deeming the borrower a
co-insurer, or in an amount satisfying other similar
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standards, and (b) by a flood insurance policy (if any part of the Mortgaged
Property is located in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards and for which flood insurance
has been made available under the National Flood Insurance Program) in an
amount at least equal to the outstanding principal amount of the Mortgage Loan
(or with respect to certain Pool Loans, the full insurable value of the
Mortgaged Property) or the maximum limit of coverage available, whichever is
less, or in an amount satisfying other similar standards. The hazard insurance
policies are generally required to cover loss or damage by fire and lightning
and other risks and hazards covered by a standard extended coverage insurance
policy including, but not limited to, riot and civil commotion, vandalism,
malicious mischief, burglary and theft. Certain of the Mortgaged Properties
located in earthquake risk areas are insured by earthquake insurance, and
certain of such insured Mortgaged Properties may be insured in amounts less
than the outstanding principal balances of such Mortgage Loans (or, with
respect to certain Pool Loans, the full insurable value of the Mortgaged
Property). Certain of the Mortgaged Properties located in areas having special
hurricane hazards are insured by hurricane insurance in amounts less than the
outstanding principal balances of such Mortgage Loans. Mobile Home Park
Properties located in earthquake risk areas or areas having special hurricane
hazards are not insured against earthquake or hurricane damage.
The Mortgage Loans also generally require that the borrower obtain and
maintain during the entire term of the Mortgage Loan (i) comprehensive public
liability insurance, including broad form property damage, blanket contractual
and personal injuries coverages and containing minimum limits per occurrence as
specified in the related Mortgage, (ii) rent loss and/or business interruption
insurance in an amount equal to the greater of (x) estimated annual (or a
specified longer period) gross revenues from the operations of the Mortgaged
Property and (y) projected annual (or a specified longer period) operating
expenses (including debt service) for the maintenance and operation of the
Mortgaged Property, or in an amount satisfying other similar standards, (iii)
except with respect to certain of the Mobile Home Park Loans, insurance against
loss or damage from leakage of sprinkler systems and explosion of steam
boilers, air conditioning equipment, high pressure piping, machinery and
equipment, and pressure vessels, (iv) if the Mortgaged Property is a commercial
property, worker's compensation insurance, (v) during any period of repair or
restoration, builders "all risk" insurance, and (vi) such other insurance as
may from time to time be reasonably required by the lender in order to protect
its interests.
Preferred Equity Investments. In general, with respect to each related
borrower, the Preferred Interest Holder is entitled to receive certain
preferred distributions prior to distributions being made to the other partners
or members. Under the terms of the preferred equity arrangement or the related
Mortgage Loan, no monthly distribution to the Preferred Interest Holder is
permitted to be made until all required monthly debt service payments, reserve
payments, other payments under the related Mortgage Loan ("Monthly Mortgage
Loan Payments") and, generally, any obligations to other creditors, other than,
in certain cases, payments to borrower affiliates and property managers, have
been made when due and all monthly operating expenses with respect to the
related Mortgaged Property ("Monthly Operating Expenses") have been paid. After
payment of such amounts, the Preferred Interest Holder is entitled to receive a
distribution of a preferred yield and, generally a monthly return of capital
equal to either (i) a scheduled minimum payment or (ii) the greater of a
scheduled minimum payment and a specified percentage of certain remaining cash
flow from the Mortgaged Property or Mortgaged Properties, after payment of
Monthly Mortgage Loan Payments, Monthly Operating Expenses and the monthly
preferred yield to the Preferred Interest Holder (or, in each case, if certain
breaches, other trigger events, or trigger dates have occurred, 100% of such
remaining cash flow).
Under the related partnership agreement, operating agreement or similar
agreement, the Preferred Interest Holder generally has certain specified
rights, including, in most cases, the right to terminate and replace the
manager of the related Mortgaged Property or Properties upon the occurrence of
certain specified breaches or in some cases, if the DSCR as of certain dates
falls below certain levels generally equal to the DSCR at the time of the
origination of the related Mortgage Loan. However, the right of the Preferred
Interest Holder to terminate any manager is, in most cases, expressly subject
to the right of the lender to terminate and replace such manager. If the
Preferred Interest Holder is entitled to terminate a manager at a time when the
lender does not have such a right, then prior to termination, the Preferred
Interest Holder must, in most cases, receive written confirmation from each of
the Rating Agencies that such termination would not cause a downgrade,
qualification or withdrawal of any of its then current ratings assigned to any
Class of Certificates. Other than the increase in the percentage of the cash
flow used to calculate the monthly return of capital and the right to terminate
the manager as described above, the Preferred Interest Holder has no further
remedies under the relevant partnership, operating or similar agreement in the
event of nonpayment of its monthly preferred yield and return of capital.
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In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Property, which right does not affect any right
that the lender may have to approve such budgets. The Preferred Interest Holder
also generally has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases, improvement of the
related Mortgaged Property to a materially higher standard than comparable
properties in the vicinity of such Mortgaged Property (unless approved by the
lender as described below), and the dissolution, liquidation or the taking of
certain bankruptcy actions with respect to the borrower. With respect to the
making of any capital improvements in addition to those reserved for under the
related Mortgage Loan, the lender may approve such improvements without the
consent of the Preferred Interest Holder. In such event, the expenditure of
amounts to make such additional capital improvements, rather than to make the
monthly distribution to the Preferred Interest Holder, will not, in most cases,
cause a breach which gives rise to a right to terminate the related manager.
SIGNIFICANT MORTGAGE LOANS
In connection with the origination of each of the three largest Mortgage
Loans listed below, CCA, in addition to its ordinary underwriting procedures,
obtained audited financial statements or engaged independent accountants to
perform agreed-upon procedures with respect to financial statements for a
recent 12-month period with respect to the related Mortgaged Properties.
THE WESTIN DENVER TABOR CENTER LOAN AND PROPERTY
The Loan. The largest Mortgage Loan in the Mortgage Pool (the "Westin
Denver Tabor Center Loan") was originated by NACC on June 24, 1997, had an
original principal balance of $45,000,000 and has a Cut-Off Date Principal
Balance of $44,593,725, which represents approximately 5.7% of the Initial Pool
Balance. The Westin Denver Tabor Center Loan is secured by a Mortgage
encumbering the fee interest in one hotel property (the "Westin Denver Tabor
Center Property"), located in Denver, Colorado.
<TABLE>
<S> <C> <C> <C>
Cut-Off Date Principal % of Initial
Balance: $44,593,725 Pool Balance: 5.7%
Origination Date: June 24, 1997 Maturity Date: January 11, 2024
Loan Type: ARD Property Type: Hotel
Premium Loan: No No. of Properties: 1
CMAT Pari Passu Note: No
Monthly Payment: $ 362,503.83 Location of Properties: Denver, Colorado
Interest Rate: 8.505% Appraised Value
(combined): $77,000,000
Amortization Term: 300 months Number of Rooms: 430
Year Built/Renovated: 1984/1996
DSCR: 1.74x Cut-Off Date Principal
Balance/Room: $103,706
Cut-Off Date LTV 57.9% Fee or Leasehold: Fee
Borrower Special Yes, with independent Franchise: Westin
Purpose Entity: director and non-
consolidation opinion
Lockbox: Hard Occupancy: 79.3% (TTM as of 4/30/99)
</TABLE>
The Borrower. Westin Denver, LLC (the "Westin Denver Tabor Center
Borrower") is a special purpose Delaware limited liability company with Westin
Denver Hotel Company, a Delaware corporation, as its managing member. The
Westin Denver Tabor Center Borrower is an affiliate of Starwood Hotels and
Resorts.
Payment Terms; Prepayment Terms; Defeasance. The Westin Denver Tabor
Center Loan amortizes over 300 months and matures on January 11, 2024 (the
"Westin Denver Tabor Center Maturity Date"). The Westin Denver Tabor
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<PAGE>
Center Borrower is required to make Monthly Payments of $362,503.83, which is
based on a 300 month amortization schedule and an interest rate of 8.505% per
annum through December 11, 2013 (the "Westin Denver Tabor Center ARD"). On the
Westin Denver Tabor Center ARD, the interest rate will increase by 2.0%.
Voluntary prepayment is prohibited prior to the Westin Denver Tabor Center ARD.
However, from October 2001, the Westin Denver Tabor Center Borrower may defease
all or any portion of the Westin Denver Tabor Center Loan upon the satisfaction
of certain conditions specified in the loan documents, including confirmation
from each Rating Agency that such defeasance would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. See "Certain Terms and Conditions of the Mortgage
Loans--Property Releases" above.
Lockbox; Reserve Accounts; Financial Statements. The Westin Denver Tabor
Center Borrower has entered into a lockbox agreement whereby all rent from the
Westin Denver Tabor Center Property is required to be deposited by the tenants
directly into a Lockbox Account controlled by the lender. See "The Pooling and
Servicing Agreement--Accounts--Lockbox Accounts" in this Prospectus Supplement.
The Westin Denver Tabor Center Borrower has also established Reserve Accounts,
including a monthly capital reserve account, an ongoing tax and insurance
reserve account, a condominium common area charge reserve account and a
seasonal reserve account. See "Certain Terms and Conditions of the Mortgage
Loans--Escrow" above and "The Pooling and Servicing Agreement--Accounts--Cash
Collateral Accounts" in this Prospectus Supplement. The Westin Denver Tabor
Center Borrower is required to furnish audited financial statements within 105
days following the end of each of its fiscal years.
The Property Manager. The Westin Denver Tabor Center Property is managed
by Westin Hotel Company, a Delaware corporation (the "Westin Denver Tabor
Center Property Manager"), an affiliate of the Westin Denver Tabor Center
Borrower. The Westin Denver Tabor Center Property Manager is paid a fee of 3%
of gross revenues of the hotel (the "Annual Minimum Fee"), as well as an
additional incentive fee in the amount by which 15% of the annual operating
profit for each operating year exceeds the Annual Minimum Fee. The lender may
terminate the Westin Denver Tabor Center Property Manager upon 45 day notice if
(i) the Westin Denver Tabor Center Property fails to meet predetermined
operating profit goals outlined in the property's management agreement (except
as reasonably caused by physical events beyond the Westin Denver Tabor Center
Property Manager's control) and (ii) the Westin Denver Tabor Center Property
fails to meet occupancy and daily room rate levels that are comparable to
similar properties in the Denver area (as determined by a formula outlined in
the Westin Denver Tabor Center Property management agreement).
The Property. The Westin Denver Tabor Center Property, located in Denver,
Colorado, is a full-service hotel consisting of one 19-story building with 430
rooms. The Westin Denver Tabor Center Property is one of three condominium
units (including a 32-story office tower/urban mall and a hotel) that comprise
the Tabor Center in Denver, Colorado (the "Center") and is subject to a
condominium declaration (the "Declaration") that provides for access to and
management by an association of the common elements of the Center, such as a
foundation, plaza and utilities. The association budgets and collects
assessments and other charges for common elements based primarily on square
footage. Funds are maintained in a reserve account in an amount sufficient to
pay six months of assessments and other charges under the Declaration. As of
January 1, 1999, the appraised value of the Westin Denver Tabor Center Property
was $77,000,000. The Westin Denver Tabor Center Property had a 79.3% occupancy
and an average daily room rate of $142.45 for the 12-month period ended April
30, 1999.
See "Risk Factors and Other Special Considerations--Risks Related to The
Mortgage Loans--Risks Associated with Commercial and Multifamily Lending
Generally" and "--Hotel Properties Have Special Risks" for a discussion of
certain matters associated with hotel properties.
S-69
<PAGE>
THE 208 SOUTH LASALLE LOAN AND PROPERTY
The Loan. The second largest Mortgage Loan in the Mortgage Pool (the "208
South LaSalle Loan") was originated by NACC on March 31, 1998, had an original
principal balance of $43,202,188 and has a Cut-Off Date Principal Balance of
$42,788,119, which represents approximately 5.5% of the Initial Pool Balance.
The 208 South LaSalle Loan is secured by a Mortgage encumbering the fee
interest in an office property (the "208 South LaSalle Property"), located in
Chicago, Illinois.
<TABLE>
<S> <C> <C> <C>
Cut-Off Date % of Initial
Principal Balance: $42,788,119 Pool Balance: 5.5%
Origination Date: March 31, 1998 Maturity Date: April 11, 2028
Loan Type: ARD Property Type: Office
Premium Loan: Yes(1) No. of Properties: 1
CMAT Pari Passu Note: No
Monthly Payment: $332,187.48 Location of Properties: Chicago, Illinois
Interest Rate: 8.500% Appraised Value: $69,000,000
Amortization Term: 360 months Square Feet: 853,603
Year Built/Renovated: 1914/1996
DSCR: 1.38x Cut-Off Date Principal
Balance/SF: $50.13
Cut-Off Date LTV 62.0% Fee or Leasehold: Fee
Borrower Special Yes, with independent Major Tenants: See "The Property" below
Purpose Entity: director and non-
consolidation opinion
Lockbox: Hard(2) Occupancy: 95% (as of 3/31/99)
</TABLE>
- ---------
(1) See "--The Premium" below for additional information regarding the
Premium.
(2) In the absence of certain trigger events, funds deposited in the Lockbox
Account are remitted to the borrower on a daily basis. See "The Pooling
and Servicing Agreement--Accounts--Lockbox Accounts" in this Prospectus
Supplement.
The Premium. The 208 South LaSalle Loan is a Premium Loan. The chart below
contains significant information regarding this aspect of the 208 South LaSalle
Loan.
<TABLE>
<CAPTION>
UNAMORTIZED
TOTAL UNAMORTIZED PREMIUM %
FUNDED PREMIUM OF MORTGAGE BASE INTEREST CUT-OFF DATE CUT-OFF DATE ARD
AMOUNT AMOUNT LOAN RATE LTV PTV LTV/PTV
- -------------- ------------- ------------- --------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
$45,800,000 $2,597,812 5.7% 8.50% 62.0% 65.5% 51.1%
</TABLE>
See "Premium Loans" above for additional information regarding Premium
Loans.
The Borrower. LaSalle Adams, L.L.C. (the "208 South LaSalle Borrower") is
a special purpose Delaware limited liability company with Prime Group Realty,
L.P., a Delaware limited partnership, and PGR Finance II, Inc., a Delaware
corporation, as members.
Payment Terms; Prepayment Terms; Defeasance. The 208 South LaSalle Loan
amortizes over 360 months and matures on April 11, 2028 (the "208 South LaSalle
Maturity Date"). The 208 South LaSalle Borrower is required to make Monthly
Payments of $332,187.48, which amount is based on a 360 month amortization
schedule and an interest rate of 8.50% per annum until April 11, 2013 (the "208
South LaSalle ARD"). On the 208 South LaSalle ARD, the interest rate will
increase by 2%. See "Certain Terms and Conditions of the Mortgage Loans--Excess
Interest" above. Voluntary prepayment is prohibited until the 208 South LaSalle
ARD, whereupon the 208 South LaSalle Loan is freely prepayable.
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<PAGE>
However, from and after October 2001, the 208 South LaSalle Borrower may
defease all or any portion of the 208 South LaSalle Loan upon the satisfaction
of certain conditions specified in the loan documents, including confirmation
from each Rating Agency that such defeasance would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. See "Certain Terms and Conditions of the Mortgage
Loans--Property Releases" above.
Lockbox; Reserve Accounts; Financial Statements. The 208 South LaSalle
Borrower has entered into a lockbox agreement whereby all rent from the 208
South LaSalle Property is required to be deposited by the tenants directly into
a Lockbox Account controlled by the lender. See "The Pooling and Servicing
Agreement--Accounts--Lockbox Accounts" in this Prospectus Supplement. The 208
South LaSalle Borrower has also established Reserve Accounts, including a
monthly capital reserve account and an ongoing tax and insurance reserve
account. See "Certain Terms and Conditions of the Mortgage Loans--Escrows"
above and "The Pooling and Servicing Agreement--Accounts--Cash Collateral
Accounts" in this Prospectus Supplement. The 208 South LaSalle Borrower is
required to furnish audited financial statements within 90 days following the
end of each of its fiscal years.
The Property Manager. The 208 South LaSalle Property is managed by Prime
Group Realty, L.P., a Delaware limited partnership (the "208 South LaSalle
Property Manager"), a member of the 208 South LaSalle Borrower. The 208 South
LaSalle Property Manager is paid a fee of up to 4% of gross income from the 208
South LaSalle Property, as well as a leasing fee of up to 8% of net base rents
relating to new leases obtained after the acquisition of the 208 South LaSalle
Property, which fees are subordinate to debt service. The lender may terminate
the 208 South LaSalle Property Manager during the existence of an event of
default under the 208 South LaSalle Loan.
The Property. The 208 South LaSalle Property is an 83-year-old, 20-story
office building with 880,000 square feet of GLA located in Chicago, Illinois.
Major tenants at the 208 South LaSalle Property are shown in the chart below.
As of 3/31/99, the 208 South LaSalle Property was 95% leased and as of June 25,
1999, the appraised value was $69,000,000.
<TABLE>
<CAPTION>
MAJOR TENANTS # OF SQUARE FEET LEASE EXPIRATION
- ---------------------------------- ------------------ -------------------------------
<S> <C> <C>
The Chicago Corporation .......... 167,698 various (10/31/99 to 12/31/05)
ABN Amro ......................... 100,970 various (3/31/03 to 11/12/08)
CEDA ............................. 60,902 9/30/2009
</TABLE>
See "Risk Factors and Other Special Considerations--Risks Related to The
Mortgage Loans--Risks Associated with Commercial and Multifamily Lending
Generally" and "--Office Properties Have Special Risks" for a discussion of
certain matters associated with office properties.
S-71
<PAGE>
THE ACCOR-M-SIX-III CREDIT TENANT LOAN AND PROPERTIES
The Loan. The third largest Mortgage Loan in the Mortgage Pool (the
"ACCOR-M-Six-III Credit Tenant Loan") was originated by NACC on April 30, 1998,
and has a Cut-Off Date Principal Balance of $40,308,831, which represents
approximately 5.2% of the Initial Pool Balance. The Total ACCOR-M-Six-III
Credit Tenant Loan is evidenced by a CMAT Pari Passu Note (the "ACCOR-M-Six-III
Note") that is cross-collateralized and cross-defaulted with an Other Pari
Passu Note (the "Other ACCOR-M-Six-III Note") in the original principal amount
of $9,793,375 (the aggregate indebtedness represented by such two Notes being
referred to in this Prospectus Supplement as the "Total ACCOR-M-Six-III Credit
Tenant Loan"). The Total ACCOR-M-Six-III Credit Tenant Loan had an original
principal balance of $50,102,206. The Total ACCOR-M-Six-III Credit Tenant Loan
is secured by Mortgages encumbering the fee interests in 14 hotel properties
(each, an "ACCOR-M-Six-III Property"), located in Illinois, Indiana,
Massachusetts, Oregon, Pennsylvania and Tennessee.
<TABLE>
<S> <C> <C> <C>
Cut-Off Date % of Initial
Principal Balance: $40,308,831 Pool Balance: 5.2%
Origination Date: April 30, 1998 Maturity Date: May 1, 2018
Loan Type: Balloon Property Type: Hotel
Premium Loan: No No. of Properties: 14
CMAT Pari Passu Note: Yes
Monthly Payment: Interest only of Location of Properties: Illinois, Indiana,
$236,142.57 (through and Massachusetts, Oregon,
including September 1, Pennsylvania, Tennessee
2008)
$402,306.49 (from and
including October 1, 2008
through and including May 1,
2013)
$442,537.13 (from and
including June 1, 2013
through and including May 1,
2018; Balloon payment of
$9,938,712.55 at maturity
(May 1, 2018))
Interest Rate: 7.030% Appraised Value
(combined): $54,600,000
Amortization Term: 240 months Rooms (combined): 1,642
Year Built/Renovated: 1968-1989/1994-1999
Cut-Off Date Principal
DSCR: 1.00 x Balance/Room: $24,549
Cut-Off Date LTV 91.8 % Fee or Leasehold: Fee
Borrower Special Yes, with independent Guarantor/Tenant/ ACCOR/Commercial
Purpose Entity: director and non- Subtenant: Credit Leasing III, Inc./
consolidation opinion Motel 6 Operating, L.P.
Lockbox: Hard Occupancy: See "The Property" below
</TABLE>
The Other ACCOR-M-Six III Note was transferred to an affiliate of the
Depositor and included in the D7 Securitization. The Trustee will be the Lead
Lender with respect to the Total ACCOR-M-Six III Credit Tenant Loan and the
Servicer and the Special Servicer will therefore make all servicing and special
servicing decisions with respect to the Total ACCOR-M-Six III Credit Tenant
Loan. See "--Credit Tenant Loans" above.
The Credit Tenant, the Borrower, the Tenant and the Subtenant. The Credit
Tenant under the ACCOR-M-Six-III Credit Lease is Universal Commercial Credit
Leasing III, Inc. (the "ACCOR-M-Six-III Credit Tenant"), a Delaware
S-72
<PAGE>
corporation and indirect subsidiary of ACCOR, a French corporation ("ACCOR").
The ACCOR-M-Six-III Credit Tenant has subleased each of the ACCOR Credit Tenant
Properties to Motel 6. The obligations of the ACCOR-M-Six-III Credit Tenant
under the ACCOR-M-Six-III Credit Tenant Loan are unconditionally guaranteed by
ACCOR, one of the world's largest hoteliers with 2,500 hotels in 70 countries.
ACCOR has a long-term unsecured debt rating of "BBB" by S&P. On July 13, 1999,
S&P revised its outlook from "stable" to "negative."
M-Six Limited Partnership (the "ACCOR-M-Six-III Borrower") is a special
purpose Delaware limited partnership with M-Six GP, a Delaware corporation, as
general partner, and Realty Holdings of America, LLC, a New York limited
liability company, as limited partner.
The ACCOR-M-Six-III Credit Tenant Properties have been leased by the
ACCOR-M-Six-III Borrower under a lease agreement (the "ACCOR-M-Six-III Credit
Lease"). See "Description of the Mortgage Pool--Credit Tenant Loans" in this
Prospectus Supplement.
See "Risk Factors and Other Special Considerations--Risks Related to The
Mortgage Loans--Credit Tenant Loans Have Special Risks" for a discussion of
certain matters associated with Credit Tenant Loans.
Payment Terms; Prepayment Terms; Defeasance. The ACCOR-M-Six-III Credit
Tenant Loan is a Balloon Loan that matures on May 1, 2018 (the "ACCOR-M-Six-III
Maturity Date"). The ACCOR-M-Six-III Borrower is required to make Monthly
Payments of interest only in the amount of $236,142.57 through and including
September 1, 2008. Following September 1, 2008, the ACCOR-M-Six-III Borrower is
required to make Monthly Payments of $402,306.49 through and including May 1,
2013 and thereafter monthly payments of $442,537.13 through and including May
1, 2018 with an additional balloon payment of $9,938,713 due on the
ACCOR-M-Six-III Maturity Date, which amount is based on a 240 month
amortization schedule. Voluntary prepayment is prohibited until February 1,
2018. However, during or after March 31, 2002, the ACCOR-M-Six-III Borrower may
defease all or any portion of the ACCOR-M-Six-III Credit Tenant Loan upon the
satisfaction of certain conditions specified in the loan documents, including
confirmation from each Rating Agency that such defeasance would not cause a
downgrade, qualification or withdrawal of the then current ratings assigned to
any Class of Certificates. In addition, the ACCOR-M-Six-III Borrower may obtain
the release of an individual property by defeasing a portion of the
ACCOR-M-Six-III Credit Tenant Loan equal to the Allocated Loan Amount. See
"Certain Terms and Conditions of the Mortgage Loans--Property Releases" above.
Lockbox; Reserve Accounts; Financial Statements. The ACCOR-M-Six-III
Borrower has entered into a lockbox agreement whereby all rent from the
ACCOR-M-Six-III Credit Tenant Properties is required to be deposited by the
ACCOR-M-Six-III Credit Tenant directly into a Lockbox Account controlled by the
lender. See "The Pooling and Servicing Agreement--Accounts--Lockbox Accounts"
in this Prospectus Supplement. The loan documents do not require the
ACCOR-M-Six-III Borrower to establish any Reserve Accounts. The Borrower is
required to furnish audited financial statements within 90 days following the
end of each of its fiscal years. ACCOR is required to furnish audited financial
statements within 180 days following the end of each of its fiscal years.
The Property Manager. The loan documents do not require the
ACCOR-M-Six-III Borrower to maintain a property manager for the ACCOR-M-Six-III
Credit Tenant Properties.
Release and Substitution of Properties. Releases and substitutions of
ACCOR-M-Six-III Credit Tenant Properties may occur in connection with (i) the
failure of an ACCOR-M-Six-III Credit Tenant Property to comply with the
Americans with Disabilities Act, (ii) a major casualty or condemnation of an
ACCOR-M-Six-III Credit Tenant Property or (iii) economic obsolescence of an
ACCOR-M-Six-III Credit Tenant Property. In such event, the ACCOR-M-Six-III
Credit Tenant may offer to purchase the related ACCOR-M-Six-III Credit Tenant
Property for an amount at least equal to the Allocated Loan Amount for such
property or substitute a replacement property of equal or greater value, each
such release or substitution will be subject to certain conditions including
confirmation by the Rating Agencies that such release or substitution would not
cause a downgrade, qualification or withdrawal of the then-current ratings
assigned to any Class of Certificates. Furthermore, the ACCOR-M-Six-III Credit
Tenant has the right to substitute up to two ACCOR-M-Six-III Credit Tenant
Properties under such substitution conditions, which offers may be rejected by
the landlord. In the event of a substitution, the substituted property is
required to have a fair market value at least equal to that of the replaced
property. Under the ACCOR-M-Six-III Credit Lease, the ACCOR-M-Six-III Credit
Tenant also has an option to purchase the ACCOR-M-Six-III Credit Tenant
Properties during certain specified periods during the primary term of the
leases for an amount not less than that required to pay the outstanding
principal balance of the Mortgage Loan.
S-73
<PAGE>
The Property. The ACCOR-M-Six-III Credit Tenant Properties consist of 14
hotel properties located in Rolling Meadow, Illinois; Glenview, Illinois;
Oakbrook, Illinois; South Bend, Indiana; Indianapolis, Indiana; Merrillville,
Indiana; Chicopee, Massachusetts; Danvers, Massachusetts; Grants Pass, Oregon;
Medford, Oregon; Washington, Pennsylvania; Nashville, Tennessee; and
Chattanooga, Tennessee. The portfolio includes 1,642 rooms. The properties were
appraised as of the date and for the amounts set forth below.
<TABLE>
<CAPTION>
ALLOCATED
# OF YEAR LOAN APPRAISED
PROPERTY NAME/LOCATION ROOMS BUILT/RENOVATED AMOUNT VALUE(1)
<S> <C> <C> <C> <C>
1800 Winnetka Circle/
Rolling Meadow, IL 134 1989/1995 $ 2,202,295 2,400,000
1535 Milwaukee Avenue/
Glenview, IL 111 1989/1995 $ 4,404,590 4,800,000
10 Roosevelt Road/
Oakbrook, IL 109 1982/1996 $ 4,863,401 5,300,000
52624 US Hwy 31 N/
South Bend, IN 147 1975/1994 $ 3,303,442 3,600,000
6330 Debonair Lane/
Indianapolis, IN 164 1968/1996 $ 4,771,639 5,200,000
8290 Louisiana Street/
Merrillville, IN 125 1980/1994 $ 2,569,344 2,800,000
88 Burnett Road/
Chicopee, MA 88 1972/1995 $ 2,752,868 3,000,000
65 Newbury Street/
Danvers, MA 108 1978/1997 $ 6,423,360 7,000,000
1800 North East Seventh/
Grants Pass, OR 122 1979/1998 $ 4,129,303 4,500,000
2400 Biddle Road/
Medford, OR 116 1987/1998 $ 4,679,876 5,100,000
1283 Motel 6 Drive/
Washington, PA 101 1985/1995 $ 2,477,582 2,700,000
95 Wallace Road/ 1974/None
Nashville, TN 126 Scheduled $ 2,385,819 2,600,000
323 Cartwright Road/
Nashville, TN 94 1987/1999 $ 2,294,057 2,500,000
7707 Lee Highway/
Chattanooga, TN 97 1987/1996 $ 2,844,631 3,100,000
Total 1,642 $50,102,207 54,600,000
</TABLE>
- ---------
(1) Appraisal dates for the properties range from April 1, 1998 to July 1,
1998.
See "Risk Factors and Other Special Considerations--Risks Related to The
Mortgage Loans--Risks Associated with Commercial and Multifamily Lending
Generally" and "--Hotel Properties Have Special Risks" for a discussion of
certain matters associated with hotel properties.
S-74
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
<TABLE>
<S> <C>
Initial Pool Balance(1) ............................................................ $781,148,433
Number of Mortgage Loans ........................................................... 81
Number of CMAT Pari Passu Notes .................................................... 8
Number of Mortgaged Properties ..................................................... 103
Average Cut-Off Date Principal Balance ............................................. $ 9,643,808
Number of Premium Loans ............................................................ 12
Aggregate Cut-Off Date Principal Balance of Premium Loans .......................... $184,001,683
Number of Credit Tenant Loans ...................................................... 8
Aggregate Cut-Off Date Principal Balance of Credit Tenant Loans .................... $80,120,927
Weighted Average Mortgage Rate ..................................................... 7.897%
Range of Mortgage Rates ............................................................ 6.750% - 8.850%
Weighted Average Remaining Term to the Earlier of Maturity or Anticipated
Repayment Date (mos) .............................................................. 141
Range of Remaining Terms to the Earlier of Maturity or Anticipated Repayment Date
(mos) ............................................................................. 92 to 248
Weighted Average Original Amortization Term (mos) .................................. 327
Range of Original Amortization Terms (mos) ......................................... 210 to 360
Weighted Average Net Cash Flow DSCR(2) ............................................. 1.36x
Range of Net Cash Flow DSCRs(2) .................................................... 1.13x - 1.88x
Weighted Average LTV as of Cut-Off Date(3) ......................................... 66.4%
Weighted Average PTV as of Cut-Off Date(3) ......................................... 67.6%
Range of LTVs(3) ................................................................... 41.9% - 91.0%
Range of PTVs(3) ................................................................... 41.9% - 91.0%
Weighted Average Anticipated Repayment Date LTV/PTV(3) ............................. 54.4%
Percentage of Initial Pool Balance made up of:
ARD Loans ......................................................................... 89.7%
Balloon Loans ..................................................................... 7.9%
Fully Amortizing Loans (other than ARD Loans) ..................................... 2.3%
</TABLE>
- ---------
(1) Subject to a permitted variance of plus or minus 5%.
(2) Excluding Credit Tenant Loans.
(3) Excluding Credit Tenant Loans.
The tables, Annex A, Annex B and Annex C set forth certain information
with respect to the Mortgage Loans and Mortgaged Properties. The statistics in
the following tables, Annex A, Annex B and Annex C were primarily derived from
information provided to the Depositor by Bloomfield or CCA, which information
may have been obtained from the borrowers without independent verification
except as noted. For purposes of this Prospectus Supplement, unless otherwise
specified:
"1998 NOI" and "Most Recent NOI" (which is for the period ending as of the
date specified in Annex B) is the net operating income for a Mortgaged Property
as established by information provided by the borrowers, except that in certain
cases such net operating income has been adjusted by removing certain
non-recurring expenses and revenue or by certain other normalizations. 1998 NOI
and Most Recent NOI do not necessarily reflect accrual of certain costs such as
taxes and capital expenditures and do not reflect non-cash items such as
depreciation or amortization. In some cases, capital expenditures may have been
treated by a borrower as an expense or expenses treated as capital
expenditures. The Depositor has not verified the accuracy of any information
provided by each borrower or to reflect changes in net operating income that
may have occurred since the date of the information provided by each borrower
for the related
S-75
<PAGE>
Mortgaged Property. 1998 NOI and Most Recent NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1998 NOI and Most Recent NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations.
"Actual On-going Capital Reserve" means the annual reserves, as indicated,
per unit of measure or as a percentage of gross revenue and escrowed on a
monthly basis.
"Allocated Loan Amount" means, for each Mortgaged Property that is
security for a Pool Loan, the portion of the principal amount of the related
Pool Loan allocated to such Mortgaged Property for certain purposes (including,
without limitation, determining the release prices of properties, if the
Mortgage Loan permits such releases) under such Mortgage Loan. The Allocated
Loan Amount for each Mortgaged Property securing a Pool Loan was determined
generally based on the ratio of the Net Cash Flow or net operating income or
appraised value, or some combination thereof, of such Mortgaged Property to the
aggregate Net Cash Flow or appraised value, or some combination thereof, for
all the Mortgaged Properties securing such Mortgage Loan. The Allocated Loan
Amount for each Mortgaged Property may be adjusted upon the payment of
principal of the related Mortgage Loan, whether upon amortization, prepayment,
or otherwise.
"Amortization Term" means the number of months, based on the constant
Monthly Payment as stated in the related Note or Loan Agreement, that would be
necessary to reduce the principal balance of the related Note to zero if
interest on such Note was calculated based on twelve 30-day months and a
360-day year.
"Annual Debt Service" means the Monthly Payment for a Mortgage Loan as of
the Cut-Off Date multiplied by twelve. For purposes of determining Net Cash
Flow DSCR and NOI DSCR with respect to a CMAT Pari Passu Note, DSCR was
calculated giving effect to the debt service for the related Other Pari Passu
Note.
"Anticipated Remaining Term" means the term of the Mortgage Loan from the
Cut-Off Date to the earlier of the Anticipated Repayment Date, if applicable,
and the Maturity Date.
"Anticipated Repayment Date" or "ARD" means, for ARD Loans, the date on
which excess cash flow is retained pursuant to the related lockbox agreements
for application to payment of principal and, with respect to most of the ARD
Loans, the date on which Excess Interest begins to accrue.
"Anticipated Repayment Date LTV/PTV" for any Mortgage Loan is calculated
in the same manner as LTV as of the Cut-Off Date, except that the Cut-Off Date
Principal Balance used to calculate the LTV as of the Cut-Off Date has been
adjusted to give effect to the amortization of the applicable Mortgage Loan to
its Anticipated Repayment Date (any related Premium will be fully amortized by
the Anticipated Repayment Date) or Maturity Date. Such calculation thus assumes
that the value of the Mortgaged Property or Properties securing a Mortgage Loan
on the Anticipated Repayment Date is the same as the Appraised Value as of the
Cut-Off Date. There can be no assurance that the value of any particular
Mortgaged Property will not have declined from the original value. The Credit
Tenant Loans were excluded from the weighted average calculations.
"Appraised Value" or "Value" means, for each of the Mortgaged Properties,
the appraised value of such property as determined by an appraisal thereof
prepared by an appraiser who is a member of the Appraisal Institute of America
(an "MAI appraiser") not more than 24 months prior to the origination date of
the related Mortgage Loan. See "Risk Factors and Other Special
Considerations--Risks Related to the Mortgage Loans--Limitations of Appraisals"
in this Prospectus Supplement.
"Audit/Agreed Upon Procedures Forward" refers to Mortgaged Properties for
which annual independent accountant audits or specified procedures are required
throughout the term of the Mortgage Loan.
"Audit/Agreed Upon Procedures Upfront" refers to Mortgaged Properties for
which independent accountants performed audits, reviews or specified procedures
upon financial information provided by the borrower at the request of CCA or
the borrower. The cash flow and NOI information presented in Annex B may not
correspond to the comparable information included in the accountants' reports
because of adjustments made by CCA as part of its underwriting procedures.
"Cut-Off Date Allocated Loan Amount" means, for each Mortgaged Property,
the Allocated Loan Amount of such property as of the Cut-Off Date. In certain
cases where Allocated Loan Amounts were not assigned by the loan documentation,
CCA assigned Allocated Loan Amounts based on the above-mentioned criteria.
S-76
<PAGE>
"Cut-Off Date Principal Balance" means the principal balance of the
Mortgage Loan as of the Cut-Off Date, after application of all payments of
principal thereon, whether or not received.
"Cut-Off Date Principal Balance/Unit" means, for any Mortgage Loan, the
Cut-Off Date Principal Balance divided by the applicable unit of measure.
"GLA" means the square footage of the gross leaseable area of each
Mortgaged Property.
"Lease Expiration Date" means the year in which a Tenant's lease is
scheduled to expire.
"LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage Loan,
the Cut-Off Date Principal Balance of such Mortgage Loan (that is, the
principal amount of the Mortgage Loan against which the principal amount of the
Certificates is issued) divided by the Appraised Value of the Mortgaged
Property or Properties securing such Mortgage Loan. For purposes of determining
LTV with respect to a CMAT Pari Passu Note, LTV was calculated giving effect to
the related Other Pari Passu Note(s) secured by the related Mortgaged Property.
The Credit Tenant Loans were excluded from the weighted average calculations,
except for the "Range of Debt Service Ratios" table, the "Range of
Loan-to-Values" table and the "Range of Loan-to-Value Ratios at Earlier of
Anticipated Repayment Date and Maturity" table. In all tables, Credit Tenant
Loans were excluded from "Total/Wtd. Avg."
"Maturity Date" means the maturity date of the Mortgage Loan as stated in
the related Note or Loan Agreement.
"Monthly Payment" means, for any Mortgage Loan, the current monthly debt
service payable on the related Mortgage Loan.
For purposes of determining "Most Recent Period NOI" as set forth on Annex
B:
"Ann" means an annualized NOI calculated for the period indicated;
"TTM" means NOI calculated for the trailing twelve months ending on the
date indicated; and
"Imp TTM" means less than 12-months operating results were available and
an imputed TTM was calculated from available information.
"Net Cash Flow" or "NCF" is defined under "The Mortgage Loan
Program--Underwriting Standards" above. See also "80 John Street Note" above.
"Net Cash Flow DSCR" for any Mortgage Loan is equal to the Net Cash Flow
from the related Mortgaged Property or Properties divided by the Annual Debt
Service for such Mortgage Loan (as defined below). Unless otherwise specified
in this Prospectus Supplement, "DSCR" means Net Cash Flow DSCR. The Credit
Tenant Loans were excluded from weighted average calculations.
"NOI DSCR" for any Mortgage Loan is equal to the Underwritten NOI from the
related Mortgaged Property or Properties divided by the Annual Debt Service for
such Mortgage Loan. The Credit Tenant Loans were excluded from weighted average
calculations, except for the "Range of Debt Service Ratios" table, the "Range
of Loan-to-Values" table and the "Range of Loan-to-Value Ratios at Earlier of
Anticipated Repayment Date and Maturity" table. In all tables, Credit Tenant
Loans were excluded from "Total/Wtd. Avg."
"Occupancy" means the percentage of gross leaseable area, rooms, apartment
units, beds or pads of the property that are leased. Occupancy rates are
calculated within a recent period and in certain cases reflect the average
occupancy rate over a period of time.
"Original Loan Balance" means the principal balance of the Mortgage Loan
as of the date of origination.
"% of Total SF" means the square feet leased to Tenant as a percentage of
the total square feet of the Mortgaged Property.
"PTV" or "Proceeds-to-Value Ratio" for any Mortgage Loan is equal to (a)
the sum of (i) the Premium funded at closing of such loan and amortized through
the Cut-Off Date and (ii) the Cut-Off Date Principal Balance, divided by (b)
the Appraised Value of the related Mortgaged Property. The Credit Tenant Loans
were excluded from the weighted average calculations.
"Remaining Lock-out" means the period of the term of the related Mortgage
Loan in months from the Cut-Off Date during which the Mortgage Loan may not be
voluntarily prepaid.
S-77
<PAGE>
"Tenant 1," "Tenant 2" and "Tenant 3" (each a "Tenant") mean, with respect
to the Office Properties and Retail Properties, the largest, second largest and
third largest tenants, respectively, if any. These Tenants may occupy the space
or sublease all or some portion thereof; provided that such Tenant remains
responsible for all obligations under the lease. With respect to the Retail
Properties, such Tenants may be viewed as anchor tenants. On Annex B, an
asterisk next to a Tenant means that the space occupied by such Tenant is not
owned by the related borrower.
"Underwritten NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions for non-Hotel
Properties and before deducting for furniture, fixtures and equipment for Hotel
Properties.
"Underwritten Occupancy" or "U/W Occupancy" means the occupancy rate used
in determining Net Cash Flow.
"Underwritten On-going Capital Reserves" means the annual reserve per Unit
or as a percentage of gross revenue deducted from NOI for purposes of
calculating Net Cash Flow.
"Units" and "Type" mean the number of units in the respective Mortgaged
Property and the type of such units, respectively. As used herein, "units"
means (i) in the case of a Mortgaged Property operated as multifamily housing,
the number of apartments, regardless of the size of or number of rooms in such
apartment and, in the case of a Mortgaged Property operated as a mobile home
park, the number of pads; (ii) in the case of a Mortgaged Property operated as
a hotel or motel, the number of rooms; and (iii) in the case of a Mortgaged
Property which is not operated as multifamily housing, a mobile home park, a
hotel or motel, the number of square feet of gross leasable area.
"Year Built/Renovated" means the year in which the respective Mortgaged
Property was built and/or renovated.
Due to rounding, percentages in the following tables may not add to 100%
and amounts may not add to indicated total or subtotal.
The asterisks on Annex A and Annex B have the following meanings: (i) an
asterisk under the heading "Mortgage Rate" on Annex A means a Mortgage Loan
accruing interest on the basis of the actual number of days elapsed and a
360-day year, (ii) an asterisk under the heading "Property Name" on Annex B
means a Mortgaged Loan is secured, or partially secured, by a leasehold estate;
and (iii) an asterisk next to the name of a Tenant on Annex B means that the
space occupied by the Tenant is not owned by the related borrower.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A and Annex C hereto for certain characteristics of
the Mortgage Loans and the Notes on a loan-by-loan basis. See Annex C for
certain characteristics of the Premium Loans on a loan-by-loan basis. All
percentages of Cut-Off Date Principal Balances used in this Prospectus
Supplement and in Annex A and Annex C are based upon the Cut-Off Date Principal
Balance of the related Mortgage Loan or, with respect to Pool Loans, are based
upon the Allocated Loan Amount of the related Mortgaged Property. All weighted
average information regarding the Mortgage Loans reflects weighting of the
Mortgage Loans by their Cut-Off Date Principal Balances or, with respect to
Pool Loans, Allocated Loan Amounts. All numerical information provided in this
Prospectus Supplement and in Annex A, Annex B and Annex C with respect to the
Mortgage Loans is provided on an approximate basis. Certain statistical
information set forth in this Prospectus Supplement may change prior to the
date of issuance of the Certificates due to changes in the composition of the
Mortgage Pool prior to the Closing Date. See "Changes in Mortgage Pool
Characteristics" below.
The information set forth in the tables in this Prospectus Supplement,
Annex A, Annex B and Annex C with respect to Weighted Average DSCR, Weighted
Average Net Cash Flow DSCR, Weighted Average NOI DSCR, Weighted Average LTV and
Weighted Average PTV is calculated, unless otherwise specified, excluding the
Credit Tenant Loans. See "Risk Factors and Other Special Considerations--Risks
Related to the Mortgage Loans--Credit Tenant Loans Have Special Risks" in this
Prospectus Supplement and "Credit Tenant Loans" above. The information set
forth in the tables in this Prospectus Supplement, Annex A, Annex B and Annex C
with respect to the Balloon/ARD Balance for each of the Dual Amortization Loans
is calculated on the assumption that all scheduled monthly payments (based on
the shorter amortization schedule) are made. See "Risk Factors and Other
Special Considerations--Risks Related to the Certificates--Risks Associated
with Dual Amortization Loans" in this Prospectus Supplement and "--Dual
Amortization Loans" above.
S-78
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
NUMBER OF AGGREGATE CUT-OFF WEIGHTED
CUT-OFF DATE LOANS OR CUT-OFF DATE DATE AVERAGE
DEBT SERVICE POOL PRINCIPAL PRINCIPAL MORTGAGE
COVERAGE RATIO LOANS BALANCE BALANCE RATE
- --------------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
1.10-1.19 ........... 6 $ 47,732,200 6.1% 8.116%
1.20-1.29 ........... 21 258,084,341 33.0 8.011
1.30-1.39 ........... 14 175,599,959 22.5 8.237
1.40-1.49 ........... 12 100,005,504 12.8 7.569
1.50-1.59 ........... 4 33,863,520 4.3 7.068
1.60-1.69 ........... 11 34,009,840 4.4 7.190
1.70-1.79 ........... 4 49,818,185 6.4 8.372
1.80-1.89 ........... 1 1,913,956 0.2 7.500
CTL ................. 8 80,120,927 10.3 7.427
-- ------------ ----- -----
Total/Wtd. Avg. ..... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED ANTICIPATED
CUT-OFF DATE ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
DEBT SERVICE REMAINING AMORTIZATION AVERAGE AVERAGE DATE
COVERAGE RATIO TERM TERM DSCR LTV LTV/PTV
- --------------------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1.10-1.19 ........... 137 346 1.16x 69.5% 54.7%
1.20-1.29 ........... 123 347 1.25 67.0 56.2
1.30-1.39 ........... 146 355 1.35 68.0 55.2
1.40-1.49 ........... 112 337 1.44 61.6 51.9
1.50-1.59 ........... 118 319 1.53 73.7 60.8
1.60-1.69 ........... 119 341 1.65 68.3 57.9
1.70-1.79 ........... 169 304 1.74 58.2 40.6
1.80-1.89 ........... 112 300 1.88 50.5 41.3
CTL ................. 229 182 1.00 95.2 24.0
--- --- ---- ---- ----
Total/Wtd. Avg. ..... 141 326 1.36x 66.4% 54.4%
</TABLE>
S-79
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE WEIGHTED
NUMBER OF AGGREGATE CUT-OFF WEIGHTED AVERAGE
LOANS OR CUT-OFF DATE DATE AVERAGE ANTICIPATED
RANGE OF LOAN- POOL PRINCIPAL PRINCIPAL MORTGAGE REMAINING
TO-VALUE RATIOS LOANS BALANCE BALANCE RATE TERM
- ----------------- ----------- -------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
40.00%-49.99% ... 4 $ 26,873,431 3.4% 8.178% 111
50.00%-59.99% ... 13 160,445,542 20.5 8.171 132
60.00%-64.99% ... 13 107,934,531 13.8 7.960 136
65.00%-69.99% ... 17 148,186,193 19.0 8.015 123
70.00%-74.99% ... 12 145,601,588 18.6 7.935 132
75.00%-79.99% ... 11 84,692,110 10.8 7.546 136
80.00%-84.99% ... 2 16,194,110 2.1 7.489 155
85.00%-94.99% ... 1 11,100,000 1.4 7.214 119
CTL ............. 8 80,120,927 10.3 7.427 229
-- ------------ ----- ----- ---
Total/Wtd. Avg. . 81 $781,148,433 100.0% 7.897% 141
== ============ =====
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE WEIGHTED WEIGHTED REPAYMENT
RANGE OF LOAN- AMORTIZATION AVERAGE AVERAGE DATE MINIMUM MAXIMUM
TO-VALUE RATIOS TERM DSCR LTV LTV/PTV DSCR DSCR
- ----------------- -------------- ---------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
40.00%-49.99% ... 313 1.43x 43.7% 37.4% 1.25x 1.71x
50.00%-59.99% ... 340 1.46 57.5 46.0 1.16 1.88
60.00%-64.99% ... 342 1.38 62.4 50.9 1.15 1.78
65.00%-69.99% ... 358 1.32 67.8 59.4 1.21 1.73
70.00%-74.99% ... 339 1.29 72.5 57.5 1.21 1.70
75.00%-79.99% ... 330 1.34 76.3 60.3 1.13 1.53
80.00%-84.99% ... 355 1.28 81.0 65.8 1.24 1.40
85.00%-94.99% ... 359 1.65 91.0 79.9 1.65 1.65
CTL ............. 182 1.00 95.2 24.0 1.00 1.00
--- ---- ---- ---- ---- ----
Total/Wtd. Avg. . 326 1.36x 66.4% 54.4% 1.13x 1.88x
</TABLE>
S-80
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF
ANTICIPATED REPAYMENT DATE OR MATURITY
<TABLE>
<CAPTION>
PERCENT BY WEIGHTED
RANGE OF NUMBER OF AGGREGATE AGGREGATE AVERAGE
LOAN-TO-VALUE LOANS OR POOL CUT-OFF DATE CUT-OFF DATE MORTGAGE
RATIOS LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE RATE
- ------------------- --------------- ------------------- ------------------- ----------
<S> <C> <C> <C> <C>
0.00% - 9.99% ... 1 $ 7,030,211 0.9% 8.090%
20.00% - 29.99% ... 1 12,850,396 1.6% 8.850
30.00% - 39.99% ... 7 85,444,049 10.9% 8.214
40.00% - 49.99% ... 9 44,132,201 5.6% 7.528
50.00% - 59.99% ... 33 292,829,722 37.5% 7.960
60.00% - 69.99% ... 20 243,702,876 31.2% 7.916
70.00% - 74.99% ... 1 3,938,051 0.5% 7.300
75.00% - 84.99% ... 1 11,100,000 1.4% 7.214
CTL .............. 8 80,120,927 10.3% 7.427
-- ------------ ----- -----
Total/Wtd. Avg. ... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED ANTICIPATED
RANGE OF ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
LOAN-TO-VALUE REMAINING AMORTIZATION AVERAGE AVERAGE DATE MINIMUM MAXIMUM
RATIOS TERM TERM DSCR LTV LTV/PTV DSCR DSCR
- ------------------- ------------- -------------- ---------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0.00% - 9.99% ... 239 324 1.33x 70.3% 1.5% 1.33x 1.33x
20.00% - 29.99% ... 162 360 1.24 55.4 26.9 1.24 1.24
30.00% - 39.99% ... 145 304 1.57 55.5 38.3 1.18 1.74
40.00% - 49.99% ... 115 321 1.47 58.8 48.6 1.25 1.88
50.00% - 59.99% ... 135 353 1.33 65.0 54.3 1.13 1.73
60.00% - 69.99% ... 120 347 1.31 72.3 62.6 1.18 1.62
70.00% - 74.99% ... 101 338 1.40 82.9 73.5 1.40 1.40
75.00% - 84.99% ... 119 359 1.65 91.0 79.9 1.65 1.65
CTL .............. 229 182 1.00 95.2 24.0 1.00 1.00
--- --- ---- ---- ---- ---- ----
Total/Wtd. Avg. ... 141 326 1.36x 66.4% 54.4% 1.13x 1.88x
</TABLE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
CUT-OFF DATE CUT-OFF DATE WEIGHTED
PRINCIPAL PRINCIPAL WEIGHTED AVERAGE
NUMBER OF BALANCE/ BALANCE/ AVERAGE ANTICIPATED
MORTGAGED ALLOCATED ALLOCATED MORTGAGE REMAINING
STATE PROPERTIES LOAN AMOUNT LOAN AMOUNT RATE TERM
- -------------------------- ------------ -------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Arkansas ................. 4 $ 4,076,770 0.5% 6.780% 172
Arizona .................. 1 1,278,516 0.2 6.980 102
California ............... 9 151,238,176 19.4 8.164 130
Colorado ................. 2 56,608,131 7.2 8.408 181
Connecticut .............. 1 6,415,759 0.8 7.820 112
District of Columbia ..... 1 29,000,000 3.7 7.040 120
Florida .................. 1 3,100,000 0.4 7.910 123
Iowa ..................... 3 10,704,639 1.4 8.077 128
Illinois ................. 6 69,793,291 8.9 8.247 167
Indiana .................. 7 32,977,736 4.2 7.469 177
Kansas ................... 2 13,449,098 1.7 8.129 147
Louisiana ................ 1 7,885,913 1.0 8.500 161
Massachusetts ............ 4 36,864,777 4.7 7.178 134
Maryland ................. 2 32,647,005 4.2 7.840 106
Michigan ................. 4 15,127,794 1.9 7.342 164
Minnesota ................ 1 2,059,091 0.3 7.320 103
Mississippi .............. 1 4,158,283 0.5 7.640 248
North Carolina ........... 1 7,915,749 1.0 7.900 97
Nebraska ................. 1 1,289,256 0.2 7.120 109
New Mexico ............... 1 1,089,995 0.1 7.030 108
Nevada ................... 1 28,479,885 3.6 7.750 119
New York ................. 13 74,647,892 9.6 7.672 107
Ohio ..................... 10 41,540,228 5.3 7.901 153
Oregon ................... 2 7,087,267 0.9 7.030 223
Pennsylvania ............. 5 66,198,491 8.5 8.229 161
Tennessee ................ 5 11,293,144 1.4 7.313 235
Texas .................... 8 40,477,078 5.2 7.943 108
Utah ..................... 1 2,954,581 0.4 7.230 103
Virginia ................. 4 13,938,360 1.8 7.702 107
Wisconsin ................ 1 6,851,529 0.9 7.430 104
-- ------------ ----- ----- ---
Total/Wtd. Avg. .......... 103 $781,148,433 100.0% 7.897% 141
=== ============ =====
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED ANTICIPATED
AVERAGE WEIGHTED WEIGHTED REPAYMENT
AMORTIZATION AVERAGE AVERAGE DATE MIN MAX
STATE TERM DSCR LTV LTV/PTV DSCR DSCR
- -------------------------- -------------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Arkansas ................. 360 1.64x 66.6% 50.5% 1.40x 1.73x
Arizona .................. 353 1.32 78.7 69.3 1.32 1.32
California ............... 356 1.29 64.4 55.9 1.16 1.40
Colorado ................. 287 1.74 57.9 39.9 1.74 1.74
Connecticut .............. 351 1.41 56.3 49.6 1.41 1.41
District of Columbia ..... 312 1.53 75.3 61.6 1.53 1.53
Florida .................. 360 1.48 75.8 67.4 1.48 1.48
Iowa ..................... 342 1.19 69.3 56.1 1.13 1.24
Illinois ................. 331 1.32 66.5 55.2 1.18 1.38
Indiana .................. 253 1.34 67.7 51.3 1.27 1.45
Kansas ................... 360 1.36 61.2 50.9 1.33 1.37
Louisiana ................ 360 1.21 75.8 62.2 1.21 1.21
Massachusetts ............ 268 1.49 57.8 47.0 1.43 1.70
Maryland ................. 336 1.22 72.5 63.6 1.22 1.22
Michigan ................. 321 1.35 73.6 45.1 1.18 1.78
Minnesota ................ 324 1.23 67.0 57.0 1.23 1.23
Mississippi .............. 210 NA NA NA NA NA
North Carolina ........... 338 1.41 67.7 61.1 1.41 1.41
Nebraska ................. 360 1.51 67.9 59.9 1.51 1.51
New Mexico ............... 360 1.20 60.6 53.3 1.20 1.20
Nevada ................... 360 1.48 57.0 50.7 1.48 1.48
New York ................. 343 1.30 66.6 54.8 1.15 1.62
Ohio ..................... 351 1.44 70.2 44.4 1.24 1.88
Oregon ................... 141 NA NA NA NA NA
Pennsylvania ............. 332 1.29 72.4 60.9 1.17 1.33
Tennessee ................ 173 NA NA NA NA NA
Texas .................... 333 1.33 66.7 59.1 1.21 1.71
Utah ..................... 360 1.59 62.5 55.3 1.59 1.59
Virginia ................. 344 1.35 66.6 56.1 1.21 1.62
Wisconsin ................ 300 1.22 72.9 59.9 1.22 1.22
--- ---- -------- --------- ---- ----
Total/Wtd. Avg. .......... 326 1.36x 66.4% 54.4% 1.13x 1.88x
</TABLE>
S-81
<PAGE>
RANGE OF YEARS BUILT
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
CUT-OFF DATE CUT-OFF DATE
PRINCIPAL PRINCIPAL WEIGHTED
NUMBER OF BALANCE/ BALANCE/ AVERAGE
RANGE OF MORTGAGED ALLOCATED ALLOCATED MORTGAGE
YEARS BUILT PROPERTIES LOAN AMOUNT LOAN AMOUNT RATE
- -------------------- ------------ -------------- -------------- ----------
<S> <C> <C> <C> <C>
Pre-1921 ........... 13 $108,240,900 13.9% 8.340%
1922-1931 .......... 2 32,060,110 4.1 7.446
1952-1961 .......... 3 20,015,832 2.6 7.686
1962-1971 .......... 12 142,917,570 18.3 7.602
1972-1981 .......... 32 165,584,985 21.2 7.817
1982-1991 .......... 18 139,417,920 17.8 7.969
1992-1999 .......... 23 172,911,116 22.1 7.989
-- ------------ -----
Total/Wtd. Avg. .... 103 $781,148,433 100.0% 7.897%
=== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED ANTICIPATED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE DATE
YEARS BUILT TERM TERM DSCR LTV LTV/PTV
- -------------------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Pre-1921 ........... 148 359 1.35x 65.9% 54.9%
1922-1931 .......... 110 325 1.27 71.4 54.4
1952-1961 .......... 119 348 1.31 64.2 54.9
1962-1971 .......... 129 324 1.41 65.1 54.3
1972-1981 .......... 140 336 1.37 65.1 54.6
1982-1991 .......... 149 295 1.45 63.7 50.7
1992-1999 .......... 149 321 1.28 70.7 56.7
Total/Wtd. Avg. .... 141 326 1.36x 66.4% 54.4%
</TABLE>
S-82
<PAGE>
CUT-OFF DATE PRINCIPAL BALANCE BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE WEIGHTED
CUT-OFF DATE CUT-OFF DATE AVERAGE
PRINCIPAL PRINCIPAL CUT-OFF DATE
NUMBER OF BALANCE/ BALANCE/ PRINCIPAL
MORTGAGED ALLOCATED ALLOCATED NUMBER OF BALANCE
PROPERTY TYPE PROPERTIES LOAN AMOUNT LOAN AMOUNT UNITS PER UNIT
- ----------------------- ------------ -------------- -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
OFFICE
Office ............... 24 $276,269,917 35.4% 4,054,370 $ 68(1)
Medical Office ....... 2 11,494,182 1.5 136,222 $ 84(1)
-- ------------ ----- --------- ------------
TOTAL OFFICE ......... 26 287,764,099 36.8 4,190,592 $ 69(1)
RETAIL
Anchored ............. 13 155,866,574 20.0 2,189,882 $ 71(1)
Quasi-Anchored ....... 11 32,949,440 4.2 346,640 $ 95(1)
Unanchored ........... 5 40,203,021 5.1 634,335 $ 63(1)
--------- ------------
TOTAL RETAIL ......... 29 229,019,035 29.3 3,170,857 $ 72(1)
HOTEL
Full Service ......... 1 44,593,725 5.7 430 $ 103,706(2)
Limited Service ...... 14 40,308,831 5.2 1,642 $ 24,549(2)
-- ------------ ----- --------- ------------
TOTAL HOTEL .......... 15 84,902,556 10.9 2,072 $ 40,976(2)
MULTIFAMILY ........... 21 93,042,873 11.9 2,288 $ 40,666(3)
INDUSTRIAL ............ 7 36,075,227 4.6 1,307,253 $ 28(1)
EXPOSITION CENTER ..... 1 22,069,624 2.8 263,772 $ 84(1)
MOVIE THEATRE ......... 3 25,385,565 3.2 236,321 $ 107(1)
MOBILE HOME PARK ...... 1 2,889,455 0.4 672 $ 4,300(4)
-- ------------ ----- --------- ------------
TOTAL/WTD. AVG. ....... 103 $781,148,433 100.0% N/A N/A
=== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
WEIGHTED WEIGHTED AVERAGE ANTICIPATED
AVERAGE AVERAGE ORIGINAL WEIGHTED WEIGHTED REPAYMENT
MORTGAGE REMAINING AMORTIZATION MIN MAX AVERAGE AVERAGE DATE
PROPERTY TYPE RATE TERM TERM DSCR DSCR DSCR LTV LTV/PTV
- ----------------------- ---------- ----------- -------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE
Office ............... 8.021% 131 353 1.15x 1.70x 1.35x 65.1% 55.8%
Medical Office ....... 7.829 109 344 1.22 1.41 1.33 63.5 55.8
----- --- --- ---- ---- ---- ---- ----
TOTAL OFFICE ......... 8.014 130 352 1.15 1.70 1.35 65.0 55.8
RETAIL
Anchored ............. 8.206 131 345 1.18 1.45 1.26 68.4 56.4
Quasi-Anchored ....... 7.554 198 252 1.21 1.88 1.38 65.3 53.2
Unanchored ........... 7.842 102 344 1.24 1.42 1.34 66.2 57.7
TOTAL RETAIL ......... 8.049 136 331 1.18 1.88 1.28 67.8 56.5
HOTEL
Full Service ......... 8.505 170 300 1.74 1.74 1.74 57.9 39.9
Limited Service ...... 7.030 223 141 NA NA NA NA NA
----- --- --- ---- ---- ---- -------- ----
TOTAL HOTEL .......... 7.805 195 225 1.74 1.74 1.74 57.9 39.9
MULTIFAMILY ........... 7.500 128 337 1.13 1.88 1.36 71.6 55.3
INDUSTRIAL ............ 7.541 125 357 1.25 1.73 1.44 70.2 60.7
EXPOSITION CENTER ..... 7.250 111 300 1.43 1.43 1.43 61.3 49.9
MOVIE THEATRE ......... 8.060 226 263 1.33 1.33 1.33 70.3 1.5
MOBILE HOME PARK ...... 7.670 94 300 1.60 1.60 1.60 43.1 36.2
----- --- --- ---- ---- ---- -------- ----
TOTAL/WTD. AVG. ....... 7.897% 141 326 1.13x 1.88x 1.36x 66.4% 54.4%
</TABLE>
(1) Dollars per square foot.
(2) Dollars per room.
(3) Dollars per apartment unit.
(4) Dollars per pad.
S-83
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
NUMBER AGGREGATE CUT-OFF WEIGHTED
OF LOANS CUT-OFF DATE DATE AVERAGE
RANGE OF CUT-OFF DATE OR POOL PRINCIPAL PRINCIPAL MORTGAGE
PRINCIPAL BALANCES LOANS BALANCE BALANCE RATE
- ------------------------------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Less Than $2,500,000 .......... 24 $ 36,110,438 4.6% 7.318%
2,500,000-4,999,999 ........... 15 52,411,098 6.7 7.458
5,000,000-7,499,999 ........... 13 81,692,728 10.5 7.821
7,500,000-9,999,999 ........... 6 51,680,043 6.6 7.665
10,000,000-19,999,999 ......... 11 168,410,345 21.6 8.258
20,000,000-29,999,999 ......... 5 129,633,224 16.6 7.493
30,000,000-39,999,999 ......... 4 133,519,881 17.1 8.164
40,000,000-64,999,999 ......... 3 127,690,675 16.3 8.038
-- ------------ ----- -----
Total/Wtd. Avg. ............... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE ANTICIPATED
ANTICIPATED WEIGHTED AVERAGE WEIGHTED WEIGHTED REPAYMENT
RANGE OF CUT-OFF DATE REMAINING AMORTIZATION AVERAGE AVERAGE DATE
PRINCIPAL BALANCES TERM TERM DSCR LTV LTV/PTV
- ------------------------------- ------------- ------------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Less Than $2,500,000 .......... 138 330 1.51x 66.7% 54.5%
2,500,000-4,999,999 ........... 145 315 1.41 68.1 57.1
5,000,000-7,499,999 ........... 135 324 1.32 65.3 46.7
7,500,000-9,999,999 ........... 124 344 1.34 68.0 58.0
10,000,000-19,999,999 ......... 133 343 1.27 64.9 55.3
20,000,000-29,999,999 ......... 117 327 1.40 67. 55.9
30,000,000-39,999,999 ......... 142 354 1.29 70.2 59.8
40,000,000-64,999,999 ......... 184 270 1.56 59.9 45.4
--- --- ---- ---- ----
Total/Wtd. Avg. ............... 141 326 1.36x 66.4% 54.4%
</TABLE>
RANGE OF ANTICIPATED REMAINING TERMS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
AGGREGATE CUT-OFF WEIGHTED
RANGE OF ANTICIPATED NUMBER CUT-OFF DATE DATE AVERAGE
REMAINING TERMS OF PRINCIPAL PRINCIPAL MORTGAGE
(IN MONTHS) NOTES BALANCE BALANCE RATE
- ------------------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
80-99 ................... 11 $ 93,903,247 12.0% 8.209%
100-119 ................. 38 259,124,683 33.2 7.619
120-139 ................. 5 106,109,936 13.6 7.861
140-159 ................. 1 33,623,958 4.3 7.990
160-179 ................. 17 201,235,470 25.8 8.293
220-239 ................. 3 65,694,396 8.4 7.428
240-259 ................. 6 21,456,742 2.7 7.640
-- ------------ ----- -----
Total/Wtd. Avg. ......... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE ANTICIPATED
RANGE OF ANTICIPATED ANTICIPATED WEIGHTED AVERAGE WEIGHTED WEIGHTED REPAYMENT
REMAINING TERMS REMAINING AMORTIZATION AVERAGE AVERAGE DATE
(IN MONTHS) TERM TERM DSCR LTV LTV/PTV
- ------------------------- ------------- ------------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
80-99 ................... 96 350 1.29x 64.5% 58.3%
100-119 ................. 111 337 1.36 65.2 55.0
120-139 ................. 125 343 1.37 70.2 60.5
140-159 ................. 156 360 1.29 65.9 55.0
160-179 ................. 167 343 1.41 66.7 50.3
220-239 ................. 224 188 1.33 70.3 1.5
240-259 ................. 248 210 NA NA NA
--- --- ---- -------- ----
Total/Wtd. Avg. ......... 141 326 1.36x 66.4% 54.4%
</TABLE>
RANGE OF MONTHS REMAINING TO MATURITY
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
AGGREGATE CUT-OFF WEIGHTED
RANGE OF REMAINING NUMBER CUT-OFF DATE DATE AVERAGE
TERMS TO OF PRINCIPAL PRINCIPAL MORTGAGE
MATURITY (IN MONTHS) NOTES BALANCE BALANCE RATE
- ------------------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
220-239 ................. 2 $ 58,664,185 7.5% 7.349%
240-259 ................. 6 21,456,742 2.7 7.640
260-279 ................. 3 9,723,555 1.2 7.524
280-299 ................. 9 101,953,973 13.1 7.809
300-319 ................. 5 78,622,799 10.1 7.435
320-339 ................. 18 208,686,267 26.7 8.142
340-359 ................. 36 279,540,910 35.8 8.025
360-379 ................. 2 22,500,000 2.9 7.884
-- ------------ ----- -----
Total/Wtd. Avg. ......... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE ANTICIPATED
RANGE OF REMAINING ANTICIPATED WEIGHTED AVERAGE WEIGHTED WEIGHTED REPAYMENT
TERMS TO REMAINING AMORTIZATION AVERAGE AVERAGE DATE
MATURITY (IN MONTHS) TERM TERM DSCR LTV LTV/PTV
- ------------------------- ------------- ------------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
220-239 ................. 222 172 NA NA NA
240-259 ................. 248 210 NA NA NA
260-279 ................. 134 300 1.36x 64.6% 34.9%
280-299 ................. 135 300 1.57 60.7 45.0
300-319 ................. 118 325 1.34 71.3 56.9
320-339 ................. 120 350 1.28 64.7 54.9
340-359 ................. 141 357 1.36 68.7 57.3
360-379 ................. 120 360 1.31 61.9 55.2
--- --- ---- -------- ---------
Total/Wtd. Avg. ......... 141 326 1.36x 66.4% 54.4%
</TABLE>
S-84
<PAGE>
RANGE OF ANTICIPATED YEARS OF REPAYMENT(1)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
AGGREGATE CUT-OFF WEIGHTED
NUMBER CUT-OFF DATE DATE AVERAGE
OF PRINCIPAL PRINCIPAL MORTGAGE
YEAR NOTES BALANCE BALANCE RATE
- ------------------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
2007 .................... 8 $ 62,716,568 8.0% 8.309%
2008 .................... 20 117,015,821 15.0 7.703
2009 .................... 23 221,695,541 28.4 7.577
2010 .................... 3 57,709,936 7.4 8.267
2012 .................... 1 33,623,958 4.3 7.990
2013 .................... 8 142,346,604 18.2 8.419
2014 .................... 9 58,888,866 7.5 7.989
2018 .................... 2 58,664,185 7.5 7.349
2019 .................... 1 7,030,211 0.9 8.090
2020 .................... 6 21,456,742 2.7 7.640
-- ------------ ----- -----
Total/Wtd. Avg. ......... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED ANTICIPATED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
REMAINING AMORTIZATION AVERAGE AVERAGE DATE
YEAR TERM TERM DSCR LTV LTV/PTV
- ------------------------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
2007 .................... 95 353 1.31x 61.4% 55.9%
2008 .................... 104 341 1.29 69.9 61.2
2009 .................... 115 335 1.40 64.3 53.5
2010 .................... 129 353 1.31 71.2 62.3
2012 .................... 156 360 1.29 65.9 55.0
2013 .................... 165 337 1.43 63.7 46.7
2014 .................... 172 357 1.36 73.9 59.0
2018 .................... 222 172 NA NA NA
2019 .................... 239 324 1.33 70.3 1.5
2020 .................... 248 210 NA NA NA
--- --- ---- -------- ----
Total/Wtd. Avg. ......... 141 326 1.36x 66.4% 54.4%
</TABLE>
- ---------
(1) "Anticipated Year of Repayment" means, with respect to each Mortgage
Loan, the earlier of the Anticipated Repayment Date, if applicable, and
the Maturity Date.
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
AGGREGATE CUT-OFF WEIGHTED
NUMBER CUT-OFF DATE DATE AVERAGE
RANGE OF OF PRINCIPAL PRINCIPAL MORTGAGE
MORTGAGE NOTES NOTES BALANCE BALANCE RATE
- ------------------------- -------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
6.750%-6.999% ........... 8 $ 16,241,891 2.1% 6.901%
7.000%-7.249% ........... 13 114,754,492 14.7 7.082
7.250%-7.499% ........... 18 108,755,492 13.9 7.359
7.500%-7.749% ........... 13 53,023,581 6.8 7.615
7.750%-7.999% ........... 8 137,116,021 17.6 7.864
8.000%-8.249% ........... 6 63,721,290 8.2 8.129
8.250%-8.499% ........... 3 66,520,108 8.5 8.356
8.500%-8.749% ........... 10 192,665,161 24.7 8.501
8.750%-8.999% ........... 2 28,350,396 3.6 8.812
-- ------------ ----- -----
Total/Wtd. Avg. ......... 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE WEIGHTED ANTICIPATED
ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE DATE
MORTGAGE NOTES TERM TERM DSCR LTV LTV/PTV
- ------------------------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
6.750%-6.999% ........... 124 329 1.43x 72.7% 59.4%
7.000%-7.249% ........... 155 264 1.54 71.3 59.6
7.250%-7.499% ........... 116 325 1.34 68.8 54.0
7.500%-7.749% ........... 184 289 1.31 71.9 57.7
7.750%-7.999% ........... 123 350 1.33 64.6 55.5
8.000%-8.249% ........... 168 314 1.29 68.9 50.2
8.250%-8.499% ........... 117 360 1.30 66.3 59.2
8.500%-8.749% ........... 149 346 1.39 65.1 53.3
8.750%-8.999% ........... 136 340 1.25 48.0 32.4
--- --- ---- ---- ----
Total/Wtd. Avg. ......... 141 326 1.36x 66.4% 54.4%
</TABLE>
RANGE OF REMAINING LOCK-OUT PERIODS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE
REMAINING AGGREGATE CUT-OFF WEIGHTED
LOCK-OUT NUMBER OF CUT-OFF DATE DATE AVERAGE
PERIOD LOANS OR PRINCIPAL PRINCIPAL MORTGAGE
(IN MONTHS) POOL LOANS BALANCE BALANCE RATE
- ------------------ ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
80-99 ........... 20 $131,052,600 16.8% 7.969%
100-119 .......... 32 273,475,331 35.0 7.615
120-139 .......... 1 33,725,031 4.3 8.317
140-159 .......... 5 73,419,310 9.4 8.038
160-179 .......... 14 182,325,023 23.3 8.333
220-239 .......... 3 65,694,396 8.4 7.428
240-259 .......... 6 21,456,742 2.7 7.640
-- ------------ ----- -----
Total/Wtd. Avg. .. 81 $781,148,433 100.0% 7.897%
== ============ =====
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
REMAINING AVERAGE WEIGHTED ANTICIPATED
LOCK-OUT ANTICIPATED AVERAGE WEIGHTED WEIGHTED REPAYMENT
PERIOD REMAINING AMORTIZATION AVERAGE AVERAGE DATE
(IN MONTHS) TERM TERM DSCR LTV LTV/PTV
- ------------------ ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
80-99 ........... 98 346 1.31x 65.4% 58.1%
100-119 .......... 114 337 1.38 65.6 55.3
120-139 .......... 133 360 1.33 69.5 60.8
140-159 .......... 148 347 1.25 70.8 56.6
160-179 .......... 168 345 1.44 65.6 50.2
220-239 .......... 224 188 1.33 70.3 1.5
240-259 .......... 248 210 NA NA NA
--- --- ---- -------- ----
Total/Wtd. Avg. .. 141 326 1.36x 66.4% 54.4%
</TABLE>
S-85
<PAGE>
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-Off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the Cut-Off
Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be
removed from the Mortgage Pool if the Depositor deems such removal necessary or
appropriate or if it is prepaid. This may cause the range of Mortgage Rates and
maturities as well as the other characteristics of the Mortgage Loans to vary
from those described in this Prospectus Supplement.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Mortgage
Pool as set forth in the preceding paragraph, such removal will be noted in the
Form 8-K. Such Form 8-K will be available to purchasers and potential
purchasers of the Offered Certificates.
S-86
<PAGE>
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of eight classes (each, a "Class") of Offered
Certificates, designated as the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class B Certificates, the Class C
Certificates, the Class D Certificates, the Class E Certificates and the Class
F Certificates. The Certificates will also include the Class X Certificates,
the Class R Certificates and Class LR Certificates and certain other Classes of
Certificates (the "Other Private Certificates"), all of which are not offered
hereby (the Other Private Certificates, together with the Class X, Class R and
Class LR Certificates, the "Private Certificates"). The Classes of Certificates
other than the Class X, Class R and Class LR Certificates are sometimes
referred to in this Prospectus Supplement as the "Sequential Certificates."
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and
all payments under and proceeds of the Mortgage Loans due after the Cut-Off
Date; (ii) any Mortgaged Property acquired by the Special Servicer on behalf of
the Trust Fund through foreclosure or deed in lieu of foreclosure (upon
acquisition, an "REO Property"); (iii) such funds or assets as from time to
time are deposited in the Collection Account, the Distribution Account, the
Interest Reserve Account, the Excess Interest Distribution Account and any
account established in connection with REO Properties (an "REO Account"); (iv)
the rights of the lender under all insurance policies with respect to the
Mortgage Loans; (v) the Depositor's rights and remedies under the Mortgage Loan
Purchase and Sale Agreements; and (vi) all of the lender's right, title and
interest in the Reserve Accounts, the Cash Collateral Accounts and Lockbox
Accounts. Distributions allocable to interest on the Certificates (other than
the Class R and Class LR Certificates) on each Distribution Date will be based
on the pass-through rate for the respective Class (the "Pass-Through Rate") and
the aggregate principal balance (the "Certificate Balance") or notional amount
(the "Notional Amount") as applicable to such Class.
The Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E
and Class F Certificates will have initial Certificate Balances of
$127,000,000, $322,800,000, $108,721,000, $39,057,000, $39,057,000,
$11,718,000, $29,293,000 and $15,623,000, respectively. The Other Private
Certificates will have an aggregate initial Certificate Balance of $87,879,433
. The Class X Certificates will have an initial Notional Amount equal to
$781,148,433, which is equal to the initial Certificate Balance of all
Certificates.
The Class R and Class LR Certificates will not have a Certificate Balance
or a Notional Amount.
The Certificate Balance of any Class of Sequential Certificates
outstanding at any time represents the maximum amount which the holders thereof
are entitled to receive as distributions allocable to principal from the cash
flow on the Mortgage Loans and the other assets in the Trust Fund; provided,
however, that in the event that Realized Losses previously allocated to a Class
of Certificates in reduction of the Certificate Balance thereof are recovered
subsequent to the reduction of the Certificate Balance of such Class to zero,
such Class may receive distributions in respect of such recoveries in
accordance with the priorities set forth below under "Distributions--Payment
Priorities." The respective Certificate Balance of each Class of Sequential
Certificates will in each case be reduced by amounts actually distributed
thereon that are allocable to principal and by any Realized Losses (as defined
in this Prospectus Supplement) allocated to such Class of Certificates. The
Notional Amount of the Class X Certificates will equal the aggregate
Certificate Balance of the Sequential Certificates outstanding from time to
time. The Notional Amount of the Class X Certificates will be reduced to the
extent of all reductions in the Certificate Balances of the respective Classes
of the Sequential Certificates.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
on the 17th day of each month beginning on November 17, 1999 (each, a
"Distribution Date"), provided that if the 17th day of a month is not a
Business Day, then the Distribution Date shall be the following Business Day.
All distributions (other than the final distribution on any Certificate) will
be made by the Trustee to the persons in whose names the Certificates are
registered at the close of business on the 10th day of the month in which the
related Distribution Date occurs, or if such day is not a Business Day, the
preceding Business Day (the "Record Date"); the Record Date for the
Distribution Date occurring on November 17, 1999, for all purposes other than
the receipt of distributions is the Closing Date. Such distributions will be
made (a) by wire transfer in immediately available funds to the account
specified by the Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder provides the Trustee with wiring
instructions no
S-87
<PAGE>
less than five Business Days prior to the related Record Date, or (b) otherwise
by check mailed to such Certificateholder. The final distribution on any
Offered Certificates will be made in like manner, but only upon presentment or
surrender (for notation that the Certificate Balance or Notional Amount thereof
has been reduced to zero) of such Certificate at the office of the Trustee, as
specified in the notice to the holder thereof of such final distribution. All
distributions made with respect to a Class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates of such
Class based on their respective Percentage Interests. The "Percentage Interest"
evidenced by any Offered Certificate is equal to the initial denomination
thereof as of the Closing Date divided by the initial Certificate Balance or
Notional Amount, as applicable, of the related Class.
The aggregate distribution to be made with respect to the Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds" for
a Distribution Date will be the sum of all previously undistributed Monthly
Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Servicer in the related Collection Period,
plus (i) all P&I Advances made by the Servicer, the Trustee or the Fiscal
Agent, as applicable, in respect of such Distribution Date, (ii) for the
Distribution Date occurring in each March, the "Interest Reserve Amounts" as
described under "The Pooling and Servicing Agreement--Accounts--Interest
Reserve Account" and required to be deposited in the Distribution Account
pursuant to the Pooling and Servicing Agreement, (iii) all other amounts
required to be deposited in the Collection Account by the Servicer pursuant to
the Pooling and Servicing Agreement allocable to the Mortgage Loans, (iv) any
late payments of Monthly Payments received after the end of the Collection
Period relating to such Distribution Date but prior to the close of business on
the Business Day prior to the related Servicer Remittance Date and (v) amounts
remitted by the Servicer to the Collection Account in respect of Prepayment
Interest Shortfalls (as described under "Prepayment Interest Shortfalls"
below), but excluding the following:
(a) amounts permitted to be used to reimburse the Servicer, the Trustee or
the Fiscal Agent, as applicable, for previously unreimbursed Advances and
interest thereon as described in this Prospectus Supplement under "The Pooling
and Servicing Agreement--Advances";
(b) the aggregate amount of the Administrative Fee (which includes the
fees for both the Trustee and the Servicer) and other Servicing Compensation or
special servicing compensation (e.g., late fees, loan modification fees,
extension fees, loan service transaction fees, demand fees, beneficiary
statement charges, and similar fees) payable to the Servicer and the Special
Servicing Fee (and other amounts payable to the Special Servicer described
under "The Pooling and Servicing Agreement--Special Servicing" in this
Prospectus Supplement), and reinvestment earnings on payments received with
respect to the Mortgage Loans which the Servicer or Special Servicer is
entitled to receive as additional servicing compensation, in each case in
respect of such Distribution Date;
(c) all amounts representing scheduled Monthly Payments due after the
related Due Date;
(d) to the extent permitted by the Pooling and Servicing Agreement, that
portion of liquidation proceeds, insurance proceeds and condemnation proceeds
with respect to a Mortgage Loan which represents any unpaid Administrative Fee
and special servicing compensation as described in this Prospectus Supplement,
to which the Servicer, the Special Servicer and the Trustee is entitled;
(e) all amounts representing certain expenses reimbursable or payable to
the Servicer, the Special Servicer, the Trustee or the Fiscal Agent and other
amounts permitted to be retained by the Servicer or withdrawn pursuant to the
Pooling and Servicing Agreement in respect of various items as provided in the
Pooling and Servicing Agreement;
(f) Prepayment Premiums;
(g) Default Interest;
(h) Excess Interest;
(i) Prepayment Interest Excesses to the extent not used to offset
Prepayment Interest Shortfalls;
(j) any Interest Reserve Amounts required to be deposited in the Interest
Reserve Account as described under the "Pooling and Servicing
Agreement--Accounts--Interest Reserve Account" in this Prospectus Supplement;
(k) all amounts received with respect to each Mortgage Loan previously
purchased or repurchased pursuant to the Pooling and Servicing Agreement during
the related Collection Period and subsequent to the date as of which the amount
required to effect such purchase or repurchase was determined; and
S-88
<PAGE>
(l) the amount reasonably determined by the Trustee to be necessary to pay
any applicable federal, state or local taxes imposed on the Upper-Tier REMIC or
the Lower-Tier REMIC under the circumstances and to the extent described in the
Pooling and Servicing Agreement.
The "Monthly Payment" with respect to any Mortgage Loan (other than any
REO Mortgage Loan) and any Due Date is the scheduled monthly payment of
principal (if any) and interest at the Mortgage Rate excluding any Balloon
Payment (but including any constant Monthly Payment), which is payable by the
related borrower on the related Due Date. The Monthly Payment with respect to
an REO Mortgage Loan for any Distribution Date is the monthly payment that
would otherwise have been payable on the related Due Date had the related Note
not been discharged, determined as set forth in the Pooling and Servicing
Agreement.
"Unscheduled Payments" are all net liquidation proceeds, net insurance
proceeds and net condemnation proceeds payable under the Mortgage Loans, the
repurchase price of any Mortgage Loan repurchased by the Mortgage Loan Sellers
or NHA due to a breach of a representation or warranty made by them or the
purchase price paid by the parties described under "The Pooling and Servicing
Agreement--Optional Termination" and "--Purchase of ARD Loans by the Most
Subordinate Certificateholders," and any other payments under or with respect
to the Mortgage Loans not scheduled to be made, including Principal
Prepayments, but excluding Prepayment Premiums.
"Net REO Proceeds" with respect to any REO Property and any related REO
Mortgage Loan (as defined in this Prospectus Supplement) are all revenues
received by the Special Servicer with respect to such REO Property or REO
Mortgage Loan net of any insurance premiums, taxes, assessments and other costs
and expenses permitted to be paid therefrom pursuant to the Pooling and
Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan that are received in advance of the scheduled Due Date for such
payments and are not accompanied by an amount of interest representing the full
amount of scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment, other than any amount paid in connection
with the release of the related Mortgaged Property through defeasance.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day after the preceding Collection Period (or, with respect to
the first Distribution Date, the day after the Cut-Off Date) and ending on the
11th day in the month in which such Distribution Date occurs (or, if such day
is not a Business Day, the following Business Day).
"Net Default Interest" with respect to any Mortgage Loan is any Default
Interest accrued on such Mortgage Loan less amounts required to pay interest on
Advances at the Advance Rate to the Servicer, the Trustee or the Fiscal Agent,
as applicable.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of (i) the related Default Rate over (ii)
the sum of the related Mortgage Rate and, if applicable, the related Excess
Rate.
The "Default Rate" with respect to any Mortgage Loan is the per annum rate
at which interest accrues on such Mortgage Loan following any event of default
on such Mortgage Loan including a default in the payment of a Monthly Payment
or a Balloon Payment.
"Excess Interest" with respect to each of the Mortgage Loans that has a
Revised Rate, is interest accrued on such Mortgage Loan allocable to the Excess
Rate.
"Excess Rate" with respect to each of the Mortgage Loans that has a
Revised Rate, is the difference between (a) the applicable Revised Rate and (b)
the applicable Mortgage Rate.
Payment Priorities. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set forth
below will have the following meanings:
The "Interest Accrual Amount" with respect to any Distribution Date and
any Class of Sequential Certificates is equal to interest for the related
Interest Accrual Period at the Pass-Through Rate for such Class on the related
Certificate Balance (provided, that for interest accrual purposes any
distributions in reduction of Certificate Balance or reductions in Certificate
Balance as a result of allocations of Realized Losses on the Distribution Date
occurring in an Interest Accrual Period will be deemed to have been made on the
first day of such Interest Accrual Period). The "Interest Accrual Amount" with
respect to any Distribution Date and the Class X Certificates is equal to
interest for the related Interest Accrual Period at the Pass-Through Rate for
such Class for such Interest Accrual Period on the Notional Amount of such
Class (provided,
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that for interest accrual purposes any distributions in reduction of the
Certificate Balances of the Sequential Certificates that constitute the
Notional Amount of the Class X Certificates or reductions in such Certificate
Balances as a result of allocations of Realized Losses on the Distribution Date
occurring in an Interest Accrual Period will be deemed to have been made on the
first day of such Interest Accrual Period). Calculations of interest due in
respect of all Classes of the Certificates will be made on the basis of a
360-day year consisting of twelve 30-day months.
"Appraisal Reduction Amount" is the amount described below under
"Appraisal Reductions."
"Delinquency" means any failure of the borrower to make a scheduled
payment on a Due Date.
The "Interest Accrual Period" with respect to any Distribution Date
commences on the eleventh day of the month preceding the month in which such
Distribution Date occurs and ends on the tenth day of the month in which such
Distribution Date occurs. Each Interest Accrual Period is assumed to consist of
30 days.
An "Interest Shortfall" with respect to any Distribution Date for any
Class of Offered Certificates is any shortfall in the amount of interest
required to be distributed to such Class on such Distribution Date. No interest
accrues on Interest Shortfalls.
The "Prepayment Interest Shortfall" with respect to any Distribution Date
is equal to the amount of any shortfall in collections of interest (adjusted to
the applicable Net Mortgage Pass-Through Rate plus Trustee Fees) resulting from
a Principal Prepayment on such Mortgage Loan during the related Collection
Period and prior to the related Due Date. Such shortfall may result because
interest on a Principal Prepayment in full is paid by the related borrower only
to the date of prepayment.
The "Pass-Through Rate" for any Class of Offered Certificates is the per
annum rate at which interest accrues on the Certificates of such Class during
any Interest Accrual Period. The Pass-Through Rate on the Class A-1
Certificates is a per annum rate equal to %. The Pass-Through Rate on the
Class A-2, Class A-3, Class B, Class C, Class D, Class E and Class F
Certificates for any Distribution Date is a per annum rate equal to the lesser
of the rate specified in the following table and the Weighted Average Net
Mortgage Pass-Through Rate for such Distribution Date.
<TABLE>
<CAPTION>
CLASS RATE
- ------- -----
<S> <C>
A-2 %
A-3
B
C
D
E
F
</TABLE>
The Pass-Through Rate on the Class X Certificates is a per annum rate equal to
the Weighted Average Net Mortgage Pass-Through Rate minus the Weighted Average
Pass-Through Rate on the Sequential Certificates.
The "Weighted Average Pass-Through Rate" for purposes of calculating the
Pass-Through Rate on the Class X Certificates, with respect to any Interest
Accrual Period, is the fraction (expressed as a percentage), the numerator of
which is the sum of the products obtained by multiplying, with respect to each
Class of Sequential Certificates, (i) the Pass-Through Rate for such Class and
(ii) the Certificate Balance of such Class as of the first day of such Interest
Accrual Period, and the denominator of which is the sum of the Certificate
Balances of the Classes of Sequential Certificates as of the first day of such
Interest Accrual Period (provided, in each case, any reductions in Certificate
Balance as a result of distributions of principal or allocations of Realized
Losses to such Class occurring in an Interest Accrual Period will be deemed to
have been made on the first day of such Interest Accrual Period).
The "Weighted Average Net Mortgage Pass-Through Rate" for any Distribution
Date is the fraction (expressed as a percentage) (a) the numerator of which is
the sum of the products obtained by multiplying, for each Mortgage Loan, (i)
the Net Mortgage Pass-Through Rate of such Mortgage Loan and (ii) the Stated
Principal Balance of such Mortgage Loan as of the day next preceding such
Distribution Date and (b) the denominator of which is the sum of the Stated
Principal Balances of all such Mortgage Loans as of the day next preceding such
Distribution Date.
The "Net Mortgage Pass-Through Rate" with respect to any Mortgage and any
Distribution Date is the Mortgage Pass-Through Rate for such Mortgage Loan for
the related Interest Accrual Period minus the Administrative Fee Rate.
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The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each is
equal to the Mortgage Rate thereof.
The "Mortgage Pass-Through Rate" with respect to the Mortgage Loans that
provide for interest based on a 360-day year and the actual number of days
elapsed (each, an "Actual/360 Loan") for any Interest Accrual Period will be an
annual rate generally equal to a fraction (expressed as a percentage), the
numerator of which is twelve (12) times the aggregate amount of interest
accrued in respect of such Actual/360 Loan during the one-month accrual period
ending immediately prior to the most recent related Due Date and the
denominator of which is the Stated Principal Balance of such Actual/360 Loan as
of such Due Date; provided that with respect to any Actual/360 Loan and the
Interest Accrual Periods relating to Due Dates occurring in January (except a
January occurring in a leap year), February and March, the Mortgage
Pass-Through Rate is equal to the Mortgage Rate thereof.
The "Mortgage Rate" with respect to each Mortgage Loan and any one-month
accrual period ending immediately prior to the most recent Due Date is the
annual rate, not including any Excess Rate, at which interest accrues on such
Mortgage Loan during such period (in the absence of a default), as set forth in
the related Note and on Annex A. The Mortgage Rate for purposes of calculating
the Mortgage Pass-Through Rate will be the Mortgage Rate of such Mortgage Loan
without taking into account any reduction in the interest rate by a bankruptcy
court pursuant to a plan of reorganization or pursuant to any of its equitable
powers or a reduction on interest or principal due to a modification as
described under "The Pooling and Servicing Agreement--Modifications" in this
Prospectus Supplement.
The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum of:
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) which are due on the Mortgage Loans on or (to the extent not
previously advanced) before the related Due Date and are either received with
respect to the relevant Collection Period (or received as late payments after
the end of such Collection Period, but prior to the close of business on the
Business Day prior to the related Servicer Remittance Date) or advanced for
such Distribution Date;
(ii) the principal component of all Assumed Scheduled Payments which are
due or deemed due, as the case may be, on or (to the extent not previously
advanced) before the related Due Date and are either received with respect to
the relevant Collection Period or advanced for such Distribution Date;
(iii) the Stated Principal Balance of each Mortgage Loan that was, during
the related Collection Period, repurchased from the Trust Fund in connection
with the breach of a representation or warranty or purchased from the Trust
Fund as described in this Prospectus Supplement under "The Pooling and
Servicing Agreement--Optional Termination" and "--Purchase of ARD Loans by the
Most Subordinate Certificateholders";
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan which was liquidated during the related Collection Period;
(v) the principal component of all Balloon Payments and, to the extent not
included in the preceding clauses, any other principal payment on any Mortgage
Loan received on or after the Maturity Date thereof, to the extent received
during the related Collection Period;
(vi) to the extent not included in the preceding clause (iv) or (v), all
other Principal Prepayments received in the related Collection Period; and
(vii) to the extent not included in the preceding clauses, any other full
or partial recoveries in respect of principal, including net insurance
proceeds, net liquidation proceeds and Net REO Proceeds received in the related
Collection Period; except that, in the case of clauses (i) through (vi), net of
any related outstanding P&I Advances allocable to principal.
The "Assumed Scheduled Payment" with respect to any Mortgage Loan that is
delinquent in respect of its Balloon Payment (including any REO Mortgage Loan
as to which the Balloon Payment would have been past due) is an amount equal to
the sum of (a) the principal portion of the Monthly Payment that would have
been due on such Mortgage Loan on the related Due Date based on the constant
payment required by the related Note or the original amortization schedule
thereof (as calculated with interest at the related Mortgage Rate), if
applicable, assuming such Balloon Payment has not become due after giving
effect to any modification, and (b) interest on the Stated Principal Balance of
such Mortgage Loan at the applicable Net Mortgage Pass-Through Rate.
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An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
Distribution of Available Funds. On each Distribution Date, prior to the
Crossover Date, the Available Funds for such Distribution Date will be
distributed in the following amounts and order of priority:
(i) First, pro rata, in respect of interest, to the holders of the Class
A-1, Class A-2, Class A-3 and Class X Certificates, up to an amount equal to
the aggregate Interest Accrual Amounts of such Classes;
(ii) Second, pro rata, to the holders of the Class A-1, Class A-2, Class
A-3 and Class X Certificates, in respect of interest, up to an amount equal to
the aggregate unpaid Interest Shortfalls previously allocated to such Classes;
(iii) Third, to the holders of the Class A-1 Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal Distribution
Amount until the Certificate Balance thereof is reduced to zero;
(iv) Fourth, to the holders of the Class A-2 Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance thereof is reduced
to zero;
(v) Fifth, to the holders of the Class A-3 Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal Distribution
Amount less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance thereof is reduced
to zero;
(vi) Sixth, pro rata, to the holders of the Class A-1, Class A-2 and Class
A-3 Certificates, for the unreimbursed amounts of Realized Losses, if any, an
amount equal to the aggregate of such unreimbursed Realized Losses previously
allocated to such Class;
(vii) Seventh, to the holders of the Class B Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such Class;
(viii) Eighth, to the holders of the Class B Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class;
(ix) Ninth, to the holders of the Class B Certificates, in reduction of
the Certificate Balance thereof, an amount equal to the Principal Distribution
Amount, less the portion of the Principal Distribution Amount distributed
pursuant to all prior clauses, until the Certificate Balance of such Class is
reduced to zero;
(x) Tenth, to the holders of the Class B Certificates, for the
unreimbursed amounts of Realized Losses, if any, an amount equal to the
aggregate of such unreimbursed Realized Losses previously allocated to such
Class;
(xi) Eleventh, to the holders of the Class C Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such Class;
(xii) Twelfth, to the holders of the Class C Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class;
(xiii) Thirteenth, to the holders of the Class C Certificates in reduction
of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount, less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Balance of
such Class is reduced to zero;
(xiv) Fourteenth, to the holders of the Class C Certificates, for the
unreimbursed amounts of Realized Losses, if any, up to an amount equal to the
aggregate of such unreimbursed Realized Losses previously allocated to such
Class;
(xv) Fifteenth, to the holders of the Class D Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such Class;
(xvi) Sixteenth, to the holders of the Class D Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class;
(xvii) Seventeenth, to the holders of the Class D Certificates, in
reduction of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount, less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Balance of
such Class is reduced to zero;
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(xviii) Eighteenth, to the holders of the Class D Certificates, for the
unreimbursed amounts of Realized Losses, if any, an amount equal to the
aggregate of such unreimbursed Realized Losses previously allocated to such
Class;
(xix) Nineteenth, to the holders of the Class E Certificates in respect of
interest, up to an amount equal to the Interest Accrual Amount of such Class;
(xx) Twentieth, to the holders of the Class E Certificates in respect of
interest, up to an amount equal to the unpaid Interest Shortfalls previously
allocated to such Class;
(xxi) Twenty-first, to the holders of the Class E Certificates in
reduction of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount, less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Balance of
such Class is reduced to zero;
(xxii) Twenty-second, to the holders of the Class E Certificates, for the
unreimbursed amounts of Realized Losses, if any, an amount equal to the
aggregate of such unreimbursed Realized Losses previously allocated to such
Class;
(xxiii) Twenty-third, to the holders of the Class F Certificates in
respect of interest, up to an amount equal to the Interest Accrual Amount of
such Class;
(xxiv) Twenty-fourth, to the holders of the Class F Certificates in
respect of interest, up to an amount equal to the unpaid Interest Shortfalls
previously allocated to such Class;
(xxv) Twenty-fifth, to the holders of the Class F Certificates, in
reduction of the Certificate Balance thereof, an amount equal to the Principal
Distribution Amount, less the portion of the Principal Distribution Amount
distributed pursuant to all prior clauses, until the Certificate Balance of
such Class is reduced to zero;
(xxvi) Twenty-sixth, to the holders of the Class F Certificates, for the
unreimbursed amounts of Realized Losses, if any, an amount equal to the
aggregate of such unreimbursed Realized Losses previously allocated to such
Class; and
(xxvii)Then, to the holders of the Other Private Certificates, as provided
in the Pooling and Servicing Agreement.
All references to "pro rata" in the preceding clauses unless otherwise
specified mean pro rata based upon the amount distributable pursuant to such
clause.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the Crossover Date, the Principal Distribution Amount will be distributed
to the Class A-1, Class A-2 and Class A-3 Certificates, pro rata, based on
their respective Certificate Balances, in reduction of their respective
Certificate Balances, until the Certificate Balance of each such Class is
reduced to zero. The "Crossover Date" is the Distribution Date on which the
Certificate Balance of each Class of Certificates other than the Class A-1,
Class A-2 and Class A-3 Certificates has been reduced to zero.
Prepayment Premiums. On each Distribution Date, Prepayment Premiums (which
will include any Return of Premium Amount, as described in this Prospectus
Supplement under "Description of the Mortgage Pool--Premium Loans" but will not
include the portion of the Repurchase Price relating to the Return of Premium
Amount for any Premium Loan that is repurchased from the Trust Fund, as
described in this Prospectus Supplement under "The Pooling and Servicing
Agreement--Representations and Warranties; Repurchase" net of any portion of
the Prepayment Premium received on a Specially Serviced Mortgage Loan that is
paid to the Special Servicer as part of the Work Out Fee, as described herein
under "The Pooling and Servicing Agreement--Special Servicing") with respect to
any Unscheduled Payments received in the related Collection Period shall be
distributed to the holders of the Offered Certificates outstanding on such
Distribution Date (and will not be applied to reduce the outstanding
Certificate Balance of such Class), as follows:
(A) to the extent that such Prepayment Premium is paid with respect to a
Mortgage Loan that is not a Premium Loan, then the amount of such Prepayment
Premium will be distributed on the related Distribution Date to the holders of
the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E and
Class F Certificates in an amount up to, in the case of each such Class, the
product of (a) such Prepayment Premium, (b) the Discount Rate Fraction for such
Class and (c) the Principal Allocation Fraction of such Class. The "Discount
Rate Fraction" for any such Class of Certificates is equal to a fraction (not
greater than 1.0 or less than zero) the numerator of which is equal to the
excess, if any, of (x) the Pass-Through Rate for such Class of Certificates
over (y) the applicable Discount Rate (as defined below), and the denominator
of which is equal to the excess, if any, of (x) the Net Mortgage Pass-Through
Rate over (y) the applicable Discount Rate. With respect to any Distribution
Date and each such Class of Certificates, the "Principal Allocation
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Fraction" is a fraction, the numerator of which is the portion, if any, of the
Principal Distribution Amount allocated to such Class of Certificates for such
Distribution Date, and the denominator of which is the entire Principal
Distribution Amount for such Distribution Date. The portion of the Prepayment
Premium remaining, if any, after the payment of the amount calculated as
described above will be distributed to the holders of the Class X Certificates.
The "Discount Rate" means the yield (compounded monthly) on the U.S. Treasury
issue (primary issue) with a maturity date closest to the Assumed Final
Distribution Date of the subject Class. In the event that there are two such
U.S. Treasury issues (a) with the same coupon, the issue with the lower yield
will be utilized, and (b) with maturity dates equally close to the Assumed
Final Distribution Date, the issue with the earliest maturity date will be
utilized;
(B) to the extent that such Prepayment Premium is paid with respect to a
Premium Loan that has a Base Interest Rate, net of the Administrative Fee Rate
(the "Net Base Rate") equal to or lower than the Pass-Through Rate in effect on
such Distribution Date for the Class of Offered Certificates that received
distributions in reduction of its Certificate Balance on such Distribution Date
(the "Reference Pass-Through Rate"), then the amount of such Prepayment Premium
will be distributed to the Class X Certificates; provided that if more than one
Class of Offered Certificates receives distributions in reduction of its
Certificate Balance on such Distribution Date, the Reference Pass-Through Rate
will be equal to the weighted average of the Pass-Through Rates for such
Classes for such Distribution Date (weighted on the basis of the Certificate
Balances thereof applicable to such Interest Accrual Period); and
(C) to the extent that such Prepayment Premium is paid with respect to a
Premium Loan that has a Net Base Rate higher than the Reference Pass-Through
Rate for such Distribution Date, then the amount of such Prepayment Premium
will be allocated between the Class X Certificates and the Class or Classes of
Offered Certificates, if any, that received distributions in reduction of its
(their) Certificate Balance(s) on such Distribution Date in the following
proportions: to the Class X Certificates, a fraction of such Prepayment
Premium, the numerator of which is the excess of the Net Mortgage Pass-Through
Rate of the related Mortgage Loan over the Net-Base Rate and the denominator of
which is the excess of the Net Mortgage Pass-Through Rate of the related
Mortgage Loan over the Reference Pass-Through Rate; and the balance to the
Class or Classes of Offered Certificates receiving distributions in reduction
of its (their) Certificate Balance(s) on such Distribution Date, pro rata, in
accordance with the amounts by which their Certificate Balances were so
reduced.
In all clauses above, Prepayment Premiums will only be distributed on a
Distribution Date (i) if the respective Certificate Balance or Notional Amount
of the related Class is greater than zero on the last Business Day of the
Interest Accrual Period ending immediately prior to such Distribution Date and
(ii) if the amount computed pursuant to the related clause above is greater
than zero. Any Prepayment Premiums remaining following the distributions
described in the preceding clauses (A) through (C) shall be distributed to
holders of the Private Certificates in accordance with the Pooling and
Servicing Agreement.
In the event that any Premium Loan is the subject of a repurchase in
connection with a breach of a representation or warranty, the portion of the
related Repurchase Price relating to the Return of Premium Amount for the
Premium Loan that is so repurchased (as described in this Prospectus Supplement
under "The Pooling and Servicing Agreement--Representations and Warranties;
Repurchase") will be distributed to the holders of the Class X Certificates.
The holders of a majority Percentage Interest of the most subordinate
Class of Certificates outstanding will have the limited right, but not the
obligation, to purchase the ARD Loans on their related Anticipated Repayment
Dates under the circumstances described under "The Pooling and Servicing
Agreement--Purchase of ARD Loans by the Most Subordinate Certificateholders" in
this Prospectus Supplement.
Excess Interest. On each Distribution Date, Excess Interest received in
the related Collection Period will be distributed solely to the holders of the
Classes of Sequential Certificates (other than the Class A-1 Certificates), pro
rata, based on their respective initial Certificate Balances.
REALIZED LOSSES
The Certificate Balances of the Certificates will be reduced without
distribution on any Distribution Date as a write-off to the extent of any
Realized Loss allocated to the applicable Class of Certificates with respect to
such Distribution Date. As referred to in this Prospectus Supplement, the
"Realized Loss" with respect to any Distribution Date shall mean the amount, if
any, by which the aggregate Certificate Balance of the Sequential Certificates
after giving effect to distributions made on such Distribution Date exceeds the
aggregate Stated Principal Balance of the Mortgage Loans after giving effect to
reductions made on such Distribution Date. Except as described in the next
sentence, any such Realized Losses will
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be applied to the Classes of Certificates (in reduction of their Certificate
Balances) in the following order, until the Certificate Balance of each is
reduced to zero: first, to the Private Certificates (other than the Class X,
Class R and Class LR Certificates) in reverse sequential order, second, to the
Class F Certificates, third, to the Class E Certificates, fourth, to the Class
D Certificates, fifth, to the Class C Certificates, sixth, to the Class B
Certificates and finally, pro rata, to the Class A-1, Class A-2 and Class A-3
Certificates based on their respective outstanding balances. Any amounts
recovered in respect of any such amounts previously written off as Realized
Losses will be distributed to the Classes of Sequential Certificates in reverse
order of allocation of such Realized Losses thereto. In addition, shortfalls in
Available Funds resulting from the following items shall be applied in the same
priority as Realized Losses:
o Servicing Compensation (other than the Servicing Fee);
o Interest on Advances to the extent not covered by Default Interest;
o Extraordinary expenses of the Trust Fund (including indemnification
expenses);
o A reduction of the interest rate of a Mortgage Loan by a bankruptcy
court pursuant to a plan of reorganization or pursuant to any of its
equitable powers;
o A reduction in interest rate or a forgiveness of principal of a Mortgage
Loan as described under "The Pooling and Servicing
Agreement--Modifications" in this Prospectus Supplement or otherwise; and
o Prepayment Interest Shortfalls, to the extent that any such Prepayment
Interest Shortfalls (other than those associated with Specially Serviced
Mortgage Loans and Mortgage Loans that permit payment on a date other than
a Due Date) have not been offset by:
o any Prepayment Interest Excess collected in the related Collection
Period;
o the Servicing Fee attributable to all Mortgage Loans for the related
Collection Period; and
o investment income on the related Principal Prepayment for the period
such amount is held in the Collection Account during the related Interest
Accrual Period.
The "Stated Principal Balance" of any Mortgage Loan at any date of
determination will equal (a) the principal balance as of the Cut-Off Date of
such Mortgage Loan (after application of all payments of principal due in
respect thereof on or before the Cut-Off Date, whether or not received), minus
(b) the sum of (i) the principal portion of each Monthly Payment due and
Assumed Scheduled Payment deemed due on such Mortgage Loan after the Cut-Off
Date, to the extent received or advanced and distributed to holders of the
Certificates or applied to certain other payments required under the Pooling
and Servicing Agreement on or prior to such date of determination, (ii) all
voluntary and involuntary principal prepayments and other unscheduled
collections of principal received with respect to such Mortgage Loan, to the
extent received and distributed to holders of the Certificates or applied to
certain other payments required under the Pooling and Servicing Agreement on or
before such date of determination and (iii) any principal forgiven by the
Special Servicer and other principal losses realized with respect to such
Mortgage Loan as of the end of the Collection Period for the most recent
Distribution Date coinciding with or preceding such date of determination, each
as described in this Prospectus Supplement under "The Pooling and Servicing
Agreement--Modifications." The Stated Principal Balance of a Mortgage Loan with
respect to which title to the related Mortgaged Property has been acquired by
the Trust Fund is equal to the Stated Principal Balance thereof outstanding on
the date on which such title is acquired less any Net REO Proceeds allocated to
principal on such Mortgage Loan and any principal advanced on such Mortgage
Loan to the extent received and distributed to holders of the Certificates or
applied to certain other payments required under the Pooling and Servicing
Agreement on or before such date of determination. The Stated Principal Balance
of a Specially Serviced Mortgage Loan or an REO Mortgage Loan with respect to
which the Servicer or Special Servicer has determined that it has received all
payments and recoveries which the Servicer or the Special Servicer, as
applicable, expects to be finally recoverable on such Mortgage Loan is zero.
With respect to Total Credit Tenant Loans, losses will be applied pro rata
between the CMAT Pari Passu Note contained in the Trust Fund and the related
Other Pari Passu Note (or Other Pari Passu Notes, as applicable).
PREPAYMENT INTEREST SHORTFALLS
The Servicer will deposit from its own funds any Prepayment Interest
Shortfalls resulting from prepayments on Mortgage Loans (other than Specially
Serviced Mortgage Loans and Mortgage Loans that permit prepayments on a date
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other than a Due Date) into the Collection Account on the Servicer Remittance
Date to the extent such Prepayment Interest Shortfalls do not exceed the
aggregate of the Servicing Fee attributable to all Mortgage Loans for the
related Collection Period, the investment income accruing on the related
Principal Prepayment for such related Interest Accrual Period and any
Prepayment Interest Excesses for the Collection Period. Any Prepayment Interest
Shortfalls in excess of such amounts will be allocated as part of Realized
Losses. "Prepayment Interest Excess" means any interest that accrues on a
prepayment on a Mortgage Loan after the Due Date and before the following
Servicer Remittance Date. Any Prepayment Interest Excesses in a Collection
Period in excess of the Prepayment Interest Shortfalls on Mortgage Loans (other
than Mortgage Loans that permit prepayments on a date other than a Due Date and
other than Specially Serviced Mortgage Loans) in such Collection Period will be
paid to the Servicer.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1, Class A-2, Class A-3, and Class X Certificates against losses
associated with delinquent and defaulted Mortgage Loans and Prepayment Interest
Shortfalls, the rights of the holders of the Class B, Class C, Class D, Class E
and Class F Certificates and the Private Certificates (other than the Class X,
Class R, and Class LR Certificates) to receive distributions of interest and
principal with respect to the Mortgage Loans, as applicable, will be
subordinated to such rights of the holders of the Class A-1, Class A-2, Class
A-3 and Class X Certificates. The Class B Certificates will be likewise
protected by the subordination of the Class C, Class D, Class E and Class F
Certificates and certain of the Private Certificates. The Class C Certificates
will be likewise protected by the subordination of the Class D, Class E and
Class F Certificates and certain of the Private Certificates. The Class D
Certificates will be likewise protected by the subordination of the Class E and
the Class F Certificates and certain of the Private Certificates. The Class E
Certificates will be likewise protected by the subordination of the Class F
Certificates and certain of the Private Certificates. The Class F Certificates
will be likewise protected by the subordination of certain of the Private
Certificates. This subordination will be effected in two ways: (i) by the
preferential right of the holders of a Class of Offered Certificates to receive
on any Distribution Date the amounts of interest and principal distributable in
respect of such Certificates on such date prior to any distribution being made
on such Distribution Date in respect of any Classes of Certificates subordinate
thereto, and (ii) by the allocation of Realized Losses (as defined in this
Prospectus Supplement), first, to certain of the Private Certificates, second,
to the Class F Certificates, third, to the Class E Certificates, fourth, to the
Class D Certificates, fifth, to the Class C Certificates, sixth to the Class B
Certificates, and finally, pro rata, to the Class A-1, Class A-2 and Class A-3
Certificates based on their respective Certificate Balances.
No other form of credit enhancement will be available for the benefit of
the holders of the Offered Certificates.
APPRAISAL REDUCTIONS
With respect to the first Distribution Date following the earliest of (i)
the third anniversary of the date on which an extension of the Maturity Date of
a Mortgage Loan becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer, which extension does not change the
amount of Monthly Payments on the Mortgage Loan, (ii) 60 days after an uncured
payment delinquency occurs in respect of a Mortgage Loan, (iii) immediately
after the date on which a reduction in the amount of Monthly Payments on a
Mortgage Loan, or a change in any other material economic term of the Mortgage
Loan, becomes effective as a result of a modification of such Mortgage Loan
(other than an extension of the Maturity Date) by the Special Servicer, (iv)
immediately after a receiver has been appointed, (v) immediately after a
borrower declares bankruptcy or 60 days after the borrower becomes the subject
of involuntary bankruptcy proceedings and such proceedings are not dismissed,
(vi) immediately after a Mortgage Loan becomes an REO Mortgage Loan, (vii) 60
days after a default in the payment of a Balloon Payment or (viii) any other
event which, in the discretion of the Special Servicer and of which the Special
Servicer becomes aware in performing its obligations in accordance with the
Servicing Standard would materially and adversely impair the value of the
Mortgaged Property and security for the related Mortgage Loan (any of (i),
(ii), (iii), (iv), (v), (vi), (vii) and (viii), an "Appraisal Reduction
Event"), an Appraisal Reduction Amount (as described in the following
paragraph) will be calculated. Within 60 days after the Appraisal Reduction
Event, the Special Servicer will be required to obtain an independent MAI
appraisal (the cost of which shall constitute a Property Advance) which shall
be the basis of such calculation. If no independent MAI appraisal has been
received within 60 days after the first Distribution Date as of which an
Appraisal Reduction Event has occurred in respect of any Mortgage Loan, the
Appraisal Reduction Amount for such Mortgage Loan (the "Special Servicer's
Appraisal Reduction Amount Estimate") will be 30% of the Stated Principal
Balance of such Mortgage Loan as of the date
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of the related Appraisal Reduction Event. On the first Distribution Date
occurring on or after the delivery of such independent MAI appraisal, the
Special Servicer will be required to adjust the Appraisal Reduction Amount to
take into account such appraisal (regardless of whether the adjusted Appraisal
Reduction Amount is higher or lower than the Special Servicer's Appraisal
Reduction Amount Estimate). Appraisal Reduction Amounts will be recalculated
annually based on Updated Appraisals.
The "Appraisal Reduction Amount" for any Distribution Date and for any
Mortgage Loan as to which any Appraisal Reduction Event has occurred will be an
amount equal to the excess of (a) the outstanding Stated Principal Balance of
such Mortgage Loan over (b) the excess of (i) 90% of the sum of the appraised
values of the related Mortgaged Properties (or, with respect to each CMAT Pari
Passu Note, the pro rata portion of the Mortgaged Properties allocable to such
note) as determined by independent MAI appraisals (the costs of which shall be
paid by the Servicer as a Property Advance) over (ii) the sum of (A) all unpaid
interest on such Mortgage Loan at a per annum rate equal to the Mortgage Rate,
(B) all unreimbursed Property Advances, the principal portion of all
unreimbursed P&I Advances and all unpaid interest on Advances at the Advance
Rate in respect of such Mortgage Loan and (C) all currently due and unpaid real
estate taxes, ground rents and assessments and insurance premiums and all other
amounts due and unpaid under the Mortgage Loan (which tax, premiums and other
amounts have not been the subject of an Advance by the Servicer).
DELIVERY, FORM AND DENOMINATION
The Offered Certificates will be issued, maintained and transferred in the
book-entry form, in minimum denominations of $10,000 initial Certificate
Balance and integral multiples of $1 in excess thereof.
The Offered Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee
of DTC. The Depositor has been informed by DTC that DTC's nominee will be Cede
& Co. No holder of an Offered Certificate will be entitled to receive a
certificate issued in fully registered, certificated form (each, a "Definitive
Certificate") representing its interest in such Class, except under the limited
circumstances described in the Prospectus under "Description of the
Certificates--Book-Entry Registration and Definitive Certificates." Unless and
until Definitive Certificates are issued, all references to actions by holders
of the Offered Certificates will refer to actions taken by DTC upon
instructions received from holders of Offered Certificates through its
participating organizations (together with Cedel and Euroclear participating
organizations, the "Participants"), and all references in this Prospectus
Supplement to payments, notices, reports, statements and other information to
holders of Offered Certificates will refer to payments, notices, reports and
statements to DTC or Cede & Co., as the registered holder of the Offered
Certificates, for distribution to holders of Offered Certificates through its
Participants in accordance with DTC procedures; provided, however, that to the
extent that the party responsible for distributing any report, statement or
other information has been provided with the name of the beneficial owner of a
Certificate (or the prospective transferee of such beneficial owner), such
report, statement or other information will be provided to such beneficial
owner (or prospective transferee).
Until Definitive Certificates are issued in respect of the Offered
Certificates, interests in the Offered Certificates will be transferred on the
book-entry records of DTC and its Participants. The Trustee will initially
serve as certificate registrar (in such capacity, the "Certificate Registrar")
for purposes of recording and otherwise providing for the registration of the
Offered Certificates.
A "Certificateholder" under the Pooling and Servicing Agreement will be
the person in whose name a Certificate is registered in the certificate
register maintained pursuant to the Pooling and Servicing Agreement, except
that solely for the purpose of giving any consent or taking any action pursuant
to the Pooling and Servicing Agreement, any Certificate registered in the name
of the Depositor, the Servicer, the Special Servicer, the Trustee (in its
individual capacity), a manager of a Mortgaged Property, a borrower or any
person affiliated with the Depositor, the Servicer, the Special Servicer, the
Trustee, such manager or a borrower will be deemed not to be outstanding and
the Voting Rights to which it is entitled will not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent or take any such action has been obtained; provided,
however, that for purposes of obtaining the consent of Certificateholders to an
amendment to the Pooling and Servicing Agreement, any Certificates beneficially
owned by the Servicer or Special Servicer or an affiliate will be deemed to be
outstanding, provided that such amendment does not relate to compensation of
the Servicer or Special Servicer or otherwise benefit the Servicer or the
Special Servicer in any material respect; and, provided, further, that for
purposes of obtaining the consent of Certificateholders to any action proposed
to be taken by the Special Servicer with respect to a Specially Serviced
Mortgage Loan, any Certificates beneficially owned by the Special Servicer or
an affiliate will be deemed not to be outstanding. For the purposes of
determining who the Directing Holders are, Certificates owned by the Special
Servicer or an affiliate thereof
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will be deemed to be outstanding. Notwithstanding the foregoing, solely for
purposes of providing or distributing any reports, statements or other
information pursuant to the Pooling and Servicing Agreement, a
Certificateholder will include any beneficial owner (or prospective transferee
of a beneficial owner) to the extent that the party required or permitted to
provide or distribute such report, statement or other information has been
provided with the name of such beneficial owner (or prospective transferee).
The Percentage Interest in any Class of Offered Certificates evidenced by a
particular Certificate of such Class will be equal to the percentage obtained
by dividing the denomination of such Certificate by the aggregate initial
Certificate Balance of such Class of Certificates. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates" in the
Prospectus.
BOOK-ENTRY REGISTRATION
Holders of Offered Certificates may hold their Certificates through DTC
(in the United States) or Cedel or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. Cedel and Euroclear will hold omnibus positions
on behalf of the Cedel Participants and the Euroclear Participants,
respectively, through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective depositaries (collectively, the
"Depositaries") which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. DTC is a limited
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, 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
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created
to hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
computerized book-entries, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Cedel Participants 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 its Depositary; however, such cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the 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 its 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. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the Business Day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such Business Day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the Business Day following
settlement in DTC. For additional information regarding clearance and
settlement procedures for the Offered Certificates and for information with
respect to tax documentation procedures relating to the Offered Certificates,
see Annex D hereto.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Offered Certificates may do so only through Participants
and Indirect Participants. In addition, holders of Offered Certificates will
receive all distributions of principal and interest from the Trustee through
the Participants who in turn will receive them from DTC. Similarly, reports
distributed to Certificateholders pursuant to the Pooling and Servicing
Agreement and requests for the consent of Certificateholders will be delivered
to beneficial owners only through DTC, Euroclear, Cedel and their respective
participants. Under a book-entry format, holders of Offered Certificates may
experience some delay in their receipt of payments, reports and
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notices, since such payments, reports and notices will be forwarded by the
Trustee to Cede & Co., as nominee for DTC. DTC will forward such payments,
reports and notices to its Participants, which thereafter will forward them to
Indirect Participants, Cedel, Euroclear or holders of Offered Certificates, as
applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Except as required by law, neither the Depositor, the Servicer, the Fiscal
Agent nor the Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Offered Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes
in accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriters. Indirect access to Cedel is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("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 now be settled in any of 27 currencies,
including United States dollars. The Euroclear system 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
Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the
"Euroclear Operator"), under contract with Euroclear Clearance System, 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 the Euroclear
system on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear system 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 the Euroclear system,
withdrawal of securities and cash from the Euroclear system, and receipts of
payments with respect to securities in the Euroclear system. All securities in
the Euroclear system are held on a fungible basis without 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.
The information in this Prospectus Supplement concerning DTC, Cedel and
Euroclear and their book-entry systems has been obtained from sources believed
to be reliable, but the Depositor takes no responsibility for the accuracy or
completeness thereof.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to beneficial owners of the
Offered Certificates ("Certificate Owners") (or their nominees) only if (i) DTC
is no longer willing or able properly to discharge its responsibilities as
depository with respect to the Book-Entry Certificates, and the Trustee is
unable to locate a qualified successor, (ii) the Depositor or the Trustee, with
the consent of the Underwriters, elects to terminate the book-entry system
through DTC with respect to some or all of any Class or Classes of
Certificates, or (iii) after the occurrence of an Event of Default or
Termination Event under the Pooling and Servicing Agreement, Certificate Owners
representing a majority in principal amount of the Book-Entry Certificates then
outstanding advise DTC through DTC Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of Certificate Owners.
Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, the Trustee is required to notify
all affected Certificateholders (through DTC and related DTC Participants) of
the availability of Definitive Certificates through DTC. Upon delivery of
Definitive Certificates, the Trustee, the Certificate Registrar, and the
Servicer will recognize the holders of such Definitive Certificates as holders
under the Pooling and Servicing Agreement ("Holders of Definitive
Certificates"). Distributions of principal and interest on the Definitive
Certificates will be made by the Trustee directly to Holders of Definitive
Certificates in accordance with the procedures set forth in the Prospectus
and/or the Pooling and Servicing Agreement.
Upon the occurrence of any of the events described in clauses (i) through
(iii) of the second preceding paragraph, requests for transfer of Definitive
Certificates will be required to be submitted directly to the Certificate
Registrar in a form acceptable to the Certificate Registrar (such as the forms
which will appear on the back of the certificate representing a Definitive
Certificate), signed by the holder of a Definitive Certificate or such holder's
legal representative and accompanied by the Definitive Certificate or
Certificates for which transfer is being requested. The Trustee will be
appointed as the initial Certificate Registrar.
TRANSFERS AND EXCHANGES; TRANSFER RESTRICTIONS
In the event that holders of the Offered Certificates become entitled to
receive Definitive Certificates under the circumstances described under
"Definitive Certificates" above, then (in the case of the Subordinated Offered
Certificates, subject to the restrictions on transfer described in the
immediately succeeding paragraph), upon and after the issuance of such
Definitive Certificates, the Offered Certificates may be presented or
surrendered for registration of transfer or exchange (in authorized
denominations of $10,000 initial Certificate Balance for the Offered
Certificates and in multiples of $1 Certificate Balance in excess thereof) at
the offices of the Certificate Registrar. Every such Offered Certificate
presented or surrendered for transfer or exchange will (if so required by the
Certificate Registrar) be duly endorsed by, or be accompanied by a written
instrument in the form satisfactory to the Certificate Registrar duly executed
by the holder thereof or his attorney duly authorized in writing. No service
charge will be imposed for any transfer or exchange of such Offered
Certificates, but the Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of such Offered
Certificates. Prior to due presentment for registration of transfer, the
Depositor, the Servicer, the Special Servicer, the Trustee, the Fiscal Agent,
the Certificate Registrar and any agent of any of them may treat the person in
whose name any Offered Certificate is registered as the owner of such Offered
Certificate for the purpose of receiving distributions thereon and for all
purposes whatsoever, and none of them will be affected by notice to the
contrary.
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In the event that holders of the Subordinated Offered Certificates become
entitled to receive Definitive Certificates under the circumstances described
under "Definitive Certificates" above, each prospective transferee of a
Subordinated Offered Certificate that is a Definitive Certificate will be
required to (i) deliver to the Depositor, the Certificate Registrar and the
Trustee a representation letter substantially in the form set forth as an
exhibit to the Pooling and Servicing Agreement stating that such transferee is
not an employee benefit plan or other arrangement subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or
a governmental plan (as defined in Section 3(32) of ERISA) subject to any
federal, state or local law which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (each, a "Plan"), or a person acting
on behalf of or investing the assets of a Plan, other than an insurance company
investing the assets of its general account under circumstances whereby the
purchase and subsequent holding of a Subordinated Offered Certificate and
transactions in connection with the servicing, management and operation of the
Trust Fund would be exempt from the prohibited transaction restrictions of
ERISA and the Code under Sections I and III of PTE 95-60, or (ii) provide an
opinion of counsel and such other documentation as described under "Certain
ERISA Considerations" in this Prospectus Supplement. The purchaser or
transferee of any interest in a Subordinated Offered Certificate that is not a
Definitive Certificate shall be deemed to represent that it is not a person
described in clause (i) above.
The Subordinated Offered Certificates will contain a legend describing
such restrictions on transfer and the Pooling and Servicing Agreement will
provide that any attempted or purported transfer in violation of these transfer
restrictions will be null and void ab initio.
NOTICES
Any notice or communication to holders of the Offered Certificates will be
in writing and delivered in person or mailed by first class mail, postage
prepaid, addressed to the holders at their respective addresses as they appear
on the Certificate Registrar maintained under the Pooling and Servicing
Agreement and shall be sufficient if so mailed within the time prescribed. If a
notice or communication is given in the manner provided above, it is duly
given, whether or not received by the addressees. Any such notice shall be
deemed to have been given on the date of such publication, or, if published
more than once or on different dates, on the first date on which publication in
such newspaper is made.
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PREPAYMENT AND YIELD CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholder, the rate and timing of the distributions
in reduction of Certificate Balance of such Certificates, the rate, timing and
severity of losses on the Mortgage Loans and the extent to which such losses
are allocable in reduction of the Certificate Balance of such Certificates, and
the extent to which Prepayment Premiums are received in connection with
voluntary prepayments, liquidations on default, or other early returns of
principal, as well as prevailing interest rates at the time of prepayment or
default.
The rate of distributions in reduction of the Certificate Balance of any
Class of Offered Certificates, the aggregate amount of distributions on any
Class of Offered Certificates and the yield to maturity of any Class of Offered
Certificates will be directly related to the rate of payments of principal
(both scheduled and unscheduled) on the Mortgage Loans and the amount and
timing of borrower defaults. In addition, such distributions in reduction of
Certificate Balance may result from repurchases of the Mortgage Loans by the
Mortgage Loan Sellers or NHA due to missing or defective documentation or
breaches of representations and warranties with respect to such Mortgage Loans
as described in this Prospectus Supplement under "The Pooling and Servicing
Agreement-- Representations and Warranties; Repurchase," purchases of the
Mortgage Loans in the manner described under "The Pooling and Servicing
Agreement--Optional Termination" or purchases of ARD Loans as described under
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" and "--Purchase of ARD Loans by the Most Subordinate
Certificateholders."
Disproportionate principal payments (whether resulting from differences in
amortization terms, prepayments following expirations of the respective
Lock-out Periods or otherwise) on the Mortgage Loans having Net Mortgage
Pass-Through Rates that are higher or lower than the Weighted Average Net
Mortgage Pass-Through Rate will affect the Weighted Average Net Mortgage
Pass-Through Rate and, accordingly, may affect the Pass-Through Rates of the
Class A-2, Class A-3, Class B, Class C, Class D, Class E and Class F
Certificates, to the extent that the Pass-Through Rates thereof are equal to
the lesser of a certain fixed rate of interest and the Weighted Average Net
Mortgage Pass-Through Rate on any Distribution Date, and therefore the yield on
such Classes.
The Certificate Balance of any Class of Offered Certificates may be
reduced without distributions thereon as a result of the allocation of Realized
Losses to such Class, reducing the maximum amount distributable to such Class
in respect of Certificate Balance, as well as the amount of interest that will
accrue thereon. In general, a Realized Loss occurs when the aggregate principal
balance of a Mortgage Loan is reduced without an equal distribution to
Certificateholders in reduction of the Certificate Balances of the
Certificates. Realized Losses will generally occur only in connection with a
default on a Mortgage Loan and the liquidation of the related Mortgaged
Property or a reduction in the principal balance of a Mortgage Loan by a
bankruptcy court.
Because the ability of a borrower to make a Balloon Payment will depend
upon its ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Property, there is a risk that a borrower may default at the Maturity
Date. In connection with a default on the Balloon Payment, the Special Servicer
may agree to extend the Maturity Date thereof as described under "The Pooling
and Servicing Agreement--Realization upon Mortgage Loans." In the case of any
such default, recovery of proceeds may be delayed until, among other things,
work-outs are negotiated, foreclosures are completed or bankruptcy proceedings
are resolved. In addition, the Directing Holders (as defined below) may
instruct the Special Servicer to delay the commencement of any foreclosure
proceedings under certain conditions described in this Prospectus Supplement.
Certificateholders are not entitled to receive distributions of Monthly
Payments or the Balloon Payment when due except to the extent they are either
covered by a P&I Advance or actually received. Consequently, any defaulted
Monthly Payment for which no such P&I Advance is made and a defaulted Balloon
Payment will tend to extend the weighted average lives of the Certificates,
whether or not a permitted extension of the due date of the related Mortgage
Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans is applied in reduction of the
Certificate Balance of a Class of Offered Certificates, the greater the effect
on such investor's yield to maturity.
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All of the Mortgage Loans have Lock-out Periods ranging from 86 to 244
months following the Cut-Off Date. The weighted average Lock-out Period for the
Mortgage Loans is approximately 138.6 months. All Mortgage Loans are locked out
until no earlier than six months preceding their Anticipated Repayment Date or
Maturity Date, as applicable. See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans--Prepayment Provisions" in this
Prospectus Supplement. Nevertheless, any such Mortgage Loan may be prepaid
prior to the expiration of any such Lock-out Period in connection with certain
events of casualty or condemnation. In addition, investors may receive early
return of principal in connection with defaults, repurchases for breach of
representations and warranties and optional termination.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Offered
Certificates. In addition, although Excess Cash Flow is applied to reduce the
principal of the ARD Loans after their respective Anticipated Repayment Dates,
there can be no assurance that any of such Mortgage Loans will be prepaid on
that date or any date prior to maturity. An investor is urged to make an
investment decision with respect to any Class of Offered Certificates based on
the anticipated yield to maturity of such Class of Offered Certificates
resulting from its purchase price and such investor's own determination as to
anticipated Mortgage Loan prepayment rates under a variety of scenarios. The
extent to which any Class of Offered Certificates is purchased at a discount or
a premium and the degree to which the timing of payments on such Class of
Offered Certificates is sensitive to prepayments will determine the extent to
which the yield to maturity of such Class of Offered Certificates may vary from
the anticipated yield. An investor should carefully consider the associated
risks, including, in the case of any Offered Certificates purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield and, in the case of any Offered Certificates
purchased at a premium, the risk that a faster than anticipated rate of
principal payments could result in an actual yield to such investor that is
lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of the
principal balance of the Offered Certificates entitled to distributions of
principal may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest amounts distributed in reduction of the principal
balance of such investor's Offered Certificate may be lower than the
Pass-Through Rate. Conversely, slower rates of prepayments on the Mortgage
Loans, and therefore of amounts distributable in reduction of principal balance
of the Offered Certificates entitled to distributions of principal, may
coincide with periods of high prevailing interest rates. During such periods,
the amount of principal distributions resulting from prepayments available to
an investor in such Certificates for reinvestment at such high prevailing
interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
prices because while interest is required to be paid by the borrower on the
eleventh (or, in the case of certain Mortgage Loans, the first) day of each
month, the distribution of such interest will not be made until the
Distribution Date occurring in such month, and principal paid on any
Distribution Date will not bear interest during the period after the related
Due Date and before the Distribution Date occurs. Additionally, as described
under "Description of the Offered Certificates--Distributions" in this
Prospectus Supplement, if the portion of the Available Funds distributable in
respect of interest on any Class of Offered Certificates on any Distribution
Date is less than the amount of interest required to be paid to the holders of
such Class, the shortfall will be distributable to holders of such Class of
Certificates on subsequent Distribution Dates, to the extent of Available Funds
on such Distribution Dates. Any such shortfall will not bear interest, however,
and will therefore negatively affect the yield to maturity of such Class of
Certificates for so long as it is outstanding.
RATED FINAL DISTRIBUTION DATE
The "Rated Final Distribution Date" is the Distribution Date occurring
three years after the latest amortization term of any of the Mortgage Loans.
Because certain of the Mortgage Loans have Maturity Dates that occur earlier
than the latest Maturity Date, and because certain of the Mortgage Loans may be
prepaid prior to maturity, it is possible that the Certificate Balance of each
Class of Offered Certificates will be reduced to zero significantly earlier
than the Rated Final Distribution Date.
WEIGHTED AVERAGE LIFE OF OFFERED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or allocation
to the investor of each dollar in reduction of Certificate Balance that is
distributed or allocated,
S-103
<PAGE>
respectively. For the purposes of this Prospectus Supplement, the weighted
average life of each Class of Offered Certificates is determined by (i)
multiplying the amount of each allocation in reduction of Certificate Balance
of such Class by the number of years from the date of determination to the
related Distribution Date, (ii) adding the results and (iii) dividing the sum
by the aggregate allocations in reduction of Certificate Balance referred to in
clause (i).
The weighted average lives of the Offered Certificates will be influenced
by, among other things, the rate at which principal on the Mortgage Loans is
paid, which may occur as a result of scheduled amortization, Balloon Payments,
voluntary or involuntary prepayments or liquidations. The weighted average
lives of the Offered Certificates may also be affected to the extent that
additional distributions in reduction of the Certificate Balance of such
Certificates occur as a result of the repurchase or purchase of Mortgage Loans
from the Trust Fund as described under "The Pooling and Servicing
Agreement--Representations and Warranties; Repurchase" or "--Purchase of ARD
Loans by the Most Subordinate Certificateholders" in this Prospectus
Supplement. Such a repurchase or purchase from the Trust Fund will have the
same effect on distributions to the holders of Certificates as if the related
Mortgage Loans had prepaid in full, except that no Prepayment Premiums will be
distributed to the Offered Certificates in respect thereof.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of the pool of mortgage loans. As used in the
following tables the column headed "0% CPR" assumes that none of the Mortgage
Loans is prepaid before the related Anticipated Repayment Date or Maturity
Date, as applicable. The columns headed "25% CPR," "50% CPR" and "75% CPR"
assume that prepayments on the Mortgage Loans are made at those levels of CPR
following the expiration of any Lock-out Period until the related Anticipated
Repayment Date or Maturity Date, as applicable. The column headed "100% PP"
means 100% of each Mortgage Loan prepays when it becomes freely prepayable. All
columns in the following tables assume that all of the ARD Loans are fully
prepaid on their related Anticipated Repayment Date (if not earlier). There is
no assurance, however, that prepayments of the Mortgage Loans will conform to
any level of CPR, and no representation is made that the Mortgage Loans will
prepay at the levels of CPR shown or at any other prepayment rate. The
foregoing assumptions are referred to in this Prospectus Supplement as the
"Prepayment Assumptions."
The tables of "Percentages of Initial Certificate Balance Outstanding for
the Offered Certificates" set forth below indicate the weighted average life of
each Class of Offered Certificates and set forth the percentage of the initial
Certificate Balance of such Offered Certificates that would be outstanding
after each of the dates shown at the various CPRs and based on the Prepayment
Assumptions. The tables have also been prepared based on the following
assumptions (the "Mortgage Loan Assumptions"): (i) each Mortgage Loan will pay
principal and/or interest in accordance with its terms and scheduled payments
will be timely received on the 11th day of each month; (ii) none of the
Mortgage Loans will be repurchased as described under "The Pooling and
Servicing Agreement--Representations and Warranties; Repurchase" in this
Prospectus Supplement; (iii) none of the Depositor, the Servicer, the Special
Servicer or the Class LR Certificateholders will exercise the right to cause
early termination of the Trust Fund; (iv) the Administrative Fee Rate for each
Distribution Date is an aggregate amount equal to a per annum rate of 0.0535%
on the Stated Principal Balance of the Mortgage Loans as of the date next
preceding such Distribution Date; (v) each Dual Amortization Loan will amortize
based upon the shorter amortization schedule for such Dual Amortization Loans;
(vi) the characteristics of the Mortgage Loans are as described in Annex A to
this Prospectus Supplement; (vii) the Trust Fund does not incur any unusual or
extraordinary expenses; (viii) the Certificates are settled on October 28,
1999; (ix) distributions on the Certificates are made on the 17th day (each
assumed to be a Business Day) of each month, commencing on November 17, 1999;
(x) there are no casualties or condemnations on any of the Mortgaged
Properties; (xi) the Pass-Through Rate for the Class A-1 Certificates remains
constant at 7.12%; (xii) the Pass-Through Rate for the Class A-2 Certificates
remains constant at 7.43%; (xiii) the Pass-Through Rate for the Class A-3
Certificates remains constant at 7.55%; (xiv) the Pass-Through Rate for the
Class B Certificates remains constant at 7.80%; (xv) the Pass-Through Rate for
the Class C Certificates remains constant at 7.80%; (xvi) the Pass-Through Rate
for the Class D Certificates remains constant at 7.80%; (xvii) the Pass-Through
Rate for the Class E Certificates remains constant at 7.64%; (xviii) the
Pass-Through Rate for the Class F Certificates remains constant at 7.64%; and
(xix) that no Return of Premium Amounts are collected with respect to the
Premium Loans. These assumptions are collectively referred to as the "Mortgage
Loan Assumptions." The Mortgage Loan Assumptions made in preparing the previous
and following tables are expected to vary from the actual performance of the
Mortgage Loans. It is highly unlikely that principal of the Mortgage Loans will
be repaid in a manner consistent with assumptions underlying any one of the
scenarios. Investors are urged to conduct their own analysis concerning the
likelihood that the Mortgage Loans may pay or prepay on any particular date.
S-104
<PAGE>
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables indicate the weighted average life of the Offered
Certificates and set forth the percentages of the initial Certificate Balance
of the Offered Certificates that would be outstanding after the Distribution
Date in November of each of the years indicated, at the indicated CPRs.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS A-1 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A-1
-------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 94% 94% 94% 94% 94%
October 17, 2001 ...................... 88% 88% 88% 88% 88%
October 17, 2002 ...................... 81% 81% 81% 81% 81%
October 17, 2003 ...................... 74% 74% 74% 74% 74%
October 17, 2004 ...................... 66% 66% 66% 66% 66%
October 17, 2005 ...................... 57% 57% 57% 57% 57%
October 17, 2006 ...................... 48% 48% 48% 48% 48%
October 17, 2007 ...................... 13% 8% 3% 0% 0%
October 17, 2008 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 5.73 5.71 5.69 5.67 5.57
First Principal Payment Date .......... Nov-1999 Nov-1999 Nov-1999 Nov-1999 Nov-1999
Last Principal Payment Date ........... Dec-2007 Dec-2007 Nov-2007 Sep-2007 Jun-2007
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS A-2 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A-2
-------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 98% 87%
October 17, 2008 ...................... 64% 64% 63% 62% 53%
October 17, 2009 ...................... 1% 0% 0% 0% 0%
October 17, 2010 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 9.20 9.19 9.18 9.16 9.04
First Principal Payment Date .......... Dec-2007 Dec-2007 Nov-2007 Sep-2007 Jun-2007
Last Principal Payment Date ........... Dec-2009 Dec-2009 Dec-2009 Nov-2009 Oct-2009
</TABLE>
S-105
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS A-3 CERTIFICATES
<TABLE>
<CAPTION>
CLASS A-3
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 99%
October 17, 2010 ...................... 73% 72% 71% 70% 45%
October 17, 2011 ...................... 36% 36% 36% 36% 36%
October 17, 2012 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 11.55 11.55 11.55 11.54 11.51
First Principal Payment Date .......... Dec-2009 Dec-2009 Dec-2009 Nov-2009 Oct-2009
Last Principal Payment Date ........... Oct-2012 Oct-2012 Oct-2012 Oct-2012 Oct-2012
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS B CERTIFICATES
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 100%
October 17, 2010 ...................... 100% 100% 100% 100% 100%
October 17, 2011 ...................... 100% 100% 100% 100% 100%
October 17, 2012 ...................... 98% 96% 94% 90% 64%
October 17, 2013 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 13.41 13.40 13.38 13.36 13.26
First Principal Payment Date .......... Oct-2012 Oct-2012 Oct-2012 Oct-2012 Oct-2012
Last Principal Payment Date ........... Apr-2013 Apr-2013 Apr-2013 Apr-2013 Apr-2013
</TABLE>
S-106
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS C CERTIFICATES
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 100%
October 17, 2010 ...................... 100% 100% 100% 100% 100%
October 17, 2011 ...................... 100% 100% 100% 100% 100%
October 17, 2012 ...................... 100% 100% 100% 100% 100%
October 17, 2013 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 13.58 13.58 13.58 13.58 13.57
First Principal Payment Date .......... Apr-2013 Apr-2013 Apr-2013 Apr-2013 Apr-2013
Last Principal Payment Date ........... Jul-2013 Jul-2013 Jul-2013 Jul-2013 Jul-2013
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS D CERTIFICATES
<TABLE>
<CAPTION>
CLASS D
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 100%
October 17, 2010 ...................... 100% 100% 100% 100% 100%
October 17, 2011 ...................... 100% 100% 100% 100% 100%
October 17, 2012 ...................... 100% 100% 100% 100% 100%
October 17, 2013 ...................... 44% 38% 29% 16% 0%
October 17, 2014 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 13.93 13.91 13.89 13.85 13.77
First Principal Payment Date .......... Jul-2013 Jul-2013 Jul-2013 Jul-2013 Jul-2013
Last Principal Payment Date ........... Dec-2013 Dec-2013 Dec-2013 Nov-2013 Aug-2013
</TABLE>
S-107
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS E CERTIFICATES
<TABLE>
<CAPTION>
CLASS E
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 100%
October 17, 2010 ...................... 100% 100% 100% 100% 100%
October 17, 2011 ...................... 100% 100% 100% 100% 100%
October 17, 2012 ...................... 100% 100% 100% 100% 100%
October 17, 2013 ...................... 100% 100% 100% 100% 77%
October 17, 2014 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 14.14 14.14 14.14 14.13 14.05
First Principal Payment Date .......... Dec-2013 Dec-2013 Dec-2013 Nov-2013 Aug-2013
Last Principal Payment Date ........... Jan-2014 Jan-2014 Dec-2013 Dec-2013 Dec-2013
</TABLE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPR FOR THE CLASS F CERTIFICATES
<TABLE>
<CAPTION>
CLASS F
--------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage .................... 100% 100% 100% 100% 100%
October 17, 2000 ...................... 100% 100% 100% 100% 100%
October 17, 2001 ...................... 100% 100% 100% 100% 100%
October 17, 2002 ...................... 100% 100% 100% 100% 100%
October 17, 2003 ...................... 100% 100% 100% 100% 100%
October 17, 2004 ...................... 100% 100% 100% 100% 100%
October 17, 2005 ...................... 100% 100% 100% 100% 100%
October 17, 2006 ...................... 100% 100% 100% 100% 100%
October 17, 2007 ...................... 100% 100% 100% 100% 100%
October 17, 2008 ...................... 100% 100% 100% 100% 100%
October 17, 2009 ...................... 100% 100% 100% 100% 100%
October 17, 2010 ...................... 100% 100% 100% 100% 100%
October 17, 2011 ...................... 100% 100% 100% 100% 100%
October 17, 2012 ...................... 100% 100% 100% 100% 100%
October 17, 2013 ...................... 100% 100% 100% 100% 100%
October 17, 2014 ...................... 0% 0% 0% 0% 0%
Weighted Average Life (years) ......... 14.22 14.22 14.21 14.20 14.14
First Principal Payment Date .......... Jan-2014 Jan-2014 Dec-2013 Dec-2013 Dec-2013
Last Principal Payment Date ........... Jan-2014 Jan-2014 Jan-2014 Jan-2014 Dec-2013
</TABLE>
S-108
<PAGE>
PRICE/YIELD TABLES
The tables set forth below show the corporate bond equivalent ("CBE")
yield, weighted average life (as described under "--Weighted Average Life of
the Offered Certificates" above) and the period during which principal payments
would be received with respect to each Class of Offered Certificates under the
Mortgage Loan Assumptions and the Prepayment Assumptions. Purchase prices set
forth below for each Class of Offered Certificates are expressed in 32nds
(e.g., 99.16 means 9916/32%) as a percentage of the initial Certificate Balance
of such Class of Certificates, before adding accrued interest.
The yields set forth in the following tables were calculated by
determining the monthly discount rates which, when applied to the assumed
stream of cash flows to be paid on each Class of Offered Certificates, would
cause the discounted present value of such assumed stream of cash flows as of
the Closing Date to equal the assumed purchase prices, plus accrued interest at
the applicable initial Pass-Through Rate from and including October 11, 1999 to
but excluding the Closing Date, and converting such monthly rates to
semi-annual corporate bond equivalent rates. Such calculation does not take
into account variations that may occur in the interest rates at which investors
may be able to reinvest funds received by them as reductions of the Certificate
Balances of such Classes of Offered Certificates and consequently does not
purport to reflect the return on any investment in such Classes of Offered
Certificates when such reinvestment rates are considered.
S-109
<PAGE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-1 CERTIFICATES
AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
99.00 ................................ 7.427% 7.428% 7.428% 7.429% 7.431%
99.04 ................................ 7.399% 7.399% 7.400% 7.400% 7.402%
99.08 ................................ 7.370% 7.370% 7.371% 7.371% 7.373%
99.12 ................................ 7.341% 7.342% 7.342% 7.342% 7.344%
99.16 ................................ 7.313% 7.313% 7.313% 7.314% 7.315%
99.20 ................................ 7.285% 7.285% 7.285% 7.285% 7.286%
99.24 ................................ 7.256% 7.256% 7.256% 7.256% 7.257%
99.28 ................................ 7.228% 7.228% 7.228% 7.228% 7.228%
100.00 ................................ 7.200% 7.199% 7.199% 7.199% 7.199%
100.04 ................................ 7.171% 7.171% 7.171% 7.171% 7.170%
100.08 ................................ 7.143% 7.143% 7.143% 7.142% 7.141%
100.12 ................................ 7.115% 7.115% 7.114% 7.114% 7.113%
100.16 ................................ 7.087% 7.086% 7.086% 7.086% 7.084%
100.20 ................................ 7.059% 7.058% 7.058% 7.057% 7.055%
100.24 ................................ 7.031% 7.030% 7.030% 7.029% 7.027%
100.28 ................................ 7.003% 7.002% 7.002% 7.001% 6.998%
101.00 ................................ 6.975% 6.974% 6.974% 6.973% 6.970%
Weighted Average Life (years) ......... 5.73 5.71 5.69 5.67 5.57
First Principal Payment Date .......... Nov-1999 Nov-1999 Nov-1999 Nov-1999 Nov-1999
Last Principal Payment Date ........... Dec-2007 Dec-2007 Nov-2007 Sep-2007 Jun-2007
</TABLE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST
PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-2 CERTIFICATES
AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
99.00 ................................ 7.683% 7.683% 7.683% 7.683% 7.684%
99.04 ................................ 7.663% 7.663% 7.663% 7.663% 7.665%
99.08 ................................ 7.644% 7.644% 7.644% 7.644% 7.645%
99.12 ................................ 7.624% 7.624% 7.624% 7.624% 7.625%
99.16 ................................ 7.604% 7.604% 7.605% 7.605% 7.605%
99.20 ................................ 7.585% 7.585% 7.585% 7.585% 7.585%
99.24 ................................ 7.565% 7.566% 7.566% 7.566% 7.566%
99.28 ................................ 7.546% 7.546% 7.546% 7.546% 7.546%
100.00 ................................ 7.527% 7.527% 7.527% 7.527% 7.526%
100.04 ................................ 7.507% 7.507% 7.507% 7.507% 7.507%
100.08 ................................ 7.488% 7.488% 7.488% 7.488% 7.487%
100.12 ................................ 7.469% 7.469% 7.469% 7.468% 7.468%
100.16 ................................ 7.449% 7.449% 7.449% 7.449% 7.448%
100.20 ................................ 7.430% 7.430% 7.430% 7.430% 7.429%
100.24 ................................ 7.411% 7.411% 7.411% 7.411% 7.409%
100.28 ................................ 7.392% 7.392% 7.392% 7.391% 7.390%
101.00 ................................ 7.373% 7.373% 7.372% 7.372% 7.371%
Weighted Average Life (years) ......... 9.20 9.19 9.18 9.16 9.04
First Principal Payment Date .......... Dec-2007 Dec-2007 Nov-2007 Sep-2007 Jun-2007
Last Principal Payment Date ........... Dec-2009 Dec-2009 Dec-2009 Nov-2009 Oct-2009
</TABLE>
S-110
<PAGE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-3 CERTIFICATES AT
THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
-------------------------------------------------------------------------------
0% CPR 25% CPR 50% CPR 75% CPR 100% PP
ASSUMED PRICE (32NDS) -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
99.00 ................................ 7.788% 7.788% 7.788% 7.788% 7.788%
99.04 ................................ 7.771% 7.771% 7.771% 7.771% 7.771%
99.08 ................................ 7.754% 7.754% 7.754% 7.754% 7.754%
99.12 ................................ 7.737% 7.737% 7.737% 7.737% 7.737%
99.16 ................................ 7.720% 7.720% 7.720% 7.720% 7.720%
99.20 ................................ 7.703% 7.703% 7.703% 7.703% 7.703%
99.24 ................................ 7.686% 7.686% 7.686% 7.686% 7.686%
99.28 ................................ 7.670% 7.670% 7.670% 7.670% 7.670%
100.00 ................................ 7.653% 7.653% 7.653% 7.653% 7.653%
100.04 ................................ 7.636% 7.636% 7.636% 7.636% 7.636%
100.08 ................................ 7.619% 7.619% 7.619% 7.619% 7.619%
100.12 ................................ 7.603% 7.603% 7.603% 7.603% 7.602%
100.16 ................................ 7.586% 7.586% 7.586% 7.586% 7.586%
100.20 ................................ 7.569% 7.569% 7.569% 7.569% 7.569%
100.24 ................................ 7.553% 7.553% 7.553% 7.553% 7.552%
100.28 ................................ 7.536% 7.536% 7.536% 7.536% 7.536%
101.00 ................................ 7.519% 7.519% 7.519% 7.519% 7.519%
Weighted Average Life (years) ......... 11.55 11.55 11.55 11.54 11.51
First Principal Payment Date .......... Dec-2009 Sep-2009 Dec-2009 Nov-2009 Oct-2009
Last Principal Payment Date ........... Oct-2012 Oct-2012 Oct-2012 Oct-2012 Oct-2012
</TABLE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST
PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
98.00 ................................ 8.164% 8.164% 8.164% 8.164% 8.165%
98.08 ................................ 8.132% 8.132% 8.132% 8.132% 8.133%
98.16 ................................ 8.100% 8.100% 8.100% 8.100% 8.101%
98.24 ................................ 8.068% 8.068% 8.068% 8.069% 8.069%
99.00 ................................ 8.037% 8.037% 8.037% 8.037% 8.037%
99.08 ................................ 8.005% 8.005% 8.005% 8.005% 8.006%
99.16 ................................ 7.974% 7.974% 7.974% 7.974% 7.974%
99.24 ................................ 7.943% 7.943% 7.943% 7.943% 7.943%
100.00 ................................ 7.912% 7.912% 7.912% 7.912% 7.912%
100.08 ................................ 7.881% 7.881% 7.881% 7.881% 7.880%
100.16 ................................ 7.850% 7.850% 7.850% 7.850% 7.849%
100.24 ................................ 7.819% 7.819% 7.819% 7.819% 7.818%
101.00 ................................ 7.788% 7.788% 7.788% 7.788% 7.787%
101.08 ................................ 7.758% 7.758% 7.757% 7.757% 7.757%
101.16 ................................ 7.727% 7.727% 7.727% 7.727% 7.726%
101.24 ................................ 7.697% 7.697% 7.697% 7.696% 7.695%
102.00 ................................ 7.667% 7.666% 7.666% 7.666% 7.665%
Weighted Average Life (years) ......... 13.41 13.40 13.38 13.36 13.26
First Principal Payment Date .......... Oct-2012 Oct-2012 Oct-2012 Oct-2012 Oct-2012
Last Principal Payment Date ........... Apr-2013 Apr-2013 Apr-2013 Apr-2013 Apr-2013
</TABLE>
S-111
<PAGE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
96.00 ................................ 8.419% 8.419% 8.419% 8.419% 8.419%
96.08 ................................ 8.387% 8.387% 8.387% 8.387% 8.387%
96.16 ................................ 8.354% 8.354% 8.354% 8.354% 8.354%
96.24 ................................ 8.322% 8.322% 8.322% 8.322% 8.322%
97.00 ................................ 8.290% 8.290% 8.290% 8.290% 8.290%
97.08 ................................ 8.258% 8.258% 8.258% 8.258% 8.258%
97.16 ................................ 8.226% 8.226% 8.226% 8.226% 8.226%
97.24 ................................ 8.194% 8.194% 8.194% 8.194% 8.194%
98.00 ................................ 8.162% 8.162% 8.162% 8.162% 8.162%
98.08 ................................ 8.130% 8.130% 8.130% 8.130% 8.130%
98.16 ................................ 8.099% 8.099% 8.099% 8.099% 8.099%
98.24 ................................ 8.067% 8.067% 8.067% 8.067% 8.067%
99.00 ................................ 8.036% 8.036% 8.036% 8.036% 8.036%
99.08 ................................ 8.005% 8.005% 8.005% 8.005% 8.005%
99.16 ................................ 7.974% 7.974% 7.974% 7.974% 7.974%
99.24 ................................ 7.943% 7.943% 7.943% 7.943% 7.943%
100.00 ................................ 7.912% 7.912% 7.912% 7.912% 7.912%
Weighted Average Life (years) ......... 13.58 13.58 13.58 13.58 13.58
First Principal Payment Date .......... Apr-2013 Apr-2013 Apr-2013 Apr-2013 Apr-2013
Last Principal Payment Date ........... Jul-2013 Jul-2013 Jul-2013 Jul-2013 Jul-2013
</TABLE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
94.16 ................................. 8.608% 8.608% 8.609% 8.610% 8.612%
94.24 ................................. 8.575% 8.575% 8.576% 8.577% 8.579%
95.00 ................................. 8.542% 8.543% 8.543% 8.544% 8.546%
95.08 ................................. 8.510% 8.510% 8.511% 8.511% 8.513%
95.16 ................................. 8.477% 8.477% 8.478% 8.479% 8.480%
95.24 ................................. 8.445% 8.445% 8.446% 8.446% 8.448%
96.00 ................................. 8.412% 8.413% 8.413% 8.414% 8.415%
96.08 ................................. 8.380% 8.381% 8.381% 8.382% 8.383%
96.16 ................................. 8.348% 8.349% 8.349% 8.350% 8.351%
96.24 ................................. 8.316% 8.317% 8.317% 8.318% 8.319%
97.00 ................................. 8.285% 8.285% 8.285% 8.286% 8.287%
97.08 ................................. 8.253% 8.253% 8.253% 8.254% 8.255%
97.16 ................................. 8.221% 8.222% 8.222% 8.222% 8.223%
97.24 ................................. 8.190% 8.190% 8.190% 8.191% 8.192%
98.00 ................................. 8.159% 8.159% 8.159% 8.159% 8.160%
98.08 ................................. 8.127% 8.128% 8.128% 8.128% 8.129%
98.16 ................................. 8.096% 8.096% 8.097% 8.097% 8.097%
Weighted Average Life (years) ......... 13.93 13.91 13.89 13.85 13.77
First Principal Payment Date .......... Jul-2013 Jul-2013 Jul-2013 Jul-2013 Jul-2013
Last Principal Payment Date ........... Dec-2013 Dec-2013 Dec-2013 Nov-2013 Aug-2013
</TABLE>
S-112
<PAGE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
85.00 ................................. 9.754% 9.755% 9.755% 9.755% 9.761%
85.12 ................................. 9.698% 9.698% 9.699% 9.699% 9.705%
85.24 ................................. 9.642% 9.643% 9.643% 9.643% 9.649%
86.04 ................................. 9.587% 9.587% 9.587% 9.587% 9.593%
86.16 ................................. 9.532% 9.532% 9.532% 9.532% 9.538%
86.28 ................................. 9.477% 9.477% 9.477% 9.477% 9.483%
87.08 ................................. 9.422% 9.422% 9.423% 9.423% 9.428%
87.20 ................................. 9.368% 9.368% 9.368% 9.369% 9.374%
88.00 ................................. 9.314% 9.314% 9.315% 9.315% 9.320%
88.12 ................................. 9.261% 9.261% 9.261% 9.261% 9.266%
88.24 ................................. 9.208% 9.208% 9.208% 9.208% 9.213%
89.04 ................................. 9.155% 9.155% 9.155% 9.155% 9.160%
89.16 ................................. 9.102% 9.102% 9.102% 9.103% 9.107%
89.28 ................................. 9.050% 9.050% 9.050% 9.050% 9.055%
90.08 ................................. 8.998% 8.998% 8.998% 8.998% 9.002%
90.20 ................................. 8.946% 8.947% 8.947% 8.947% 8.951%
91.00 ................................. 8.895% 8.895% 8.895% 8.895% 8.899%
Weighted Average Life (years) ......... 14.14 14.14 14.14 14.13 14.05
First Principal Payment Date .......... Dec-2013 Dec-2013 Dec-2013 Nov-2013 Aug-2013
Last Principal Payment Date ........... Jan-2014 Jan-2014 Dec-2013 Dec-2013 Dec-2013
</TABLE>
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE,
FIRST PRINCIPAL PAYMENT DATE,
LAST PRINCIPAL PAYMENT DATE FOR THE CLASS F CERTIFICATES AT THE SPECIFIED CPRS
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT--OTHERWISE AT INDICATED CPR OR 100% PP
--------------------------------------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% PP
- --------------------------------------- -------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
80.00 ................................. 10.532% 10.532% 10.533% 10.535% 10.541%
80.12 ................................. 10.471% 10.471% 10.472% 10.474% 10.480%
80.24 ................................. 10.410% 10.410% 10.411% 10.413% 10.418%
81.04 ................................. 10.350% 10.350% 10.351% 10.352% 10.358%
81.16 ................................. 10.290% 10.290% 10.291% 10.292% 10.298%
81.28 ................................. 10.230% 10.230% 10.231% 10.232% 10.238%
82.08 ................................. 10.171% 10.171% 10.172% 10.173% 10.179%
82.20 ................................. 10.112% 10.112% 10.113% 10.114% 10.120%
83.00 ................................. 10.054% 10.054% 10.055% 10.056% 10.061%
83.12 ................................. 9.996% 9.996% 9.996% 9.998% 10.003%
83.24 ................................. 9.938% 9.938% 9.939% 9.940% 9.945%
84.04 ................................. 9.881% 9.881% 9.881% 9.883% 9.887%
84.16 ................................. 9.824% 9.824% 9.825% 9.826% 9.830%
84.28 ................................. 9.767% 9.767% 9.768% 9.769% 9.774%
85.08 ................................. 9.711% 9.711% 9.712% 9.713% 9.717%
85.20 ................................. 9.655% 9.655% 9.656% 9.657% 9.661%
86.00 ................................. 9.600% 9.600% 9.600% 9.601% 9.606%
Weighted Average Life (years) ......... 14.22 14.22 14.21 14.20 14.14
First Principal Payment Date .......... Jan-2014 Jan-2014 Dec-2013 Dec-2013 Dec-2013
Last Principal Payment Date ........... Jan-2014 Jan-2014 Jan-2014 Jan-2014 Dec-2013
</TABLE>
S-113
<PAGE>
THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers will be Nomura Holding America Inc. ("NHA"), a
Delaware corporation, and The Capital Company of America LLC ("CCA"), a
Delaware limited liability company. CCA is the parent of the Depositor, an
indirect wholly-owned subsidiary of NHA and an affiliate of NSI.
Affiliates of CCA have been involved in a total of 27 offerings of
commercial mortgage-backed securities from June 1993 through March 1999
totaling over $17 billion in initial principal amount. The mortgage loans
included in these offerings were predominantly originated directly by NACC/CCA.
As described under "The Pooling and Servicing Agreement--Representations
and Warranties; Repurchase," NHA will be required to repurchase any Mortgage
Loan as to which there is a breach of one of its representations or warranties
or which CCA is required to repurchase but fails to repurchase in connection
with a breach of one of CCA's representations and warranties. There can be no
assurance that any party required to repurchase Mortgage Loans in connection
with breaches of representations and warranties will be able to do so.
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of October 11, 1999 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the Special Servicer,
the Trustee and the Fiscal Agent.
Reference is made to the Prospectus for important information in addition
to that set forth in this Prospectus Supplement regarding the terms of the
Pooling and Servicing Agreement and terms and conditions of the Offered
Certificates. The Depositor will provide to a prospective or actual holder of
an Offered Certificate without charge, upon written request, a copy (without
exhibits) of the Pooling and Servicing Agreement. Requests should be addressed
to Asset Securitization Corporation, 2 World Financial Center, Building B, New
York, New York 10281-1198. A copy of the Pooling and Servicing Agreement will
be filed under Form 8-K ("Form 8-K") with the Securities and Exchange
Commission ("SEC") within 15 days after the initial issuance of the Offered
Certificates. In the event Mortgage Loans are removed from the Mortgage Pool
prior to the Closing Date, such information will be contained in the Form 8-K.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise
convey, assign or cause the assignment of the Mortgage Loans, without recourse,
to the Trustee for the benefit of the holders of Certificates. On or prior to
the Closing Date, the Depositor will deliver (or, with respect to items (ii)
through (xviii) below, use its best efforts, promptly upon receipt thereof and
in any case not later than 45 days from the Closing Date to deliver) to the
Trustee (with a copy to the Servicer and the Special Servicer), with respect to
each Mortgage Loan, certain documents and instruments including, among other
things, the following:
(i) the original Note endorsed in blank;
(ii) the original Mortgage or counterpart thereof;
(iii) the assignment of the Mortgage in recordable form in favor of
the Trustee;
(iv) if applicable, preceding assignments of mortgages;
(v) the related security agreement, if applicable;
(vi) to the extent not contained in the Mortgages, the original
assignments of leases and rents or counterparts thereof;
(vii) if applicable, the original assignments of assignments of leases
and rents to the Trustee;
(viii) if applicable, preceding assignments of assignments of leases
and rents;
(ix) where applicable, a certified copy of the UCC-1 Financing
Statements, if any, including UCC-3 continuation statements and
UCC-3 assignments;
S-114
<PAGE>
(x) the original loan agreements;
(xi) the original lender's title insurance policy (or marked
commitments to insure);
(xii) with respect to the Credit Tenant Loans, the original of any RVI
Policy, the related Credit Tenant Lease and tenant estoppels, and
any guaranty of the Credit Tenant Lease;
(xiii) with respect to each Total Credit Tenant Loan, the related
co-lender agreement;
(xiv) copies of the original engineering reports and environmental
reports of the Mortgaged Properties made in connection with
origination of the Mortgage Loan;
(xv) a copy of the related ground lease, as amended, for the
Mortgaged Property, if any;
(xvi) copies of the original management agreements, if any;
(xvii) any lockbox agreements; and
(xviii) any other written agreements related to the Mortgage Loan.
The Trustee will hold such documents in trust for the benefit of the
holders of Certificates. The Trustee is obligated to review such documents for
each Mortgage Loan within 60 days after the later of delivery or the Closing
Date and report any missing documents or certain types of defects therein to
the Depositor.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign the
Mortgage Loans together with the representations and warranties made by the
Mortgage Loan Sellers to the Depositor in the Mortgage Loan Purchase and Sale
Agreements to the Trustee for the benefit of Certificateholders. In the related
Mortgage Loan Purchase and Sale Agreement, each Mortgage Loan Seller will make
certain representations and warranties (subject to certain exceptions specified
in the related Mortgage Loan Purchase and Sale Agreement, certain of which are
described under "Risk Factors and Other Special Considerations--Risks
Associated with Ground Leases" herein) as of the Closing Date (unless otherwise
specified) with respect to each Mortgage Loan. Such representations and
warranties will include those listed below. NHA, the indirect parent of CCA,
will be required to purchase any Mortgage Loans that CCA is required to
repurchase but fails to repurchase in connection with a breach of
representations and warranties.
(i) Immediately prior to the sale, transfer and assignment to the
Depositor, each related Note and Mortgage was not subject to an assignment,
other than to the Mortgage Loan Seller, or pledge, and the Mortgage Loan Seller
had good and marketable title to, and was the sole owner of, the Mortgage Loan;
(ii) The Mortgage Loan Seller has full right and authority to sell, assign
and transfer such Mortgage Loan and the assignment to the Depositor constitutes
a legal, valid and binding assignment of such Mortgage Loan;
(iii) The Mortgage Loan Seller is transferring such Mortgage Loan free and
clear of any and all liens, pledges, charges or security interests of any
nature encumbering such Mortgage Loan (subject to certain specified matters);
(iv) Each related Note, Mortgage, Assignment of Leases and Rents (if any)
and other material agreement executed in connection with such Mortgage Loan
was, at the time of such execution, legal, valid and binding obligations of the
related borrower, enforceable in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and, to the
best of the Mortgage Loan Seller's knowledge, there is no valid defense,
counterclaim, right of rescission or right of set-off or abatement available to
the related borrower with respect to such Note, Mortgage and other material
agreements;
(v) Each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor, and any related Reassignment of Assignment of Leases and Rents,
if any, or assignment of any other agreement executed in connection with such
Mortgage Loan, from the Mortgage Loan Seller to the Depositor constitutes the
legal, valid and binding assignment from the Mortgage Loan Seller to the
Depositor except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other laws relating to
or affecting creditor's rights generally, or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
S-115
<PAGE>
(vi) Each related Mortgage is a valid and enforceable first priority lien
on the related Mortgaged Property and such Mortgaged Property (subject to
certain specified matters) is free and clear of any mechanics' and
materialmen's liens which are prior to or equal with the lien of the related
Mortgage, except those which are insured against by a lender's title insurance
policy (as set forth in the Mortgage Loan Purchase and Sale Agreement);
(vii) The lien of each related Mortgage is insured by an American Land
Title Association lender's title insurance policy (or a binding commitment
therefor), or its equivalent as adopted in the applicable jurisdiction,
insuring the Originator, its successors and assigns, or the holder of the
related Note as to the valid and first priority lien of the Mortgage at least
in the original principal amount of such Mortgage Loan or Allocated Loan Amount
of the related Mortgaged Property (as set forth on the Mortgage Loan Schedule
which is an exhibit to the Pooling and Servicing Agreement), subject only to
(a) the lien of current real property taxes, ground rents, water charges, sewer
rents and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record, none
of which, individually or in the aggregate, materially interferes with the
current use or operation of the Mortgaged Property or the security intended to
be provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or the value of the Mortgaged Property and (c)
the exceptions (general and specific) set forth in such lender's title
insurance policy, none of which, individually or in the aggregate, materially
interferes with the security intended to be provided by such Mortgage or with
the borrower's ability to pay its obligations when they become due or the value
of the Mortgaged Property; the Originator or its successors or assigns is the
sole named insured of such policy; such policy is assignable to the Depositor
without the consent of or any notification to the insurer, and is in full force
and effect upon the consummation of the transactions contemplated by the
Mortgage Loan Purchase and Sale Agreements; no claims have been made under such
policy and the Mortgage Loan Seller has not done anything, by act or omission,
and the Mortgage Loan Seller has no knowledge of any matter, which would impair
or diminish the coverage of such policy; to the extent required by applicable
law the insurer issuing such policy is qualified to do business in the
jurisdiction in which the related Mortgaged Properties are located;
(viii) The proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(ix) Each related Mortgaged Property is free of any material damage that
would affect materially and adversely the value of such Mortgaged Property as
security for the Mortgage Loan, is in good repair and there is no proceeding
pending for the total or partial condemnation of such Mortgaged Property;
(x) All taxes and governmental assessments that prior to the Closing Date
became due and owing in respect of each related Mortgaged Property have been
paid, or an escrow of funds in an amount sufficient to cover such payments has
been established;
(xi) All escrow deposits and payments required pursuant to the Mortgage
Loans are in the possession, or under the control, of the Mortgage Loan Seller
or its agent and there are no deficiencies in connection therewith and all such
escrows and deposits have been conveyed by the Mortgage Loan Seller to the
Depositor for deposit with the Servicer and identified as such with appropriate
detail;
(xii) There is no default, breach, violation or event of acceleration
existing under the related Mortgage or the related Note and, to the Mortgage
Loan Seller's knowledge, no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would and does
constitute a default, breach, violation or event of acceleration;
(xiii) Such Mortgage Loan has not been 30 days or more delinquent on the
payment of principal or interest since origination and as of the Cut-Off Date
was not delinquent;
(xiv) The mortgage loan schedule which is an exhibit to the Pooling and
Servicing Agreement is complete and accurate in all material respects;
(xv) Each Mortgaged Property is in compliance, in all material respects,
with all applicable laws, zoning ordinances, rules, covenants and restrictions
affecting the construction, occupancy, use and operation of such Mortgaged
Property; provided that several Mortgaged Properties constitute a legal
nonconforming use or structure. All inspections, licenses and certificates
required, including (with some exceptions) certificates of occupancy (if
applicable), whether by law, ordinance, regulation or insurance standards to be
made or issued with regard to the Mortgaged Property, have been obtained, and
are in full force and effect;
S-116
<PAGE>
(xvi) Except for documents which have been submitted for recording but
have not been returned by the applicable recording office and with respect to
Mortgage Loans for which title policies have not yet been issued, each Mortgage
File that is being conveyed to the Trustee is materially complete; and
(xvii) Each Mortgaged Property (a) is located on or adjacent to a
dedicated road, or has access to an irrevocable easement permitting ingress and
egress, (b) is served by public utilities, water and sewer (or septic
facilities), (c) is a separate tax parcel (or has reserved funds sufficient to
cover taxes for the entire tax parcel), and (d) except with respect to certain
of the ACCOR-M-Six-III Credit Tenant Properties and certain other Mortgaged
Properties, has parking as required under applicable law.
The Pooling and Servicing Agreement requires that the Servicer, the
Special Servicer or the Trustee notify the Mortgage Loan Sellers and the
Depositor upon its becoming aware of (a) any breach of any representation or
warranty contained in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (xi) or (xiii), and (b) any breach of any representation or warranty
contained in clauses (x), (xii), (xiv), (xv), (xvi) and (xvii) that materially
and adversely affects the value of such Mortgage Loan or the interests of the
holders of the Certificates therein. The Mortgage Loan Purchase and Sale
Agreements provide that, with respect to any such Mortgage Loan, within 90 days
after notice from the Servicer, the Special Servicer or the Trustee, the
Mortgage Loan Seller shall either (a) repurchase such Mortgage Loan at the
"Repurchase Price," which is an amount equal to (i) the outstanding principal
balance of the Mortgage Loan as of the Due Date as to which a payment was last
made by the borrower (less any outstanding P&I Advances previously made on
account of principal), (ii) accrued interest up to the Due Date in the month
following the month in which such repurchase occurs (less any outstanding P&I
Advances previously made on account of interest), (iii) the amount of any
unreimbursed Advances (with interest thereon) and any unreimbursed servicing
compensation relating to such Mortgage Loan, (iv) any expenses reasonably
incurred or to be incurred by the Servicer, the Special Servicer or the Trustee
in respect of the breach or defect giving rise to the repurchase obligation,
including any expenses arising out of the enforcement of the repurchase
obligation and (v) with respect to each Mortgage Loan that is a Premium Loan,
any unearned premium or other amount that would have been due by the related
borrower if such Premium Loan were prepaid or (b) promptly cure such breach in
all material respects, provided, however, that in the event that such breach is
capable of being cured, as determined by the Servicer, but not within such
90-day period and the Mortgage Loan Seller has commenced and is diligently
proceeding with the cure of such breach, the Mortgage Loan Seller will have an
additional 90 days to complete such cure; provided, further, that with respect
to such additional 90-day period the Mortgage Loan Seller shall have delivered
an officer's certificate to the Trustee, the Servicer and the Special Servicer
setting forth the reason such breach is not capable of being cured within the
initial 90-day period and what actions the Mortgage Loan Seller is pursuing in
connection with the cure thereof and stating that the Mortgage Loan Seller
anticipates that such breach will be cured within the additional 90-day period;
and, provided, further, that in the event the Mortgage Loan Seller fails to
cure such breach within such additional 90-day period, the Repurchase Price
shall include interest on any Advances made in respect of the related Mortgage
Loan during such period. NHA will be required to purchase any Mortgage Loan
that CCA is required, but fails, to repurchase in connection with any breach of
representations and warranties.
Notwithstanding the foregoing, upon discovery by the Trustee, any
custodian for the Trustee, the Servicer or Special Servicer of a breach of a
representation or warranty that causes any Mortgage Loan not to be a "qualified
mortgage" within the meaning of the REMIC provisions of the Code, such person
shall give prompt notice thereof to the Depositor and within 90 days after such
discovery, if such breach cannot be cured within such period, the Depositor
shall purchase, or cause the related Mortgage Loan Seller to purchase, such
Mortgage Loan from the Trust Fund at the Repurchase Price.
The obligations of a Mortgage Loan Seller to repurchase or cure constitute
the sole remedies available to holders of Certificates or the Trustee for a
breach of a representation or warranty by such Mortgage Loan Seller with
respect to a Mortgage Loan (other than NHA's agreement to repurchase any
Mortgage Loan required to be repurchased by CCA upon the failure of CCA to
repurchase such Mortgage Loan). However, with respect to the Mortgage Loan
acquired by the Mortgage Loan Seller from Bloomfield, the Mortgage Loan Seller,
in addition to making representations with respect to such Mortgage Loan, will
also assign to the Depositor, and the Depositor will further assign to the
Trustee, the Mortgage Loan Seller's rights and remedies against Bloomfield in
respect of the representations and warranties made by Bloomfield in its
purchase and sale agreement with the Mortgage Loan Seller (the "Bloomfield
Purchase Agreement"), except that the Trustee will be required to reassign such
rights and remedies to the Mortgage Loan Seller if such Mortgage Loan is
repurchased by the Mortgage Loan Seller. None of the Depositor (except as
described in the previous paragraph), the Servicer, the Special Servicer, the
Trustee or the Fiscal Agent will be obligated to purchase a Mortgage
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Loan if the Mortgage Loan Seller defaults on its obligation to repurchase or
cure, and no assurance can be given that the Mortgage Loan Seller will fulfill
such obligations. No assurance can be given that the Mortgage Loan Seller will
perform any obligation to cure or repurchase a Mortgage Loan for a breach of
any representation referred to in the second preceding paragraph. If such
obligation is not met, as to a Mortgage Loan that is not a "qualified
mortgage," the Upper-Tier REMIC and Lower-Tier REMIC may be disqualified.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
In general, the "Servicing Standard" set forth in the Pooling and
Servicing Agreement requires the Servicer and Special Servicer to service and
administer the Mortgage Loans, on behalf of the Trust Fund, solely in the best
interests of and for the benefit of all of the Certificateholders and, in the
case of each CMAT Pari Passu Note, in the best interests of and for the benefit
of the holder of the Other Note or Other Notes (as determined by the Servicer
or Special Servicer in the exercise of its reasonable judgment) in accordance
with applicable law, the terms of the Pooling and Servicing Agreement, the
Mortgage Loans and, in the case of each CMAT Pari Passu Note, the related
co-lender agreement, and to the extent not inconsistent with the foregoing, in
the same manner in which, and with the same care, skill, prudence and diligence
with which, it (a) services and administers similar mortgage loans comparable
to the Mortgage Loans and held for other similar third party portfolios giving
due consideration to customary and usual standards and practices of prudent
institutional commercial mortgage lenders servicing their own loans and to the
maximization of the recovery on such Mortgage Loans on a net present value
basis or (b) administers mortgage loans for its own account, whichever standard
is higher, but without regard to (i) any known relationship that the Servicer
or Special Servicer, or an affiliate of the Servicer or Special Servicer, may
have with the borrowers or any other party to the Pooling and Servicing
Agreement, including, but not limited to, any lending relationship; (ii) the
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate of the Servicer or Special Servicer, as applicable; (iii) the
Servicer's obligation to make Advances or to incur servicing expenses with
respect to the Mortgage Loans; (iv) the Servicer's or Special Servicer's right
to receive compensation for its services under the Pooling and Servicing
Agreement or with respect to any particular transaction; or (v) the ownership,
or servicing or management for others, by the Servicer or Special Servicer of
any other loans or property (other than Other Pari Passu Notes).
The Servicer and the Special Servicer are permitted to employ subservicers
(only at their own expense and, except for S&P, with respect to the Special
Servicer, subject to written confirmation from the Rating Agencies that the
appointment of such subservicer will not result in a qualification, withdrawal
or downgrade of the then-current ratings of the Certificates), agents or
attorneys in performing any of their respective obligations under the Pooling
and Servicing Agreement, but will not thereby be relieved of any such
obligation, and will be responsible for the acts and omissions of any such
subservicers, agents or attorneys. The Special Servicer is restricted under the
Pooling and Servicing Agreement from engaging subservicers for more than 25% of
the Mortgage Loans. The Pooling and Servicing Agreement provides, however, that
neither the Servicer, the Special Servicer nor any of their respective
directors, officers, employees or agents shall have any liability to the Trust
Fund or the Certificateholders for taking any action or refraining from taking
an action in good faith, or for errors in judgment. The foregoing provision
would not protect the Servicer or the Special Servicer for the breach of its
representations or warranties in the Pooling and Servicing Agreement or any
liability by reason of willful misconduct, bad faith, fraud or negligence in
the performance of its duties or by reason of its reckless disregard of
obligations or duties under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts consistent with the
Servicing Standard to collect all payments called for under the terms and
provisions of the Mortgage Loans. Consistent with the above, the Servicer or
Special Servicer may, in its discretion, waive any late payment charge or
Default Interest in connection with any delinquent Monthly Payment or Balloon
Payment with respect to any Mortgage Loan. Notwithstanding the foregoing, with
respect to the ARD Loans, the Servicer and Special Servicer will be directed in
the Pooling and Servicing Agreement not to take any enforcement action with
respect to payment of Excess Interest or principal in excess of the principal
component of the constant Monthly Payment prior to the final Maturity Date. The
Pooling and Servicing Agreement provides that if a Mortgage Loan provides that
the lender may in its discretion apply certain amounts to a prepayment of
principal (e.g., by applying casualty or condemnation proceeds or funds
escrowed improvements not completed by the required date) prior to the
expiration of the related Lock-out Period, the Servicer cannot apply such funds
to such a prepayment unless the Servicer has first consulted with the Special
Servicer (if the Special Servicer is not the Servicer), provided that the
Servicer is not obligated to follow the Special Servicer's advice after such
consultation. See "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans--Prepayment Provisions" in this Prospectus
Supplement. With respect to any Specially Serviced
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Mortgage Loan, subject to the restrictions set forth below under "Realization
upon Mortgage Loans," the Special Servicer will be entitled to pursue any of
the remedies set forth in the related Mortgage, including the right to acquire,
through foreclosure, all or any of the Mortgaged Properties securing such
Mortgage Loan. The Special Servicer may elect to extend a Mortgage Loan
(subject to conditions described in this Prospectus Supplement) notwithstanding
its decision to foreclose on certain of the Mortgaged Properties.
The Pooling and Servicing Agreement provides that with respect to all
Mortgage Loans that provide that the holder of the related Note may apply
amounts received thereunder (including, without limitation, liquidation
proceeds) against principal, interest and any other sums due in the order as
the holder shall determine, the Servicer shall apply amounts received in
respect of such Mortgage Loans (after using such amounts to reimburse the
Servicer, the Trustee or the Fiscal Agent for any Advances and interest thereon
(to the extent not offset by Default Interest) that are made with respect to
such Mortgage Loan): (i) first to interest (other than Excess Interest or
Default Interest) due thereunder; (ii) next to principal; (iii) next to Default
Interest due thereunder, which is payable to the Servicer; (iv) next to
Prepayment Premiums (excluding Return of Premium Amounts) due thereunder; (v)
then to any Excess Interest due thereunder; (vi) then to reimburse any
litigation or other expenses incurred in collecting any such amounts received
in respect of such Mortgage Loan and that were not otherwise reimbursed as an
Advance, as described above; (vii) then to any Return of Premium Amounts due
thereunder; and (viii) finally to any other sums due thereunder.
ADVANCES
The Servicer will be obligated to advance, on the Business Day immediately
preceding a Distribution Date (the "Servicer Remittance Date") an amount (each
such amount, a "P&I Advance") equal to the amount not received in respect of
the Monthly Payment on a Mortgage Loan (with interest at the Mortgage
Pass-Through Rate) (or, with respect to any Total Credit Tenant Loan, only that
portion payable with respect to the CMAT Pari Passu Note) that was delinquent
as of the close of business on the immediately preceding Due Date (and which
delinquent payment has not been cured as of the Servicer Remittance Date), or,
in the event of a default in the payment of amounts due on the Maturity Date of
a Mortgage Loan, the amount equal to the Monthly Payment (or, with respect to
any Total Credit Tenant Loan, only that portion payable with respect to the
CMAT Pari Passu Note) or portion thereof not received that was due prior to the
Maturity Date (with interest at the Mortgage Pass-Through Rate); provided,
however, the Servicer will not be required to make an Advance to the extent it
determines that such advance would not be ultimately recoverable from late
payments, net insurance proceeds, net liquidation proceeds and other
collections with respect to the related Mortgage Loan. P&I Advances are
intended to maintain a regular flow of scheduled interest and principal
payments to holders of the Certificates entitled thereto, rather than to
guarantee or insure against losses. The Servicer will not be required or
permitted to make a P&I Advance for Balloon Payments, Excess Interest or
Default Interest. The amount required to be advanced in respect of a Mortgage
Loan that is delinquent in respect of its Balloon Payment is the Assumed
Scheduled Payment (as defined herein under "Description of the Offered
Certificates--Distributions") of such Mortgage Loan. The amount required to be
advanced in respect of delinquent Monthly Payments on a Mortgage Loan that has
been subject to an Appraisal Reduction Event will equal the product of (a) the
amount that would be required to be advanced by the Servicer without giving
effect to such Appraisal Reduction Event and (b) a fraction, the numerator of
which is the Stated Principal Balance of the Mortgage Loan (as of the last day
of the related Collection Period) less any Appraisal Reduction Amount in
respect thereof and the denominator of which is the related Stated Principal
Balance (as of the last day of the related Collection Period).
In addition to P&I Advances, the Servicer will also be obligated (subject
to the limitations described in the Pooling and Servicing Agreement, including
a determination of recoverability) to make cash advances ("Property Advances,"
and together with P&I Advances, "Advances") to pay delinquent real estate
taxes, assessments and hazard insurance premiums and to cover other similar
costs and expenses necessary to preserve the priority of the related Mortgage,
enforce the terms of any Mortgage Loan or to maintain such Mortgaged Property.
The Servicer will be required to make all Property Advances with respect to
Total Credit Tenant Loans and will be entitled to immediate reimbursement from
the servicer of the D7 Securitization for its allocable pro rata share of such
Property Advance. If such allocable pro rata share is not immediately
reimbursed by the servicer of the D7 Securitization, such amount can be netted
from amounts collected on the Total Credit Tenant Loan and otherwise payable to
the holder of the Other Pari Passu Note. See "Description of the Mortgage
Pool--Credit Tenant Loans" in this Prospectus Supplement.
To the extent the Servicer fails to make an Advance it is required to make
under the Pooling and Servicing Agreement, the Trustee, subject to a
determination of recoverability, will make such required Advance or, in the
event the
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Trustee fails to make such Advance, the Fiscal Agent, subject to a
determination of recoverability, will make such Advance, in each case pursuant
to the terms of the Pooling and Servicing Agreement. Both the Trustee and the
Fiscal Agent will be entitled to rely conclusively on any non-recoverability
determination of the Servicer. See "The Trustee" and "The Fiscal Agent" below.
The Servicer, the Trustee or the Fiscal Agent, as applicable, will be
entitled to reimbursement for any Advance made by it in an amount equal to the
amount of such Advance and any unreimbursed interest accrued thereon (and
interest accrued on Servicing Fees, Trustee Fees, Special Servicing Fees,
Liquidation Fees and Work Out Fees for which the Servicer, Trustee or Special
Servicer, as applicable, has not been timely paid) at the Advance Rate (i) from
late payments and default interest on the Mortgage Loan by the Mortgagor, (ii)
from insurance proceeds, condemnation proceeds, liquidation proceeds from the
sale of the Specially Serviced Mortgage Loan or the related Mortgaged Property
or other collections relating to the Mortgage Loan or (iii) upon determining in
good faith that such Advance is not or will not be recoverable in the manner
described in the preceding two clauses, from any other amounts from time to
time on deposit in the Collection Account. In connection with any Total Credit
Tenant Loan, if the portion of a Property Advance related to the Other Pari
Passu Note is deemed non-recoverable, then the Servicer, the Trustee or the
Fiscal Agent, as applicable, may reimburse itself from any amounts on deposit
from time to time in the Collection Account.
The Servicer, the Trustee and the Fiscal Agent will each be entitled to
receive interest on Advances at a per annum rate equal to the Prime Rate (as
defined in this Prospectus Supplement) (the "Advance Rate"), compounded
monthly, as of each Servicer Remittance Date accrued on the amount of such
Advance from the date made to but not including the date of reimbursement and
the Servicer will be authorized to pay itself, the Trustee or the Fiscal Agent,
as applicable, such interest monthly from general collections with respect to
all of the Mortgage Loans prior to any payment to holders of Certificates. If
the interest on such Advance is not recovered from Default Interest on such
Mortgage Loan, a shortfall will result which will have the same effect as a
Realized Loss. The "Prime Rate" is the rate, for any day, set forth as such in
the "Money Rates" section of The Wall Street Journal, Eastern Edition.
The obligation of the Servicer, the Trustee or the Fiscal Agent, as
applicable, to make Advances with respect to any Mortgage Loan pursuant to the
Pooling and Servicing Agreement continues through the foreclosure of such
Mortgage Loan and until the liquidation of the Mortgage Loan or related
Mortgaged Properties. P&I Advances are intended to provide a limited amount of
liquidity, not to guarantee or insure against losses. None of the Servicer, the
Trustee or the Fiscal Agent will be required to make any Advance that it
determines in its good faith business judgment will not be recoverable by the
Servicer, the Trustee or the Fiscal Agent, as applicable, out of related late
payments, insurance proceeds, liquidation proceeds and other collections with
respect to the Mortgage Loan as to which such Advances were made. In addition,
if the Servicer, the Trustee or the Fiscal Agent, as applicable, determines in
its good faith business judgment that any Advance previously made will not be
recoverable from the foregoing sources, then the Servicer, the Trustee or the
Fiscal Agent, as applicable, will be entitled to reimburse itself for such
Advance, plus interest thereon, out of amounts payable on or in respect of all
of the Mortgage Loans prior to distributions on the Certificates. Any such
judgment or determination with respect to the recoverability of Advances must
be evidenced by an officers' certificate delivered to the Trustee, Fiscal Agent
and Depositor in the case of the Servicer, the Depositor, in the case of the
Trustee or the Fiscal Agent, and the Trustee in the case of the Fiscal Agent,
setting forth such judgment or determination of nonrecoverability and the
considerations of the Servicer, the Trustee or the Fiscal Agent, as applicable,
forming the basis of such determination (including but not limited to
information selected by the person making such determination in its good faith
discretion such as related income and expense statements, rent rolls, occupancy
status, property inspections, inquiries by the Servicer, the Trustee or the
Fiscal Agent, as applicable, and an independent appraisal performed by an
independent MAI appraiser selected by the Servicer, and conducted within the
past twelve months on the applicable Mortgaged Property). Any request by the
Special Servicer that the Servicer (or Trustee or the Fiscal Agent, as
applicable) make an Advance will be considered a determination by the Special
Servicer that such requested Advance is not nonrecoverable, and the Servicer
(or the Trustee or the Fiscal Agent, as applicable) will be entitled to
conclusively rely on such determination.
ACCOUNTS
Lockbox Accounts. Under Mortgage Loans representing 72.8% of the Initial
Pool Balance, one or more accounts in the name of the related borrower (the
"Lockbox Accounts") have been established into which rents or other revenues
from the related Mortgaged Properties are deposited by the related tenants.
Under other Mortgage Loans, which represent in the aggregate 7.5% of the
Initial Pool Balance, the borrower or the related property manager is required
to
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deposit rents and other revenues in the related Lockbox Account. Agreements
governing the Lockbox Accounts provide that the borrower has no withdrawal or
transfer rights with respect thereto and that all funds on deposit in the
Lockbox Accounts are periodically swept into the Cash Collateral Accounts (as
defined below). Certain of the Mortgage Loans provide that amounts deposited
into the Lockbox Account are remitted to the borrower on a daily basis until
certain trigger events have occurred. Such trigger events include, generally,
among other things, an event of default under the related Mortgage Loan or the
failure of a specified percentage of rents to be remitted to the Lockbox
Account by the tenants of the related Mortgaged Property. The operation of such
trigger events may result in amounts being remitted to borrowers during a
Collection Period preceding the occurrence or discovery of a trigger event to
which such borrowers are not entitled. Additionally, all of the Mortgage Loans
that have Anticipated Repayment Dates require that a Lockbox Account be
established prior to their respective Anticipated Repayment Dates. The Lockbox
Accounts will not be an asset of the Trust REMICs.
Cash Collateral Accounts. With respect to certain of the Mortgage Loans
that have a Lockbox Account, one or more accounts in the name of the Servicer
on behalf of the Trust Fund (the "Cash Collateral Accounts") have been
established into which funds in the related Lockbox Accounts will be swept on a
regular basis; with respect to certain other of the Mortgage Loans that have a
Lockbox Account, such Lockbox Account will be swept into one or more of the
Cash Collateral Accounts only in the event of a default by the related
borrower. The Reserve Accounts generally will be sub-accounts of the Cash
Collateral Accounts. Any excess over the amount necessary to fund the Monthly
Payment, the Reserve Accounts and any other amounts due under the Mortgage
Loans will be returned to or retained by the related borrower provided no event
of default of which the Servicer is aware of has occurred and is continuing
with respect to such Mortgage Loan. However, as described under "Description of
the Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Excess
Interest," after the respective Anticipated Repayment Date, if applicable, all
amounts in the related Cash Collateral Account in excess of the amount
necessary to fund the Monthly Payment and Reserve Accounts will be applied to
(i) operating and capital expenses, (ii) the reduction of the principal balance
of the related Mortgage Loan until such principal is paid in full and (iii)
Excess Interest, in that order. The Cash Collateral Accounts will not be an
asset of the Trust REMICs or the Servicer.
Collection Account. The Servicer will establish and maintain a segregated
account (the "Collection Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Collection Account for application towards the Monthly
Payment (including Administrative Fees) due on the related Mortgage Loan. The
Servicer shall also deposit into the Collection Account within one Business Day
of receipt all other payments in respect of the Mortgage Loans, other than
amounts to be deposited into any Reserve Account.
Distribution Accounts. The Trustee will establish and maintain one or more
segregated accounts (the "Distribution Account") in the name of the Trustee for
the benefit of the holders of Certificates. With respect to each Distribution
Date, the Servicer will deposit in the Distribution Account, to the extent of
funds on deposit in the Collection Account, on the Servicer Remittance Date an
aggregate amount of immediately available funds equal to the sum of Available
Funds, Prepayment Premiums and the Trustee Fee. The Servicer will deposit all
P&I Advances into the Distribution Account on the related Servicer Remittance
Date. To the extent the Servicer fails to do so, the Trustee or the Fiscal
Agent will deposit all P&I Advances into the Distribution Account as described
in this Prospectus Supplement. See "Description of the Offered
Certificates--Distributions" in this Prospectus Supplement.
Interest Reserve Account. The Trustee will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in its name for the
benefit of the holders of the Certificates. On each Servicer Remittance Date
occurring in February and on any Servicer Remittance Date occurring in any
January which occurs in a year that is not a leap year, the Servicer will be
required to withdraw from the Collection Account and deposit into the Interest
Reserve Account with respect to each Actual/360 Loan an amount equal to one
day's interest accrued at a per annum rate equal to 31/30 of the Mortgage Rate
(minus the Administrative Fee) on the Stated Principal Balance, as of the last
day of the immediately preceding Interest Accrual Period, of the Mortgage Loan,
to the extent a Monthly Payment or P&I Advance is made in respect thereof (all
amounts so deposited in any consecutive January (if applicable) and February
with respect to any Actual/360 Loan, "Interest Reserve Amounts"). On each
Servicer Remittance Date occurring in March, the Servicer will be required to
withdraw from the Interest Reserve Account an amount equal to the Interest
Reserve Amounts from the preceding January (if applicable) and February, if
any, and deposit such amount into the Collection Account for inclusion in the
Available Funds for the related Distribution Date.
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The Trustee will also establish and maintain one or more accounts, which
may be maintained as subaccounts of the Distribution Account, described herein
as the "Upper-Tier Distribution Account" and the "Excess Interest Distribution
Account," each in the name of the Trustee for the benefit of the holders of the
Certificates.
The Cash Collateral Accounts, Collection Account, the Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account and
the Excess Interest Distribution Account will be held in the name of the
Trustee (or the Servicer on behalf of the Trustee) on behalf of the holders of
Certificates and the Servicer will be authorized to make withdrawals from the
Cash Collateral Accounts and the Collection Account. Each of the Cash
Collateral Account, Collection Account, any REO Account, the Distribution
Account, the Upper-Tier Distribution Account, the Interest Reserve Account and
the Excess Interest Distribution Account and will be either (i) (A) an account
or accounts maintained with a depository institution or trust company the
short-term unsecured debt obligations or commercial paper of which are rated at
least "F-1+" by Fitch IBCA, "P-1" by Moody's and "A-1" by S&P in the case of
accounts in which funds are held for 30 days or less or, in the case of
accounts in which funds are held for more than 30 days, the long-term unsecured
debt obligations of which are rated at least "AA" by Fitch IBCA, "Aa3" by
Moody's and "AA-" by S&P (or, if such depository institution or trust company
does not have a long-term unsecured debt rating of "AA-" by S&P, the short-term
unsecured debt rating of which is at least "A-1" by S&P and the long-term
unsecured debt rating of which is at least "A-" by S&P) or (B) as to which the
Trustee has received written confirmation from each of the Rating Agencies that
holding funds in such account would not cause any Rating Agency to qualify,
withdraw or downgrade any of its ratings on the Certificates, or (ii) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution, is
subject to regulations substantially similar to 12 C.F.R. Section 9.10(b),
having in either case a combined capital surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority, or, (iii)
any other account that, as evidenced by a written confirmation from each Rating
Agency, would not, in and of itself, cause a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates, which
other account may be an account maintained with the Trustee (an "Eligible
Bank"). Amounts on deposit in the Collection Account, Cash Collateral Account,
any REO Account and the Interest Reserve Account may be invested in certain
United States government securities and other high-quality investments
specified in the Pooling and Servicing Agreement ("Permitted Investments").
Interest or other income earned on funds in the Collection Account and Cash
Collateral Accounts will be paid to the Servicer (except to the extent required
to be paid to the related borrower) as additional servicing compensation and
interest or other income earned on funds in any REO Account will be payable to
the Special Servicer. Interest or other income earned on funds in the Interest
Reserve Account will be paid to the Mortgage Loan Seller as compensation for
arranging for ongoing monitoring and surveillance of the Offered Certificates
by the Rating Agencies.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Servicer may make withdrawals from the Collection Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit on or before each Servicer
Remittance Date (A) to the Distribution Account an amount equal to the sum of
(I) Available Funds and any Prepayment Premiums and (II) the Trustee Fee for
such Distribution Date, (B) to the Excess Interest Distribution Account an
amount equal to the Excess Interest received in the related Collection Period,
if any, and (C) to the Interest Reserve Account an amount required to be
withheld as described under "Accounts--Interest Reserve Account"; (ii) to pay
or reimburse the Servicer, the Trustee, the Fiscal Agent, as applicable, for
Advances made by any of them and interest on Advances (provided, that the
Trustee and Fiscal Agent will have priority with respect to such payment or
reimbursement), the Servicer's right to reimbursement for items described in
this clause (ii) being limited as described above under "Advances"; (iii) to
pay on or before each Servicer Remittance Date to the Servicer and the Special
Servicer as compensation, the aggregate unpaid Servicing Compensation, Special
Servicing Fee, Work Out Fee, Liquidation Fee and any other servicing or special
servicing compensation in respect of the immediately preceding calendar month
(together with interest on such fees that are overdue); (iv) to pay on or
before each Distribution Date to the Depositor, Mortgage Loan Sellers or
Bloomfield with respect to each Mortgage Loan or REO Property that has
previously been purchased or repurchased by it pursuant to the Pooling and
Servicing Agreement, all amounts received thereon during the related Collection
Period and subsequent to the date as of which the amount required to effect
such purchase or repurchase was determined; (v) to the extent not reimbursed or
paid pursuant to any of the above clauses, to reimburse or pay the Servicer,
the Special Servicer, the Trustee, the Fiscal Agent and/or the Depositor for
unpaid servicing compensation (in the case of the Servicer, the Special
Servicer or the Trustee) and certain other unreimbursed expenses incurred by
such persons pursuant to and to the extent reimbursable under the Pooling and
Servicing Agreement and to satisfy any indemnification obligations of the Trust
Fund
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under the Pooling and Servicing Agreement; (vi) to pay to the Trustee amounts
requested by it to pay taxes on certain net income with respect to REO
Properties or any other taxes not covered by a party to the Pooling and
Servicing Agreement; (vii) to withdraw any amount deposited into the Collection
Account that was not required to be deposited therein; and (viii) to clear and
terminate the Collection Account pursuant to a plan for termination and
liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or may
at the lender's option) become due and payable generally upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related lender
in connection with any such sale or other transfer. In the case of any Mortgage
Loan other than a Specially Serviced Mortgage Loan, the Servicer will be
responsible for notifying the Special Servicer of any requests for waiver of,
or any breach of, any "due-on-sale" or "due-on-encumbrance" clause of which it
has actual knowledge, in accordance with the requirements of the Pooling and
Servicing Agreement. With respect to all Mortgage Loans, the Special Servicer
will be solely responsible for making the determination, in accordance with the
Servicing Standard and on behalf of the Trust Fund, whether to enforce such
due-on-sale clauses and in connection therewith will not be required to (i)
accelerate payments thereon or (ii) withhold its consent to such an assumption
to the extent permitted under the terms of the related Mortgage Loan if (x)
such provision is not exercisable under applicable law or such provision is
reasonably likely to result in meritorious legal action by the borrower or (y)
the Special Servicer determines, in accordance with the Servicing Standard,
that permitting such assumption or granting such consent would be likely to
result in an equal or greater recovery, on a present value basis (discounting
at the related Mortgage Rate), than would enforcing such clause. If the Special
Servicer determines that permitting such assumption or granting such consent
would be likely to result in an equal or greater recovery or such provision is
not legally enforceable, the Special Servicer is authorized to take or enter
into an assumption agreement from or with the proposed transferee as obligor
thereon provided that (a) the credit status of the prospective transferee is in
compliance with the Special Servicer's regular commercial mortgage origination
or servicing standards and criteria and the terms of the related Mortgage and
(b) the Special Servicer has received written confirmation from each Rating
Agency that such assumption or substitution would not, in and of itself, cause
a downgrade, qualification or withdrawal of the then current ratings assigned
to the Certificates; provided, however, such written confirmation shall not be
required from any of the Rating Agencies if the Stated Principal Balance of
such Mortgage Loan is: (x) for Fitch IBCA, not one of the ten largest Mortgage
Loans, by outstanding principal balance, in the Trust Fund (including in such
calculation any concentration of Mortgage Loans with affiliated borrowers), (y)
for Moody's (i) less than 2% of the total aggregate Stated Principal Balance of
the Mortgage Loans as of the day immediately prior to the date of
determination, (ii) not one of the ten largest Mortgage Loans, by principal
balance, in the Trust Fund (including in such calculation any concentration of
Mortgage Loans with affiliated borrowers) and (iii) less than $15,000,000 and
(z) for S&P (i) less than 5% of the total aggregate Stated Principal Balance of
the Mortgage Loans as of the day immediately prior to the date of determination
and (ii) less than $20,000,000. No assumption agreement may contain any terms
that are different from any term of any Mortgage or related Note, except
pursuant to the provisions described under "--Realization upon Mortgage Loans"
and "--Modifications," in this Prospectus Supplement.
In general, the Mortgage Loans contain provisions in the nature of
"due-on-encumbrance" clauses which by their terms (a) provide that the Mortgage
Loans shall (or may at the lender's option) become due and payable upon the
creation of any lien or other encumbrance on the related Mortgaged Property, or
(b) require the consent of the related lender to the creation of any such lien
or other encumbrance on the related Mortgaged Property. The Special Servicer
will not be required to enforce such due-on-encumbrance clauses and in
connection therewith will not be required to (i) accelerate payments thereon or
(ii) withhold its consent to such lien or encumbrance if the Special Servicer
(x) determines, in accordance with the Servicing Standard, that such
enforcement would not be in the best interests of the Trust Fund or, with
respect to a consent, that granting such consent would be consistent with the
Servicing Standard and (y) to the extent required in the Pooling and Servicing
Agreement, receives prior written confirmation from each Rating Agency that
granting such consent would not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the then current ratings assigned to the
Certificates. The term "encumbrance" shall be deemed to exclude items which
might ordinarily be considered by a title company to be exceptions to title
(e.g., leases, subordination, non-disturbance and attornment agreements,
easements and similar items) (collectively, "Beneficial Title Exceptions") but
which (i) are subordinate to the Mortgage, (ii) do not adversely impact debt
service coverage ratio of the Mortgage Loan and (iii) do
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not secure any debt of the related Borrower. Such Beneficial Title Exceptions
shall not require the written confirmation from any Rating Agency to the effect
that such action would not result in the qualification, downgrade, or
withdrawal of the rating then assigned by such Rating Agency to any Class of
Certificates; provided, however, that the consent by the Servicer or the
Special Servicer, as the case may be, to such Beneficial Title Exception shall
be consistent with the Servicing Standard. See "Certain Legal Aspects of the
Mortgage Loans--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
INSPECTIONS
The Servicer (i) is required to inspect each Mortgaged Property (other
than a Mortgaged Property relating to a Specially Serviced Mortgage Loan)
securing a Note with a Stated Principal Balance (or in the case of a Note
secured by more than one Mortgaged Property, having an Allocated Loan Amount)
of (a) $5,000,000 or more at least once every twelve months, (b) less than
$5,000,000 at least once every 24 months, and (c) with respect to a Mortgaged
Property securing a Credit Tenant Loan, at least once every 24 months, in each
case, such period commencing in November 1999; provided, however, that in the
event the Trustee notifies the Special Servicer that the long-term unsecured
debt rating of the Credit Tenant or Guarantor with respect to the Credit Tenant
Loan is downgraded by a full letter rating since origination by either Rating
Agency, then such Mortgaged Property or Mortgaged Properties securing such
Credit Tenant Loan shall be inspected by the Special Servicer within six months
of such downgrade, withdrawal or qualification and, thereafter, at least once
every 24 months and (ii) if the Mortgage Loan (a) becomes a "Specially Serviced
Mortgage Loan," (b) is delinquent for 60 days or (c) except with respect to
Credit Tenant Loans, has a debt service coverage ratio of less than 1.0 or,
with respect to the Credit Tenant Loans, the related Credit Tenant has
defaulted, the Special Servicer is required to inspect the related Mortgaged
Properties as soon as practicable and thereafter at least every twelve months,
until such condition is cured.
INSURANCE POLICIES
The Pooling and Servicing Agreement requires the Servicer (or the Special
Servicer in the case of an REO Property) to the extent permitted by each
Mortgage Loan (other than REO Mortgage Loans) to obtain or cause the mortgagor
on each Mortgage Loan to maintain fire and hazard insurance with extended
coverage on the related Mortgaged Property in an amount which is at least equal
to the lesser of (A) one hundred percent (100%) of the then "full replacement
cost" of the improvements and equipment, without deduction for physical
depreciation, and (B) the outstanding principal balance of the related Mortgage
Loan, or such greater amount as is necessary to prevent any reduction, by
reason of the application of co-insurance and to prevent the Trustee thereunder
from being deemed a co-insurer and provided such policy shall include a
"replacement cost" rider. The Pooling and Servicing Agreement also requires the
Servicer (or the Special Servicer in the case of an REO Property) to obtain or
cause the mortgagor on each Mortgaged Property generally to maintain insurance
providing coverage against at least 12 months of rent interruptions or such
other amount as provided in the related loan documents (12 months with respect
to an REO Property) and any other insurance as is required in the related
Mortgage Loan. In the case of an REO Property, if the Special Servicer fails to
maintain fire and hazard insurance as described above or flood insurance as
described below, the Servicer, as soon as practicable after its receipt of
notice of such failure, will maintain such insurance to the extent available at
commercially reasonable rates. In the event the Servicer fails to pay a premium
due on such insurance policy, the Trustee or the Fiscal Agent, as applicable,
will be required to make an Advance to cover such payment. Any cost incurred by
the Servicer, Trustee or Fiscal Agent in maintaining any such insurance shall
not, for the purpose of calculating distributions to Certificateholders, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit. Notwithstanding
the foregoing insurance requirements, and in lieu thereof, the Pooling and
Servicing Agreement permits the Servicer to allow Credit Tenants with respect
to certain of the Mortgage Loans to self-insure with respect to such risks in
accordance with the terms of the related Credit Tenant Lease.
In general, the standard form of fire and hazard extended coverage policy
covers physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to certain conditions and exclusions in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers in different states and therefore will not contain identical
terms and conditions, most such policies will not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of
uninsured risks. Nonetheless, certain of the Mortgage Loans require
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insurance coverage for floods and other water-related causes and earth
movement. When the Servicer determines that a Mortgaged Property is located in
a federally designated flood area, the Pooling and Servicing Agreement requires
the Servicer to use its reasonable efforts to cause the related borrower to
maintain, or if not maintained, to itself obtain, and to advance amounts in
order to obtain (subject to the provisions concerning nonrecoverable Advances),
flood insurance. Such flood insurance shall be in an amount equal to the lesser
of (i) the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance required by the terms of the related Mortgage,
in either case, to the extent available for the related property under the
national flood insurance program, if available. If an REO Property (i) is
located in a federally designated special flood hazard area or (ii) is related
to a Mortgage Loan pursuant to which earthquake insurance was in place at the
time of origination and continues to be available at commercially reasonable
rates, the Pooling and Servicing Agreement requires that the Special Servicer
obtain, and direct the Servicer to Advance amounts in order to obtain (subject
to the issues concerning nonrecoverable Advances), flood insurance and/or
earthquake insurance. If a recovery due to a flood or earthquake is not
available for an REO Property but would have been available if such insurance
were maintained in accordance with the standards described above, the Special
Servicer will be required (subject to whether such failure to maintain is the
result of the provisions concerning nonrecoverable Advances) to (i) immediately
deposit into the Collection Account from its own funds the amount that would
have been recovered or (ii) apply to the restoration and repair of the property
from its own funds the amount that would have been recovered, if such
application is consistent with the Servicing Standard; provided, however, that
the Special Servicer shall not be responsible for any shortfall in insurance
proceeds resulting from an insurer's refusal or inability to pay a claim.
The Servicer or the Special Servicer may obtain and maintain a blanket
insurance policy insuring against fire and hazard losses on all of the
Mortgaged Properties (other than REO Properties) as to which the related
borrower has not maintained insurance to satisfy its obligations concerning the
maintenance of insurance coverage, as long as such policy is issued by an
insurer qualified under the terms of the Pooling and Servicing Agreement and
provides no less coverage in scope and amount than otherwise required to be
maintained as described in the preceding paragraphs. Any such blanket insurance
policy shall be maintained with an insurer qualified under the terms of the
Pooling and Servicing Agreement. Additionally, the Servicer or the Special
Servicer may obtain a master force placed insurance policy, as long as such
policy is issued by an insurer qualified under the terms of the Pooling and
Servicing Agreement and provides no less coverage in scope and amount than
otherwise required to be maintained as described in the preceding paragraphs.
The ability of the Servicer to assure that fire and hazard, flood or
earthquake insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under such policy, or upon the extent
to which information in this regard is furnished by mortgagors.
Under the terms of the Mortgage Loans, the borrowers will be required to
present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Servicer or Special Servicer, as applicable,
on behalf of itself, the Trustee and Certificateholders, is obligated to
present or cause to be presented claims under any blanket insurance policy
insuring against hazard losses on Mortgaged Properties securing the Mortgage
Loans. However, the ability of the Servicer or Special Servicer, as applicable,
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Servicer or Special
Servicer, as applicable, by the borrowers.
All insurance policies required shall name the Trustee or the Servicer or
the Special Servicer, on behalf of the Trustee as the lender, as loss payee.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a
nationally recognized firm of independent public accountants, which is a member
of the American Institute of Certified Public Accountants, to furnish to the
Trustee, the Depositor and the Rating Agencies on or before March 15 of each
year, beginning March 15, 2001, a statement to the effect that such firm has
examined certain documents and records relating to the servicing of similar
mortgage loans under similar agreements for the prior calendar year and that on
the basis of their examination, conducted substantially in compliance with
generally accepted auditing standards and the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
The Federal Home Loan Mortgage Corporation ("FHLMC"), such servicing has been
conducted in compliance with similar agreements except for such significant
exceptions or errors in records that, in the opinion of such firm, generally
accepted auditing standards and the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC require
it to report, in which case such exceptions and errors shall be so reported.
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The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15 of
each year, beginning March 15, 2001, an officer's certificate of the Servicer
stating that, to the best of such officer's knowledge, the Servicer has
fulfilled its obligations under the Pooling and Servicing Agreement in all
material respects throughout the preceding year or, if there has been a
material default, specifying each material default known to such officer and
the action proposed to be taken with respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
The Servicer may assign its rights and delegate its duties and obligations
under the Pooling and Servicing Agreement upon sixty days notice, provided that
certain conditions are satisfied including obtaining written confirmation of
each Rating Agency that such assignment or delegation will not cause a
qualification, withdrawal or downgrading of the then current ratings assigned
to the Certificates and the consent of certain parties specified in the Pooling
and Servicing Agreement (which consent may not be unreasonably withheld and
which consent will be deemed given if such parties do not disapprove the
resignation within 60 days after notice). The Pooling and Servicing Agreement
provides that the Servicer may not otherwise resign from its obligations and
duties as Servicer thereunder, except upon the determination that performance
of its duties is no longer permissible under applicable law and provided that
such determination is evidenced by an opinion of counsel delivered to the
Trustee. No such resignation may become effective until the Trustee or a
successor Servicer has assumed the obligations of the Servicer under the
Pooling and Servicing Agreement. The Special Servicer has the right to resign
at any time provided that (i) a willing successor thereto has been found, (ii)
each of the Rating Agencies confirms in writing that the successor's
appointment will not result in a withdrawal, qualification or downgrade of the
current ratings then assigned to any Class of Certificates, (iii) the resigning
party pays all costs and expenses in connection with such transfer and (iv) the
successor accepts appointment prior to the effectiveness of such resignation.
The Trustee or any other successor Servicer or Special Servicer assuming the
obligations of the Servicer or Special Servicer under the Pooling and Servicing
Agreement will be entitled to the compensation to which the Servicer or Special
Servicer would have been entitled. If no successor Servicer or Special Servicer
can be obtained to perform such obligations for such compensation, additional
amounts payable to such successor Servicer or Special Servicer will be treated
as Realized Losses.
The Pooling and Servicing Agreement also provides that neither the
Depositor, the Servicer, the Special Servicer, nor any director, officer,
employee or agent of the Depositor, the Servicer or the Special Servicer will
be under any liability to the Trust Fund or the holders of Certificates for any
action taken or for refraining from the taking of any action in good faith
pursuant to the Pooling and Servicing Agreement, or for errors in judgment;
provided, however, that neither the Depositor, the Servicer, the Special
Servicer nor any such person will be protected against any breach of its
representations and warranties made in the Pooling and Servicing Agreement or
any liability which would otherwise be imposed by reason of willful misconduct,
bad faith, fraud or negligence in the performance of duties thereunder or by
reason of reckless disregard of obligations and duties thereunder. The Pooling
and Servicing Agreement further provides that the Depositor, the Servicer, the
Special Servicer and any director, officer, employee or agent of the Depositor,
the Servicer, or the Special Servicer will be entitled to indemnification by
the Trust Fund for any loss, liability or expense incurred in connection with
any legal action relating to the Pooling and Servicing Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misconduct, bad faith, fraud or negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder.
In addition, the Pooling and Servicing Agreement provides that neither the
Depositor, the Servicer nor the Special Servicer will be under any obligation
to appear in, prosecute or defend any legal action unless such action is
related to its duties under the Pooling and Servicing Agreement and which in
its opinion does not expose it to any expense or liability. The Depositor, the
Servicer or the Special Servicer may, however, in its discretion undertake any
such action which it may deem necessary or desirable with respect to the
Pooling and Servicing Agreement and the rights and duties of the parties
thereto and the interests of the holders of Certificates thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Trust Fund, and the
Depositor, the Servicer and the Special Servicer will be entitled to be
reimbursed therefor and to charge the Collection Account.
The Depositor is not obligated to monitor or supervise the performance of
the Servicer, the Special Servicer or the Trustee under the Pooling and
Servicing Agreement. The Depositor may, but is not obligated to, enforce the
obligations of the Servicer or the Special Servicer under the Pooling and
Servicing Agreement and may, but is not obligated to, perform or cause a
designee to perform any defaulted obligation of the Servicer or the Special
Servicer or exercise any
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right of the Servicer or the Special Servicer under the Pooling and Servicing
Agreement. In the event the Depositor undertakes any such action, it will be
reimbursed by the Trust Fund from the Collection Account to the extent not
recoverable from the Servicer or Special Servicer, as applicable. Any such
action by the Depositor will not relieve the Servicer or the Special Servicer
of its obligations under the Pooling and Servicing Agreement.
Any person into which the Servicer or Special Servicer may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the Servicer or Special Servicer is a party, or any person succeeding to the
business of the Servicer or Special Servicer (which may be limited to its
commercial mortgage servicing business), will be the successor of the Servicer
or Special Servicer under the Pooling and Servicing Agreement, and shall be
deemed to have assumed all of the liabilities and obligations of the Servicer
or Special Servicer, as applicable, under the Pooling and Servicing Agreement
if each of the Rating Agencies has confirmed in writing that such merger or
consolidation or transfer of assets or succession, in and of itself, will not
cause a downgrade, qualification or withdrawal of the then current ratings
assigned by such Rating Agency for any Class of Certificates.
EVENTS OF DEFAULT; TERMINATION EVENTS
Events of default of the Servicer (each, an "Event of Default") under the
Pooling and Servicing Agreement consist, among other things, of (i) any failure
by the Servicer to remit to the Collection Account or any failure by the
Servicer to remit to the Trustee for deposit into the Upper-Tier Distribution
Account, Distribution Account, Excess Interest Distribution Account or Interest
Reserve Account any amount required to be so remitted pursuant to the Pooling
and Servicing Agreement; or (ii) any failure by the Servicer duly to observe or
perform in any material respect any of its other covenants or agreements or the
breach of its representations or warranties under the Pooling and Servicing
Agreement which continues unremedied for thirty (30) days (or sixty (60) days,
so long as the Servicer is in good faith diligently pursuing a cure) after the
giving of written notice of such failure to the Servicer by the Depositor or
the Trustee, or to the Servicer and to the Depositor and the Trustee by the
holders of Certificates evidencing Percentage Interests of at least 25% of any
affected Class; or (iii) any failure by the Servicer to make any P&I Advances
as required pursuant to the Pooling and Servicing Agreement; or (iv) certain
events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and certain actions by, on behalf of or
against the Servicer indicating its insolvency or inability to pay its
obligations.
Events of Default of the Special Servicer under the Pooling and Servicing
Agreement include the items specified in clauses (i), (ii) or (iv) in the
definition of Events of Default above with respect to, and to the extent
applicable to, the Special Servicer along with either of the following: (a)
confirmation in writing by Fitch IBCA or Moody's that failure to remove the
Special Servicer will, in and of itself, cause a downgrade, qualification or
withdrawal of the then-current ratings assigned to any Class of Certificates;
or (b) the Special Servicer is no longer an "approved" special servicer by S&P
for mortgage pools similar to the Mortgage Pool.
Upon either (i) confirmation in writing by Fitch IBCA or Moody's that
failure to remove the Servicer will, in and of itself, cause a downgrade,
qualification or withdrawal of the then-current ratings assigned to any Class
of Certificates; or (ii) the Servicer is no longer rated an "approved" master
servicer by S&P for mortgage pools similar to the Mortgage Pool (each, a
"Termination Event"), the Servicer will have the ability to deliver proposed
bid materials to the Trustee and the Trustee will solicit bids for the rights
to service the Mortgage Loans under the Pooling and Servicing Agreement from at
least three persons qualified thereunder to act as successor Servicer (or, if
three qualified persons cannot be located, then from as many persons as
qualified). If the servicing rights under the Pooling and Servicing Agreement
are awarded to a bidder located by the Trustee or the Servicer, the Trustee
will remit to the terminated Servicer the net proceeds of the bid of the
successor Servicer, as described in the Pooling and Servicing Agreement.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Servicer or Special Servicer
(or a Termination Event with respect to the Servicer) occurs, then the Trustee
may, and at the direction of the holders of Certificates evidencing at least
25% of the aggregate Voting Rights of all Certificateholders, the Trustee will,
terminate all of the rights and obligations of the Servicer or Special Servicer
as servicer or special servicer, as applicable, under the Pooling and Servicing
Agreement and in and to the Trust Fund. Notwithstanding the foregoing, upon any
termination of the Servicer or the Special Servicer under the Pooling and
Servicing Agreement the Servicer or the Special Servicer will continue to be
entitled to receive all accrued and unpaid servicing compensation through the
date of termination and the Servicer will be entitled to be reimbursed for
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all of its outstanding Advances and interest thereon as provided in the Pooling
and Servicing Agreement. In the event that the Servicer is also the Special
Servicer and the Servicer is terminated, the Servicer will also be terminated
as Special Servicer.
On and after the date of termination following an Event of Default or
Termination Event by the Servicer, the Trustee will succeed to all authority
and power of the Servicer (and the Special Servicer if the Special Servicer is
also the Servicer) under the Pooling and Servicing Agreement and will be
entitled to the compensation arrangements to which the Servicer (and the
Special Servicer if the Servicer is also the Special Servicer) would have been
entitled. If the Trustee is unwilling or unable so to act, or if the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders so request, or if the long-term unsecured debt rating of the
Trustee or the Fiscal Agent is not at least "AA" by Fitch IBCA, "Aa2" by
Moody's and "A" by S&P or if the Rating Agencies do not provide written
confirmation that the succession of the Trustee as Servicer will not cause a
qualification, withdrawal or downgrading of the then current ratings assigned
to the Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution, the
appointment of which will not result in the downgrading, qualification or
withdrawal of the rating or ratings then assigned to any Class of Certificates
as evidenced in writing by each Rating Agency, to act as successor to the
Servicer under the Pooling and Servicing Agreement. Pending such appointment,
the Trustee is obligated to act in such capacity. The Trustee and any such
successor may agree upon the servicing compensation to be paid in accordance
with the provisions of the Pooling and Servicing Agreement. The payment of any
fees to any successor servicer or special servicer cannot exceed the fees paid
by the terminated servicer or special servicer, as applicable, unless otherwise
consented to by the Directing Holders. Any such additional servicing or special
servicing fees shall be treated as Realized Losses.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and Servicing
Agreement or the Mortgage Loans, unless, with respect to the Pooling and
Servicing Agreement, such holder previously shall have given to the Trustee a
written notice of a default under the Pooling and Servicing Agreement, and of
the continuance thereof, and unless also the holders of Certificates of any
Class affected thereby evidencing Percentage Interests of at least 25% of such
Class shall have made written request of the Trustee to institute such
proceeding in its own name as Trustee under the Pooling and Servicing Agreement
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute such
proceeding.
The holders of Certificates evidencing at least 662/3% of the aggregate
Voting Rights may waive any default by the Servicer or Special Servicer, except
a default in making any required deposits to or payments from the Collection
Account or the Distribution Account or otherwise remitting payments as required
under the Pooling and Servicing Agreement.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement 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 Certificates, unless such holders of
Certificates shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended at any time by the
Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal Agent
without the consent of any of the holders of Certificates (i) to cure any
ambiguity; (ii) to correct or supplement any provisions therein which may be
defective or inconsistent with any other provisions therein; (iii) to amend any
provision thereof to the extent necessary or desirable to maintain the rating
or ratings assigned to each Class of Certificates; (iv) to amend or supplement
a provision which will not adversely affect in any material respect the
interests of any Certificateholder not consenting thereto, as evidenced in
writing by an opinion of counsel or confirmation in writing from each Rating
Agency that such amendment will not result in a qualification, withdrawal or
downgrading of the then current ratings assigned to the Certificates; and (v)
to amend or supplement any provisions therein to the extent not inconsistent
with the provisions of the Pooling and Servicing Agreement and will not result
in a downgrade, qualification or withdrawal of the then current ratings
assigned to any Class of Certificates as confirmed in writing by each Rating
Agency. The Pooling and Servicing Agreement requires that no such amendment
shall cause the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as
a REMIC.
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The Pooling and Servicing Agreement may also be amended from time to time
by the Depositor, the Servicer, the Special Servicer, the Trustee and the
Fiscal Agent with the consent of the holders of Certificates evidencing at
least 662/3% of the Percentage Interests of each Class of Certificates
affected thereby for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or modifying in any manner the rights of the holders of Certificates;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, payments received on the Mortgage Loans
which are required to be distributed on any Class of Certificates; (ii) alter
the obligations of the Servicer, the Trustee or the Fiscal Agent to make a P&I
Advance or Property Advance or alter the Servicing Standard; (iii) change the
percentages of Voting Rights of holders of Certificates which are required to
consent to any action or inaction under the Pooling and Servicing Agreement; or
(iv) amend the section in the Pooling and Servicing Agreement relating to the
amendment of the Pooling and Servicing Agreement, in each case, without the
consent of the holders of all Certificates representing all the Percentage
Interests of the Class or Classes affected thereby.
VOTING RIGHTS
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class R and Class LR Certificates, (b) 1% in the case of the Class X
Certificates, (c) in the case of each other Class of Certificates, a percentage
equal to the product of (i) 99% multiplied by (ii) a fraction, the numerator of
which is equal to the aggregate outstanding Certificate Balance of any such
Class and the denominator of which is equal to the aggregate outstanding
Certificate Balances of all Classes of Certificates. The Voting Rights of any
Class of Certificates shall be allocated among holders of Certificates of such
Class in proportion to their respective Percentage Interests, except that any
Certificate beneficially owned by the Depositor, the Servicer, the Special
Servicer, any mortgagor, the Trustee, a manager, or any of their respective
affiliates will be deemed not to be outstanding for voting purposes; provided,
however, that for purposes of obtaining the consent of Certificateholders to an
amendment to the Pooling and Servicing Agreement, any Certificates beneficially
owned by the Servicer or Special Servicer or an affiliate thereof will be
deemed to be outstanding, provided that such amendment does not relate to
compensation of the Servicer, Special Servicer or otherwise benefit such entity
or an affiliate (other than solely in its capacity as Certificateholder) in any
material respect; and, provided, further, that for purposes of obtaining the
consent of Certificateholders to any action proposed to be taken by the Special
Servicer with respect to a Specially Serviced Mortgage Loan, any Certificates
beneficially owned by the Servicer or an affiliate will be deemed to be
outstanding if the Special Servicer is not the Servicer or any affiliate. The
Certificates beneficially owned by the Special Servicer or an affiliate thereof
shall be deemed outstanding for purposes of determining the identity of the
Directing Holders (as defined below). The Voting Rights of each Class of
Certificates will be deemed to be reduced on any day on which an Appraisal
Reduction Amount is allocated to such Class. The Fixed Voting Right Percentage
of the Class X Certificates will be proportionally reduced upon the allocation
of Appraisal Reduction Amounts with respect to any component of such Classes
based on the amount of such reduction.
REALIZATION UPON MORTGAGE LOANS
Specially Serviced Mortgage Loans; Appraisals. Contemporaneously with the
earliest of (i) the effective date of any modification of the Mortgage Rate,
principal balance or amortization terms of any Mortgage Loan, any extension of
the Maturity Date of a Mortgage Loan or consent to the release of any Mortgaged
Property or REO Property from the lien of the related Mortgage, (ii) the
occurrence of an Appraisal Reduction Event, (iii) a default in the payment of a
Balloon Payment or (iv) the date on which the Special Servicer, consistent with
the Servicing Standard, requests an Updated Appraisal (as defined below), the
Special Servicer will obtain an appraisal (or a letter update from an existing
appraisal which is less than two years old) of the Mortgaged Property, or REO
Property, as the case may be, from an independent appraiser who is a member of
the American Institute of Real Estate Appraisers (an "Updated Appraisal"), the
cost of which will constitute a Property Advance.
Following a default on a Mortgage Loan at maturity, the Special Servicer
may either foreclose or elect to grant up to three one-year extensions of the
Specially Serviced Mortgage Loan; provided that the Special Servicer may only
extend such Mortgage Loan if (i) the Special Servicer determines that (A)
extension of such Mortgage Loan is consistent with the Servicing Standard and
(B) extension of such Mortgage Loan is likely to result in a recovery which on
a net present value basis would be greater than the recovery that would result
from a foreclosure; provided, further however, that no such extension extends
the final Maturity Date beyond (a) the date that is two years before the Rated
Final Distribution Date or (b) the date that is twenty years prior to the
expiration of a ground lease with respect to a material portion of a Mortgaged
Property securing such Mortgage Loan.
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The Special Servicer may, consistent with the Servicing Standard, agree to
the modification, waiver or amendment of any term of a Mortgage Loan (subject
to certain rights of modification of the Servicer described in the Pooling and
Servicing Agreement) which is in default or as to which default is reasonably
foreseeable, as described below under "--Modifications."
Material Defaults; Foreclosure. Upon the occurrence of a material default
under a Specially Serviced Mortgage Loan, the Special Servicer may, consistent
with the Servicing Standard, accelerate such Specially Serviced Mortgage Loan
and commence a foreclosure or other acquisition with respect to the related
Mortgaged Property or Properties, provided, that the Special Servicer
determines that such acceleration and foreclosure are more likely to produce a
greater recovery to Certificateholders on a present value basis (discounting at
the related Mortgage Rate) than would a waiver of such default or an extension
or modification in accordance with the provisions described above or under
"--Modifications" below.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, the
cost and expenses of any such proceeding shall be paid by the Servicer as a
Property Advance based upon notice from the Special Servicer.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related borrower, if available, or any other liable party
if the laws of the state do not permit such a deficiency judgment after a
non-judicial foreclosure or if the Special Servicer determines, in its best
judgment, that the likely recovery if a deficiency judgment is obtained will
not be sufficient to warrant the cost, time, expense and/or exposure of
pursuing the deficiency judgment and such determination is evidenced by an
officers' certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer shall
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and shall not otherwise
acquire possession of, or take any other action with respect to, any Mortgaged
Property if, as a result of any such action, the Trustee, for the Trust Fund or
the holders of Certificates, would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of, such
Mortgaged Property within the meaning of CERCLA or any comparable law, unless
the Special Servicer has previously determined, based on an environmental
assessment report prepared by an independent person who regularly conducts
environmental audits, that: (i) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, after consultation with an
environmental consultant that it would be in the best economic interest of the
Trust Fund to take such actions as are necessary to bring such Mortgaged
Property in compliance therewith and (ii) there are no circumstances present at
such Mortgaged Property relating to the use, management or disposal of any
hazardous materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any currently effective
federal, state or local law or regulation, or that, if any such hazardous
materials are present for which such action could be required, after
consultation with an environmental consultant it would be in the best economic
interest of the Trust Fund to take such actions with respect to the affected
Mortgaged Property.
If the Special Servicer determines that it is in the best economic
interest of the Trust Fund to take any action as described in items (i) and
(ii) above, the Special Servicer shall take such action only if the Trustee has
mailed notice to the holders of the Certificates (other than the Class R and
Class LR Certificates) of such proposed action, which notice shall be prepared
by the Special Servicer, and if the Trustee does not receive, within 30 days of
such notification, instructions from the holders of greater than 50% of the
aggregate Voting Rights of such Classes directing the Special Servicer not to
take such action. Notwithstanding the foregoing, if the Special Servicer
reasonably determines that it is likely that within such 30-day period
irreparable environmental harm to such Mortgaged Property would result from the
presence of such hazardous materials and provides a prior written statement to
the Trustee setting forth the basis for such determination, then the Special
Servicer may take such action to remedy such condition as may be consistent
with the Servicing Standard. None of the Trustee, the Servicer or the Special
Servicer shall be obligated to take any action or not take any action at the
direction of the Certificateholders unless the Certificateholders agree to
indemnify the Trustee, the Servicer and the Special Servicer with respect to
such action or inaction.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee, on behalf of holders of
Certificates. Notwithstanding any such acquisition of title and cancellation of
the related Mortgage Loan, such Mortgage Loan shall be considered to be an REO
Mortgage Loan held in the Trust Fund until such time as the related REO
Property shall be sold by the Trust Fund and shall be reduced only by
collections net of expenses.
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If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling and
Servicing Agreement provides that the Trustee (or the Special Servicer, on
behalf of the Trustee), must administer such Mortgaged Property so that it
qualifies at all times as "foreclosure property" within the meaning of Code
Section 860G(a)(8). The Pooling and Servicing Agreement also requires that any
such Mortgaged Property be managed and operated by an "independent contractor,"
within the meaning of applicable Treasury regulations, who furnishes or renders
services to the tenants of such Mortgaged Property. Among other things, the
independent contractor will not be permitted to perform construction work on
the Mortgaged Property unless such construction was at least 10% completed when
default on the related Mortgage Loan became imminent. Generally, the Lower-Tier
REMIC will not be taxable on income received with respect to a Mortgaged
Property to the extent that it constitutes "rents from real property," within
the meaning of Code Section 856(c)(3)(A) and Treasury regulations thereunder.
"Rents from real property" do not include the portion of any rental based on
the net income or gain of any tenant or sub-tenant. No determination has been
made whether rent on any of the Mortgaged Properties meets this requirement.
"Rents from real property" include charges for services customarily furnished
or rendered in connection with the rental of real property, whether or not the
charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings which are of a
similar class are customarily provided with the service. No determination has
been made whether the services furnished to the tenants of the Mortgaged
Properties are "customary" within the meaning of applicable regulations. It is
therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Trust Fund, presumably allocated based on the
value of any non-qualifying services, would not constitute "rents from real
property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on a Mortgaged
Property owned by the Lower-Tier REMIC, including but not limited to a hotel,
will not constitute "rents from real property." Any of the foregoing types of
income may instead constitute "net income from foreclosure property," which
would be taxable to the Lower-Tier REMIC at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local taxes.
Any such taxes would be chargeable against the related income for purposes of
determining the Net REO Proceeds available for distribution to holders of
Certificates. Under the Pooling and Servicing Agreement, the Special Servicer
is required to determine whether the earning of such income taxable to the
Lower-Tier REMIC would result in a greater recovery to Certificateholders on a
net after-tax basis than a different method of operation of such property. See
"Federal Income Tax Consequences--REMIC Certificates" and "--Taxes That May Be
Imposed on the REMIC Pool--Net Income from Foreclosure Property" in the
Prospectus.
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, pursuant to the Pooling and Servicing Agreement and on behalf
of the Trust Fund, will be required to sell the Mortgaged Property prior to the
close of the third calendar year beginning after the year of acquisition,
unless the Trustee receives (i) an opinion of independent counsel to the effect
that the holding of the property by the Trust Fund subsequent to the close of
such period will not result in the imposition of a tax on the Lower-Tier REMIC
or the Upper-Tier REMIC or cause the Trust Fund to fail to qualify as two
separate REMICs under the Code at any time that any Certificate is outstanding
or (ii) an extension from the Internal Revenue Service.
The limitations imposed by the Pooling and Servicing Agreement and the
REMIC provisions of the Code on the operations and ownership of any Mortgaged
Property acquired on behalf of the Trust Fund may result in the recovery of an
amount less than the amount that would otherwise be recovered. See "Certain
Legal Aspects of Mortgage Loans--Foreclosure" in the Prospectus.
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, or may offer to purchase any
Specially Serviced Mortgage Loan or any REO Property (in each case at the
repurchase price set forth in the Pooling and Servicing Agreement, which
includes unpaid principal and interest thereon), if and when the Special
Servicer determines, consistent with the Servicing Standard set forth in the
Pooling and Servicing Agreement, that no satisfactory arrangements can be made
for collection of delinquent payments thereon and such a sale would be in the
best economic interests of the Trust Fund, but shall, in any event, so offer to
sell any REO Property no later than the time determined by the Special Servicer
to be sufficient to result in the sale of such REO Property within the period
specified in the Pooling and Servicing Agreement, including extensions thereof.
The Special Servicer shall give the Trustee and the Servicer not less than ten
days' prior written notice of its intention to sell any Specially Serviced
Mortgage Loan or REO Property, in which case the Special Servicer shall accept
the highest offer received from any person for any Specially Serviced Mortgage
Loan or any REO Property in an amount at least equal to the Repurchase Price
or, at its option, if it has received no offer at least equal to the Repurchase
Price therefor, purchase the Specially Serviced Mortgage Loan or REO Property
at such Repurchase Price.
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In the absence of any such offer (or purchase by the Special Servicer),
the Special Servicer will accept the highest offer received from any person
that is determined by the Special Servicer to be a fair price for such
Specially Serviced Mortgage Loan or REO Property, if the highest offeror is
not, and is not affiliated with, the Special Servicer, the Servicer, the
Depositor or certain other specified persons (an "Interested Party") or is
determined to be a fair price by the Trustee (after consultation with an
independent appraiser if the highest offeror is an Interested Party).
Notwithstanding anything to the contrary in this Prospectus Supplement, neither
the Trustee, in its individual capacity, nor any of its affiliates may make an
offer for or purchase any Specially Serviced Mortgage Loan or any REO Property.
The Special Servicer will not be obligated by either of the foregoing
paragraphs or otherwise to accept the highest offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the holders of Certificates. In
addition, the Special Servicer may accept a lower offer if it determines, in
accordance with the Servicing Standard, that acceptance of such offer would be
in the best interests of the holders of Certificates (for example, if the
prospective buyer making the lower offer is more likely to perform its
obligations, or the terms offered by the prospective buyer making the lower
offer are more favorable), provided that the offeror is not a person affiliated
with the Special Servicer. The Special Servicer is required to use its best
efforts to sell all Specially Serviced Mortgage Loans and REO Property prior to
the Rated Final Distribution Date.
MODIFICATIONS
The Special Servicer may, consistent with the Servicing Standard and
pursuant to the terms of the Pooling and Servicing Agreement, agree to the
modification, waiver or amendment of any term of a Mortgage Loan which is in
default or as to which default is reasonably foreseeable after consulting with
the Directing Holders, provided, in the sole, good faith judgment of the
Special Servicer, such modification, waiver or amendment would increase the
recovery to Certificateholders on a net present value basis documented to the
Trustee. All modifications, waivers and amendments related to the extension of
the Maturity Date of any Mortgage Loan will be subject to the limitations set
forth under "--Realization upon Mortgage Loans" above.
In the absence of a default or if a default is not reasonably foreseeable,
the Special Servicer may, consistent with the Servicing Standard, agree to any
modification, waiver or amendment of any term of any Mortgage Loan (subject to
certain rights of the Servicer described in the Pooling and Servicing
Agreement) with the consent of the Directing Holders, subject, however, to,
among other things, each of the following limitations, conditions and
restrictions: (i) the Special Servicer may not permit any borrower to pledge
additional collateral unless, among other things, the Special Servicer has
first determined in accordance with the Servicing Standard, based upon an
environmental assessment prepared by an independent person who regularly
conducts environmental assessments, at the expense of the borrower, that such
additional collateral is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions present with
respect to such new collateral relating to the use, management or disposal of
any hazardous materials for which investigation, testing, monitoring,
containment, clean-up or remediation would be required under any then
applicable environmental laws and/or regulations and the Special Servicer has
received confirmation in writing from each of the Rating Agencies that the
pledge of such additional collateral will not, in and of itself, cause a
downgrade, qualification or withdrawal of the then-current ratings assigned to
any Class of Certificates; (ii) the Special Servicer may not waive or reduce a
Lock-out Period or any Prepayment Premiums; (iii) the modification may not
affect the amount or timing of any scheduled payments of principal, interest or
other amounts (including Prepayment Premiums) payable under the Mortgage Loan;
and (iv) except as expressly provided in the related Mortgage or in connection
with a material adverse environmental condition at the related Mortgaged
Property, the Special Servicer may not take any action that results in a
release of the lien of the related Mortgage on any material portion of such
Mortgaged Property without a corresponding principal prepayment. In addition,
in the absence of a default or if a default is not reasonably foreseeable, the
Special Servicer or the Servicer may not modify, waive or amend any term of a
Mortgage Loan unless such modification (a)(i) would not be "significant" as
such term is defined in Treasury Regulation Sections 1.860G-2(b) as determined
by the Servicer or Special Servicer or (ii) occurs within three months of the
Closing Date, and (b) would not adversely affect in any material respect the
interests of any Certificateholders not consenting thereto. Notwithstanding the
foregoing, the Special Servicer will not be required to oppose the confirmation
of a plan in any bankruptcy or similar proceeding involving a borrower if in
its reasonable and good faith judgment such opposition would not ultimately
prevent the confirmation of such plan or one substantially similar.
The "Directing Holders" are holders of Certificates representing greater
than 50% of the Voting Rights of the most subordinate Class or Classes of
Certificates then outstanding representing a minimum of 1.0% of the aggregate
initial
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Certificate Balances of all Classes of Certificates (or if the Certificate
Balance of such Class or Classes has been notionally reduced by any Appraisal
Reduction Amounts to less than 25% of its initial Certificate Balance, the
holders of the next most subordinate Class). For the purpose of determining the
most subordinate Class of Certificates outstanding in order to identify the
Directing Holder, the Class A-1, Class A-2, Class A-3 and Class X Certificates
collectively, will be treated as one Class.
No modification or amendment may extend the final Maturity Date beyond (a)
the date that is two years prior to the Rated Final Distribution Date or (b)
the date that is twenty years prior to the expiration of a ground lease with
respect to a material portion of a Mortgaged Property securing such Mortgage
Loan.
With respect to any ARD Loan, the Special Servicer is permitted to waive
all or any accrued Excess Interest if, prior to the related maturity date, the
borrower has requested the right to prepay the ARD Loan in full together with
all payments required by the ARD Loan in connection with such prepayment except
for accrued Excess Interest, provided that the Special Servicer has determined
that such a waiver is likely to produce an equal or greater payment to
Certificateholders on a present value basis.
Any payment of interest, which is deferred as described in this Prospectus
Supplement will not, for purposes, including, without limitation, calculating
monthly distributions to Certificateholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit or that such interest may actually be capitalized.
Following the execution of any modification, waiver or amendment agreed to
by the Special Servicer pursuant to the above provisions, the Special Servicer
must deliver to the Trustee, with a copy to the Servicer, an officer's
certificate setting forth in reasonable detail the basis of the determination
made by it pursuant to the above provisions.
OPTIONAL TERMINATION
The Depositor and, if the Depositor does not exercise the option, the
Special Servicer and, if neither the Depositor nor the Special Servicer
exercises its option, the Servicer and, if the Depositor, the Special Servicer
or the Servicer do not exercise their respective option, the holders of the
Class LR Certificates (who represent more than a 50% Percentage Interest of the
Class LR Certificates), will have the option to purchase, at the purchase price
specified in this Prospectus Supplement, all of the Mortgage Loans and all REO
Property remaining in the Trust Fund, and will thereby effect termination of
the Trust Fund and early retirement of the then outstanding Certificates, on
any Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans remaining in the Trust Fund is less than 1% of the Initial Pool
Balance. The purchase price payable upon the exercise of such option, on such a
Distribution Date, will be an amount equal to the greater of (i) the sum of (A)
100% of the outstanding principal balance of each Mortgage Loan (other than an
REO Mortgage Loan) included in the Trust Fund as of the last day of the month
preceding such Distribution Date (less any P&I Advances previously made on
account of principal); (B) the fair market value of all other property included
in the Trust Fund (including REO Properties) as of the last day of the month
preceding such Distribution Date, as determined by an independent appraiser as
of a date not more than 30 days prior to the last day of the month preceding
such Distribution Date; (C) all unpaid interest accrued on such principal
balance of each such Mortgage Loan (including any Mortgage Loans as to which
title to the related Mortgaged Property has been acquired) at the Mortgage Rate
(plus the Excess Rate, to the extent applicable) to the last day of the month
preceding such Distribution Date (less any P&I Advances previously made on
account of interest), (D) unreimbursed Advances (with interest thereon) and
unpaid Trust Fund expenses and (E) with respect to any Premium Loan, any
unearned Premium or other amount that would have been due from the related
borrower if such Premium Loan were prepaid and (ii) the aggregate fair market
value of the Mortgage Loans and all REO Property in the Trust Fund, on the last
day of the month preceding such Distribution Date, as determined by an
independent appraiser acceptable to the Servicer, together with one month's
interest thereon at the Mortgage Rate.
PURCHASE OF ARD LOANS BY THE MOST SUBORDINATE CERTIFICATEHOLDERS
The holders of 100% of the Percentage Interest in the most subordinate
Class of Sequential Certificates then outstanding may purchase any Mortgage
Loan on its Anticipated Repayment Date at a price equal to the sum of the
following: (i) 100% of the outstanding principal balance of such Mortgage Loan
on such Anticipated Repayment Date (less any P&I Advances previously made on
account of principal); (ii) all unpaid interest accrued on such principal
balance of such Mortgage Loan at the Mortgage Rate thereof, to the last day of
the Interest Accrual Period preceding such
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Anticipated Repayment Date (less any P&I Advances previously made on account of
interest); (iii) the aggregate amount of all unreimbursed Advances with respect
to such Mortgage Loan, with interest thereon at the Advance Rate, and all
unpaid Special Servicing Fees, Servicing Fees and any other compensation due to
the Servicer or Special Servicer with interest thereon at the Advance Rate,
Trustee Fees and Trust Fund expenses; and (iv) the amount of any liquidation
expenses incurred by the Trust Fund in connection with such purchase.
Notwithstanding the foregoing, such Mortgage Loan may not be purchased if the
fair market value of the Mortgage Loan is greater than 100% of the outstanding
principal balance of such Mortgage Loan. See "Description of the
Certificates--Termination" in the Prospectus. Notwithstanding anything to the
contrary described above, purchase by the most subordinate Class of Sequential
Certificates then outstanding of any ARD Loan will not cause the Trust to
terminate.
THE TRUSTEE
LaSalle Bank National Association, a nationally chartered bank with its
principal offices in Chicago, Illinois, will act as Trustee pursuant to the
Pooling and Servicing Agreement. The Trustee's corporate trust office is
located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60603,
Attention: Asset Backed Securities Trust Services, CMAT 1999-C2.
The Trustee may resign at any time by giving written notice to the
Depositor, the Servicer, Special Servicer and the Rating Agencies, provided
that no such resignation shall be effective until a successor has been
appointed. Upon such notice, the Servicer will appoint a successor trustee. If
no successor trustee is appointed within one month after the giving of such
notice of resignation, the resigning Trustee may petition the court for
appointment of a successor trustee.
The Servicer or the Depositor may remove the Trustee and the Fiscal Agent
if, among other things, the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if at any time the Trustee becomes
incapable of acting, or is adjudged bankrupt or insolvent, or a receiver of the
Trustee or its property is appointed or any public officer takes charge or
control of the Trustee or of its property. The holders of Certificates
evidencing aggregate Voting Rights of at least 50% of all Certificateholders
may remove the Trustee and the Fiscal Agent upon written notice to the
Depositor, the Servicer, the Trustee and the Fiscal Agent. Any resignation or
removal of the Trustee and the Fiscal Agent and appointment of a successor
trustee and, if such trustee is not rated at least "AA" by each Rating Agency,
fiscal agent, will not become effective until acceptance of the appointment by
the successor trustee and, if necessary, fiscal agent. Notwithstanding the
foregoing, upon any termination of the Trustee and Fiscal Agent under the
Pooling and Servicing Agreement, the Trustee and Fiscal Agent will continue to
be entitled to receive all accrued and unpaid compensation through the date of
termination plus all Advances and interest thereon as provided in the Pooling
and Servicing Agreement. Any successor trustee must have a combined capital and
surplus of at least $50,000,000 and such appointment must not result in the
downgrade, qualification or withdrawal of the then current ratings assigned to
the Certificates, as evidenced in writing by the Rating Agencies.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to withdraw from the Distribution Account a monthly fee (the "Trustee
Fee").
The Trust Fund will indemnify the Trustee and the Fiscal Agent against any
and all losses, liabilities, damages, claims or unanticipated expenses
(including reasonable attorneys' fees) arising in respect of the Pooling and
Servicing Agreement or the Certificates other than those resulting from the
negligence, bad faith or willful misconduct of the Trustee or the Fiscal Agent,
as applicable. Neither the Trustee nor the Fiscal Agent will be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties under the Pooling and Servicing Agreement, or
in the exercise of any of its rights or powers, if in the Trustee's or the
Fiscal Agent's opinion, as applicable, the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. Each
of the Servicer, the Special Servicer, the Depositor, and the Trustee and
certain related parties will indemnify the Servicer, the Special Servicer, the
Trustee and the Fiscal Agent and certain related parties for losses incurred
related to the willful misconduct, bad faith, fraud and/or negligence in the
performance of such Indemnifying Party's respective duties under the Pooling
and Servicing Agreement or by reason of reckless disregard of its obligations
and duties under the Pooling and Servicing Agreement.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the same
is located, the Depositor and the Trustee acting jointly will have the power to
appoint one or more persons or entities approved by the Trustee to act (at the
expense of the Trustee) as co-trustee or co-trustees, jointly with the Trustee,
or separate trustee or separate trustees, of all or any part of the Trust Fund,
and to vest in such co-trustee or separate trustee such powers, duties,
obligations, rights and trusts as the Depositor and the Trustee may
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consider necessary or desirable. Except as required by applicable law, the
appointment of a co-trustee or separate trustee will not relieve the Trustee of
its responsibilities, obligations and liabilities under the Pooling and
Servicing Agreement.
DUTIES OF THE TRUSTEE
The Trustee (except for the information under the first paragraph of "The
Trustee") will make no representation as to the validity or sufficiency of the
Pooling and Servicing Agreement, the Certificates or the Mortgage Loans, this
Prospectus Supplement or related documents. The Trustee will not be accountable
for the use or application by the Depositor, the Servicer or the Special
Servicer of any Certificates issued to it or of the proceeds of such
Certificates, or for the use of or application of any funds paid to the
Depositor, the Servicer or the Special Servicer in respect of the assignment of
the Mortgage Loans to the Trust Fund, or any funds deposited in or withdrawn
from the Lockbox Accounts, Cash Collateral Accounts, Reserve Accounts,
Collection Account, Excess Interest Distribution Account and Interest Reserve
Account or any other account maintained by or on behalf of the Servicer or
Special Servicer, nor will the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer or Special Servicer under the Pooling and Servicing Agreement.
In the event that the Servicer fails to make a required Advance, the
Trustee will make such Advance, provided that the Trustee shall not be
obligated to make any Advance it deems to be nonrecoverable. The Trustee shall
be entitled to rely conclusively on any determination by the Servicer that an
Advance, if made, would not be recoverable. The Trustee will be entitled to
reimbursement for each Advance, with interest, made by it in the same manner
and to same extent as the Servicer.
If no Event of Default or Termination Event has occurred, and after the
curing of all Events of Default or Termination Event which may have occurred,
the Trustee is required to perform only those duties specifically required
under the Pooling and Servicing Agreement. Upon receipt of the various
certificates, reports or other instruments required to be furnished to it, the
Trustee is required to examine such documents and to determine whether they
conform on their face to the requirements of the Pooling and Servicing
Agreement.
THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle Street,
Chicago, Illinois 60603. The Fiscal Agent will be deemed to have been removed
in the event of the resignation or removal of the Trustee.
DUTIES OF THE FISCAL AGENT
The Fiscal Agent will make no representation as to the validity or
sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loan, this Prospectus Supplement (except for the information above,
see "The Fiscal Agent") or related documents. The duties and obligations of the
Fiscal Agent consist only of making Advances as described below and in
"Advances" above; the Fiscal Agent shall not be liable except for the
performance of such duties and obligations.
In the event that the Servicer and the Trustee fail to make a required
Advance, the Fiscal Agent will make such Advance, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent shall be entitled to rely conclusively on any
determination by the Servicer or the Trustee, as applicable, that an Advance,
if made, would not be recoverable. The Fiscal Agent will be entitled to
reimbursement for each Advance made by it in the same manner and to the same
extent as the Trustee and the Servicer.
THE SERVICER
BNY Asset Solutions LLC, in its capacity as servicer under the Pooling and
Servicing Agreement (in such capacity, the "Servicer"), will be responsible for
servicing the Mortgage Loans (other than Specially Serviced Mortgage Loans and
REO Properties). Although the Servicer is authorized to employ agents,
including sub-servicers, to directly service the Mortgage Loans for which it is
responsible, the Servicer will remain liable for its servicing obligations
under the Pooling and Servicing Agreement.
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The Servicer's principal servicing offices are located at 6000 E. Las
Colinas Boulevard, Suite 1300, Irving, Texas 75039. As of August 1999, the
Servicer and its affiliates were responsible for servicing approximately 650
commercial and multifamily loans, totaling approximately $5 billion in
aggregate outstanding principal amounts, including loans securitized in
mortgage-backed securitization transactions.
The information concerning the Servicer set forth in this Prospectus
Supplement has been provided by the Servicer, and none of the Mortgage Loan
Sellers, the Special Servicer, the Depositor, the Trustee, the Fiscal Agent or
the Underwriters makes any representation or warranty as to the accuracy
thereof. The Servicer (except for the information under this heading) will make
no representations as to the validity or sufficiency of the Pooling and
Servicing Agreement, the Certificates, the Mortgage Loans, this Prospectus
Supplement or related documents.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
entitled to withdraw monthly from the Collection Account the Servicing Fee. The
monthly servicing fee with respect to any Mortgage Loan (the "Administrative
Fee") for any Distribution Date is an amount equal to one-twelfth of the
product of (i) 0.0535% (the "Administrative Fee Rate") and (ii) the Stated
Principal Balance of such Mortgage Loan as of the day immediately preceding the
Distribution Date and includes the compensation payable to the Servicer and the
Trustee Fee. The Servicer's portion of the Administrative Fee (the "Servicing
Fee") relating to each Mortgage Loan will be retained by the Servicer from
payments and collections (including insurance proceeds, condemnation proceeds
and liquidation proceeds) or Advances in respect of such Mortgage Loan or, to
the extent payments or Advances on such Mortgage Loan are not sufficient, from
funds on deposit in the Collection Account relating to other Mortgage Loans.
The Servicer will also be entitled to retain as additional servicing
compensation (together with the Servicing Fee, "Servicing Compensation") (i)
all investment income earned on amounts on deposit in the Collection Account
and investment income earned on amounts on deposit in certain collateral
accounts, escrow accounts and Reserve Accounts (to the extent consistent with
the related Mortgage Loan and applicable law) and (ii) to the extent permitted
by applicable law and the related Mortgage Loans which are not Specially
Serviced Mortgage Loans, any late payment charges, certain of the assumption
and modification fees on the Mortgage Loans, as applicable, loan service
transaction fees, Net Default Interest, Prepayment Interest Excess on all
Mortgage Loans in excess of any Prepayment Interest Shortfalls on Mortgage
Loans (other than Mortgage Loans that permit prepayments on a date other than a
Due Date and other than Specially Serviced Mortgage Loans), beneficiary
statement changes, or similar items (but not including Prepayment Premiums).
If the Servicer accepts a voluntary prepayment on a Mortgage Loan (other
than Mortgage Loans that permit prepayments on a date other than a Due Date and
Specially Serviced Mortgage Loans) after the related Lock-out Period with
respect to such loan which results in a Prepayment Interest Shortfall (and such
Mortgage Loan, by its terms, required that such payments only be made on a Due
Date), the Servicer will be obligated to reduce its Servicing Compensation as
provided above under "Description of the Offered
Certificates--Distributions--Prepayment Interest Shortfalls."
Except as otherwise provided in the Pooling and Servicing Agreement or
reimbursed pursuant to an express provision of a loan agreement, the Servicer
will pay all expenses incurred in connection with its responsibilities under
the Pooling and Servicing Agreement (subject to reimbursement as described in
this Prospectus Supplement), including all fees of any subservicers retained by
it.
SPECIAL SERVICING
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR Property
Corporation, will initially be appointed as special servicer (the "Special
Servicer") to, among other things, oversee the resolution of Mortgage Loans
that, in general, are in default or as to which default is imminent and act as
disposition manager of REO Properties.
The principal offices of the Special Servicer are located at 760 N.W.
107th Avenue, Miami, Florida 33172, and its telephone number is (305) 485-2000.
As of December 31, 1998, the Special Servicer and its affiliates were managing
a portfolio including over 10,000 assets in most states with an original face
value of over $35 billion, most of which are commercial real estate assets.
Included in this managed portfolio are $28 billion of commercial real estate
assets representing 49 securitization transactions, for which the Special
Servicer is the master servicer or special servicer. The Special Servicer
(except for the information contained with this paragraph) will make no
representations as to the validity
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or sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loans, this Prospectus Supplement or related documents. The foregoing
information concerning the Special Servicer has been provided by it.
Accordingly, neither the Depositor nor any of the Underwriters makes any
representation or warranty as to the accuracy or completeness of such
information.
The Pooling and Servicing Agreement will provide that the Special Servicer
will comply with the REMIC Provisions.
The Pooling and Servicing Agreement provides that the Directing Holders
may replace the Special Servicer, provided that each Rating Agency confirms to
the Trustee in writing that such replacement, in and of itself, will not cause
a qualification, withdrawal or downgrading of the then current ratings assigned
to any Class of Certificates.
The duties of the Special Servicer relate to Specially Serviced Mortgage
Loans and to any REO Property. The Pooling and Servicing Agreement will define
a "Specially Serviced Mortgage Loan" to include any Mortgage Loan with respect
to which: (i) the related borrower has not made two consecutive Monthly
Payments (and has not cured at least one such delinquency by the next due date
under the related Mortgage Loan); (ii) the borrower has expressed to the
Servicer an inability to pay or a hardship in paying the Mortgage Loan in
accordance with its terms; (iii) the Servicer has received notice that the
borrower has become the subject of any bankruptcy, insolvency or similar
proceeding, admitted in writing the inability to pay its debts as they come due
or made an assignment for the benefit of creditors; (iv) the Servicer has
received notice of a foreclosure or threatened foreclosure of any lien on the
Mortgaged Property securing the Mortgage Loan; (v) a default of which the
Servicer has notice (other than a failure by the borrower to pay principal or
interest) and which materially and adversely affects the interests of the
Certificateholders has occurred and remained unremedied for the applicable
grace period specified in the Mortgage Loan (or, if no grace period is
specified, 60 days); (vi) the Special Servicer proposes to commence foreclosure
or other work out arrangements; or (vii) such borrower has failed to make a
Balloon Payment as and when due, unless the Servicer reasonably believes that
the Balloon Payment will be paid within ninety days of its Due Date; provided,
however, that a Mortgage Loan will cease to be a Specially Serviced Mortgage
Loan (each such Mortgage Loan that is no longer a Specially Serviced Mortgage
Loan being a "Corrected Mortgage Loan") (i) with respect to the circumstances
described in clauses (i) and (vii) above, when the borrower thereunder has
brought the Mortgage Loan current (or, with respect to the circumstances
described in clause (vii), pursuant to a work out implemented by the Special
Servicer) and thereafter made three consecutive full and timely monthly
payments, including pursuant to any work out of the Mortgage Loan, (ii) with
respect to the circumstances described in clause (ii), (iii), (iv) and (vi)
above, when such circumstances cease to exist in the good faith judgment of the
Servicer, or (iii) with respect to the circumstances described in clause (v)
above, when such default is cured; provided, in any case, that at that time no
circumstance exists (as described above) that would cause the Mortgage Loan to
continue to be characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, the Special Servicer will
be entitled to the following fees:
The Special Servicing Fee.
In general, the "Special Servicing Fee" will:
o be earned in respect of each and every Specially Serviced Mortgage
Loan, if any, and each and every REO Mortgage Loan, if any,
o be computed on the basis of a 360-day year consisting of twelve 30-day
months (except in the case of partial periods, when it will be computed
on the basis of the actual number of days elapsed in such period and a
360-day year) and accrue at 0.25% per annum (the "Special Servicing Fee
Rate") on the same principal amount as interest periodically accrues or
is deemed to accrue, as the case may be, in respect of each Specially
Serviced Mortgage Loan or REO Mortgage Loan, if any, and
o be payable monthly from general collections on all the Mortgage Loans
and any REO Properties on deposit in the Collection Account from time to
time.
The Work Out Fee.
The Special Servicer will, in general, be entitled to receive a Work Out
Fee with respect to each Corrected Mortgage Loan. As to each Corrected
Mortgage Loan, with limited exceptions, the "Work Out Fee" will be payable
out of, and will be calculated by application of a "Work Out Fee Rate" of
1.0% to, each collection of interest (other than Default Interest and
Excess Interest), principal (including scheduled payments, prepayments and
Balloon
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Payments at maturity) and Prepayment Premiums received on such Mortgage
Loan for so long as it remains a Corrected Mortgage Loan. The Work Out Fee
with respect to any Corrected Mortgage Loan will cease to be payable if
such loan again becomes a Specially Serviced Mortgage Loan or if the
related Mortgaged Property becomes an REO Property. Nevertheless, a new
Work Out Fee will become payable if and when such Mortgage Loan again
becomes a Corrected Mortgage Loan. If the Special Servicer is terminated
(other than for cause) or resigns, it shall retain the right to receive any
and all Work Out Fees payable with respect to Mortgage Loans that became
Corrected Mortgage Loans during the period that it acted as Special
Servicer and remained Corrected Mortgage Loans at the time of such
termination or resignation. The successor Special Servicer will not be
entitled to any portion of such Work Out Fees.
The Liquidation Fee.
The Special Servicer will be entitled to receive a "Liquidation Fee" with
respect to each Specially Serviced Mortgage Loan as to which the Special
Servicer obtains a full or discounted payoff from the related borrower and,
except as otherwise described below, with respect to any Specially Serviced
Mortgage Loan or REO Property as to which the Special Servicer receives any
liquidation proceeds. As to each such Specially Serviced Mortgage Loan and
REO Property, the Liquidation Fee will be payable from, and will be
calculated by application of a "Liquidation Fee Rate" of 1.0% to, the
related payment or proceeds (other than any portion thereof that represents
a recovery of Default Interest or Excess Interest). Notwithstanding
anything to the contrary described above, no Liquidation Fee will be
payable based on, or out of, liquidation proceeds received in connection
with:
o the repurchase of any Mortgage Loan by a Mortgage Loan Seller or NHA
for a breach of representation or warranty so long as such repurchase
occurs within the 180-day cure period (See "--Representations and
Warranties; Repurchases" above in this Prospectus Supplement);
o the purchase of any Specially Serviced Mortgage Loan or REO Property
by the Special Servicer (see "--Realization upon Mortgage Loans" above);
o the purchase of all of the Mortgage Loans and REO Properties by the
Depositor, the Special Servicer, the Servicer or the holders of the
Class LR Certificates representing greater than a 50% Percentage
Interest of the Class LR Certificates in connection with the optional
termination of the Trust Fund (see "--Optional Termination" in this
Prospectus Supplement); or
o amounts remitted on account of the defeasance of a Mortgaged Property
(see "Description of the Mortgage Pool--Certain Terms and Conditions of
the Mortgage Loans--Property Releases" in this Prospectus Supplement).
The Special Servicer will be entitled to additional servicing compensation
in the form of (i) certain of the assumption fees with respect to the Mortgage
Loans, (ii) certain extension fees and modification fees on or with respect to
any Mortgage Loans, and (iii) any income earned on deposits in the REO
Accounts.
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict between the Servicer's or Special Servicer's duties pursuant
to the Pooling and Servicing Agreement and the Servicer's or Special Servicer's
interest as a holder of Certificates, especially to the extent that certain
actions or events have a disproportionate effect on one or more Classes of
Certificates. The Pooling and Servicing Agreement provides that the Servicer or
Special Servicer shall administer the Mortgage Loans in accordance with the
Servicing Standard without regard to ownership of any Certificate by the
Servicer or Special Servicer or any affiliate thereof.
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REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports
Based on information provided in monthly reports (a form of which is
attached as Annex F to this Prospectus Supplement) prepared by the Servicer and
the Special Servicer and delivered to the Trustee, the Trustee will prepare and
forward on each Distribution Date to each Certificateholder, the Depositor, the
Servicer, the Special Servicer, the Underwriters, each Rating Agency and, if
requested, any potential investors in the Certificates:
1. A statement (a "Distribution Date Statement") setting forth, among other
things: (i) the amount of distributions, if any, made on such Distribution
Date to the holders of each Class of Certificates applied to reduce the
respective Certificate Balances thereof; (ii) the amount of distributions,
if any, made on such Distribution Date to holders of each Class of
Certificates allocable to (A) the Interest Accrual Amount and/or (B)
Prepayment Premiums; (iii) the number of outstanding Mortgage Loans and
the aggregate unpaid principal balance of the Mortgage Loans at the close
of business on the related Due Date; (iv) the number and aggregate unpaid
principal balance of Mortgage Loans, without giving effect to grace
periods (A) delinquent 30-59 days, (B) delinquent 60-89 days, (C)
delinquent 90 days or more, (D) that are Specially Serviced Mortgage Loans
that are not delinquent, or (E) as to which foreclosure proceedings have
been commenced; (v) with respect to any Mortgage Loan as to which the
related Mortgaged Property became an REO Property during the preceding
calendar month, the Stated Principal Balance and unpaid principal balance
of such Mortgage Loan as of the date such Mortgaged Property became an REO
Property; (vi) as to any Mortgage Loan repurchased by the Mortgage Loan
Seller or otherwise liquidated or disposed of during the related
Collection Period, the loan number thereof and the amount of proceeds of
any repurchase of a Mortgage Loan, liquidation proceeds and/or other
amounts, if any, received thereon during the related Collection Period and
the portion thereof included in the Available Funds for such Distribution
Date; (vii) with respect to any REO Property included in the Trust Fund as
of the close of business on the related Due Date, the loan number of the
related Mortgage Loan, the value of such REO Property based on the most
recent appraisal or valuation and the amount of any other income collected
with respect to any REO Property net of related expenses and other
amounts, if any, received on such REO Property during the related
Collection Period and the portion thereof included in the Available Funds
for such Distribution Date; (viii) with respect to any REO Property sold
or otherwise disposed of during the related Collection Period, (A) the
loan number of the related Mortgage Loan and the amount of sale proceeds
and other amounts, if any, received in respect of such REO Property during
the related Collection Period and the portion thereof included in the
Available Funds for such Distribution Date and (B) the date of the related
determination by the Special Servicer that it has recovered all payments
which it expects to be finally recoverable (the "Final Recovery
Determination"); (ix) the aggregate Certificate Balance of each Class of
Certificates before and after giving effect to the distributions and
allocations of Realized Losses made on such Distribution Date, separately
identifying any reduction in the aggregate Certificate Balance of each
such Class due to Realized Losses and/or Trust Fund expenses; (x) the
aggregate amount of Principal Prepayments made during the related
Collection Period and the aggregate amount of any Prepayment Interest
Shortfalls (not absorbed by the Servicer) for such Distribution Date; (xi)
the Pass-Through Rate, if any, applicable to each Class of Certificates
for such Distribution Date; (xii) the aggregate amount of the Servicing
Fee, Special Servicing Fee and any other servicing compensation retained
by or paid to the Servicer and the Special Servicer during the related
Collection Period; (xiii) the amount of losses, Trust Fund expenses and
Prepayment Interest Shortfalls, if any, incurred with respect to the
Mortgage Loans during the related Collection Period and in the aggregate
for all prior Collection Periods (except to the extent reimbursed or
paid); (xiv) the aggregate amount of Property Advances and P&I Advances
outstanding which have been made by the Servicer, the Trustee and the
Fiscal Agent; and (xv) the amount of any Appraisal Reduction Amounts
allocated during the related Collection Period on a loan-by-loan basis and
the total Appraisal Reduction Amounts as of such Distribution Date on a
loan-by-loan basis. In the case of information furnished pursuant to
subclauses (i), (ii) and (ix) above, the amounts shall be expressed as a
dollar amount in the aggregate for all Certificates of each applicable
Class and per single Certificate of a specified minimum denomination.
2. A report containing information regarding the Mortgage Loans as of the end
of the related Collection Period, which report shall contain substantially
the categories of information regarding the Mortgage Loans set forth in
this Prospectus Supplement in the tables under the caption "Description of
the Mortgage Pool--Additional Mortgage Loan Information" (calculated,
where applicable, on the basis of the most recent relevant information
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provided by the borrowers to the Servicer or the Special Servicer and by
the Servicer or the Special Servicer, as the case may be, to the Trustee)
and such information shall be presented in a tabular format substantially
similar to the format utilized in this Prospectus Supplement under such
caption and a loan-by-loan listing (in descending balance order) showing
loan name, property type, location, unpaid principal balance, Mortgage
Rate, paid through date, Maturity Date, net interest portion of the
Monthly Payment, principal portion of the Monthly Payment and any
Prepayment Premiums received. Such loan-by-loan listing will be made
available electronically; provided, however, the Trustee will provide any
Certificateholder with a written copy of such report upon written request.
Certain information made available in the Distribution Date Statements
referred to in item (1) above may be obtained by calling LaSalle Bank National
Association's ASAP System at (714) 852-5512 and requesting statement number 457
and certain information regarding the Mortgage Loans may be made available via
the Trustee's website at (714) 282-3990 or the Trustee's bulletin board service
at www.lnbabs.com or information may be made available by such other mechanism
as the Trustee may have in place from time to time.
Servicer Reports
The Servicer is required to deliver to the Trustee prior to each
Distribution Date, and the Trustee is to deliver to each Certificateholder, the
Depositor, each Underwriter, each Rating Agency and, if requested, any
potential investor in the Certificates, on each Distribution Date, the
following seven reports (forms of which are attached as Annex G to this
Prospectus Supplement):
(a) A "Comparative Financial Status Report" setting forth, to the extent
such information is provided by the related borrowers, among other things, the
occupancy, revenue, net operating income and DSCR for the Mortgage Loans as of
the latest financial information available immediately preceding the
presentation of such report for each of the following three periods; (i) the
most current available year-to-date, (ii) the most recent twelve months, (iii)
the previous two full fiscal years, and (iv) the "base year" (representing the
original underwriting information used as of the Cut-Off Date); provided,
however that DSCR will not be calculated for any Mortgaged Property for which
twelve months of operating income is not available (including for purposes of
clause (i)).
(b) A "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, were delinquent 30-59
days, delinquent 60-89 days, delinquent 90 days or more, current but specially
serviced, or in foreclosure but not REO Property, without regard to any notice
and cure or other grace periods.
(c) An "Historical Loan Modification Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the Due Date
immediately preceding the preparation of such report, have been modified
pursuant to the Pooling and Servicing Agreement (i) during the related
Collection Period and (ii) since the Cut-Off Date, showing the original and the
revised terms thereof.
(d) An "Historical Loss Estimate Report" setting forth, among other
things, as of the close of business on the Due Date immediately preceding the
preparation of such report, (i) the aggregate amount of liquidation proceeds
and liquidation expenses, both for the current period and historically, and
(ii) the amount of Realized Losses occurring during the related Collection
Period, set forth on a Mortgage Loan-by-Mortgage Loan basis.
(e) An "REO Status Report" setting forth, among other things, with respect
to each REO Property that was included in the Trust Fund as of the close of
business on the Due Date immediately preceding the preparation of such report,
(i) the acquisition date of such REO Property, (ii) the amount of income
collected with respect to any REO Property net of related expenses and other
amounts, if any, received on such REO Property during the related Collection
Period and (iii) the value of the REO Property based on the most recent
appraisal or other valuation thereof available to the Servicer as of such date
of determination (including any prepared internally by the Special Servicer).
(f) A "Watch List" setting forth, among other things, any Mortgage Loan
that is in jeopardy of becoming a Specially Serviced Mortgage Loan.
(g) A "Loan Payoff Notification Report" setting forth, among other things,
any Mortgage Loan for which written notice of pay-off has been received by the
Servicer.
(h) A "Premium Loan Report" setting forth certain information on Premium
Loans on a monthly basis in substantially the form of Annex G-10.
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The Servicer may make available each month via the Servicer's internet
website, initially located at www.bnyassetsolutions.com, (i) to any interested
party, the Delinquent Loan Status Report, the Historical Loan Modification
Report, the Historical Loss Estimate Report, the REO Status Report, the Loan
Payoff Notification Report, the Premium Loan Report, the CSSA loan setup file
and the CSSA Loan File, and, as a convenience for interested parties (and not
in furtherance of the distribution thereof under the securities laws) the
Prospectus and this Prospectus Supplement, and (ii) to any holder or
Certificate Owner of an Offered Certificate or any person identified to the
Trustee as a prospective transferee of an Offered Certificate or any interest
therein, the Rating Agencies, the Underwriters and to any of the parties to the
Pooling and Servicing Agreement (collectively, the "Privileged Persons"), with
the use of a password provided by the Servicer to such Privileged Person upon
receipt by the Servicer from such person of a certification in the form
attached to the Pooling and Servicing Agreement, the Watch List, the
Comparative Financial Status Report and the CSSA property file; provided,
however, that the Rating Agencies, the Underwriters and the parties to the
Pooling and Servicing Agreement will not be required to provide such
certification. For assistance with the Servicer's internet website, investors
may call (972) 401-8500.
The Trustee will provide Certificateholders with a written copy of the
standard CSSA loan file and CSSA property file upon request. The information
that pertains to Specially Serviced Mortgage Loans and REO Properties reflected
in such reports shall be based solely upon the reports delivered by the Special
Servicer to the Servicer at least two Business Days prior to the Servicer
Remittance Date. Absent manifest error, none of the Servicer, the Special
Servicer or the Trustee shall be responsible for the accuracy or completeness
of any information supplied to it by a borrower or third party that is included
in any reports, statements, materials or information prepared or provided by
the Servicer, the Special Servicer or the Trustee, as applicable.
The Servicer is also required to deliver to the Trustee the following
materials:
(a) Annually, on or before June 30 of each year, commencing with June 30,
2000, with respect to each Mortgaged Property and REO Property, an "Operating
Statement Analysis Report" together with copies of the operating statements and
rent rolls (but only to the extent the related borrower is required by the
Mortgage to deliver, or otherwise agrees to provide such information) for such
Mortgaged Property or REO Property as of the end of the preceding calendar
year. To the extent delivery is required in the related Mortgage Loan, the
Servicer (or the Special Servicer in the case of Specially Serviced Mortgage
Loans and REO Properties) is required to use efforts consistent with the
Servicing Standard to obtain said annual operating statements and rent rolls.
(b) Within thirty days of receipt by the Servicer (or within ten days of
receipt from the Special Servicer with respect to any Specially Serviced
Mortgage Loan or REO Property) of annual operating statements, if any, with
respect to any Mortgaged Property or REO Property, an "NOI Adjustment
Worksheet" for such Mortgaged Property (with the annual operating statements
attached thereto as an exhibit), presenting the computations made in accordance
with the methodology described in the Pooling and Servicing Agreement to
"normalize" the full year net operating income and debt service coverage
numbers used by the Servicer in the other reports referenced above.
The Trustee is to deliver a copy of each Operating Statement Analysis
Report and NOI Adjustment Worksheet that it receives from the Servicer to the
Depositor, the Special Servicer, each Underwriter and each Rating Agency
promptly after its receipt thereof. Upon request, any Certificateholder and any
potential investor in the Certificates may obtain a copy of any NOI Adjustment
Worksheet for a Mortgaged Property or REO Property in the possession of the
Trustee.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements relating to
actual distributions and such other information as may be required to enable
such Certificateholders to prepare their federal income tax returns. Such
information is to include the amount of original issue discount accrued on each
Class of Certificates held by persons other than holders exempted from the
reporting requirements and information regarding the expenses of the Trust
Fund.
The Servicer shall be entitled to conclusively rely upon, without
investigation or inquiry, the information and reports delivered to it by the
borrowers and Special Servicer without any duty or obligation to recompute,
verify or recalculate any of the amounts and other information stated therein
(and the reports delivered by the Servicer or the Special Servicer may include
any reasonable disclaimers with respect to any information provided by third
parties or with respect to assumptions required to be made in the preparation
of such reports as the Servicer or the Special Servicer deems appropriate).
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Other Information
The Pooling and Servicing Agreement requires that the Trustee, upon
reasonable prior notice, make available at its offices, during normal business
hours, for review by any holder of a Certificate, the Depositor, the Special
Servicer, the Servicer, any Rating Agency, any potential investor in the
Certificates or any other Person to whom the Depositor believes such disclosure
is appropriate, originals or copies of, among other things, the following items
(except to the extent not permitted by applicable law or under any of the
Mortgage Loan documents): (i) the Pooling and Servicing Agreement and any
amendments thereto, (ii) all Distribution Date Statements delivered to holders
of the relevant Class of Offered Certificates since the Closing Date, (iii) all
annual officers' certificates and accountants' reports delivered by the
Servicer and Special Servicer to the Trustee since the Closing Date regarding
compliance with the relevant agreements, (iv) the most recent property
inspection report prepared by or on behalf of the Servicer or the Special
Servicer with respect to each Mortgaged Property, (v) the most recent annual
operating statements, rent rolls (to the extent such rent rolls have been made
available by the related borrower) and retail "sales information," if any,
collected by or on behalf of the Servicer or the Special Servicer with respect
to each Mortgaged Property, (vi) any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Servicer and/or
the Special Servicer and (vii) any and all officers' certificates and other
evidence delivered to or by the Trustee to support the determination of the
Servicer, the Trustee or the Fiscal Agent, as the case may be, that any
Advance, if made, would not be recoverable. Copies of any and all of the
foregoing items will be available from the Trustee upon request; however, the
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS FOR MORTGAGED
PROPERTIES LOCATED IN CALIFORNIA
The following discussion contains a summary of certain legal aspects of
the Mortgage Loans or portions of Mortgage Loans secured by parcels in
California (approximately 19.4% of the Initial Pool Balance), which is general
in nature. The summary does not purport to be complete and is qualified in its
entirety by reference to the applicable federal and state laws governing the
Mortgage Loans.
Mortgage Loans in California generally are secured by deeds of trust on
the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust or by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is given for a statutory period of time
after which the mortgaged real estate may be sold by the Trustee, if foreclosed
pursuant to the Trustee's power of sale, or by court appointed sheriff under a
judicial foreclosure. Following a judicial foreclosure sale, the borrower or
its successor in interest may, for a period of up to one year, redeem the
property. California's "one action rule" requires the lender to exhaust the
security afforded under the deed of trust by foreclosure in an attempt to
satisfy the full debt before bringing a personal action (if otherwise
permitted) against the borrower for recovery of the debt, except in certain
cases involving environmentally impaired real property. California case law has
held that acts such as an offset of an unpledged account constitute violations
of such statutes. Violations of such statutes may result in the loss of some or
all of the security under the loan. Other statutory provisions in California
limit any deficiency judgment (if otherwise permitted) against the borrower
following a judicial sale to the excess of the outstanding debt over the
greater of (i) the fair market value of the property at the time of the public
sale and (ii) the amount of the winning bid in the foreclosure. Further, under
California law, once a property has been sold pursuant to a power-of-sale
clause contained in a deed of trust, the lender is precluded from seeking a
deficiency judgment from the borrower or, under certain circumstances,
guarantors. California statutory provisions regarding assignments of rents and
leases require that a lender whose loan is secured by such an assignment must
exercise a remedy with respect to rents as authorized by statute in order to
establish its right to receive the rents after an event of default. Among the
remedies authorized by statute is the lender's right to have a receiver
appointed under certain circumstances.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary and the discussion in the Prospectus under the
heading "Federal Income Tax Consequences--REMIC Certificates" are a general
discussion of the anticipated material federal income tax consequences of the
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purchase, ownership and disposition of the Offered Certificates and are based
on the advice of Cadwalader, Wickersham & Taft. The summary below and such
discussion in the Prospectus do not purport to address all federal income tax
consequences that may be applicable to particular categories of investors, some
of which may be subject to special rules. In addition, such summary and such
discussion do not address state, local or foreign tax issues with respect to
the acquisition, ownership or disposition of the Offered Certificates. The
authorities on which such summary and such discussion are based are subject to
change or differing interpretations, and any such change or interpretation
could apply retroactively. Such summary and such discussion reflect the
applicable provisions of the Code, as well as regulations (the "REMIC
Regulations") promulgated by the U.S. Department of the Treasury. Investors
should consult their own tax advisors in determining the federal, state, local,
foreign or any other tax consequences to them of the purchase, ownership and
disposition of Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Excess
Interest in respect of the Mortgage Loans (such portion of the Trust Fund, the
"Trust REMICs"), as two separate REMICs (the "Upper-Tier REMIC" and the
"Lower-Tier REMIC," respectively) within the meaning of Code Section 860D. The
Lower-Tier REMIC will hold the Mortgage Loans (exclusive of the Excess
Interest), proceeds therefrom, the Collection Account, the Distribution
Account, Interest Reserve Account, the REO Account, any REO Property, and
certain repurchase proceeds and will issue (i) certain uncertificated classes
of regular interests (the "Lower-Tier Regular Interests") to the Upper-Tier
REMIC and (ii) the Class LR Certificates, which will represent the sole class
of residual interests in the Lower-Tier REMIC. In the case of two Mortgage
Loans, the Lower-Tier REMIC will hold the regular interest in a REMIC comprised
of each such Mortgage Loan (each, a "Loan REMIC"). The Upper-Tier REMIC will
hold the Lower-Tier Regular Interests and the Upper-Tier Distribution Account
in which distributions thereon will be deposited, and will issue the Class A-1,
Class A-2, Class A-3, Class X, Class B, Class C, Class D, Class E, Class F and
Other Private Certificates (the "Regular Certificates"), which will represent
classes of regular interests, and the Class R Certificates as the sole class of
residual interests in the Upper-Tier REMIC. Qualification as a REMIC requires
ongoing compliance with certain conditions. Assuming (i) the making of
appropriate elections, (ii) compliance with the Pooling and Servicing Agreement
and (iii) compliance with any changes in the law, including any amendments to
the Code or applicable temporary or final regulations of the United States
Department of the Treasury ("Treasury Regulations") thereunder, in the opinion
of Cadwalader, Wickersham & Taft, each of the Upper-Tier REMIC, the Lower-Tier
REMIC and the Loan REMICs will qualify as a REMIC.
In addition, the Class A-2, Class A-3, Class B, Class C, Class D, Class E,
Class F and Other Private Certificates will represent pro rata undivided
beneficial interests in designated portions of the Excess Interest and the
related portions of the Excess Interest Distribution Account, which portion of
the Trust Fund will be treated as part of a grantor trust for federal income
tax purposes. Although holders of these Classes of Certificates will be
required to allocate their purchase price between their interests in the
regular interests in the Upper-Tier REMIC and their beneficial interests in
Excess Interest based on the relative fair market values of each, it is
anticipated that the rights to Excess Interest will have negligible value as of
the Closing Date. Excess Interest actually collected on the Mortgage Loans will
be distributed on the Certificates as and to the extent described in this
Prospectus Supplement. Excess Interest represents the right to certain stripped
coupons on the related Mortgage Loans. It is not entirely clear under the Code
when Excess Interest should be taxed to the Certificateholders. Because the
receipt of Excess Interest is uncertain and would occur only if the related
Mortgage Loan is outstanding after the interest rate thereon increases after
its Anticipated Repayment Date, for federal income tax reporting purposes, the
Trustee will report Excess Interest as income to the Certificateholders
entitled thereto only as it accrues after the related Anticipated Repayment
Date. The IRS may nevertheless seek to require that an assumed amount of Excess
Interest be included in distributions projected to be made on the Certificates
and that taxable income be reported based on the projected constant yield to
maturity of the Certificates, including such projected Excess Interest prior to
its actual receipt. If such projected Excess Interest were not actually
received, presumably the Certificateholder would be allowed to claim a
deduction or reduction in gross income at the time such unpaid Excess Interest
had been projected to be received. You should consider consulting your own tax
advisors concerning the treatment of Excess Interest.
The Offered Certificates will be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" for
domestic building and loan associations (but only to the extent of the
allocable portion of the Mortgage Loans secured by Multifamily Properties and
Mobile Home Park Properties, respectively) and "real estate assets" for real
estate investment trusts, to the extent described in the Prospectus. As of the
Cut-Off Date, Multifamily Loans and the Mobile Home Park Loan represent
approximately 11.9% and approximately 0.4%, respectively, of the Mortgage Loans
by unpaid principal balance. Mortgage Loans which have been defeased with U.S.
Treasury obligations will not qualify for the foregoing treatments.
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The interest of the Offered Certificates in the related regular interests
in the Upper-Tier REMIC generally will be treated as newly originated debt
instruments for federal income tax purposes. Beneficial owners of the Offered
Certificates will be required to report income on such regular interests in
accordance with the accrual method of accounting. It is anticipated that the
Class Certificates will, and that the Class Certificates will not, be
issued with original issue discount for federal income tax purposes. See
"Federal Income Tax Consequences" and "REMIC Certificates--Taxation of Regular
Certificates--Premium" in the Prospectus.
For purposes of accruing original issue discount, determining whether such
original issue discount is de minimis and amortizing any premium, the
Prepayment Assumption will be 0% CPR, with all ARD Loans prepaying in full on
their related Anticipated Repayment Dates. No representation is made as to the
rate, if any, at which the Mortgage Loans will actually prepay.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to certain Classes of Offered Certificates as and to the extent
described in this Prospectus Supplement. It is not entirely clear under the
Code when the amount of a Prepayment Premium should be taxed to the
Certificateholder. For federal income tax reporting purposes, Prepayment
Premiums will be treated as income to the Certificateholders only after the
Servicer's actual receipt thereof. The IRS may nevertheless seek to require
that an assumed amount of Prepayment Premiums be included in distributions
projected to be made on the Certificates and that taxable income be reported
based on the projected constant yield to maturity of the Certificates,
including such projected prepayment prior to their actual receipt. If such
projected Prepayment Premiums were not actually received, presumably the
Certificateholder would be allowed to claim a deduction or reduction in gross
income at the time such unpaid Prepayment Premiums had been projected to be
received. Moreover, it appears that Prepayment Premiums are to be treated as
ordinary income rather than capital gain. The correct characterization of such
income is not entirely clear, however, and you should consider consulting your
own tax advisors concerning the treatment of Prepayment Premiums.
For a discussion of the tax consequences of the ownership of Offered
Certificates by any person who is not a citizen or resident of the United
States, a corporation or partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or is
a foreign estate or trust, see "Federal Income Tax Consequences" and "REMIC
Certificates--Taxation of Certain Foreign Investors--REMIC Regular
Certificates" in the Prospectus.
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<PAGE>
CERTAIN ERISA CONSIDERATIONS
The purchase by or transfer to a retirement plan or other employee benefit
plan or arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or a
governmental plan (as defined in Section 3(32) of ERISA) that is subject to any
federal, state or local law ("Similar Law") which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (each of which are
hereinafter referred to as a "Plan"), or a collective investment fund in which
such Plans are invested, an insurance company using the assets of separate
accounts or general accounts which include assets of Plans (or which are deemed
pursuant to ERISA or any Similar Law to include assets of Plans) or other
Persons acting on behalf of any such Plan or using the assets of any such Plan
of the Subordinated Offered Certificates is restricted. See "Description of the
Offered Certificates--Transfer and Exchanges; Transfer Restrictions" in this
Prospectus Supplement. Accordingly, except as specifically referenced in this
Prospectus Supplement, the following discussion does not purport to discuss the
considerations under ERISA, Section 4975 of the Code or Similar Law with
respect to the purchase, holding or disposition of the Subordinated Offered
Certificates and for purposes of the following discussion all references to the
Offered Certificates are deemed to exclude the Subordinated Offered
Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a Plan
in the Offered Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by the
United States Department of Labor (the "Department") that may be applicable to
an investment by a Plan in the Offered Certificates. The Department has granted
to Goldman Sachs and NSI individual prohibited transaction exemptions (each, a
"PTE") as follows: PTE 89-88 (54 Fed. Reg. 42,581 (October 17, 1989), as
amended, (55 Fed. Reg. 48,939 (November 23, 1990)), and PTE 93-32 (58 Fed. Reg.
28,623 (May 14, 1993)), each as amended, PTE 97-34 (62 Fed. Reg. 39021 (July
21, 1997)) (the "Exemptions"), each of which generally exempts from the
application of certain of the prohibited transaction provisions of Section 406
of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code,
and the civil penalties imposed by 502(i) of ERISA, transactions relating to
(i) the purchase, sale and holding of certain pass-through certificates of the
same general nature as the Class A-1, Class A-2 and Class A-3 Certificates (the
"Senior Offered Certificates") by or on behalf of Plans and (ii) the servicing
and operation of mortgage pools such as the Mortgage Pool, provided that
certain conditions are satisfied. See "ERISA Considerations" in the Prospectus.
Among the conditions that must be satisfied for the Exemptions to apply to
the acquisition, holding and resale of the Senior Offered Certificates are the
following:
(1) The acquisition of Senior Offered Certificates by a Plan is on terms
(including the price for the 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 Senior Offered Certificates
acquired by the Plan are not subordinated to the rights and interests evidenced
by the other Certificates of the Trust Fund;
(3) The Senior Offered Certificates acquired by the Plan have received a
rating at the time of such acquisition that is one of the three highest generic
rating categories from any of Fitch IBCA, Moody's, S&P or Duff & Phelps Credit
Rating Co. ("DCR");
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of Senior Offered Certificates represents not
more than reasonable compensation for underwriting the Senior Offered
Certificates. The sum of all payments made to and retained by the Depositor
pursuant to the assignment of the Mortgage Loans to the Trust Fund represents
not more than the fair market value of such Mortgage Loans. The sum of all
payments made to and retained by the Servicer and any other servicer represents
not more than reasonable compensation for such person's services under the
Pooling and Servicing Agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(6) The Plan investing in the Senior Offered Certificates 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, as amended
(the "Securities Act").
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<PAGE>
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the type
that have been included in other investment pools;
(b) certificates in such other investment pools must have been rated in
one of the three highest rating categories of Fitch IBCA, Moody's, S&P or DCR
for at least one year prior to the Plan's acquisition of the Senior Offered
Certificates pursuant to the Exemptions; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior
to any Plan's acquisition of the Senior Offered Certificates pursuant to the
Exemptions.
If all of the conditions of the Exemptions are met, whether or not a
Plan's assets would be deemed to include an ownership interest in the Mortgage
Loans in the Mortgage Pool, the acquisition, holding and resale of the Senior
Offered Certificates by Plans would be exempt from the prohibited transaction
provisions of ERISA and the Code.
Moreover, the Exemptions can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust, provided that, among other requirements, (a) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each class of certificates in which
Plans have invested is acquired by persons independent of the Restricted Group
(as defined below) and at least fifty percent of the aggregate interest in the
trust is acquired by persons independent of the Restricted Group (as defined
below); (b) such fiduciary (or its affiliate) is an obligor with respect to
five percent or less of the fair market value of the obligations contained in
the trust; (c) the Plan's investment in certificates of any class does not
exceed twenty-five percent of all of the certificates of that class outstanding
at the time of the acquisition; and (d) immediately after the acquisition no
more than twenty-five percent of the assets of the Plan with respect to which
such person is a fiduciary are invested in certificates representing an
interest in one or more trusts containing assets sold or served by the same
entity.
The Exemptions do not apply to the purchasing or holding of Senior Offered
Certificates by Plans sponsored by the Depositor, the Underwriters, the
Trustee, the Servicer, the Special Servicer, any obligor with respect to
Mortgage Loans included in the Trust Fund constituting more than five percent
of the aggregate unamortized principal balance of the assets in the Trust Fund,
or any affiliate of such parties (the "Restricted Group").
The Depositor believes that the conditions to the applicability of the
Exemptions will generally be met with respect to the Senior Offered
Certificates, other than possibly those conditions which are dependent on facts
unknown to the Depositor or which it cannot control, such as those relating to
the circumstances of the Plan purchaser or the Plan fiduciary making the
decision to purchase any such Class of Certificates. However, before purchasing
a Senior Offered Certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive relief provided by the
Exemptions or the availability of any other PTE, and whether the conditions of
any such exemption will be applicable to the Senior Offered Certificates. The
Department, in granting the Exemptions, may not have considered interests in
pools of the exact nature as some of the Senior Offered Certificates. A
fiduciary of a Plan that is a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law. See "Description of the Offered Certificates--Transfer
and Exchanges; Transfer Restrictions" in this Prospectus Supplement.
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 the Code to such investment. See "ERISA Considerations" in the
Prospectus.
Sections I and III of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") exempt from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operations of a
trust (such as the Trust Fund) in which an insurance company general account
has an interest as a result of its acquisition of certificates issued by the
trust and the purchase of such Certificates by the insurance company general
account, in each case provided that certain conditions are satisfied. If these
conditions are met, insurance company general accounts would be allowed to
purchase certain Classes of Certificates (such as the Class B, Class C, Class
D, Class E and Class F Certificates) that do not meet the requirements of the
Exemptions solely because they (a) are subordinated to other Classes of
Certificates in the Trust
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or (b) have not received a rating at the time of the purchase in one of the
three highest rating categories from DCR, Fitch, Moody's and S&P. All other
conditions of the Exemptions would have to be satisfied in order for PTCE 95-60
to be available. Before purchasing Class B, Class C, Class D, Class E or Class
F Certificates, an insurance company general account seeking to rely on
Sections I and III of PTCE 95-60 should itself confirm that all applicable
conditions and other requirements have been satisfied.
BECAUSE THE CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F (THE
"SUBORDINATED OFFERED CERTIFICATES") ARE SUBORDINATE TO ONE OR MORE CLASSES OF
CERTIFICATES, THE PURCHASE AND HOLDING OF THE SUBORDINATED OFFERED CERTIFICATES
BY OR ON BEHALF OF A PLAN MAY RESULT IN "PROHIBITED TRANSACTIONS" WITHIN THE
MEANING OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW. ACCORDINGLY,
EACH PROSPECTIVE TRANSFEREE OF A SUBORDINATED OFFERED CERTIFICATE THAT IS A
DEFINITIVE CERTIFICATE WILL BE REQUIRED TO (A) DELIVER TO THE DEPOSITOR, THE
CERTIFICATE REGISTRAR AND THE TRUSTEE A REPRESENTATION LETTER SUBSTANTIALLY IN
THE FORM SET FORTH AS AN EXHIBIT TO THE POOLING AND SERVICING AGREEMENT STATING
THAT SUCH TRANSFEREE IS NOT A PLAN (INCLUDING A GOVERNMENTAL PLAN SUBJECT TO
ANY SIMILAR LAW) OR A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN, OTHER THAN AN INSURANCE COMPANY INVESTING THE ASSETS OF ITS GENERAL
ACCOUNT UNDER CIRCUMSTANCES WHEREBY THE PURCHASE AND SUBSEQUENT HOLDING OF THE
SUBORDINATED OFFERED CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE
SERVICING, MANAGEMENT AND OPERATION OF THE TRUST FUND WOULD BE EXEMPT FROM THE
PROHIBITED TRANSACTION PROVISIONS OF ERISA AND THE CODE UNDER SECTIONS I AND
III OF PTE 95-60, OR (B) PROVIDE (I) AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE CERTIFICATE REGISTRAR THAT THE PURCHASE OF THE
SUBORDINATED OFFERED CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST
FUND BEING DEEMED TO BE "PLAN ASSETS" AND SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA, THE CODE OR ANY SIMILAR LAW, WILL NOT CONSTITUTE OR RESULT IN A
PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR 407 OF ERISA OR
SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE DEPOSITOR, THE SERVICER, THE
SPECIAL SERVICER, THE TRUSTEE, THE CERTIFICATE REGISTRAR OR THE FISCAL AGENT TO
ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND SERVICING
AGREEMENT AND (II) SUCH OTHER OPINIONS OF COUNSEL, OFFICERS' CERTIFICATES AND
AGREEMENTS AS THE CERTIFICATE REGISTRAR MAY REQUIRE IN CONNECTION WITH SUCH
TRANSFER. THE PURCHASER OR TRANSFEREE OF ANY INTEREST IN A SUBORDINATED OFFERED
CERTIFICATE THAT IS NOT A DEFINITIVE CERTIFICATE SHALL BE DEEMED TO REPRESENT
THAT IT IS NOT A PERSON DESCRIBED IN CLAUSE (A) ABOVE. THE SUBORDINATED OFFERED
CERTIFICATES WILL CONTAIN A LEGEND DESCRIBING SUCH RESTRICTIONS ON TRANSFER AND
THE POOLING AND SERVICING AGREEMENT WILL PROVIDE THAT ANY ATTEMPTED OR
PURPORTED TRANSFER IN VIOLATION OF THESE TRANSFER RESTRICTIONS OR THAT RESULTS
IN A PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE WILL BE
NULL AND VOID AB INITIO. SEE "DESCRIPTION OF THE OFFERED CERTIFICATES--TRANSFER
AND EXCHANGES; TRANSFER RESTRICTIONS" IN THIS PROSPECTUS SUPPLEMENT.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriters that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or any particular Plan, or that this investment is appropriate for Plans
generally or any particular Plan.
LEGAL INVESTMENT
Any Class of Offered Certificates rated at least "AA-" (or the equivalent)
by at least one Rating Agency (or any other nationally recognized statistical
rating organization) will constitute "mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
Except as to the status of certain Classes of Offered Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase the Offered Certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Offered Certificates. Accordingly, all institutions
whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements or review by regulatory
authorities should consult with their own legal advisors in determining whether
and to what extent the Offered Certificates constitute a legal investment or
are subject to investment, capital or other restrictions. See "Legal
Investment" in the Prospectus.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor and
the Mortgage Loan Sellers by Cadwalader, Wickersham & Taft, New York, New York
and for the Underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New
York. In addition, certain federal income tax matters will be passed upon for
the Depositor by Cadwalader, Wickersham & Taft.
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RATING
It is a condition to the issuance of the Offered Certificates that (i) the
Class A-1, Class A-2 and Class A-3 Certificates be rated "AAA" by Fitch IBCA,
Inc. ("Fitch IBCA"), "Aaa" by Moody's Investors Service, Inc. ("Moody's") and
"AAA" by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("S&P", and together with Moody's and Fitch IBCA, the "Rating
Agencies"), (ii) the Class B Certificates be rated "AA" by Fitch IBCA, "Aa2" by
Moody's and "AA" by S&P, (iii) the Class C Certificates be rated "A" by Fitch
IBCA, "A2" by Moody's and "A" by S&P, (iv) the Class D Certificates be rated
"A-" by Fitch IBCA, "A3" by Moody's and "A-" by S&P, (v) the Class E
Certificates be rated "BBB" by Fitch IBCA, "Baa2" by Moody's and "BBB" by S&P
and (vi) the Class F Certificates be rated "BBB-" by Fitch IBCA, "Baa3" by
Moody's and "BBB-" by S&P. The Rated Final Distribution Date of each Class of
Offered Certificates is November 17, 2031.
The Rating Agencies' ratings on the Offered Certificates address the
likelihood of the timely payment of interest and the ultimate repayment of
principal by the Rated Final Distribution Date. A security rating does not
address the likelihood or frequency of prepayments (either voluntary or
involuntary) or the possibility that Certificateholders might suffer a lower
than anticipated yield due to prepayments, nor does a security rating address
the likelihood of receipt of Prepayment Premiums or Excess Interest. A security
rating does not represent any assessment of the yield to maturity that
investors may experience. The ratings do not address the fact that the
Pass-Through Rates of the Offered Certificates, to the extent that they are
based on the Weighted Average Net Mortgage Pass-Through Rate, will be affected
by changes therein. Also, a security rating does not represent any assessment
of the yield to maturity that investors may experience in the event of
delinquencies or rapid prepayments of the Mortgage Loans (including both
voluntary and involuntary prepayments). In general, the ratings thus address
credit risk and not prepayment risk. See "Risk Factors and Other Special
Considerations" in this Prospectus Supplement and "Yield Considerations" in the
Prospectus. A security rating does not address any tax treatment of the
securities. With respect to the Credit Tenant Loans, a downgrade, withdrawal or
qualification in the credit rating of the related Credit Tenants or Guarantors
or in the claims paying rating of any insurer under a residual value insurance
policy may have a related adverse affect on the rating of the Offered
Certificates.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so, what
such rating would be. A rating assigned to the Offered Certificates by a rating
agency that has not been requested by the Depositor to do so may be lower than
the rating assigned by the Rating Agencies pursuant to the Depositor's request.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to review,
revision, suspension, qualification or withdrawal at any time by the assigning
rating agency. A review, revision, suspension, downgrade, qualification or
withdrawal of a rating may have an adverse effect on the market price of the
Offered Certificates.
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UNDERWRITING
The Depositor and the Underwriters for the offering named below have
entered into an underwriting agreement with respect to the Offered
Certificates. Subject to certain conditions, each Underwriter has severally
agreed to purchase the Certificate Balance of Offered Certificates indicated in
the following table:
<TABLE>
<CAPTION>
Certificate Balance of Offered Certificates
------------------------------------------------------------------------------------
Underwriters Class A-1 Class A-2 Class A-3 Class B Class C Class D Class E Class F
- ------------------------------------------ ----------- ----------- ----------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Goldman, Sachs & Co ...................... $ $ $ $ $ $ $ $
Nomura Securities International, Inc .....
Donaldson, Lufkin & Jenrette
Securities Corporation ..................
Total .................................... $ $ $ $ $ $ $ $
======== ======== ======== ======= ======= ======= ======= =======
</TABLE>
Goldman, Sachs & Co., and Nomura Securities International, Inc. will act
as co-lead managers and joint bookrunners with respect to the Offered
Certificates.
Each Underwriter intends to sell its allocation of the Offered
Certificates from time to time in individually negotiated transactions or
otherwise at varying prices to be determined at the time of sale.
The Offered Certificates are a new issue of securities with no established
trading market. The Depositor has been advised by the Underwriters that the
Underwriters intend to make a market in the Offered Certificates but are not
obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Offered Certificates.
In connection with the offering, the Underwriters may purchase and sell
the Offered Certificates in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the Underwriters of a greater
number of Offered Certificates than they are required to purchase in the
offering. Stabilizing transactions consist of certain bids or purchases made
for the purpose of preventing or retarding a decline in the market price of the
Offered Certificates while the Offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased Offered
Certificates sold by or for the account of such Underwriter in stabilizing or
short covering transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Offered Certificates. As a result, the price of
the Offered Certificates may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued by the Underwriters at any time. These transactions may be
effected in the over-the-counter market or otherwise.
The Depositor estimates that its share of the total expenses of the
Offering, excluding underwriting discounts and commissions, will be
approximately $ . The Underwriters and their affiliates have performed
certain investment banking and advisory and general financing and banking
services for the Depositor and its affiliates from time to time for which they
have received customary fees and expenses.
The Depositor and an affiliate thereof have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
This Prospectus Supplement may only be issued or passed on in the United
Kingdom to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom this Prospectus Supplement may otherwise lawfully be
issued or passed on.
The Trust Fund described in this Prospectus Supplement may only be
promoted (whether by the issuing or passing on of documents as referred to in
the foregoing restriction or otherwise) by an authorized person under Chapter
III of the Financial Services Act 1986 of the United Kingdom ("FSA") to a
person in the United Kingdom if that person is a kind described in section
76(2) of the FSA or as permitted by the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991 (as amended).
The Offered Certificates may not be offered or sold directly or indirectly
in Japan and this Prospectus Supplement may not be distributed or circulated in
Japan except in circumstances that do not constitute an offer to the public
within the meaning of the Securities and Exchange Law of Japan.
S-149
<PAGE>
INDEX OF SIGNFICANT DEFINITIONS
<TABLE>
<CAPTION>
PAGE
<S> <C>
%
% of Total SF ......................................S-77
1
1998 NOI ...........................................S-75
2
208 South LaSalle ARD ..............................S-70
208 South LaSalle Borrower .........................S-70
208 South LaSalle Loan .............................S-70
208 South LaSalle Maturity Date ....................S-70
208 South LaSalle Property .........................S-70
208 South LaSalle Property Manager .................S-71
8
80 John Street Borrower ............................S-48
80 John Street Loan ..........................S-48, S-61
80 John Street Note ................................S-61
80 John Street Property ............................S-48
A
ACCOR ........................................S-37, S-73
ACCOR-M-Six-III Borrower ...........................S-73
ACCOR-M-Six-III Credit Lease .......................S-73
ACCOR-M-Six-III Credit Tenant ......................S-72
ACCOR-M-Six-III Credit Tenant Lease ................S-59
ACCOR-M-Six-III Credit Tenant Lease Properties .....S-59
ACCOR-M-Six-III Credit Tenant Loan .................S-72
ACCOR-M-Six-III Maturity Date ......................S-73
ACCOR-M-Six-III Note ...............................S-72
ACCOR-M-Six-III Property ...........................S-72
ACMs ...............................................S-43
Actual On-going Capital Reserve ....................S-76
Actual/360 Loan ....................................S-91
ADA ................................................S-48
Administrative Fee ................................S-136
Administrative Fee Rate ...........................S-136
Advance Rate ......................................S-120
Advances ...................................S-119, S-122
Allocated Loan Amount ..............................S-76
Amortization Term ..................................S-76
anchor tenant ......................................S-36
Annual Debt Service ................................S-76
Annual Minimum Fee .................................S-69
Anticipated Remaining Term .........................S-76
Anticipated Repayment Date ...................S-28, S-76
Anticipated Repayment Date LTV/PTV .................S-76
Appraisal Reduction Amount .............S-20, S-90, S-97
Appraisal Reduction Event ..........................S-96
Appraisal Reduction Events .........................S-20
Appraised Value ....................................S-76
ARD ................................................S-76
ARD Loan ...........................................S-62
ARD Note .....................................S-21, S-62
ARD Notes ..........................................S-45
Assumed Final Distribution Date ...............S-2, S-11
Assumed Scheduled Payment ..........................S-91
Audit/Agreed Upon Procedures Forward ...............S-76
Audit/Agreed Upon Procedures Upfront ...............S-76
Auerbach Borrower ..................................S-41
Auerbach Loan ......................................S-41
Auerbach Mezzanine Borrower ........................S-41
Auerbach Mezzanine Loan ............................S-41
Available Funds ....................................S-88
B
Balloon Note .......................................S-46
Balloon Payments ...................................S-45
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Bank of America Loan ...............................S-41
Base Interest Rate .................................S-56
Beneficial Title Exceptions .......................S-123
BGK Loans ..........................................S-48
Bloomfield .........................................S-10
Bloomfield Purchase Agreement .....................S-117
Bondable Leases ....................................S-57
Business Day .......................................S-64
C
Cash Collateral Accounts ..........................S-121
CBE ...............................................S-109
CCA ..........................................S-9, S-114
Cedel ..............................................S-13
Cedel Participants .................................S-99
Center .............................................S-69
CERCLA .............................................S-43
Certificate Balance ................................S-87
Certificate Owners ................................S-100
Certificate Registrar ..............................S-97
Certificateholder ..................................S-97
Cinemark Credit Tenant Leases ......................S-60
Cinemark Credit Tenant Loan ........................S-59
Circuit City Credit Tenant Leases ..................S-59
Class ..............................................S-87
Closing Date .......................................S-11
CMAT .........................................S-12, S-53
CMAT Pari Passu Note .........................S-27, S-57
Code ..............................................S-101
Co-Lender ..........................................S-57
Collateral Substitution Deposit ....................S-64
Collection Account ................................S-121
Collection Period ............................S-11, S-89
Comparative Financial Status Report ...............S-140
Constant Prepayment Rate ..........................S-104
Cooperative ........................................S-99
Corrected Mortgage Loan ...........................S-137
CPR ...............................................S-104
Credit Tenant ......................................S-57
Credit Tenant Lease ..........................S-38, S-57
Credit Tenant Loans ................................S-57
Credit Tenant Properties ...........................S-57
Crossover Date .....................................S-93
Cut-Off Date .......................................S-11
Cut-Off Date Allocated Loan Amount .................S-76
Cut-Off Date Principal Balance ...............S-24, S-77
Cut-Off Date Principal Balance/Unit ................S-77
D
D7 Cut-Off Date ....................................S-57
D7 Securitization ............................S-27, S-57
DCR ...............................................S-145
Declaration ........................................S-69
Default Interest ...................................S-89
Default Rate .......................................S-89
Defeasance Lock-out Period .........................S-64
Defeasance Option ..................................S-64
Definitive Certificate .............................S-97
Delinquency ........................................S-90
Delinquent Loan Status Report .....................S-140
Department ........................................S-145
Depositaries .......................................S-98
Depositor ............................................ 1
Directing Holders .................................S-132
Discount Rate ......................................S-94
</TABLE>
S-150
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Discount Rate Fraction ............................S-93
Distribution Account .............................S-121
Distribution Date ...........................S-11, S-87
Distribution Date Statement ......................S-139
DLJ ................................................S-9
DSCR ..............................................S-22
DTC ...............................................S-13
Dual Amortization Loans ...............S-28, S-50, S-61
Due Date ..........................................S-62
E
Eligible Bank ....................................S-122
encumbrance ......................................S-123
ERISA .....................................S-101, S-145
Euroclear .........................................S-13
Euroclear Operator ................................S-99
Euroclear Participants ............................S-99
Event of Default .................................S-127
Excess Cash Flow ..................................S-62
Excess Interest .............................S-62, S-89
Excess Rate .................................S-62, S-89
Exemptions .......................................S-145
Exposition Center Loan ............................S-53
Exposition Center Property ........................S-53
F
FF&E ........................................S-22, S-65
FHLMC ............................................S-125
Final Recovery Determination .....................S-139
Fiscal Agent ................................S-9, S-135
Fitch IBCA .......................................S-148
Form 8-K .............................S-15, S-86, S-114
FSA ..............................................S-149
FSL ...............................................S-39
G
Gilbert ...........................................S-48
GLA ...............................................S-77
Goldman Sachs ......................................S-9
Guarantor .........................................S-57
H
Historical Loan Modification Report ..............S-140
Historical Loss Estimate Report ..................S-140
Holders of Definitive Certificates ...............S-100
Hotel Loan ........................................S-53
Hotel Property ....................................S-53
I
Indirect Participants .............................S-98
Industrial Loan ...................................S-53
Industrial Property ...............................S-53
Initial Pool Balance ..............................S-53
Interest Accrual Amount ...........................S-89
Interest Accrual Period ...........................S-90
Interest Reserve Account .........................S-121
Interest Reserve Amounts .........................S-121
Interest Shortfall ................................S-90
Interested Party .................................S-132
L
La Jolla Borrower .................................S-34
La Jolla Plan .....................................S-34
Lead Lender .......................................S-57
Lease Expiration Date .............................S-77
Liquidation Fee ..................................S-138
Liquidation Fee Rate .............................S-138
Loan Payoff Notification Report ..................S-140
Loan REMIC .......................................S-143
Loan-to-Value Ratio ...............................S-22
Lockbox Accounts .................................S-120
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Lock-out Period .............................S-29, S-63
Lower-Tier Regular Interests .....................S-143
Lower-Tier REMIC ...........................S-13, S-143
LTV ...............................................S-56
LUSTs .............................................S-44
M
MAI appraiser .....................................S-76
Marina Pacifica Borrower ..........................S-32
Marina Pacifica Shopping Center Property ..........S-34
Maturity Date .....................................S-21
Mobile Home Park Loan .............................S-53
Mobile Home Park Property .........................S-53
Monthly Debt Service Payment ................S-29, S-62
Monthly Mortgage Loan Payments ....................S-67
Monthly Operating Expenses ........................S-67
Monthly Payment .............................S-77, S-89
Monthly Payments ..................................S-62
Monthly Rental Payments ...........................S-58
Moody's ..........................................S-148
Mortgage ..........................................S-54
Mortgage Loan .....................................S-53
Mortgage Loan Assumptions ........................S-104
Mortgage Loan Purchase and Sale Agreement .........S-53
Mortgage Loan Sellers ..............................S-9
Mortgage Pass-Through Rate ........................S-91
Mortgage Pool .....................................S-53
Mortgage Rate ...............................S-28, S-91
Mortgaged Properties ..............................S-53
Most Recent NOI ...................................S-75
Movie Theater Loan ................................S-53
Movie Theater Property ............................S-53
Mr. Achenbaum .....................................S-48
Multifamily Loan ..................................S-53
Multifamily Property ..............................S-53
N
NACC ..............................................S-10
NACC/CCA ..........................................S-10
Net Base Rate .....................................S-94
Net Cash Flow .....................................S-55
Net Cash Flow DSCR ................................S-77
Net Default Interest ..............................S-89
Net Mortgage Pass-Through Rate ....................S-90
Net REO Proceeds ..................................S-89
NHA .........................................S-9, S-114
NOI Adjustment Worksheet .........................S-141
NOI DSCR ..........................................S-77
Note ..............................................S-54
Notional Amount .............................S-12, S-87
NSI ................................................S-9
O
Occupancy .........................................S-77
Office Loan .......................................S-53
Office Property ...................................S-53
Operating Statement Analysis Report ..............S-141
Original Loan Balance .............................S-77
Originators .......................................S-54
Other ACCOR-M-Six-III Note ........................S-72
Other Pari Passu Note .......................S-27, S-57
Other Private Certificates .........................S-8
P
Participants ......................................S-97
Pass-Through Rate ...........................S-12, S-87
Percentage Interest ...............................S-88
Permitted Encumbrances ............................S-54
Permitted Investments ............................S-122
</TABLE>
S-151
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Plan .......................................S-101, S-145
Pool Loan .........................................S-23
Pool Loans ...................................S-53, S-66
Pooling and Servicing Agreement ...................S-114
Preferred Equity Loans .............................S-41
Preferred Interest Holder ..........................S-41
Premium ......................................S-46, S-56
Premium Loan Report ...............................S-140
Premium Loans ..........................S-26, S-46, S-56
Prepayment Assumptions ............................S-104
Prepayment Interest Excess .........................S-96
Prepayment Interest Shortfall ......................S-90
Prepayment Premium ...........................S-29, S-63
Primary Term .......................................S-58
Prime Rate ........................................S-120
Principal Allocation Fraction ......................S-93
Principal Distribution Amount ......................S-91
Principal Prepayments ..............................S-89
Private Certificates ...............................S-87
Privileged Persons ................................S-141
Proceeds-to-Value Ratio ............................S-77
Property Advance ...................................S-20
Property Advances .................................S-119
Prospectus ..........................................S-2
Prospectus Supplement ...............................S-2
PTCE 95-60 ........................................S-146
PTE ...............................................S-145
PTV ....................................S-22, S-56, S-77
Q
quasi-anchored .....................................S-36
R
Rated Final Distribution Date .....................S-103
Rating Agencies ...................................S-148
RCRA ...............................................S-43
Realized Loss ......................................S-94
Record Date ........................................S-87
Reference Pass-Through Rate ........................S-94
Regular Certificates ..............................S-143
Release Date .......................................S-64
Remaining Lock-out .................................S-77
REMIC ..............................................S-13
REMIC Regulations .................................S-143
REO Account ........................................S-87
REO Mortgage Loan ..................................S-92
REO Property .......................................S-87
REO Status Report .................................S-140
Repurchase Price ..................................S-117
Reserve Accounts ...................................S-54
Restricted Group ..................................S-146
Retail Loan ........................................S-53
Retail Property ....................................S-53
Return of Premium Amount .....................S-46, S-56
Rules ..............................................S-99
R.V.I. America .....................................S-39
RVI Policies .......................................S-39
S
SEC ..........................................S-2, S-114
Securities Act ...............................S-2, S-145
SEL .................................................S-3
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Senior Offered Certificates .......................S-145
Servicer ..........................................S-135
Servicer Remittance Date ..........................S-119
Servicing Compensation ............................S-136
Servicing Fee .....................................S-136
Servicing Standard ................................S-118
Similar Law .......................................S-145
SMMEA ..............................................S-14
S&P ...............................................S-148
Special Servicer ..................................S-136
Special Servicer's Appraisal Reduction Amount
Estimate..........................................S-96
Special Servicing Fee .............................S-137
Special Servicing Fee Rate ........................S-137
Specially Serviced Mortgage Loan ...........S-124, S-137
Stated Principal Balance ...........................S-95
Subordinate Sequential Certificates ................S-18
Subordinated Offered Certificates .................S-147
T
Tenant .............................................S-78
Termination Event .................................S-127
Terms and Conditions ..............................S-100
Total ACCOR-M-Six-III Credit Tenant Loan ...........S-72
Total Credit Tenant Loan ...........................S-57
Treasury Regulations ..............................S-143
Trust Fund .........................................S-53
Trust REMICs ......................................S-143
Trustee ......................................S-9, S-135
Trustee Fee .......................................S-134
Type ...............................................S-78
U
Underwriters ..........................................1
Underwritten NOI ...................................S-78
Underwritten Occupancy .............................S-78
Underwritten On-going Capital Reserves .............S-78
Units ..............................................S-78
Unscheduled Payments ...............................S-89
Updated Appraisal .................................S-129
Upper-Tier REMIC ..................................S-143
USTs ...............................................S-44
U/W Occupancy ......................................S-78
V
Value ..............................................S-76
Voting Rights .....................................S-129
W
Warminster Town Center Property ....................S-34
Watch List ........................................S-140
Weighted Average Net Mortgage Pass-Through Rate S-90
Weighted Average Pass-Through Rate .................S-90
Westin Denver Tabor Center ARD .....................S-69
Westin Denver Tabor Center Borrower ................S-68
Westin Denver Tabor Center Loan ....................S-68
Westin Denver Tabor Center Maturity Date ...........S-68
Westin Denver Tabor Center Property ................S-68
Westin Denver Tabor Center Property Manager ........S-69
Work Out Fee ......................................S-137
Work Out Fee Rate .................................S-137
Y
Year Built/Renovated ...............................S-78
</TABLE>
S-152
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX A: CHARACTERISTICS OF THE NOTES IN THE POOL
<TABLE>
<CAPTION>
BALLOON/ANTICIPATED
LOAN LOAN CUT-OFF DATE PRINCIPAL MONTHLY REPAYMENT DATE
# LOAN NAME TYPE BALANCE PAYMENT BALANCE
---- --------- ---- ---------------------- ------- -------------------
<S> <C> <C> <C> <C> <C>
1 Westin Denver Tabor Center Hyper $ 44,593,725 $ 362,503.83 $ 30,758,480
2 208 South Lasalle Hyper $ 42,788,119 **$ 332,187.48 $ 35,275,542
3 ACCOR Corp. - Pool III - Note B Balloon $ 40,308,831 $ 236,142.57 $ 9,938,713
4 Marina Pacifica Shopping Center Hyper $ 33,725,031 $ 256,550.10 $ 29,488,582
5 Luckman Plaza Hyper $ 33,623,958 $ 247,450.30 $ 28,047,842
6 Henry W. Oliver Hyper $ 33,523,888 **$ 259,036.81 $ 27,484,247
7 Congressional North Hyper $ 32,647,005 $ 242,829.45 $ 28,610,013
8 80 John Street Hyper $ 29,198,810 $ 230,517.38 $ 21,837,916
9 633 Indiana Avenue Hyper $ 29,000,000 $ 202,831.69 $ 23,733,616
10 Bank of America-Vegas Hyper $ 28,479,885 $ 204,177.49 $ 25,337,700
11 Bayside Exposition Center Hyper $ 22,069,624 $ 161,185.93 $ 17,975,207
12 Warminster Town Center Hyper $ 20,884,905 $ 158,923.58 $ 18,264,718
13 Park Place Shops + Entertainment Hyper $ 19,692,004 $ 151,802.73 $ 18,065,648
14 Campbell Forum Hyper $ 19,660,894 **$ 152,959.81 $ 17,991,048
15 Calaveras Center Hyper $ 19,400,000 $ 140,730.80 $ 17,304,533
16 Cinemark Fully $ 18,355,354 $ 123,118.55 $ -
17 Mall of Orange Hyper $ 15,500,000 $ 125,302.54 $ 13,695,360
18 60 Madison Avenue Hyper $ 13,265,426 **$ 103,248.58 $ 12,146,660
19 Geneva Crossing Hyper $ 13,227,139 **$ 102,498.99 $ 10,890,353
20 La Jolla Village Professional Ctr. Hyper $ 13,103,073 **$ 100,591.44 $ 11,882,713
21 Allied Portfolio Hyper $ 12,850,396 **$ 104,825.01 $ 6,230,026
22 Auerbach Retail Portfolio Hyper $ 12,256,059 $ 86,600.56 $ 9,657,257
23 SL-Mentor II Facility Hyper $ 11,100,000 $ 75,509.78 $ 9,743,496
24 Signature Place/Overland Hyper $ 9,976,778 **$ 73,864.64 $ 8,052,047
25 Park Fletcher Hyper $ 8,796,886 $ 60,252.59 $ 7,763,299
26 Staples Plaza Hyper $ 8,776,196 $ 61,902.38 $ 7,803,693
27 Euless Town Center Hyper $ 8,328,519 $ 59,561.22 $ 6,926,620
28 Willow Creek Apartments Hyper $ 7,915,749 $ 58,523.68 $ 7,149,483
29 Bayou Walk Village Shopping Center Hyper $ 7,885,913 **$ 61,378.30 $ 6,467,937
30 Lakewood Center North Hyper $ 7,480,144 $ 51,887.56 $ 6,609,747
31 Lakeside Office Park Hyper $ 7,412,583 $ 53,535.89 $ 5,987,127
32 Regal Cinema Hyper $ 7,030,211 $ 53,797.05 $ 147,264
33 East Town Mall Hyper $ 6,851,529 $ 51,411.08 $ 5,629,556
34 Spring Glen Medical Center Hyper $ 6,415,759 $ 47,019.74 $ 5,659,100
35 532 Broad Hollow Road Hyper $ 6,402,648 $ 48,695.31 $ 5,816,701
36 Manassas Executive Center Hyper $ 6,240,164 **$ 48,319.54 $ 5,685,786
37 Fairway Corporate Center Hyper $ 6,037,079 **$ 47,077.14 $ 5,537,761
38 Circuit City-Philadelphia Balloon $ 5,821,598 $ 37,064.18 $ 2,803,968
39 Westbury Lakes Apartments Hyper $ 5,762,708 $ 43,639.37 $ 2,431,313
40 Northridge Shopping Center Hyper $ 5,533,666 $ 43,053.74 $ 2,995,995
41 100 Cortland Office Portfolio Hyper $ 5,442,813 **$ 42,443.05 $ 4,992,646
42 Northwood Village Apartments Hyper $ 5,261,826 $ 39,131.48 $ 3,784,660
43 Stadium Apartments Hyper $ 4,836,987 $ 34,202.87 $ 3,652,296
44 Dekalb Plaza Hyper $ 4,549,820 $ 32,535.92 $ 4,064,410
45 Circuit City-Ridgeland Balloon $ 4,158,283 $ 26,474.40 $ 2,002,830
46 Belgravia Building Hyper $ 3,974,806 $ 28,499.74 $ 3,355,093
47 Southwest Pointe Apartments Hyper $ 3,938,051 $ 27,496.45 $ 3,492,788
48 Short Pump Village Hyper $ 3,751,913 $ 27,738.79 $ 2,485,314
49 Circuit City-Indianapolis Balloon $ 3,742,455 $ 23,826.96 $ 1,802,547
50 Chestnut Gardens Hyper $ 3,197,265 $ 23,126.39 $ 2,870,829
51 Treehouse Apartments Hyper $ 3,100,000 $ 22,552.51 $ 2,755,362
52 Bayshore Village Hyper $ 3,029,642 $ 20,612.06 $ 2,253,647
53 Cobleskill Center Hyper $ 2,989,654 $ 21,027.10 $ 2,656,980
54 Sports Park Plaza Hyper $ 2,954,581 $ 20,424.61 $ 2,617,084
55 Cedar Grove Mobile Home Park Hyper $ 2,889,455 $ 22,315.01 $ 2,428,437
56 Circuit City-Jackson Balloon $ 2,744,467 $ 17,473.11 $ 1,321,869
57 Parham 64 Hyper $ 2,553,718 $ 17,339.56 $ 2,252,786
58 Circuit City-Kingsport Balloon $ 2,494,969 $ 15,884.64 $ 1,201,696
59 Circuit City-Wichita Falls Balloon $ 2,494,969 $ 15,884.64 $ 1,201,696
60 231 & 235 East 117th Street Hyper $ 2,398,074 $ 17,030.16 $ 1,930,062
61 Willow Creek Manor Hyper $ 2,376,178 $ 16,047.93 $ 2,085,039
62 312, 318 & 328 East 106th Street Hyper $ 2,286,925 $ 16,240.82 $ 1,840,604
63 234-236 & 238-240 East 116th Street Hyper $ 2,203,317 $ 15,647.07 $ 1,773,313
64 Wayzata Bay Office Buildings Hyper $ 2,059,091 $ 14,884.99 $ 1,751,998
65 Eastgate/Southgate Apartments Hyper $ 1,913,956 $ 14,299.48 $ 1,563,541
66 Schram Tech Park Hyper $ 1,498,458 $ 11,408.85 $ 1,051,326
67 215 East 117th Street Hyper $ 1,460,681 $ 10,373.17 $ 1,175,612
68 Ironbridge Plaza Hyper $ 1,392,565 $ 9,273.09 $ 1,218,616
69 Huffman Business Park Bldg. A&B Hyper $ 1,329,064 $ 8,716.65 $ 1,009,177
70 Flatiron Hyper $ 1,289,256 $ 8,753.95 $ 1,137,329
71 Winterhaven East Apartments Hyper $ 1,278,516 $ 8,638.60 $ 1,126,299
72 Hidden Creek Apartments Hyper $ 1,165,521 $ 7,621.03 $ 880,812
73 Huffman Business Park Bldgs. M & N Hyper $ 1,123,425 $ 7,367.97 $ 853,032
74 Sentry I Hyper $ 1,090,909 $ 7,407.19 $ 962,355
75 Gateway Office Plaza Hyper $ 1,089,995 $ 7,340.50 $ 960,222
76 228 East 116th Street Hyper $ 1,081,986 $ 7,683.83 $ 870,823
77 Greenway Shopping Center Hyper $ 1,071,393 $ 8,658.26 $ 912,561
78 Huffman Business Park Bldg. O Hyper $ 927,111 $ 6,080.45 $ 703,968
79 2371 2nd Avenue Hyper $ 767,226 $ 5,448.53 $ 617,493
80 Huffman Business Park C Hyper $ 697,169 $ 4,572.37 $ 529,370
81 154 East 106th Street Hyper $ 619,683 $ 4,400.74 $ 498,744
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANTICIPATED
LOAN REPAYMENT MATURITY NON-LEVEL ADDITIONAL
# DATE DATE RATE AMORT. AMORT. AMORT.
---- ----------- -------- ---- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11-Dec-13 11-Jan-24 8.505% * 300
2 11-Apr-13 11-Apr-28 8.500% * 360
3 01-May-18 7.030% 141 Yes
4 11-Nov-10 11-Dec-28 8.317% * 360
5 11-Oct-12 11-Oct-27 7.990% * 360
6 11-Jan-14 11-Jan-29 8.500% * 360
7 11-Aug-08 11-Aug-26 7.840% * 336
8 11-Feb-09 11-Feb-29 7.342% * 360
9 11-Oct-09 11-Oct-25 7.040% * 312
10 11-Sep-09 11-Sep-29 7.750% * 360
11 11-Jan-09 11-Jan-24 7.250% * 300
12 11-Feb-10 11-Feb-28 8.240% * 340
13 11-Jun-07 11-Jun-27 8.360% * 360
14 11-Jan-08 11-Jan-28 8.500% * 360
15 11-Oct-09 11-Oct-29 7.880% * 360
16 11-Mar-18 8.049% 240 Yes
17 11-Apr-09 11-Sep-26 8.780% * 323
18 11-Dec-07 11-Dec-27 8.500% * 360
19 11-Jul-13 11-Jul-28 8.500% * 360
20 11-Apr-09 11-Apr-26 8.450% * 360
21 11-Apr-13 11-Apr-28 8.850% * 360 241
22 11-Feb-14 11-Feb-29 7.550% * 360
23 11-Sep-09 11-Sep-29 7.214% * 359
24 11-Jul-13 11-May-27 8.000% * 360
25 11-Feb-09 11-Feb-29 7.230% * 360
26 11-Apr-08 11-Jan-28 7.420% * 343
27 11-Jan-08 11-Oct-23 6.970% * 300
28 11-Nov-07 11-Nov-27 7.900% * 338
29 11-Mar-13 11-Dec-27 8.500% * 360
30 11-Jun-09 11-Jun-29 7.392% * 360
31 11-Feb-09 11-Dec-23 7.110% * 300
32 11-Sep-19 11-Jun-26 8.090% * 324 240
33 11-Jun-08 11-Mar-23 7.430% * 300
34 11-Feb-09 11-Nov-27 7.820% * 351
35 11-Dec-07 11-Sep-27 8.220% * 360
36 11-Sep-08 11-Sep-28 8.500% * 360
37 11-Sep-07 11-Sep-27 8.500% * 360
38 11-Jun-20 7.640% 210 Yes
39 11-Apr-13 11-Jan-23 7.320% * 300 240
40 11-Jan-09 11-Nov-23 7.750% * 300 192
41 11-Sep-07 11-Sep-27 8.500% * 360
42 11-May-13 11-Feb-25 7.640% * 324
43 11-Jun-14 11-Mar-28 7.460% * 342
44 11-Jun-08 11-Mar-28 7.600% * 360
45 11-Jun-20 7.640% 210 Yes
46 11-Mar-09 11-Mar-29 7.350% * 322
47 11-Mar-08 11-Dec-27 7.300% * 338
48 11-Jul-08 11-Apr-23 7.070% * 300 228
49 11-Jun-20 7.640% 210 Yes
50 11-Jan-08 11-Oct-27 7.680% * 360
51 11-Jan-10 11-Oct-29 7.910% * 360
52 11-Apr-14 11-Feb-28 7.050% * 340
53 11-Aug-08 11-May-28 7.440% * 360
54 11-May-08 11-Feb-28 7.230% * 360
55 11-Aug-07 11-Aug-22 7.670% * 300
56 11-Jun-20 7.640% 210 Yes
57 11-Nov-08 11-Nov-28 7.120% * 360
58 11-Jun-20 7.640% 210 Yes
59 11-Jun-20 7.640% 210 Yes
60 11-Apr-09 11-Jul-28 7.490% * 360 300
61 11-Dec-08 11-Sep-28 7.050% * 360
62 11-Apr-09 11-Jul-28 7.490% * 360 300
63 11-Apr-09 11-Jul-28 7.490% * 360 300
64 11-May-08 11-Feb-25 7.320% * 324
65 11-Feb-09 11-Dec-23 7.500% * 300
66 11-Feb-09 11-Dec-23 7.640% * 300 240
67 11-Apr-09 11-Jul-28 7.490% * 360 300
68 11-Nov-08 11-Aug-28 6.900% * 360
69 11-Feb-14 11-Dec-28 6.780% * 360
70 11-Nov-08 11-Nov-28 7.120% * 360
71 11-Apr-08 11-Jan-28 6.980% * 353
72 11-Mar-14 11-Dec-28 6.750% * 360
73 11-Feb-14 11-Dec-28 6.780% * 360
74 11-Nov-08 11-Nov-28 7.120% * 360
75 11-Oct-08 11-Oct-28 7.030% * 360
76 11-Apr-09 11-Jul-28 7.490% * 360 300
77 11-Aug-07 11-Aug-22 8.230% * 300
78 11-Feb-14 11-Dec-28 6.780% * 360
79 11-Apr-09 11-Jul-28 7.490% * 360 300
80 11-Feb-14 11-Dec-28 6.780% * 360
81 11-Apr-09 11-Jul-28 7.490% * 360 300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALLOON/
ANTICIPATED ANTICIPATED
LOAN REMAINING REMAINING CUT-OFF DATE REPAYMENT
# SEASONING TERM LOCKOUT DSCR LTV DATE LTV
---- --------- ----------- --------- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1 27 170 169 1.74 57.9% 39.9%
2 18 162 161 1.38 62.0% 51.1%
3 17 223 222 1.00 91.8% 22.6%
4 11 133 131 1.33 69.5% 60.8%
5 7 156 155 1.29 65.9% 55.0%
6 15 171 170 1.33 72.9% 59.7%
7 21 106 105 1.22 72.5% 63.6%
8 8 112 107 1.27 72.3% 54.1%
9 0 120 119 1.53 75.3% 61.6%
10 1 119 118 1.48 57.0% 50.7%
11 9 111 110 1.43 61.3% 49.9%
12 0 124 143 1.25 73.3% 64.1%
13 27 92 87 1.33 65.6% 60.2%
14 21 99 91 1.21 69.0% 63.1%
15 0 120 119 1.28 59.7% 53.2%
16 19 221 220 1.00 100.0% 0.0%
17 0 114 112 1.25 41.9% 37.0%
18 22 98 97 1.22 58.4% 53.5%
19 15 165 164 1.18 77.8% 64.1%
20 6 114 112 1.16 59.0% 53.5%
21 18 162 161 1.24 55.4% 26.9%
22 18 172 165 1.24 80.4% 63.3%
23 0 119 116 1.65 91.0% 79.9%
24 15 165 164 1.37 64.0% 51.6%
25 18 112 112 1.27 69.8% 61.6%
26 4 102 94 1.42 56.6% 50.3%
27 12 99 91 1.34 75.7% 63.0%
28 1 97 89 1.41 67.7% 61.1%
29 22 161 153 1.21 75.8% 62.2%
30 4 116 115 1.41 69.3% 61.2%
31 10 112 108 1.70 47.2% 38.1%
32 4 239 231 1.33 70.3% 1.5%
33 19 104 96 1.22 72.9% 59.9%
34 14 112 105 1.41 56.3% 49.6%
35 25 98 91 1.15 64.0% 58.2%
36 13 107 106 1.21 71.7% 65.4%
37 25 95 94 1.33 53.4% 49.0%
38 14 248 244 1.00 97.9% 47.2%
39 21 162 154 1.18 78.5% 33.1%
40 11 111 107 1.45 64.3% 34.8%
41 25 95 94 1.24 62.6% 57.4%
42 20 163 155 1.13 76.3% 54.9%
43 1 176 168 1.32 78.0% 58.9%
44 19 104 96 1.21 75.8% 67.7%
45 14 248 244 1.00 97.4% 46.9%
46 13 113 112 1.17 63.1% 53.3%
47 0 101 93 1.40 82.9% 73.5%
48 18 105 97 1.43 59.8% 39.6%
49 14 248 244 1.00 97.2% 46.8%
50 24 99 91 1.41 69.5% 62.4%
51 24 123 115 1.48 75.8% 67.4%
52 0 174 166 1.78 62.5% 46.5%
53 17 106 99 1.25 67.2% 59.7%
54 20 103 95 1.59 62.5% 55.3%
55 26 94 86 1.60 43.1% 36.2%
56 14 248 244 1.00 98.1% 47.3%
57 11 109 108 1.62 63.8% 56.3%
58 14 248 244 1.00 98.0% 47.2%
59 14 248 244 1.00 98.0% 47.2%
60 15 114 113 1.61 70.5% 56.8%
61 13 110 102 1.62 72.0% 63.2%
62 15 114 113 1.40 69.3% 55.8%
63 15 114 113 1.46 73.4% 59.1%
64 20 103 95 1.23 67.0% 57.0%
65 10 112 108 1.88 50.5% 41.3%
66 10 112 104 1.25 62.7% 44.0%
67 15 114 113 1.39 76.9% 61.9%
68 14 109 101 1.27 66.6% 58.3%
69 10 172 168 1.66 65.8% 50.0%
70 11 109 108 1.51 67.9% 59.9%
71 13 102 94 1.32 78.7% 69.3%
72 10 173 169 1.70 72.8% 55.1%
73 10 172 168 1.73 67.3% 51.1%
74 11 109 108 1.62 57.4% 50.7%
75 12 108 107 1.20 60.6% 53.3%
76 15 114 113 1.49 72.1% 58.1%
77 26 94 86 1.71 47.6% 40.6%
78 10 172 168 1.68 66.9% 50.8%
79 15 114 113 1.62 51.1% 41.2%
80 10 172 168 1.40 66.4% 50.4%
81 15 114 113 1.54 63.2% 50.9%
</TABLE>
* Interest is computed based on the actual number of days elapsed in a
360 day year.
** Indicates premium loans.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX B
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
LOAN # ASSET # PROPERTY NAME ADDRESS
<S> <C> <C> <C>
1 1 Westin Denver Hotel 1672 Lawrence Street
2 1 208 South Lasalle 208 South Lasalle
- -------------------------------------------------------------------------------------------------------------------------
ACCOR-M-SIX LIMITED PARTNERSHIP
3 1 1078 65 Newbury Street
3 2 1268 10 Roosevelt Road
3 3 775 6330 Debonair Lane
3 4 739 2400 Biddle Rd
3 5 1040 1535 Milwaukee Ave
3 6 253 1800 North East Seventh
3 7 245 52624 Us Hwy 31 N
3 8 700 7707 Lee Hwy
3 9 1059 88 Burnett Road
3 10 1254 8290 Louisiana Street
3 11 1283 1283 Motel 6 Drive
3 12 156 95 Wallace Rd
3 13 699 323 Cartwright Rd
3 14 784 1800 Winnetka Circle
- -------------------------------------------------------------------------------------------------------------------------
4 1 Marina Pacifica Shopping Center 6272-6380 Pacific Coast Highway
5 1 Luckman Plaza 9200 & 9220 Sunset Boulevard
6 1 Henry W. Oliver 535 Smithfield Street
- -------------------------------------------------------------------------------------------------------------------------
CONGRESSIONAL NORTH
7 1 Congressional North Plaza 1501 Rockville Pike
7 2 121 Congressional Lane 121 Congressional Lane
- -------------------------------------------------------------------------------------------------------------------------
8 1 80 John Street 80 John Street
9 1 633 Indiana Avenue 633 Indian Avenue NW
10 1 Bank of America-Vegas 300 S 4th Street
11 1 Bayside Exposition Center 200 Mount Vernon Street
12 1 Warminster Towne Center Route 132 & Norristown Rd
13 1 Shops at Park Place 2963-3041 Michelson Drive
14 1 Campbell Forum 801 East Campbell Road & 2050 North Greenville
15 1 Calaveras Center 301-496 S. Abbott
- -------------------------------------------------------------------------------------------------------------------------
CINEMARK POOL B
16 1 Colorado Springs, CO - Tinseltown 1545 E. Cheyenne Mountain
16 2 Mishawaka - Movies 10 910 W. Edison
- -------------------------------------------------------------------------------------------------------------------------
17 1 Mall of Orange 2298 North Orange Mall
18 1 60 Madison Ave. 60 Madison Avenue
19 1 Geneva Crossing NWC Geneva and Schmale Rds.
20 1 La Jolla Professional 8950 La Jolla Village Drive
- -------------------------------------------------------------------------------------------------------------------------
ALLIED PORTFOLIO
21 1 Park Shopping Center 1001 N. Bechtle
21 2 Miamisburg Plaza 58 Lawrence Ave
21 3 Page Manor 5500 Airway Rd.
21 4 Fairborn Plaza 1166 N. Broad St.
- -------------------------------------------------------------------------------------------------------------------------
AUERBACH RETAIL PORTFOLIO
22 1 National & Sepulveda Center National & Sepulveda
22 2 Hacienda Valley Hacienda Valley Center
- -------------------------------------------------------------------------------------------------------------------------
23 1 SL-Mentor II Facility Tyler Boulevard
24 1 Signature Place Apartments 9251 West 121st Terrace
25 1 Park Fletcher 2601 Fortune Circle
26 1 Staples Plaza 333 Crompond Road
27 1 Euless Town Center 1201 West Airport Freeway
- -------------------------------------------------------------------------------------------------------------------------
28 1 Willow Creek Apartments 161 Lansing Circle
29 1 Bayou Walk Shopping Center Youree Drive & 70th Street
30 1 Lakewood Center North 14600 Detroit Ave.
31 1 Lakeside Office Park 591, 595 and 607 North St
32 1 Regal Cinema SE Corner of W Reagan and Huntington
- -------------------------------------------------------------------------------------------------------------------------
33 1 East Town Mall 2350 E. Mason St.
34 1 Spring Glen Medical Center 2200 Whitier Ave
35 1 532 Broad Hollow Road 532 Broad Hollow Road
36 1 Manassas Executive Center 9613 & 9615 Center Street
- -------------------------------------------------------------------------------------------------------------------------
FAIRWAY CORPORATE CENTER
37 1 Fairway Corporate Center 4210 & 4220 Shawnee Mission Parkway
37 2 Pyramid Plaza 3223 South Loop 289
- -------------------------------------------------------------------------------------------------------------------------
38 1 Circuit City-Philadelphia 7207 Bustleton Aveneue
39 1 Westbury Lake Apartments 1157 Westbury Circle
40 1 Northridge Shopping Center 7760 East Ridge Road
- -------------------------------------------------------------------------------------------------------------------------
100 COURT & LIBERTY BUILDING
41 1 Liberty Building 400 6th Avenue
41 2 100 Court 100 Court Ave.
- -------------------------------------------------------------------------------------------------------------------------
42 1 Northwood Village 1140 E. 37th Street
43 1 Stadium Apartments 1846 Stadium Place
44 1 DeKalb Plaza US Route 23
45 1 Circuit City-Ridgeland 1055 East Countyline Road
46 1 The Belgravia Building 1811 Chestnut Street
- -------------------------------------------------------------------------------------------------------------------------
47 1 Southwest Pointe Apartments 14265 Van Nuys Boulevard
48 1 Short Pump Village W. Broad & Puncey
49 1 Circuit City-Indianapolis 3670 Moller Road
50 1 Chestnut Gardens 10-12 Chestnut Street
51 1 Treehouse Apartments 3709 Postwood Circle
- -------------------------------------------------------------------------------------------------------------------------
52 1 Bayshore Village Apartments 50631 Jefferson Avenue
53 1 Cobleskill Center Route 7
54 1 Sports Park Plaza 5353 S. 960 E.
55 1 Cedar Grove Mobile Home Park 100 Cedar Grove Dr.
56 1 Circuit City-Jackson,TN 1938 Emporium Drive
- -------------------------------------------------------------------------------------------------------------------------
57 1 Parham 64 2807 North Parham Road
58 1 Circuit City-Kingsport 1740 Idle Hour Road
59 1 Circuit City-Witchita Falls 3121 Lawence Road
60 1 231-235 East 117th Street 231-235 East 117th Street
- -------------------------------------------------------------------------------------------------------------------------
61 1 Willow Creek Manor 3833 S. Mustang Road
62 1 312 East 106th Street 312 East 106th Street
63 1 234/236/238/240 East 116th Street 234/236/238/240 East 116th Street
64 1 Wayzata Bay Office Buildings 100/130 West Lake Street
- -------------------------------------------------------------------------------------------------------------------------
EASTGATE/SOUTHGATE APARTMENTS
65 1 Eastgate 90-122 N. Buena Vista
65 2 South Gate Corners 793-813 Hebron Road
- -------------------------------------------------------------------------------------------------------------------------
66 1 Schram Tech Park 5085-5105 Williams Lake Road
67 1 215 East 117th Street 215 East 117th Street
68 1 Ironbridge Plaza 12030 Ironbridge Rd.
69 1 Huffman Business Park Buildings A & B 11901 & 12001 Industry Way
70 1 Flatiron 1722 St. Marys Ave.
- -------------------------------------------------------------------------------------------------------------------------
71 1 Winterhaven East Apartments 3357 North country Club Road
72 1 Hidden Creek Apartments 6000-6002-6004 Jaycox Road
73 1 Huffman Business Park Building M & N 11900 & 12000 Industry Way
74 1 Sentry I 6502 Slide Road
75 1 Gateway Office Plaza 2021 Girard Blvd., SE
- -------------------------------------------------------------------------------------------------------------------------
76 1 228 East 116th Street 228 East 116th Street
77 1 Greenway Shopping Center 1827 SW Green Oaks Blvd.
78 1 Huffman Business Park Building O 12050 Industry Way
79 1 2371 2nd Avenue 2371 2nd Avenue
80 1 Huffman Business Park Building C 12101 Industry Way
81 1 154 East 106th Street 154 East 106th Street
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROUND YEAR BUILT/
LOAN # CITY STATE ZIP PROPERTY TYPE LEASE (A) RENOVATED UNITS
<S> <C> <C> <C> <C> <C> <C> <C>
1 Denver CO 80202 Hotel-Full Service 1984/1996 430
2 Chicago IL 60603 Office 1914/1996 853,603
- ------------------------------------------------------------------------------------------------------------------------
3 Danvers MA 01923 Hotel-Ltd. Service 1978/1997 108
3 Villa Park IL 60181 Hotel-Ltd. Service 1982/1996 109
3 Speedway IN 46224 Hotel-Ltd. Service 1968/1996 164
3 Medford OR 97504 Hotel-Ltd. Service 1987/1998 116
3 Glenview IL 60025 Hotel-Ltd. Service 1989/1995 111
3 Grants Pass OR 97526 Hotel-Ltd. Service 1979/1998 122
3 South Bend IN 46637 Hotel-Ltd. Service 1975/1994 147
3 Chattanooga TN 37421 Hotel-Ltd. Service 1987/1996 97
3 Chicopee MA 01020 Hotel-Ltd. Service 1972/1995 88
3 Merrillville IN 46410 Hotel-Ltd. Service 1980/1994 125
3 Washington PA 15301 Hotel-Ltd. Service 1985/1995 101
3 Nashville TN 37211 Hotel-Ltd. Service 1974 126
3 Goodlettsville TN 37072 Hotel-Ltd. Service 1987/1999 94
3 Rolling Meadows IL 60008 Hotel-Ltd. Service 1989/1995 134
-------
1,642
- ------------------------------------------------------------------------------------------------------------------------
4 Long Beach CA 90803 Retail-Anchored Yes 1976/1997 291,869
5 West Hollywood CA 90069 Office 1964/1971 282,423
6 Pittsburgh PA 15222 Office 1909/1998 471,786
- ------------------------------------------------------------------------------------------------------------------------
7 Rockville MD 20852 Retail-Anchored 1997 250,483
7 Rockville MD 20852 Office-Medical Office 1970 54,160
-------
304,643
- ------------------------------------------------------------------------------------------------------------------------
8 New York NY 10038 Multifamily 1926/1998 150
9 Washington DC 20004 Office 1964/1998 143,600
10 Las Vegas NV 89101 Office 1975/1998 256,621
11 Boston MA 02125 Other-Convention 1968/1983 263,772
12 Warminster Twnsp PA 18974 Retail-Anchored 1997 239,052
13 Irvine CA 92612 Retail-Unanchored 1994/1996 118,183
14 Richardson TX 75081 Office 1984/1997 206,735
15 Milpitas CA 95035 Industrial Yes 1990 404,330
- ------------------------------------------------------------------------------------------------------------------------
16 Colorado Springs CO 80906 Movie Theatre 1997/1998 109,986
16 Mishawaka IN 46545 Movie Theatre 1995/1998 62,088
-------
172,074
- ------------------------------------------------------------------------------------------------------------------------
17 Orange CA 92865 Retail-Anchored Yes 1971/1993 277,720
18 New York NY 10010 Office 1910/1999 175,525
19 Carol Stream IL 60118 Retail-Anchored 1997 123,281
20 La Jolla CA 92037 Office 1980 180,368
- ------------------------------------------------------------------------------------------------------------------------
21 Springfield OH 45505 Retail-Anchored 1979/1983 218,582
21 Miamisburg OH 45342 Retail-Anchored 1975/1985 111,538
21 Dayton OH 45431 Retail-Unanchored 1979/1988 57,514
21 Fairborn OH 45324 Retail-Anchored 1978/1987 98,120
-------
485,754
- ------------------------------------------------------------------------------------------------------------------------
22 Los Angeles CA 90034 Retail-Anchored 1973 93,759
22 Industry CA 91745 Retail-Unanchored 1978 25,400
-------
119,159
- ------------------------------------------------------------------------------------------------------------------------
23 Mentor OH 44060 Industrial 1970/1997 764,274
24 Overland Park KS 66213 Multifamily 1996 232
25 Indianapolis IN 46241 Office 1980 165,015
26 Yorktown Heights NY 10598 Retail-Unanchored 1960/1995 193,551
27 Euless TX 76040 Retail-Unanchored 1982 239,687
- ------------------------------------------------------------------------------------------------------------------------
28 Mooresville NC 28115 Multifamily 1997 207
29 Shreveport LA 76102 Retail-Anchored 1997 93,669
30 Lakewood OH 44107 Office 1974/1985 251,021
31 Wakefield MA 01880 Office 1970/1994 196,905
32 Medina OH 21401 Movie Theatre 1998 64,247
- ------------------------------------------------------------------------------------------------------------------------
33 Green Bay WI 54302 Retail-Anchored 1982/1997 117,514
34 Hamden CT 06518 Office-Medical Office 1970/1997 82,062
35 Melville NY 11747 Office 1960/1997 82,721
36 Manassas VA 20110 Office 1984/1999 102,329
- ------------------------------------------------------------------------------------------------------------------------
37 Fairway KS 66205 Office 1972/1996 109,484
37 Lubbock TX 79414 Office 1981 90,115
-------
199,599
- ------------------------------------------------------------------------------------------------------------------------
38 Philadelphia PA 19149 Retail-Quasi-Anchored 1989 47,913
39 Lansing MI 48917 Multifamily 1997 124
40 Hobart IN 46342 Retail-Anchored 1988/1992 162,754
- ------------------------------------------------------------------------------------------------------------------------
41 Des Moines IA 50309 Office 1923/1992 134,610
41 Des Moines IA 50309 Office 1909/1985 60,991
-------
195,601
- ------------------------------------------------------------------------------------------------------------------------
42 Davenport IA 52807 Multifamily 1967/1998 264
43 Ann Arbor MI 48103 Multifamily 1957/1998 173
44 DeKalb IL 60115 Retail-Quasi-Anchored 1997 57,835
45 Ridgeland MS 39157 Retail-Quasi-Anchored 1998 32,784
46 Philadelphia PA 19103 Office 1906/1997 80,877
- ------------------------------------------------------------------------------------------------------------------------
47 Arleta CA 91331 Multifamily 1973/1998 161
48 Richmond VA 23060 Retail-Quasi-Anchored 1997 37,650
49 Indianapolis IN 46224 Retail-Quasi-Anchored 1997 33,665
50 Suffern NY 10994 Multifamily 1997 48
51 Tampa FL 33614 Multifamily 1974/1993 160
- ------------------------------------------------------------------------------------------------------------------------
52 New Baltimore MI 48007 Multifamily 1972/1997 160
53 Cobbleskill NY 12043 Retail-Anchored 1973/1995 111,541
54 Salt Lake City UT 84107 Office 1997 37,758
55 Copperas Cove TX 76522 Mobile Home Park 1970/1996 672
56 Jackson TN 38305 Retail-Quasi-Anchored 1998 33,665
- ------------------------------------------------------------------------------------------------------------------------
57 Richmond VA 23294 Office 1976/1987 52,868
58 Kingsport TN 37660 Retail-Quasi-Anchored 1998 19,258
59 Wichita Fallas TX 76308 Retail-Quasi-Anchored 1998 21,196
60 New York NY 10029 Multifamily 1900/1997 68
- ------------------------------------------------------------------------------------------------------------------------
61 Alvin TX 77511 Multifamily 1978/1997 128
62 New York NY 10029 Multifamily 1900/1997 66
63 New York NY 10028 Multifamily 1900/1997 56
64 Wayzata MN 55391 Office 1997 16,777
- ------------------------------------------------------------------------------------------------------------------------
65 Newark OH 43055 Multifamily 1972/1996 73
65 Heath OH 43056 Retail-Quasi-Anchored 1964/1994 29,911
-------
NAP
- ------------------------------------------------------------------------------------------------------------------------
66 Waterford MI 48329 Industrial 1988 40,750
67 New York NY 10029 Multifamily 1900/1996 33
68 Chesterfield VA 23831 Retail-Quasi-Anchored 1997 14,927
69 Anchorage AK 99515 Industrial 1977 33,252
70 Omaha NE 68102 Office 1911/1991 28,863
- ------------------------------------------------------------------------------------------------------------------------
71 Tucson AZ 85716 Multifamily 1982/1990 40
72 North Ridgeville OH 44039 Multifamily 1975/1998 69
73 Anchorage AK 99515 Industrial 1977 25,970
74 Lubbock TX 79424 Office 1979 43,868
75 Albuquerque NM 87106 Office 1988 29,507
- ------------------------------------------------------------------------------------------------------------------------
76 New York NY 10029 Multifamily 1900/1997 28
77 Arlington TX 76017 Retail-Quasi-Anchored 1996/1997 17,836
78 Anchorage AK 99515 Industrial 1977 21,200
79 New York NY 10028 Multifamily 1910/1997 28
80 Anchorage AK 99515 Industrial 1977 17,477
81 New York NY 10028 Multifamily 1900/1997 20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE CUT-OFF DATE
PRINCIPAL PRINCIPAL MOST RECENT MOST UNDERWRITTEN
LOAN # UNIT TYPE BALANCE BALANCE /UNIT PERIOD REVENUE RECENT PERIOD REVENUE
<S> <C> <C> <C> <C> <C> <C>
1 rooms $ 44,593,725 $ 103,706 25 $ 26,635,733 TTM 4/30/99 $ 25,613,065
2 sf $ 42,788,119 $ 50 19 $ 15,612,523 TTM 3/31/99 $ 15,272,820
- --------------------------------------------------------------------------------------------------------------------------
3 rooms $ 5,167,799 $ 47,850 799
3 rooms $ 3,912,762 $ 35,897 762
3 rooms $ 3,838,936 $ 23,408 936
3 rooms $ 3,765,111 $ 32,458 111
3 rooms $ 3,543,633 $ 31,925 633
3 rooms $ 3,322,156 $ 27,231 156
3 rooms $ 2,657,725 $ 18,080 725
3 rooms $ 2,288,597 $ 23,594 597
3 rooms $ 2,214,771 $ 25,168 771
3 rooms $ 2,067,120 $ 16,537 120
3 rooms $ 1,993,294 $ 19,736 294
3 rooms $ 1,919,468 $ 15,234 468
3 rooms $ 1,845,642 $ 19,634 642
3 rooms $ 1,771,817 $ 13,223 817
------------ ------------
$ 40,308,831 $ 24,549
- --------------------------------------------------------------------------------------------------------------------------
4 sf $ 33,725,031 $ 116 $ 6,118,092 TTM 4/30/99 $ 6,023,189
5 sf $ 33,623,958 $ 119 $ 6,611,647 TTM 3/31/99 $ 7,030,178
6 sf $ 33,523,888 $ 71 $ 8,818,662 TTM 3/31/99 $ 9,008,124
- --------------------------------------------------------------------------------------------------------------------------
7 sf $ 27,568,582 $ 110 $ 4,195,023 TTM 6/30/99 $ 4,063,711
7 sf $ 5,078,423 $ 94 $ 1,045,137 TTM 6/30/99 $ 1,104,301
------------ ------------ ----------- -----------
$ 32,647,005 $ 107 $ 5,240,160 $ 5,168,012
- --------------------------------------------------------------------------------------------------------------------------
8 units $ 29,198,810 $ 194,659 $ 4,419,906 TTM 4/30/99 $ 4,455,273
9 sf $ 29,000,000 $ 202 NAP NAP $ 4,600,114
10 sf $ 28,479,885 $ 111 $ 5,629,279 TTM 7/31/99 $ 5,986,985
11 sf $ 22,069,624 $ 84 $ 7,633,967 TTM 4/30/99 $ 7,564,055
12 sf $ 20,884,905 $ 87 $ 3,319,382 TTM 5/31/99 $ 3,250,891
13 sf $ 19,692,004 $ 167 $ 3,484,756 TTM 3/31/99 $ 3,619,780
14 sf $ 19,660,894 $ 95 $ 3,878,925 TTM 5/31/99 $ 3,749,022
15 sf $ 19,400,000 $ 48 $ 3,927,014 TTM 5/31/99 $ 3,743,892
- --------------------------------------------------------------------------------------------------------------------------
16 sf $ 12,014,406 $ 109
16 sf $ 6,340,948 $ 102
------------ ------------
$ 18,355,354 $ 107
- --------------------------------------------------------------------------------------------------------------------------
17 sf $ 15,500,000 $ 56 $ 5,846,677 TTM 7/1 /99 $ 5,708,653
18 sf $ 13,265,426 $ 76 $ 3,677,358 TTM 3/31/99 $ 3,798,576
19 sf $ 13,227,139 $ 107 $ 1,993,222 TTM 3/31/99 $ 1,984,275
20 sf $ 13,103,073 $ 73 $ 2,878,796 TTM 4/30/99 $ 3,184,124
- --------------------------------------------------------------------------------------------------------------------------
21 sf $ 8,296,076 $ 38 $ 1,484,309 TTM 3/31/99 $ 1,762,227
21 sf $ 1,934,752 $ 17 $ 609,915 TTM 3/31/99 $ 655,003
21 sf $ 1,342,907 $ 23 $ 342,831 TTM 3/31/99 $ 313,463
21 sf $ 1,276,660 $ 13 $ 377,526 TTM 3/31/99 $ 341,332
------------ ------------ ----------- -----------
$ 12,850,396 $ 26 $ 2,814,581 $ 3,072,025
- --------------------------------------------------------------------------------------------------------------------------
22 sf $ 10,192,666 $ 109 $ 1,478,880 TTM 8/31/99 $ 1,483,508
22 sf $ 2,063,393 $ 81 $ 425,518 TTM 8/31/99 $ 403,058
------------ ------------ ----------- -----------
$ 12,256,059 $ 103 $ 1,904,398 $ 1,886,566
- --------------------------------------------------------------------------------------------------------------------------
23 sf $ 11,100,000 $ 15 $ 2,683,448 TTM 6/31/99 $ 2,694,531
24 units $ 9,976,778 $ 43,003 $ 1,934,693 TTM 4/30/99 $ 2,046,456
25 sf $ 8,796,886 $ 53 $ 2,089,206 TTM 3/31/99 $ 2,204,425
26 sf $ 8,776,196 $ 45 $ 1,858,628 TTM 4/30/99 $ 1,613,110
27 sf $ 8,328,519 $ 35 $ 1,632,422 TTM 7/31/99 $ 1,641,608
- --------------------------------------------------------------------------------------------------------------------------
28 units $ 7,915,749 $ 38,240 $ 1,544,136 TTM 3/31/99 $ 1,545,837
29 sf $ 7,885,913 $ 84 $ 1,369,717 TTM 3/31/99 $ 1,331,136
30 sf $ 7,480,144 $ 30 $ 2,558,143 TTM 3/31/99 $ 2,463,938
31 sf $ 7,412,583 $ 38 $ 2,514,507 TTM 6/30/99 $ 2,424,284
32 sf $ 7,030,211 $ 109 $ 1,053,802 YTD 7/31/99 $ 1,100,655
- --------------------------------------------------------------------------------------------------------------------------
33 sf $ 6,851,529 $ 58 $ 1,336,855 TTM 4/30/99 $ 1,306,673
34 sf $ 6,415,759 $ 78 $ 1,576,653 TTM 3/31/99 $ 1,586,713
35 sf $ 6,402,648 $ 77 $ 1,766,457 TTM 6/30/99 $ 1,604,010
36 sf $ 6,240,164 $ 61 $ 1,364,791 TTM 3/31/99 $ 1,343,281
- --------------------------------------------------------------------------------------------------------------------------
37 sf $ 3,472,319 $ 32 $ 1,367,471 TTM 3/31/99 $ 1,340,712
37 sf $ 2,564,760 $ 28 $ 1,061,396 TTM 3/31/99 $ 1,009,186
----------- ------------ ----------- -----------
$ 6,037,079 $ 30 $ 2,428,867 $ 2,349,898
- --------------------------------------------------------------------------------------------------------------------------
38 sf $ 5,821,598 $ 122
39 units $ 5,762,708 $ 46,473 $ 1,089,627 TTM 12/31/98 $ 1,107,551
40 sf $ 5,533,666 $ 34 $ 1,202,833 TTM 4/30/99 $ 1,260,011
- --------------------------------------------------------------------------------------------------------------------------
41 sf $ 2,861,300 $ 21 $ 1,545,790 TTM 4/30/99 $ 1,315,571
41 sf $ 2,581,513 $ 42 $ 754,935 TTM 4/30/99 $ 841,593
----------- ------------ ----------- -----------
$ 5,442,813 $ 28 $ 2,300,725 $ 2,157,164
- --------------------------------------------------------------------------------------------------------------------------
42 sf $ 5,261,826 $ 19,931 $ 1,404,537 TTM 3/31/99 $ 1,250,950
43 units $ 4,836,987 $ 27,959 $ 1,167,188 TTM 5/31/99 $ 1,185,747
44 sf $ 4,549,820 $ 79 $ 816,897 TTM 3/31/99 $ 763,829
45 sf $ 4,158,283 $ 127
46 sf $ 3,974,806 $ 49 $ 1,133,369 TTM 3/31/99 $ 1,098,444
- --------------------------------------------------------------------------------------------------------------------------
47 units $ 3,938,051 $ 24,460 $ 971,109 TTM 2/20/99 $ 950,243
48 sf $ 3,751,913 $ 100 $ 759,150 TTM 3/31/99 $ 701,573
49 sf $ 3,742,455 $ 111
50 units $ 3,197,265 $ 66,610 $ 650,556 TTM 5/31/99 $ 649,406
51 units $ 3,100,000 $ 19,375 $ 882,239 TTM 3/31/99 $ 935,612
- --------------------------------------------------------------------------------------------------------------------------
52 units $ 3,029,642 $ 18,935 $ 814,584 TTM 4/30/99 $ 901,830
53 sf $ 2,989,654 $ 27 $ 716,932 TTM 4/30/99 $ 692,369
54 sf $ 2,954,581 $ 78 $ 674,813 TTM 4/30/99 $ 628,419
55 pads $ 2,889,455 $ 4,300 $ 943,591 TTM 5/31/99 $ 996,862
56 sf $ 2,744,467 $ 82
- --------------------------------------------------------------------------------------------------------------------------
57 sf $ 2,553,718 $ 48 $ 646,070 TTM 3/31/99 $ 620,472
58 sf $ 2,494,969 $ 130
59 sf $ 2,494,969 $ 118
60 units $ 2,398,074 $ 35,266 $ 485,626 TTM 4/30/99 $ 529,157
- --------------------------------------------------------------------------------------------------------------------------
61 units $ 2,376,178 $ 18,564 $ 691,436 TTM 5/31/99 $ 721,209
62 units $ 2,286,925 $ 34,650 $ 470,783 TTM 4/30/99 $ 485,150
63 units $ 2,203,317 $ 39,345 $ 415,165 TTM 4/30/99 $ 489,248
64 sf $ 2,059,091 $ 123 $ 370,771 TTM 3/31/99 $ 363,916
- --------------------------------------------------------------------------------------------------------------------------
65 units $ 1,186,950 $ 16,260 $ 282,939 TTM 3/31/99 $ 297,331
65 sf $ 727,007 $ 24 $ 228,812 TTM 3/31/99 $ 215,296
----------- ------------ ----------- -----------
$ 1,913,956 NAP $ 511,751 $ 512,627
- --------------------------------------------------------------------------------------------------------------------------
66 sf $ 1,498,458 $ 37 $ 283,366 TTM 3/31/99 $ 290,365
67 units $ 1,460,681 $ 44,263 $ 251,255 TTM 4/30/99 $ 288,023
68 sf $ 1,392,565 $ 93 $ 247,968 TTM 3/31/99 $ 225,027
69 sf $ 1,329,064 $ 40 $ 358,060 TTM 3/31/99 $ 329,666
70 sf $ 1,289,256 $ 45 $ 362,616 TTM 5/31/99 $ 362,616
- --------------------------------------------------------------------------------------------------------------------------
71 units $ 1,278,516 $ 31,963 $ 255,731 TTM 3/31/99 $ 266,655
72 units $ 1,165,521 $ 16,892 $ 308,784 TTM 12/31/98 $ 312,393
73 sf $ 1,123,425 $ 43 $ 257,699 TTM 3/31/99 $ 261,446
74 sf $ 1,090,909 $ 25 $ 521,879 TTM 3/31/99 $ 455,651
75 sf $ 1,089,995 $ 37 $ 249,667 TTM 3/31/99 $ 261,179
- --------------------------------------------------------------------------------------------------------------------------
76 units $ 1,081,986 $ 38,642 $ 229,225 TTM 4/30/99 $ 223,718
77 sf $ 1,071,393 $ 60 $ 332,313 TTM 3/31/99 $ 298,516
78 sf $ 927,111 $ 44 $ 284,688 TTM 3/31/99 $ 268,152
79 units $ 767,226 $ 27,401 $ 162,659 TTM 4/30/99 $ 185,432
80 sf $ 697,169 $ 40 $ 143,963 TTM 3/31/99 $ 144,328
81 units $ 619,683 $ 30,984 $ 130,216 TTM 4/30/99 $ 137,626
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOST RECENT UNDERWRITTEN NET CASH
LOAN # 1998 NOI PERIOD NOI NOI NET CASH FLOW NOI DSCR FLOW DSCR LOCK BOX
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 9,973,624 $ 10,218,277 $ 7,570,937 $ 7,570,937 1.74 1.74 Hard
2 $ 6,595,137 $ 7,134,041 $ 7,315,221 $ 5,491,667 1.84 1.38 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
3 1.00 1.00 Hard
---- ----
1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
4 $ 4,551,614 $ 4,609,426 $ 4,317,867 $ 4,109,190 1.40 1.33 Hard
5 $ 4,152,894 $ 4,269,256 $ 4,513,299 $ 3,817,419 1.52 1.29 Hard
6 $ 4,945,585 $ 4,680,257 $ 4,995,588 $ 4,138,006 1.61 1.33 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
7 $ 3,336,412 $ 3,124,483 $ 3,087,937 $ 3,067,801 1.25 1.22 Hard
7 $ 502,581 $ 568,298 $ 550,987 $ 482,503 1.25 1.22 Hard
----------- ----------- ----------- ----------- ---- ----
$ 3,838,993 $ 3,692,781 $ 3,638,924 $ 3,550,304 1.25 1.22
- ---------------------------------------------------------------------------------------------------------------------------------
8 NAP $ 3,645,848 $ 2,654,253 $ 3,507,128 0.96 1.27 Soft
9 NAP $ - $ 3,773,769 $ 3,722,391 1.55 1.53 Hard
10 $ 3,037,868 $ 3,687,406 $ 3,993,076 $ 3,633,283 1.63 1.48 Hard
11 $ 3,123,720 $ 2,965,568 $ 2,836,441 $ 2,760,663 1.47 1.43 Hard
12 $ 2,468,075 $ 2,537,243 $ 2,501,444 $ 2,385,431 1.31 1.25 Hard
13 $ 2,338,477 $ 2,493,183 $ 2,553,858 $ 2,416,780 1.40 1.33 Hard
14 $ 2,507,445 $ 2,713,409 $ 2,517,844 $ 2,223,481 1.37 1.21 No
15 $ 2,180,080 $ 2,488,297 $ 2,444,179 $ 2,166,369 1.45 1.28 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
16 1.00 1.00 Hard
16 1.00 1.00 Hard
---- ----
1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
17 $ 2,550,975 $ 2,553,002 $ 2,194,232 $ 1,883,824 1.46 1.25 Hard
18 $ 1,998,346 $ 1,827,803 $ 1,818,744 $ 1,512,356 1.47 1.22 No
19 $ 1,511,436 $ 1,550,869 $ 1,518,565 $ 1,456,642 1.23 1.18 Hard
20 $ 1,477,727 $ 1,408,988 $ 1,640,102 $ 1,398,358 1.36 1.16 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
21 $ 955,079 $ 1,069,268 $ 1,344,998 $ 1,092,008 1.65 1.24 Hard
21 $ 376,047 $ 388,846 $ 419,946 $ 281,040 1.65 1.24 Hard
21 $ 197,974 $ 186,670 $ 159,374 $ 114,146 1.65 1.24 Hard
21 $ 209,050 $ 172,360 $ 148,040 $ 72,921 1.65 1.24 Hard
----------- ----------- ----------- ----------- ---- ----
$ 1,738,150 $ 1,817,144 $ 2,072,358 $ 1,560,115 1.65 1.24
- ---------------------------------------------------------------------------------------------------------------------------------
22 $ 1,024,170 $ 1,172,706 $ 1,127,322 $ 1,076,875 1.32 1.24 Hard
22 $ 225,066 $ 275,955 $ 243,788 $ 211,530 1.32 1.24 Hard
----------- ----------- ----------- ----------- ---- ----
$ 1,249,236 $ 1,448,661 $ 1,371,110 $ 1,288,405 1.32 1.24
- ---------------------------------------------------------------------------------------------------------------------------------
23 $ 1,658,636 $ 1,964,626 $ 1,929,935 $ 1,495,887 2.13 1.65 Hard
24 $ 1,132,922 $ 1,177,863 $ 1,271,210 $ 1,213,210 1.43 1.37 Soft
25 $ 1,173,698 $ 1,099,799 $ 1,151,862 $ 916,736 1.59 1.27 Hard
26 $ 1,474,400 $ 1,492,225 $ 1,155,766 $ 1,051,897 1.56 1.42 Soft
27 $ 1,109,468 $ 1,015,122 $ 1,131,525 $ 957,401 1.58 1.34 No
- ---------------------------------------------------------------------------------------------------------------------------------
28 $ 1,083,960 $ 1,088,570 $ 1,043,851 $ 992,101 1.49 1.41 No
29 $ 992,019 $ 1,010,389 $ 950,304 $ 892,604 1.29 1.21 No
30 $ 1,021,231 $ 1,010,123 $ 1,103,863 $ 878,653 1.77 1.41 Hard
31 $ 1,498,274 $ 1,481,886 $ 1,351,209 $ 1,089,740 2.10 1.70 No
32 NAP $ 1,004,071 $ 872,759 $ 859,910 1.35 1.33 No
- ---------------------------------------------------------------------------------------------------------------------------------
33 $ 832,752 $ 853,243 $ 824,715 $ 750,234 1.34 1.22 No
34 $ 923,396 $ 1,040,904 $ 938,352 $ 796,693 1.66 1.41 Hard
35 $ 1,041,604 $ 1,104,343 $ 925,724 $ 669,163 1.58 1.15 No
36 $ 1,058,745 $ 1,027,144 $ 851,430 $ 699,590 1.47 1.21 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
37 $ 585,861 $ 629,261 $ 588,267 $ 415,545 1.80 1.33 Hard
37 $ 422,389 $ 489,251 $ 428,154 $ 335,056 1.80 1.33 Hard
----------- ----------- ----------- ----------- ---- ----
$ 1,008,250 $ 1,118,512 $ 1,016,421 $ 750,601 1.80 1.33
- ---------------------------------------------------------------------------------------------------------------------------------
38 1.00 1.00 Hard
39 $ 669,935 $ 669,935 $ 647,731 $ 616,731 1.24 1.18 No
40 $ 935,948 $ 945,356 $ 847,077 $ 750,113 1.64 1.45 No
- ---------------------------------------------------------------------------------------------------------------------------------
41 $ 792,691 $ 665,176 $ 469,365 $ 306,975 1.78 1.24 Hard
41 $ 397,356 $ 410,910 $ 435,059 $ 326,005 1.78 1.24 Hard
----------- ----------- ----------- ----------- ---- ----
$ 1,190,047 $ 1,076,086 $ 904,424 $ 632,980 1.78 1.24
- ---------------------------------------------------------------------------------------------------------------------------------
42 $ 830,622 $ 752,319 $ 595,316 $ 529,316 1.27 1.13 No
43 $ 540,281 $ 571,225 $ 584,159 $ 540,909 1.42 1.32 No
44 $ 573,783 $ 601,008 $ 517,086 $ 471,121 1.32 1.21 No
45 1.00 1.00 Hard
46 $ 524,010 $ 536,657 $ 513,157 $ 399,443 1.50 1.17 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
47 $ 537,557 $ 532,919 $ 500,748 $ 460,498 1.52 1.40 No
48 $ 584,866 $ 575,153 $ 531,749 $ 476,050 1.60 1.43 No
49 1.00 1.00 Hard
50 $ 406,289 $ 492,621 $ 403,791 $ 391,791 1.46 1.41 No
51 $ 416,300 $ 416,165 $ 441,358 $ 401,358 1.63 1.48 No
- ---------------------------------------------------------------------------------------------------------------------------------
52 $ 424,557 $ 427,648 $ 483,750 $ 439,491 1.96 1.78 No
53 $ 332,222 $ 397,244 $ 358,120 $ 314,668 1.42 1.25 No
54 $ 468,162 $ 514,829 $ 464,939 $ 389,028 1.90 1.59 No
55 $ 465,834 $ 445,494 $ 463,332 $ 429,732 1.73 1.60 No
56 1.00 1.00 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
57 $ 414,112 $ 428,771 $ 396,956 $ 336,306 1.91 1.62 Hard
58 1.00 1.00 Hard
59 1.00 1.00 Hard
60 $ 343,546 $ 364,028 $ 345,190 $ 328,010 1.69 1.61 Soft
- ---------------------------------------------------------------------------------------------------------------------------------
61 $ 338,482 $ 332,772 $ 345,722 $ 311,846 1.80 1.62 No
62 $ 317,686 $ 389,356 $ 288,615 $ 272,485 1.48 1.40 Soft
63 $ 259,956 $ 300,988 $ 292,966 $ 274,976 1.56 1.46 Soft
64 $ 275,191 $ 283,462 $ 254,612 $ 220,340 1.43 1.23 No
- ---------------------------------------------------------------------------------------------------------------------------------
65 $ 197,438 $ 190,686 $ 198,281 $ 180,031 2.19 1.88 No
65 $ 197,553 $ 204,989 $ 177,007 $ 142,660 2.19 1.88 No
----------- ----------- ----------- ----------- ---- ----
$ 394,991 $ 395,675 $ 375,288 $ 322,691 2.19 1.88
- ---------------------------------------------------------------------------------------------------------------------------------
66 $ 225,464 $ 252,480 $ 209,326 $ 171,609 1.53 1.25 No
67 $ 180,082 $ 173,914 $ 181,592 $ 172,850 1.46 1.39 Soft
68 $ 176,997 $ 179,089 $ 159,818 $ 141,878 1.44 1.27 No
69 $ 217,966 $ 220,958 $ 194,549 $ 173,346 1.86 1.66 No
70 NAP $ 205,658 $ 188,485 $ 158,625 1.79 1.51 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
71 $ 127,063 $ 132,628 $ 147,250 $ 136,737 1.42 1.32 No
72 $ 170,278 $ 170,278 $ 172,628 $ 155,378 1.89 1.70 No
73 $ 167,818 $ 166,450 $ 170,380 $ 153,395 1.93 1.73 No
74 $ 235,884 $ 277,132 $ 186,248 $ 143,845 2.10 1.62 Hard
75 $ 149,091 $ 138,950 $ 136,847 $ 105,985 1.55 1.20 Hard
- ---------------------------------------------------------------------------------------------------------------------------------
76 $ 154,070 $ 161,826 $ 144,391 $ 137,097 1.57 1.49 Soft
77 $ 225,176 $ 233,155 $ 201,016 $ 178,097 1.93 1.71 No
78 $ 152,442 $ 156,698 $ 134,268 $ 122,444 1.84 1.68 No
79 $ 95,481 $ 94,127 $ 113,098 $ 105,918 1.73 1.62 Soft
80 $ 96,452 $ 84,189 $ 85,293 $ 76,705 1.55 1.40 No
81 $ 88,552 $ 88,078 $ 86,188 $ 81,188 1.63 1.54 Soft
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALLOON/ AUDIT/AGREED
ANTICIPATED CURRENT UPON
REPAYMENT OCCUPANCY U/W PROCEDURES
LOAN # VALUE LTV DATE LTV CURRENT OCCUPANCY PERIOD OCCUPANCY UPFRONT
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 77,000,000 57.9% 39.9% 79% 04/30/99 75% No
2 $ 69,000,000 62.0% 51.1% 95% 03/31/99 93% Yes
- -----------------------------------------------------------------------------------------------------------------------------------
3 $ 7,000,000 91.8% 22.6% Yes
3 $ 5,300,000 91.8% 22.6% Yes
3 $ 5,200,000 91.8% 22.6% Yes
3 $ 5,100,000 91.8% 22.6% Yes
3 $ 4,800,000 91.8% 22.6% Yes
3 $ 4,500,000 91.8% 22.6% Yes
3 $ 3,600,000 91.8% 22.6% Yes
3 $ 3,100,000 91.8% 22.6% Yes
3 $ 3,000,000 91.8% 22.6% Yes
3 $ 2,800,000 91.8% 22.6% Yes
3 $ 2,700,000 91.8% 22.6% Yes
3 $ 2,600,000 91.8% 22.6% Yes
3 $ 2,500,000 91.8% 22.6% Yes
3 $ 2,400,000 91.8% 22.6% Yes
------------ ----- -----
$ 54,600,000 91.8% 22.6%
- -----------------------------------------------------------------------------------------------------------------------------------
4 $ 48,500,000 69.5% 60.8% 96% 04/30/99 91% Yes
5 $ 51,000,000 65.9% 55.0% 83% 04/19/99 83% No
6 $ 46,000,000 72.9% 59.7% 89% 06/09/99 89% No
- -----------------------------------------------------------------------------------------------------------------------------------
7 $ 38,000,000 72.5% 63.6% 100% 06/30/99 95% No
7 $ 7,000,000 72.5% 63.6% 96% 06/30/99 95% No
------------ ----- -----
$ 45,000,000 72.5% 63.6%
- -----------------------------------------------------------------------------------------------------------------------------------
8 $ 40,400,000 72.3% 54.1% 96% 04/26/99 95% No
9 $ 38,500,000 75.3% 61.6% 100% 06/30/99 100% No
10 $ 50,000,000 57.0% 50.7% 93% 07/01/99 93% Yes
11 $ 36,000,000 61.3% 49.9% 100% 09/11/99 100% Yes
12 $ 28,500,000 73.3% 64.1% 100% 08/01/99 90% No
13 $ 30,000,000 65.6% 60.2% 98% 04/12/99 93% No
14 $ 28,500,000 69.0% 63.1% 100% 06/07/99 93% No
15 $ 32,500,000 59.7% 53.2% 100% 07/09/99 93% No
- -----------------------------------------------------------------------------------------------------------------------------------
16 $ 18,000,000 100.0% Yes
16 $ 9,500,000 100.0% Yes
------------ ------
$ 27,500,000 100.0%
- -----------------------------------------------------------------------------------------------------------------------------------
17 $ 37,000,000 41.9% 37.0% 99% 05/12/99 93% No
18 $ 22,700,000 58.4% 53.5% 92% 05/20/99 93% No
19 $ 17,000,000 77.8% 64.1% 100% 05/01/99 91% No
20 $ 22,200,000 59.0% 53.5% 95% 04/30/99 90% Yes
- -----------------------------------------------------------------------------------------------------------------------------------
21 $ 14,000,000 55.4% 26.9% 96% 06/30/99 95% Yes
21 $ 5,400,000 55.4% 26.9% 100% 06/30/99 95% Yes
21 $ 1,800,000 55.4% 26.9% 59% 06/30/99 65% Yes
21 $ 2,000,000 55.4% 26.9% 56% 06/30/99 57% Yes
------------ ----- -----
$ 23,200,000 55.4% 26.9%
- -----------------------------------------------------------------------------------------------------------------------------------
22 $ 11,750,000 80.4% 63.3% 97% 08/31/99 95% Yes
22 $ 3,500,000 80.4% 63.3% 97% 08/31/99 95% Yes
------------ ----- -----
$ 15,250,000 80.4% 63.3%
- -----------------------------------------------------------------------------------------------------------------------------------
23 $ 12,200,000 91.0% 79.9% 86% 06/30/99 86% No
24 $ 15,600,000 64.0% 51.6% 95% 04/15/99 95% Yes
25 $ 12,600,000 69.8% 61.6% 90% 03/01/99 90% No
26 $ 15,500,000 56.6% 50.3% 82% 05/19/99 77% No
27 $ 11,000,000 75.7% 63.0% 84% 09/09/99 81% No
- -----------------------------------------------------------------------------------------------------------------------------------
28 $ 11,700,000 67.7% 61.1% 98% 03/31/99 94% No
29 $ 10,400,000 75.8% 62.2% 100% 06/01/99 90% No
30 $ 10,800,000 69.3% 61.2% 76% 07/02/99 76% No
31 $ 15,700,000 47.2% 38.1% 81% 08/17/99 81% No
32 $ 10,000,000 70.3% 1.5% 100% 07/31/99 95% No
- -----------------------------------------------------------------------------------------------------------------------------------
33 $ 9,400,000 72.9% 59.9% 95% 04/30/99 93% No
34 $ 11,400,000 56.3% 49.6% 99% 03/01/99 90% No
35 $ 10,000,000 64.0% 58.2% 100% 05/25/99 90% No
36 $ 8,700,000 71.7% 65.4% 100% 03/01/99 90% No
- -----------------------------------------------------------------------------------------------------------------------------------
37 $ 6,450,000 53.4% 49.0% 100% 04/01/99 85% No
37 $ 4,850,000 53.4% 49.0% 100% 04/01/99 90% No
------------ ----- -----
$ 11,300,000 53.4% 49.0%
- -----------------------------------------------------------------------------------------------------------------------------------
38 $ 7,100,000 97.9% 47.2% Yes
39 $ 7,340,000 78.5% 33.1% 94% 06/14/99 93% No
40 $ 8,600,000 64.3% 34.8% 100% 06/01/99 95% No
- -----------------------------------------------------------------------------------------------------------------------------------
41 $ 4,500,000 62.6% 57.4% 77% 04/01/99 77% No
41 $ 4,200,000 62.6% 57.4% 83% 04/01/99 83% No
------------ ----- -----
$ 8,700,000 62.6% 57.4%
- -----------------------------------------------------------------------------------------------------------------------------------
42 $ 6,900,000 76.3% 54.9% 87% 03/01/99 87% No
43 $ 6,200,000 78.0% 58.9% 97% 05/27/99 94% No
44 $ 6,000,000 75.8% 67.7% 100% 02/01/99 95% No
45 $ 5,100,000 97.4% 46.9% Yes
46 $ 6,300,000 63.1% 53.3% 98% 06/15/99 90% No
- -----------------------------------------------------------------------------------------------------------------------------------
47 $ 4,750,000 82.9% 73.5% 93% 02/21/99 93% No
48 $ 6,270,000 59.8% 39.6% 100% 04/30/99 90% No
49 $ 4,600,000 97.2% 46.8% Yes
50 $ 4,600,000 69.5% 62.4% 100% 04/01/99 95% No
51 $ 4,090,000 75.8% 67.4% 94% 03/24/99 94% No
- -----------------------------------------------------------------------------------------------------------------------------------
52 $ 4,850,000 62.5% 46.5% 87% 04/01/99 87% No
53 $ 4,450,000 67.2% 59.7% 91% 06/01/99 90% No
54 $ 4,730,000 62.5% 55.3% 100% 05/30/99 92% No
55 $ 6,700,000 43.1% 36.2% 66% 05/31/99 66% No
56 $ 3,340,000 98.1% 47.3% Yes
- -----------------------------------------------------------------------------------------------------------------------------------
57 $ 4,000,000 63.8% 56.3% 97% 07/01/99 90% No
58 $ 3,040,000 98.0% 47.2% Yes
59 $ 3,040,000 98.0% 47.2% Yes
60 $ 3,400,000 70.5% 56.8% 96% 04/07/99 95% No
- -----------------------------------------------------------------------------------------------------------------------------------
61 $ 3,300,000 72.0% 63.2% 95% 06/25/99 91% No
62 $ 3,300,000 69.3% 55.8% 91% 04/07/99 91% No
63 $ 3,000,000 73.4% 59.1% 95% 06/16/99 95% No
64 $ 3,075,000 67.0% 57.0% 100% 03/31/99 94% No
- -----------------------------------------------------------------------------------------------------------------------------------
65 $ 1,950,000 50.5% 41.3% 100% 04/19/99 95% No
65 $ 1,840,000 50.5% 41.3% 100% 05/10/99 95% No
------------ ----- -----
$ 3,790,000 50.5% 41.3%
- -----------------------------------------------------------------------------------------------------------------------------------
66 $ 2,390,000 62.7% 44.0% 100% 03/01/99 92% No
67 $ 1,900,000 76.9% 61.9% 94% 06/16/99 94% No
68 $ 2,090,000 66.6% 58.3% 100% 06/01/99 91% No
69 $ 2,020,000 65.8% 50.0% 93% 06/01/99 92% No
70 $ 1,900,000 67.9% 59.9% 90% 04/01/99 90% No
- -----------------------------------------------------------------------------------------------------------------------------------
71 $ 1,625,000 78.7% 69.3% 100% 02/12/99 93% No
72 $ 1,600,000 72.8% 55.1% 93% 09/01/98 93% No
73 $ 1,670,000 67.3% 51.1% 89% 06/01/99 89% No
74 $ 1,900,000 57.4% 50.7% 95% 06/01/99 90% No
75 $ 1,800,000 60.6% 53.3% 81% 08/01/99 81% No
- -----------------------------------------------------------------------------------------------------------------------------------
76 $ 1,500,000 72.1% 58.1% 93% 04/07/99 93% No
77 $ 2,250,000 47.6% 40.6% 100% 06/01/99 90% No
78 $ 1,385,000 66.9% 50.8% 91% 06/01/99 92% No
79 $ 1,500,000 51.1% 41.2% 87% 04/30/99 87% No
80 $ 1,050,000 66.4% 50.4% 84% 06/01/99 84% No
81 $ 980,000 63.2% 50.9% 100% 04/07/99 95% No
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AUDITS/AGREED ACTUAL
UPON U/W ONGOING ONGOING
PROCEDURES CAPITAL CAPITAL RESERVE
LOAN # FORWARD RESERVE RESERVE UNITS TENANT 1
<S> <C> <C> <C> <C> <C>
1 Yes $0.05 $0.05 % revenue
2 Yes $0.25 $0.25 $psf The Chicago Corporation
- -----------------------------------------------------------------------------------------------------------------------
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
3 Yes $0.00 $0.00 $/unit
- -----------------------------------------------------------------------------------------------------------------------
4 Yes $0.15 $0.15 $psf Ralphs
5 No $0.20 $0.20 $psf RJ Gordon & Co
6 Yes $0.20 $0.20 $psf Kirkpatrick & Lockhart, LLP
- -----------------------------------------------------------------------------------------------------------------------
7 Yes $0.15 $0.15 $psf Bed Bath & Beyond
7 Yes $0.20 $0.20 $psf
- -----------------------------------------------------------------------------------------------------------------------
8 Yes $257.74 $308.76 $/unit
9 No $0.24 $0.24 $psf GSA
10 Yes $0.20 $0.20 $psf Bank Building Inc.
11 Yes $0.29 $0.29 $psf
12 No $0.15 $0.15 $psf Supervalue (Shop 'N Save/Giant Food)
13 No $0.15 $0.15 $psf Sport Chalet
14 No $0.20 $0.20 $psf Northern Telecom, Inc.
15 No $0.15 $0.15 $psf Appro International
- -----------------------------------------------------------------------------------------------------------------------
16 Yes $0.00 $0.00 $psf Cinemark
16 Yes $0.00 $0.00 $psf Cinemark
- -----------------------------------------------------------------------------------------------------------------------
17 Yes $0.15 $0.15 $psf Ross Dress For Less
18 No $0.41 $0.22 $psf Venture Communication
19 No $0.15 $0.15 $psf Dominick's
20 Yes $0.21 $0.21 $psf UCSD
- -----------------------------------------------------------------------------------------------------------------------
21 Yes $0.20 $0.15 $psf Kroger
21 Yes $0.20 $0.15 $psf Big Lots
21 Yes $0.19 $0.19 $psf DolgenCorp
21 Yes $0.20 $0.19 $psf Fulmer Supermarket
- -----------------------------------------------------------------------------------------------------------------------
22 Yes $0.15 $0.15 $psf Vons
22 Yes $0.15 $0.27 $psf Denny's
- -----------------------------------------------------------------------------------------------------------------------
23 No $0.15 $0.15 $psf K-Mart Corp.
24 Yes $250.00 $250.00 $/unit
25 Yes $0.21 $0.21 $psf Electronic Data Systems
26 No $0.17 $0.17 $psf Best Plumbing Supply
27 No $0.15 $0.15 $psf Burlington Coat Factory
- -----------------------------------------------------------------------------------------------------------------------
28 No $250.00 $250.00 $/unit
29 No $0.20 $0.20 $psf OfficeMax
30 Yes $0.20 $0.20 $psf United Transportation
31 No $0.21 $0.20 $psf Lord Wakefield Hotel (Best Western)
32 No $0.20 $0.20 $psf Regal Cinema
- -----------------------------------------------------------------------------------------------------------------------
33 No $0.15 $0.15 $psf Office Max
34 No $0.20 $0.20 $psf Gastroenterology Ctr of CT
35 No $0.20 $0.20 $psf NorthFork Bank
36 Yes $0.20 $0.20 $psf Worldwide Interban
- -----------------------------------------------------------------------------------------------------------------------
37 No $0.20 $0.20 $psf Sprint Communications
37 No $0.20 $0.20 $psf Ted L. Parker & Associates
- -----------------------------------------------------------------------------------------------------------------------
38 Yes $0.00 $0.00 $psf Circuit City
39 No $250.00 $250.00 $/unit
40 No $0.16 $0.15 $psf Strack and Van Til
- -----------------------------------------------------------------------------------------------------------------------
41 No $0.20 $0.19 $psf AmerUs
41 No $0.20 $0.19 $psf Iowa Board of Regents
- -----------------------------------------------------------------------------------------------------------------------
42 No $250.00 $250.00 $/unit
43 No $250.00 $250.00 $/unit
44 No $0.15 $0.15 $psf Office Max
45 Yes $0.00 $0.00 $psf Circuit City
46 No $0.20 $0.20 $psf Webber Goldstein
- -----------------------------------------------------------------------------------------------------------------------
47 No $250.00 $250.00 $/unit
48 No $0.15 $0.15 $psf Dollar Tree
49 Yes $0.00 $0.00 $psf Circuit City
50 No $250.00 $250.00 $/unit
51 No $250.00 $250.00 $/unit
- -----------------------------------------------------------------------------------------------------------------------
52 No $277.00 $264.88 $/unit
53 No $0.20 $0.20 $psf Price Chopper
54 No $0.20 $0.20 $psf The Hurst Group
55 No $50.00 $50.00 $/unit
56 Yes $0.00 $0.00 $psf Circuit City
- -----------------------------------------------------------------------------------------------------------------------
57 Yes $0.20 $0.20 $psf Douglas Publications, Inc.
58 Yes $0.00 $0.00 $psf Circuit City
59 Yes $0.00 $0.00 $psf Circuit City
60 No $253.00 $250.00 $/unit
- -----------------------------------------------------------------------------------------------------------------------
61 No $265.00 $265.00 $/unit
62 No $256.00 $250.00 $/unit
63 No $321.00 $250.00 $/unit
64 No $0.20 $0.20 $psf Return Inc
- -----------------------------------------------------------------------------------------------------------------------
65 No $250.00 $250.00 $/unit
65 No $0.20 $0.20 $psf Staples
- -----------------------------------------------------------------------------------------------------------------------
66 No $0.20 $0.15 $psf PBS Tool & Die
67 No $265.00 $264.90 $/unit
68 No $0.15 $0.15 $psf Dollar Tree
69 No $0.20 $0.20 $psf Polaris Athletic Club
70 Yes $0.20 $0.20 $psf Policy Studies
- -----------------------------------------------------------------------------------------------------------------------
71 No $263.00 $262.81 $/unit
72 No $250.00 $250.00 $/unit
73 No $0.20 $0.21 $psf Digitech
74 Yes $0.20 $0.20 $psf St. Mary of the Plains
75 Yes $0.20 $0.20 $psf Ball Aerospace & Technology
- -----------------------------------------------------------------------------------------------------------------------
76 No $261.00 $250.00 $/unit
77 No $0.20 $0.20 $psf Blockbuster
78 No $0.20 $0.20 $psf Dreyers - MKD Distributors
79 No $256.00 $250.00 $/unit
80 No $0.20 $0.20 $psf Grinnell Corporation
81 No $250.00 $250.00 $/unit
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE EXPIRATION LEASE EXPIRATION
LOAN # DATE OF TOTAL SF TENANT 2 DATE
<S> <C> <C> <C> <C>
1
2 VARIOUS 10/31/99 TO 12/31/05 20% ABN Amro 3/31/03 to 11/12/08
- -----------------------------------------------------------------------------------------------------------------------------------
3
3
3
3
3
3
3
3
3
3
3
3
3
3
- -----------------------------------------------------------------------------------------------------------------------------------
4 10/31/16 16% AMC 1/9/17
5 Various 2000-2002 12% Agency for the Performing Arts 9/30/07
6 Various 2000-2009 65% Meyer, Unrovic & Scott Various 1999-2007
- -----------------------------------------------------------------------------------------------------------------------------------
7 1/31/13 25% Staples 10/31/12
7
- -----------------------------------------------------------------------------------------------------------------------------------
8
9 12/30/08 95% CVS 12/30/02
10 10/31/05 29% Lionel Sawyer & C 12/31/09
11
12 12/12/27 27% Homeplace 10/19/12
13 11/30/15 30% Mother's Market & Kitchen 9/30/11
14 11/30/05 27% American Express 12/23/00
15 Various 2001-2009 31% Express Logistics Various 2000-2001
- -----------------------------------------------------------------------------------------------------------------------------------
16 3/11/18 100%
16 3/11/18 100%
- -----------------------------------------------------------------------------------------------------------------------------------
17 3/30/08 10% Strouds 7/31/01
18 Various 2006 17% Financial Communications Company Various 2001-2006
19 10/31/17 59% John's Christian Store 10/31/07
20 Various 1999-2005 37% City National Bank 5/31/00
- -----------------------------------------------------------------------------------------------------------------------------------
21 8/30/18 26% OfficeMax 2/28/13
21 11/30/00 29% Handyman Ace Hardware 12/31/02
21 7/31/01 14% Euro Bistro, Inc. 11/30/99
21 8/31/00 17% Duff's Smorgasborg 2/28/03
- -----------------------------------------------------------------------------------------------------------------------------------
22 9/30/03 34% Sav-on Drugs 11/30/02
22 12/1/02 20% Der Weinerschnitzel 6/1/03
- -----------------------------------------------------------------------------------------------------------------------------------
23 2/28/00 60% Interpak, Inc. 10/31/01
24
25 7/31/01 21% Anthem Life/Farnsworth 9/30/99
26 9/30/07 43% AC Moore 2/28/08
27 1/31/02 26% Luxury Linens 11/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
28
29 12/31/12 25% Barnes & Noble 3/1/13
30 3/31/01 20% New York Life Insurance 5/31/09
31 12/31/01 20% Homeside Lending 1/31/02
32 12/31/18 100%
- -----------------------------------------------------------------------------------------------------------------------------------
33 10/31/12 20% Budget Cinema 3/31/17
34 7/14/08 15% Center for Orthopedics 5/1/04
35 Various 2000 12% Paul Associates 11/30/03
36 12/31/07 100%
- -----------------------------------------------------------------------------------------------------------------------------------
37 Various 1999-2001 56% Waddell & Reed, Inc. 10/31/03
37 Various from 1999 - 2002 14% Computer Transition Svcs., Inc. 5/31/00
- -----------------------------------------------------------------------------------------------------------------------------------
38 6/30/20 100%
39
40 7/31/09 52% Fashion Bug 3/31/03
- -----------------------------------------------------------------------------------------------------------------------------------
41 Various 1999-2002 26% Iowa Bankers 8/31/01
41 2/12/02 9% Stanley Consultants 1/14/00
- -----------------------------------------------------------------------------------------------------------------------------------
42
43
44 3/31/12 41% Factory Card Outlet 1/31/08
45 6/30/20 100%
46 12/31/02 24% Ludert-Adler 5/31/08
- -----------------------------------------------------------------------------------------------------------------------------------
47
48 6/1/01 11% Pic N Pay 7/31/02
49 6/30/20 100%
50
51
- -----------------------------------------------------------------------------------------------------------------------------------
52
53 5/31/15 44% Central Tractor 6/30/06
54 6/15/04 22% SOS Staffing Services 12/31/02
55
56 6/30/20 100%
- -----------------------------------------------------------------------------------------------------------------------------------
57 10/31/03 14% A- Plus Computer Education 8/31/03
58 6/30/20 100%
59 6/30/20 100%
60
- -----------------------------------------------------------------------------------------------------------------------------------
61
62
63
64 various 2002-2003 66% RJ Steichen 10/31/03
- -----------------------------------------------------------------------------------------------------------------------------------
65
65 5/31/04 54% Victor's Craft 6/30/03
- -----------------------------------------------------------------------------------------------------------------------------------
66 Various 2001 20% Dovetails, Inc. 4/30/01
67
68 11/1/02 27% Dairy Queen 12/1/07
69 10/31/01 19% California Closets 11/30/00
70 2/28/04 62% Cohen, Vacanil, Higgins 2/28/01
- -----------------------------------------------------------------------------------------------------------------------------------
71
72
73 4/30/02 22% Michaels Interiors 10/31/01
74 1/31/04 47% R.H. Administrators 9/30/01
75 5/31/02 16% MZA Associates Corporation 12/31/01
- -----------------------------------------------------------------------------------------------------------------------------------
76
77 4/30/07 37% Einstein's Bagels 3/31/02
78 11/30/05 41% Denali Commercial Management 9/30/99
79
80 2/28/01 34% Dan Bull & Associates 7/31/01
81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE EXPIRATION
LOAN # % OF TOTAL SF TENANT 3 DATE % OF TOTAL SF
<S> <C> <C> <C> <C>
1
2 12% CEDA 9/30/09 7%
- ---------------------------------------------------------------------------------------------------------------
3
3
3
3
3
3
3
3
3
3
3
3
3
3
- ---------------------------------------------------------------------------------------------------------------
4 15% The Good Guys 11/30/11 11%
5 5% Lichter 1/1/06 4%
6 8% Rose, Schmidt, Hasley, Et.Al. 3/31/02 6%
- ---------------------------------------------------------------------------------------------------------------
7 11% Circuit City 1/31/17 13%
7
- ---------------------------------------------------------------------------------------------------------------
8
9 5%
10 20% Morris Brignone 12/31/08 12%
11
12 22% Petsmart 12/14/12 11%
13 9% Houston's 12/31/15 6%
14 10% Ford Motor Credit Co. Various 2001 10%
15 24% Telogy Inc. 6/30/01 23%
- ---------------------------------------------------------------------------------------------------------------
16
16
- ---------------------------------------------------------------------------------------------------------------
17 7% Sav on Drug 5/30/04 5%
18 10% GSA 12/31/00 6%
19 10% Hollywood Video 11/7/07 6%
20 6% Rock Bottom Brewery 12/31/12 6%
- ---------------------------------------------------------------------------------------------------------------
21 11% Big Lot's #23 11/30/00 10%
21 14% Goodwill Ind. Of Miami 11/30/01 10%
21 7% Mae Tan Brown -China's Best 9/30/00 5%
21 11% Dollar General #414 10/31/00 8%
- ---------------------------------------------------------------------------------------------------------------
22 34% 20/20 Video, Inc. 11/30/02 3%
22 20% See's Candles 7/1/04 15%
- ---------------------------------------------------------------------------------------------------------------
23 10% North Coast Wood Prod. 7/31/00 7%
24
25 6% Jacobs Engineering 11/30/00 6%
26 11% Staples 10/31/05 10%
27 15% Ross Dress for Less 1/31/06 11%
- ---------------------------------------------------------------------------------------------------------------
28
29 25% GAP/Old Navy 8/31/07 16%
30 15% North Coast Health Care Various 2002-2005 8%
31 5% Deerfield Healthcare 8/31/00 4%
32
- ---------------------------------------------------------------------------------------------------------------
33 16% Fashion Bug 1/31/06 10%
34 7% MARILLAC Mgt. Serv. 4/30/04 6%
35 12% BFI Inc/Apecmark, Inc. 7/31/01 9%
36
- ---------------------------------------------------------------------------------------------------------------
37 9% Core Source, Inc. 1/31/03 7%
37 10% Healthsmart Preferred Care Inc. Various 1999-2001 9%
- ---------------------------------------------------------------------------------------------------------------
38
39
40 7% Dollar General 6/30/04 5%
- ---------------------------------------------------------------------------------------------------------------
41 25% Connolly, O'malley 12/31/99 5%
41 9% Iowa Attorney General 2/28/02 7%
- ---------------------------------------------------------------------------------------------------------------
42
43
44 19% Blockbuster Video 3/31/02 12%
45
46 12% Somnia Furniture 6/4/06 9%
- ---------------------------------------------------------------------------------------------------------------
47
48 10% Dots 1/31/02 9%
49
50
51
- ---------------------------------------------------------------------------------------------------------------
52
53 19% Stage 1/31/09 13%
54 18% Lundberg & Meaders 10/31/02 15%
55
56
- ---------------------------------------------------------------------------------------------------------------
57 10% Williams & Lynch 7/31/03 9%
58
59
60
- ---------------------------------------------------------------------------------------------------------------
61
62
63
64 21% Bayview Partners 12/31/03 13%
- ---------------------------------------------------------------------------------------------------------------
65
65 20% Robert Dunlap/ABC 7/31/02 13%
- ---------------------------------------------------------------------------------------------------------------
66 15% Netcon Enterprises 4/30/01 15%
67
68 11% Friedmans Jewelers 3/1/00 11%
69 13% Denali Commercial Management 9/30/99 12%
70 7% Broom, Johnson and Clarkson 12/31/99 7%
- ---------------------------------------------------------------------------------------------------------------
71
72
73 11% H&R Block Premium 4/30/01 11%
74 12% CoBank 9/30/00 7%
75 11% Radiant Technology Inc. 2/28/00 10%
- ---------------------------------------------------------------------------------------------------------------
76
77 14% Flanagan, DDS 4/30/02 14%
78 17%
79
80 34% Steam Supply & Rubber 10/31/01 16%
81
</TABLE>
Footnotes:
(a) Indicated only for those properties where a material portion of such
property is subject to a leasehold interest.
<PAGE>
ANNEX C: PREMIUM LOANS
<TABLE>
<CAPTION>
ANTICIPATED CUT-OFF
LOAN CUT-OFF CUT-OFF REPAYMENT DATE DATE PRINCIPAL UNAMORTIZED
# LOAN NAME DATE LTV DATE PTV LTV/PLTV DSCR BALANCE PREMIUM
- --------- -------- -------- -------- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
2 208 South Lasalle 62.0% 65.5% 51.1% 1.38x $ 42,788,119 5.7%
6 Henry W. Oliver 72.9% 79.0% 59.7% 1.33 $ 33,523,888 8.4%
14 Campbell Forum 69.0% 72.4% 63.1% 1.21 $ 19,660,894 4.9%
18 60 Madison 58.4% 61.0% 53.5% 1.22 $ 13,265,426 4.4%
19 Geneva Crossing 77.8% 84.4% 64.1% 1.18 $ 13,227,139 8.5%
20 La Jolla Village Professional Ctr. 59.0% 63.2% 53.5% 1.16 $ 13,103,073 7.0%
21 Allied Portfolio 55.4% 61.6% 26.9% 1.24 $ 12,850,396 11.1%
24 Signature Place Overland 64.0% 68.4% 51.6% 1.37 $ 9,976,778 6.9%
29 Bayou Walk Shopping Center 75.8% 82.6% 62.2% 1.21 $ 7,885,913 8.9%
36 Manassas Executive Center 71.7% 78.0% 65.4% 1.21 $ 6,240,164 8.7%
37 Fairway Corporate Center 53.4% 56.2% 49.0% 1.33 $ 6,037,079 5.3%
41 100 Cortland Office Portfolio 62.6% 65.3% 57.4% 1.24 $ 5,442,813 4.3%
----- ----- ----- ---- ------------------- ----
TOTAL / WEIGHTED AVERAGE: 65.7% 70.3% 54.7% 1.28X $ 184,001,683 6.9%
===================
<CAPTION>
LOAN PREMIUM BASE INTEREST BASE
# CUT-OFF BALANCE RATE RATE AMORT. AMORT.
- --------------- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
2 $ 45,216,141 7.785% 8.500% 348 360
6 $ 36,340,126 7.490% 8.500% 343 360
14 $ 20,621,778 7.680% 8.500% 331 360
18 $ 13,844,605 7.760% 8.500% 333 360
19 $ 14,350,299 7.460% 8.500% 343 360
20 $ 14,024,933 7.390% 8.450% 324 360
21 $ 14,281,823 7.307% 8.850% 240 360
24 $ 10,668,144 7.160% 8.000% 346 360
29 $ 8,585,379 7.390% 8.500% 342 360
36 $ 6,782,930 7.147% 8.500% 317 360
37 $ 6,354,346 7.595% 8.500% 328 360
41 $ 5,678,541 7.750% 8.500% 333 360
--------------- ------ ------ --- ---
$ 196,749,044 7.554% 8.494% 332 360
===============
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX D
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Commercial
Mortgage Asset Trust, Commercial Mortgage Pass-Through Certificates, Series
1999-C2 (the "Global Securities") will be available only in book-entry form.
Investors in the Global Securities may hold such Global Securities through any
of The Depositary Trust Company ("DTC"), Cedel 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 Cedel 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 days 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 Cedel or Euroclear and DTC
Participants holding Offered Certificates will be effected on a delivery
against payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC 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
of their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional Eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade 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 DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional Eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, calculated on the basis of a year of
360 days consisting of twelve 30-day months. Payment will then be made by the
respective Depositary to the DTC 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 Cedel Participant's
D-1
<PAGE>
or Euroclear Participant's account. The securities credit will appear the next
day (European time) and the cash debit will be back-valued to, and the interest
on the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occured in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants 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 Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants can elect not to pre-position funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure, Cedel
Participants or Euroclear Participants 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 the 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 Cedel Participant's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds
to the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, calculated on the basis of a year of
360 days consisting of 12 30-day months. The payment will then be reflected in
the account of the Cedel Participant or Euroclear Participant the following
day, and receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over the one-day period. If settlement is no completed on the
intended value date (i.e., the trade fails) receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their Cedel or Euroclear account in order to
settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the Cedel Participant or Euroclear
Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel
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
D-2
<PAGE>
interest (including original issue discount) on registered debt issued by U.S.
Persons (as defined herein), unless (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 or 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.
Exceptions for non-U.S. Persons (Form W-8): Beneficial owners of
Certificates 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). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exception for Non-U.S. Persons with effectively connected income (Form
4224). 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 for 4224 (Exemption from Withholding of Tax 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). Non-U.S. Persons that are beneficial owners of a
Certificate and reside 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).
If the treaty provides only for a reduced rate, withholding tax will be imposed
at that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the holder of a Certificate or his agent.
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 holder 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). Except as discussed below, Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one calendar
year.
Final withholding regulations (the "New Regulations") effective January 1,
2001 affect the documentation required from non-U.S. Persons having validly
existing IRS Forms, such as IRS Form W-8, 1001 or 4224. The New Regulations
replace a number of current tax certification forms (including IRS Forms W-9,
1001 and 4224, as discussed above) with a new series of IRS Forms W-8 and
generally standardize the period of time for which withholding agents can rely
on such forms (although certain of the new forms may remain valid indefinitely
if the beneficial owner provides a United States taxpayer identification number
and the information on the form does not change). Existing forms and statements
will remain valid until the earlier of their expiration on December 31, 2000.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership (except to the extent provided in
applicable Treasury regulations) organized in or under the laws of the United
States, any state or the District of Columbia, including any entity treated as
a corporation or partnership for federal income tax purposes, (iii) an estate
the income of which is includible in gross income for United States tax
purposes, regardless of its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more U.S. Persons have the authority to control all
substantial decisions of such trust (including a trust, to the extent provided
in the applicable Treasury regulations, which were in existence on August 20,
1996 and is eligible to elect to be treated as a U.S. Person). 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.
D-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
$693,269,000 (APPROXIMATE) OCTOBER 4, 1999
COMMERCIAL MORTGAGE ASSET TRUST
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
APPROXIMATE SECURITIES STRUCTURE:
- ---------------------------------
EXPECTED EXPECTED
APPROXIMATE CREDIT WEIGHTED EXPECTED
EXPECTED RATING FACE/NOTIONAL SUPPORT AVERAGE LIFE PAYMENT
CLASS AMOUNT (MM) (% OF UPB) (YEARS) (A) WINDOW
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY OFFERED CLASSES
A-1 AAA $127.0 28.50% 5.73 11/99-12/07
A-2 AAA 322.8 28.50 9.20 12/07-12/09
A-3 AAA 108.7 28.50 11.55 12/09-10/12
B AA 39.0 23.50 13.41 10/12-04/13
C A 39.0 18.50 13.58 04/13-07/13
D A- 11.7 17.00 13.93 07/13-12/13
E BBB 29.3 13.25 14.14 12/13-01/14
F BBB- 15.6 11.25 14.22 01/14-01/14
PRIVATE CLASSES (B)
- ----------------------------------------------------------------------------------------------------------
X AAAr - - - -
Other Private Certificates - - - -
- - - -
- - - -
- - - -
- - - -
- - - -
TOTAL SECURITIES:
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated at 0% CPR, no balloon extension and ARD Loans pay in full on
Anticipated Repayment Dates.
(b) Not offered hereby and includes Class R and LR
certificates.
KEY FEATURES:
- -------------
Co-Lead Managers: Goldman, Sachs & Co.
Nomura Securities International, Inc.
Co-Manager: Donaldson, Lufkin & Jenrette Securities
Corporation
Mortgage Loan Sellers: Capital Company of America, LLC
Nomura Holding America Inc.
Master Servicer: BNY Asset Solutions LLC
Interim Special Servicer: Lennar Partners, Inc.
Trustee: LaSalle Bank National Association
Launch: On or about October , 1999
Pricing: On or about October , 1999
Closing: On or about October , 1999
Cut-Off Date: October 11, 1999
Distribution Date: 17th of each month, or following business day
Payment Delay: 6 days
ERISA Eligible: Classes A-1, A-2 and A-3
SMMEA Eligible: Classes A-1, A-2, A-3 and B
Structure: Sequential Pay
Day Count: 30/360
Tax Treatment: REMIC
Rated Final Distribution Date: November 17, 2031
Clean up Call: 1.0%
Minimum Denominations: Publicly Offered Classes: $10,000
Delivery: DTC and Euroclear
- --------------------------------------------------------------------------------
COLLATERAL FACTS:
- -----------------
Initial Pool Balance: $781,148,433
Number of Mortgage Loans: 81
Number of Mortgaged Properties: 103
Average Cut-Off Date Principal Balance: $9,643,808
Weighted Average Current Mortgage Rate: 7.897%
Weighted Average U/W DSCR: (w/out CTLs) 1.36x
Weighted Average Cut-Off Date LTV: (w/out CTLs) 66.4%
Weighted Average Cut-Off Date PTV: (w/out CTLs) 67.6%
Weighted Average Remaining Term to Maturity (months): 141
Weighted Average Remaining Amortization Term (months): 326
Weighted Average Seasoning (months): 13
CTL/Participation Loans as a % of Total (a): 10.3%
Balloon/ARD Loans as % of Total: 97.7%
Ten Largest Loans or Related Loans as % of Total: 44.5%
Defeasance Loans as % of Total: 100.0%
<TABLE>
<CAPTION>
TEN LARGEST LOANS OR RELATED LOANS:
- -----------------------------------
LOAN BALANCE % BY UPB LTV DSCR PROPERTY TYPE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Westin Denver Tabor Center $44,593,725 5.7% 57.9% 1.74x Hotel
208 South Lasalle 42,788,119 5.5 62.0 1.38 Office
ACCOR Corp. - Pool III (b) 40,308,831 5.2 91.8 1.00 Hotel
Marina Pacific Shopping Ctr. 33,725,031 4.3 69.5 1.33 Retail
Luckman Plaza 33,623,958 4.3 65.9 1.29 Office
Henry W. Oliver 33,523,888 4.3 72.9 1.33 Office
Congressional North 32,647,005 4.2 72.5 1.22 Office
80 John Street 29,198,810 3.7 72.3 1.27 Multifamily
633 Indiana Avenue 29,000,000 3.7 75.3 1.53 Office
Bank of America - Vegas 28,479,885 3.7 57.0 1.48 Office
---------- ---
TOTAL/WTD. AVG. $347,889,251 44.5% 66.4% 1.41X
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) All of the 8 Credit Tenant Lease loans are pari passu participations. The
Trustee is the lead lender for each such loan.
(b) Excludes CTL loan.
<TABLE>
<CAPTION>
SELECTED LOAN DATA:
- -------------------
NUMBER OF CUT-OFF DATE PRINCIPAL BALANCE
MORTGAGED ---------------------------------------------------------
GEOGRAPHIC DISTRIBUTION PROPERTIES BALANCE % BY UPB WTD. AVG. DSCR (A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California 9 $ 151,238,176 19.4% 1.29x
New York 13 74,647,892 9.6 1.30
Illinois 6 69,793,291 8.9 1.32
Pennsylvania 5 66,198,491 8.5 1.29
Colorado 2 56,608,131 7.2 1.74
Other (b) 68 362,662,391 46.4 1.33
-- ----------- ----
TOTAL/WTD. AVG. 103 $781,148,373 100.0% 1.36X
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF CUT-OFF DATE PRINCIPAL BALANCE
MORTGAGED ---------------------------------------------------------
PROPERTY TYPE PROPERTIES BALANCE % BY UPB WTD. AVG. DSCR (A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office (c) 26 $287,764,099 36.8% 1.35x
Retail (d) 29 229,019,035 29.3 1.28
Multifamily 21 93,042,873 11.9 1.36
Hotel (e) 15 84,902,556 10.9 1.74
Industrial 7 36,075,227 4.6 1.43
Movie Theatre 3 25,385,565 3.2 1.33
Exposition Center 1 22,069,624 2.8 1.43
Mobile Home Park 1 2,889,455 0.4 1.60
-- --------- -------
TOTAL/WTD. AVG. 103 $781,148,433 100.0% 1.36X
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Includes 25 other states.
(c) Includes medical office properties.
(d) Includes anchored, quasi-anchored and unanchored properties. (e) Includes
full and limited service hotel properties.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
STRUCTURAL OVERVIEW
- --------------------------------------------------------------------------------
o For purposes of calculating principal distributions of the Certificates:
-- Available principal will be allocated sequentially to the Class A-1, A-2,
A-3, B, C, D, E, F and then to the private certificates.
-- In case the principal balance of the private certificates and the Class F,
E, D, C and B certificates, in that order, have been reduced to zero due
to the allocation of principal losses, then principal will be allocated
pro rata to the A-1, A-2 and A-3 certificates.
o Class X will be entitled to receive payments of interest only and will not
receive any payments of principal. Class X will be entitled to payments of
interest pro rata (based on interest entitlements) with the Class A-1, A-2
and A-3 certificates each month.
o Each class will be subordinate to the Class A-1, A-2, A-3 and X certificates
and to each class with an earlier alphabetical designation than such class.
Each of the Class A-1, A-2, A-3 and X certificates will be of equal priority.
o All classes will pay interest on a 30/360 basis.
o Principal Losses will be allocated in reverse alphabetical order to the
private certificates and then to the Class F, E, D, C, B, and then pro rata
to Class A-1, A-2 and A-3.
o The Master Servicer will cover prepayment interest shortfalls (excluding
shortfalls on specially serviced mortgage loans), up to the amount of its
servicing compensation plus certain reinvestment income received by it and
prepayment interest excesses. Net prepayment interest shortfalls (after
application of prepayment interest excesses and other Servicer coverage from
the Master Servicing Fee) will be allocated in reverse priority (based on
interest entitlements) to all regular Certificates.
o Shortfalls resulting from Master Servicer and Special Servicer modifications,
Special Servicer compensation or other extraordinary trust fund expenses will
be allocated in reverse alphabetical order to classes of outstanding regular
Certificates other than to the Class X.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
AVERAGE LIFE TABLE (IN YEARS) (A)
(PREPAYMENTS LOCKED OUT THROUGH LOCK OUT PERIOD, DEFEASANCE AND YIELD
MAINTENANCE, THEN RUN AT THE INDICATED CPRS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREPAYMENT ASSUMPTIONS (CPR)
0% CPR 25% CPR 50% CPR 75% CPR 100% PP (B)
- --------------------------------------------------------------------------------
A-1 5.73 5.71 5.69 5.67 5.57
A-2 9.20 9.19 9.18 9.16 9.04
A-3 11.55 11.55 11.55 11.54 11.51
B 13.41 13.40 13.38 13.36 13.26
C 13.58 13.58 13.58 13.58 13.57
D 13.93 13.91 13.89 13.85 13.77
E 14.14 14.14 14.14 14.13 14.05
F 14.22 14.22 14.21 14.20 14.14
- --------------------------------------------------------------------------------
(a) ARD loans are assumed to pay on the Anticipated Repayment Date.
(b) "PP" means 100% of each loan prepays when it becomes freely prepayable.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY CUT-OFF DATE PRINCIPAL BALANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
RANGE OF CUT-OFF DATE MORTGAGE PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
PRINCIPAL BALANCES LOANS BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - 2,500,000 24 $36,110,438 4.6% $1,504,602 1.51x 7.318% 138 66.7%
2,500,000 - 4,999,999 15 52,411,098 6.7 3,494,073 1.41 7.458 145 68.1
5,000,000 - 7,499,999 13 81,692,728 10.5 6,284,056 1.32 7.821 135 65.3
7,500,000 - 9,999,999 6 51,680,043 6.6 8,613,340 1.34 7.665 124 68.0
10,000,000 - 19,999,999 11 168,410,345 21.6 15,310,031 1.27 8.258 133 64.9
20,000,000 - 29,999,999 5 129,633,224 16.6 25,926,645 1.40 7.493 117 67.9
30,000,000 - 39,999,999 4 133,519,881 17.1 33,379,970 1.29 8.164 142 70.2
40,000,000 - 64,999,999 3 127,690,675 16.3 42,563,558 1.56 8.038 184 59.9
- ----------- ----
TOTAL/WTD. AVG. 81 $781,148,433 100.0% $9,643,808 1.36X 7.897% 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION OF MORTGAGED PROPERTIES BY STATE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
STATE PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 9 $151,238,176 19.4% $ 16,804,242 1.29x 8.164% 130 64.5%
New York 13 74,647,892 9.6 5,742,146 1.30 7.672 107 66.6
Illinois 6 69,793,291 8.9 11,632,215 1.32 8.247 167 66.5
Pennsylvania 5 66,198,491 8.5 13,239,698 1.29 8.229 161 72.4
Colorado 2 56,608,131 7.2 28,304,066 1.74 8.408 181 57.9
Ohio 10 41,540,228 5.3 4,154,023 1.44 7.896 153 70.2
Texas 8 40,477,078 5.2 5,059,635 1.33 7.943 108 66.7
Massachusetts 4 36,864,777 4.7 9,216,194 1.49 7.178 133 57.8
Indiana 7 32,977,736 4.2 4,711,105 1.34 7.469 177 67.7
Maryland 2 32,647,005 4.2 16,323,502 1.22 7.840 106 72.5
District of Columbia 1 29,000,000 3.7 29,000,000 1.53 7.040 120 75.3
Nevada 1 28,479,885 3.6 28,479,885 1.48 7.750 119 57.0
Michigan 4 15,127,794 1.9 3,781,948 1.35 7.342 164 73.6
Virginia 4 13,938,360 1.8 3,484,590 1.35 7.702 107 66.6
Kansas 2 13,449,098 1.7 6,724,549 1.36 8.129 147 61.2
Tennessee (b) 5 11,293,144 1.4 2,258,629 N/A 7.313 234 N/A
Iowa 3 10,704,639 1.4 3,568,213 1.19 8.077 128 69.3
North Carolina 1 7,915,749 1.0 7,915,749 1.41 7.900 97 67.7
Louisiana 1 7,885,913 1.0 7,885,913 1.21 8.500 161 75.8
Oregon 2 7,087,267 0.9 3,543,633 N/A 7.030 222 N/A
Wisconsin (b) 1 6,851,529 0.9 6,851,529 1.22 7.430 104 72.9
Connecticut 1 6,415,759 0.8 6,415,759 1.41 7.820 112 56.3
Mississippi (b) 1 4,158,283 0.5 4,158,283 N/A 7.640 248 N/A
Alaska 4 4,076,770 0.5 1,019,192 1.64 6.780 172 66.6
Florida 1 3,100,000 0.4 3,100,000 1.48 7.910 123 75.8
Utah 1 2,954,581 0.4 2,954,581 1.59 7.230 103 62.5
Minnesota 1 2,059,091 0.3 2,059,091 1.23 7.320 103 67.0
Nebraska 1 1,289,256 0.2 1,289,256 1.51 7.120 109 67.9
Arizona 1 1,278,516 0.2 1,278,516 1.32 6.980 102 78.7
New Mexico 1 1,089,995 0.1 1,089,995 1.20 7.030 108 60.6
---- --------- -------
TOTAL/WTD. AVG. 103 $781,148,433 100.0% $7,583,965 1.36X 7.897% 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Contains only CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
DISTRIBUTION OF MORTGAGED PROPERTIES BY STATE
OR 0.91% CA 19.36% AK 0.52%
NV 3.65% UT 0.38% AZ 0.16%
CO 7.25% NM 0.14% NE 0.17%
KS 1.72% TX 5.18% MN 0.26%
IA 1.37% LA 1.01% WI 0.88%
IL 8.93% MS 0.53% MI 1.94%
IN 4.22% TN 1.45% OH 5.32%
NY 9.56% PA 8.47% VA 1.78%
NC 1.01% FL 0.40% MA 4.72%
CT 0.82% MD 4.18% D.C. 3.71%
CALIFORNIA 19.36%
NEW YORK 9.56%
ILLINOIS 8.93%
PENNSYLVANIA 8.47%
COLORADO 7.25%
OHIO 5.32%
TEXAS 5.18%
MASSACHUSETTS 4.72%
INDIANA 4.22%
MARYLAND 4.18%
DISTRICT OF COLUMBIA 3.71%
NEVADA 3.65%
MICHIGAN 1.94%
OTHER 13.51%
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY PROPERTY TYPE
- --------------------------------------------------------------------------------
MOBILE HOME PARK 0.37%
OFFICE 36.84%
RETAIL 29.32%
MULTIFAMILY 11.91%
HOTEL 10.87%
INDUSTRIAL 4.62%
MOVIE THEATRE 3.25%
EXPOSITION 2.83%
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
PROPERTY TYPE PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE
Office 24 $276,269,917 35.4% $11,511,247 1.35x 8.021% 131 65.1%
Medical Office 2 11,494,182 1.5 5,747,091 1.33 7.829 109 63.5
TOTAL OFFICE 26 287,764,099 36.8 11,067,850 1.35 8.014 130 65.0
RETAIL
Anchored 13 155,866,574 20.0 11,989,736 1.26 8.206 131 68.4
Unanchored 5 40,203,021 5.1 8,040,604 1.34 7.842 102 66.2
Quasi-Anchored 11 32,949,440 4.2 2,995,404 1.38 7.554 198 65.3
TOTAL RETAIL 29 229,019,035 29.3 7,897,208 1.28 8.049 136 67.8
MULTIFAMILY 21 93,042,873 11.9 4,430,613 1.36 7.500 128 71.6
HOTEL
Full Service 1 44,593,725 5.7 44,593,725 1.74 8.505 170 57.9
Limited Service (b) 14 40,308,831 5.2 2,879,202 N/A 7.030 223 N/A
TOTAL HOTEL 15 84,902,556 10.9 5,660,170 1.74 7.805 195 57.9
INDUSTRIAL 7 36,075,227 4.6 5,153,604 1.44 7.541 125 70.2
MOVIE THEATRE 3 25,385,565 3.2 8,461,855 1.33 8.060 226 70.3
EXPOSITION CENTER 1 22,069,624 2.8 22,069,624 1.43 7.250 111 61.3
MOBILE HOME PARK 1 2,889,455 0.4 2,889,455 1.60 7.670 94 43.1
--- ------------ -----
TOTAL/WTD. AVG. 103 $781,148,373 100.0% $7,583,965 1.36X 7.896% 141 66.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Contains Only CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY YEAR BUILT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
YEAR BUILT PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1900 - 1921 13 $108,240,900 13.9% $ 8,326,223 1.35x 8.340 148 65.9%
1922 - 1931 2 32,060,110 4.1 16,030,055 1.27 7.446 110 71.4
1952 - 1961 3 20,015,832 2.6 6,671,944 1.31 7.686 119 64.2
1962 - 1971 12 142,917,570 18.3 11,909,797 1.41 7.602 129 65.1
1972 - 1981 32 165,584,985 21.2 5,174,531 1.37 7.817 140 65.1
1982 - 1991 18 139,417,920 17.8 7,745,440 1.45 7.969 149 63.7
1992 - 1999 23 172,911,116 22.1 7,517,875 1.28 7.989 149 70.7
--- ------------ -----
TOTAL/WTD. AVG. 103 $781,148,433 100.0% $ 7,583,965 1.36x 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
- --------------------------------------------------------------------------------
DISTRIBUTION BY UNDERWRITTEN DEBT SERVICE COVERAGE RATIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
RANGE OF NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
UNDERWRITTEN MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
DSCR RATIOS PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CTL's 8 $ 80,120,927 10.3% $ 10,015,116 N/A 7.427% 229 N/A
1.10 - 1.19 6 47,732,200 6.1 7,955,367 1.16 8.11 137 69.5
1.20 - 1.29 21 258,084,341 33.0 12,289,731 1.25 8.01 123 67.0
1.30 - 1.39 14 175,599,959 22.5 12,542,854 1.35 8.23 146 68.0
1.40 - 1.49 12 100,005,504 12.8 8,333,792 1.44 7.56 112 61.6
1.50 - 1.59 4 33,863,520 4.3 8,465,880 1.53 7.06 118 73.7
1.60 - 1.69 11 34,009,840 4.4 3,091,803 1.65 7.19 119 68.3
1.70 - 1.79 4 49,818,185 6.4 12,454,546 1.74 8.37 169 58.2
1.80 - 1.89 1 1,913,956 0.2 1,913,956 1.88 7.50 112 50.5
-- ------------ -----
TOTAL/WTD. AVG. 81 $781,148,433 100.0% $ 9,643,808 1.36x 7.897% 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY CUT-OFF DATE LOAN TO VALUE RATIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF PERCENTAGE OF WEIGHTED REMAINING AVERAGE
CUT-OFF DATE NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
LOAN TO MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
VALUE RATIOS PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 - 49.9 4 $ 26,873,431 3.4% $ 6,718,358 1.43x 8.178 111 43.7%
50.0 - 59.9 13 160,445,542 20.5 12,341,965 1.46 8.171 132 57.5
60.0 - 64.9 13 107,934,531 13.8 8,302,656 1.38 7.960 136 62.4
65.0 - 69.9 17 148,186,193 19.0 8,716,835 1.32 8.015 123 67.8
70.0 - 74.9 12 145,601,588 18.6 12,133,466 1.29 7.935 132 72.5
75.0 - 79.9 11 84,692,110 10.8 7,699,283 1.34 7.546 136 76.3
80.0 - 84.9 2 16,194,110 2.1 8,097,055 1.28 7.489 155 81.0
85.0 - 94.9 1 11,100,000 1.4 11,100,000 1.65 7.214 119 91.0
CTL 8 80,120,927 10.3 10,015,116 N/A 7.427 229 N/A
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36x 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
- --------------------------------------------------------------------------------
DISTRIBUTION BY BALLOON LOAN TO VALUE RATIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF PERCENTAGE OF WEIGHTED REMAINING AVERAGE
BALLOON NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
LOAN TO MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
VALUE RATIOS PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 - 19.9 1 $ 7,030,211 0.9% $ 7,030,211 1.33x 8.090 239 70.3%
20.0 - 29.9 1 12,850,396 1.6 12,850,396 1.24 8.850 162 55.4
30.0 - 39.9 7 85,444,049 10.9 12,206,293 1.57 8.214 145 55.5
40.0 - 49.9 9 44,132,201 5.6 4,903,578 1.47 7.528 115 58.8
50.0 - 59.9 33 292,829,722 37.5 8,873,628 1.33 7.960 135 65.0
60.0 - 69.9 20 243,702,876 31.2 12,185,144 1.31 7.916 120 72.3
70.0 - 74.9 1 3,938,051 0.5 3,938,051 1.40 7.300 101 82.9
75.0 - 84.9 1 11,100,000 1.4 11,100,000 1.65 7.214 119 91.0
CTL 8 80,120,927 10.3 10,015,116 N/A 7.427 229 0.0
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY MORTGAGE INTEREST RATE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
RANGE OF MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
MORTGAGE RATES PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.7500 - 6.9999 8 $ 16,241,891 2.1% $ 2,030,247 1.43x 6.901 124 72.7%
7.0000 - 7.2499 13 114,754,492 14.7 8,827,269 1.54 7.082 155 71.3
7.2500 - 7.4999 18 108,755,492 13.9 6,041,972 1.34 7.359 116 68.8
7.5000 - 7.7499 13 53,023,581 6.8 4,078,737 1.31 7.615 184 71.9
7.7500 - 7.9999 8 137,116,021 17.6 17,139,503 1.33 7.864 123 64.6
8.0000 - 8.2499 6 63,721,290 8.2 10,620,215 1.29 8.129 168 68.9
8.2500 - 8.4999 3 66,520,108 8.5 22,173,369 1.30 8.356 117 66.3
8.5000 - 8.7499 10 192,665,161 24.7 19,266,516 1.39 8.501 149 65.1
8.7500 - 8.9999 2 28,350,396 3.6 14,175,198 1.25 8.812 136 48.0
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
- --------------------------------------------------------------------------------
DISTRIBUTION BY PREMIUM LOAN TYPE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF AVERAGE WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE CUT-OFF DATE WEIGHTED AVERAGE TERM TO CUT-OFF CUT-OFF
MORTGAGED PRINCIPAL CUT-OFF DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV DATE PTV
LOAN TYPE PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A) RATIO(A)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-Premium Loan 69 $597,146,750 76.4% $ 8,654,301 1.39x 7.713 140 66.6% 66.6%
Premium Loan 12 184,001,683 23.6 15,333,474 1.28 8.494 143 65.7 70.3
-- ------------ ----- -----------
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4% 67.6%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) For the Premium Loans the Balloon Date LTV Ratio is 56.1%.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY ORIGINAL TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF ORIGINAL PERCENTAGE OF WEIGHTED REMAINING AVERAGE
TERMS TO MATURITY OR NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
ANTICIPATED REPAYMENT MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
DATE (MONTHS) PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 - 120 months 8 $ 76,529,037 9.8% $ 9,566,130 1.38 7.895 103 65.9%
120 - 180 months 49 424,099,416 54.3 8,655,090 1.34 7.784 118 66.4
180 - 240 months 15 193,368,842 24.8 12,891,256 1.41 8.333 167 66.5
240 - 260 months 3 65,694,396 8.4 21,898,132 1.33 7.428 224 70.3
260 - 280 months 6 21,456,742 2.7 3,576,124 N/A 7.640 248 N/A
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
- --------------------------------------------------------------------------------
DISTRIBUTION BY REMAINING TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF REMAINING PERCENTAGE OF WEIGHTED REMAINING AVERAGE
TERMS TO MATURITY OR NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
ANTICIPATED REPAYMENT MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
DATE (MONTHS) PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
80 - 99 months 11 $ 93,903,247 12.0% $ 8,536,659 1.29x 8.209 96 64.5%
100 - 119 months 38 259,124,683 33.2 6,819,071 1.36 7.619 111 65.2
120 - 139 months 5 106,109,936 13.6 21,221,987 1.37 7.861 125 70.2
140 - 159 months 1 33,623,958 4.3 33,623,958 1.29 7.990 156 65.9
160 - 179 months 17 201,235,470 25.8 11,837,381 1.41 8.293 167 66.7
220 - 239 months 3 65,694,396 8.4 21,989,132 1.33 7.428 224 70.3
240 - 259 months (b) 6 21,456,742 2.7 3,576,124 N/A 7.640 248 N/A
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Contains Only CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY MATURITY OR ANTICIPATED REPAYMENT YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
MATURITY/ NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
ANTICIPATED MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
REPAYMENT YEAR PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2007 8 $ 62,716,568 8.0% $ 7,839,571 1.31x 8.309 95 61.4%
2008 20 117,015,821 15.0 5,850,791 1.29 7.703 104 69.9
2009 23 221,695,541 28.4 9,638,937 1.40 7.577 115 64.3
2010 3 57,709,936 7.4 19,236,645 1.31 8.267 129 71.2
2012 1 33,623,958 4.3 33,623,958 1.29 7.990 156 65.9
2013 8 142,346,604 18.2 17,793,326 1.43 8.419 165 63.7
2014 9 58,888,866 7.5 6,543,207 1.36 7.989 172 73.9
2018 2 58,664,185 7.5 29,332,093 N/A 7.349 222 N/A
2019 1 7,030,211 0.9 7,030,211 1.33 8.090 239 70.3
2020 6 21,456,742 2.7 3,576,124 N/A 7.640 248 N/A
-- ------------ -----
TOTAL/WTD. AVG. 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
- --------------------------------------------------------------------------------
DISTRIBUTION BY AMORTIZATION TYPE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
AMORTIZATION TYPE PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hyper 73 $701,027,505 89.7% $ 9,603,117 1.36x 7.951 131 66.4%
Balloon (b) 7 61,765,573 7.9 8,823,653 N/A 7.242 232 N/A
Fully (b) 1 18,355,354 2.4 18,355,354 N/A 8.049 221 N/A
-- ------------ -----
TOTAL/WTD. AVG 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Contains Only CTL loans.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
ALL INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
STRUCTURAL AND COLLATERAL TERM SHEET
- --------------------------------------------------------------------------------
DISTRIBUTION BY REMAINING LOCKOUT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
PERCENTAGE OF WEIGHTED REMAINING AVERAGE
NUMBER OF CUT-OFF DATE AGGREGATE AVERAGE CUT-OFF WEIGHTED AVERAGE TERM TO CUT-OFF
REMAINING LOCKOUT MORTGAGED PRINCIPAL CUT-OFF DATE DATE PRINCIPAL AVERAGE MORTGAGE MATURITY DATE LTV
PERIOD (MONTHS)(C) PROPERTIES BALANCE BALANCE BALANCE DSCR (A) RATE (MOS) RATIO (A)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
80 - 99 months 20 $131,052,600 16.8 $ 6,552,630 1.31x 7.969 98 65.4%
100 - 119 months 32 273,475,331 35.0 8,546,104 1.38 7.615 114 65.6
120 - 139 months 1 33,725,031 4.3 33,725,031 1.33 8.317 133 69.5
140 - 159 months 5 73,419,310 9.4 14,683,862 1.25 8.038 148 70.8
160 - 179 months 14 182,325,023 23.3 13,023,216 1.44 8.333 168 65.6
220 - 239 months 3 65,694,396 8.4 21,898,312 1.33 7.428 224 70.3
240 - 259 months (b) 6 21,456,742 2.7 3,576,134 N/A 7.640 248 N/A
-- ------------ -----
TOTAL 81 $781,148,433 100.0% $ 9,643,808 1.36X 7.897 141 66.4%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes CTL loans.
(b) Contains Only CTL loans.
(c) All loans are Defeasance after Lockout.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security. This material is based on
sources that we consider reliable, but we do not represent that it is accurate
or complete and it should not be relied upon as such. By accepting this material
the recipient agrees that it will not distribute or provide the material to any
other person. The information contained in this material may be based on
assumptions regarding market conditions and other matters as reflected therein.
We make no representations regarding the reasonableness of such assumptions or
the likelihood that any of such assumptions will coincide with actual market
conditions or events, and this material should not be relied upon for such
purposes. We and our affiliates, officers, directors, partners and employees,
including persons involved in the preparation or issuance of this material may,
from time to time, have long or short positions in, and buy and sell, the
securities mentioned therein or derivatives thereof (including options). This
material may be filed with the Securities and Exchange Commission (the "SEC")
and incorporated by reference into an effective registration statement
previously filed with the SEC under Rule 415 of the Securities Act of 1933,
including in cases where the material does not pertain to securities that are
ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, is hypothetical and preliminary,
is expected to change and will be superseded by the information contained in the
final prospectus. Accordingly, prospective investors are advised to carefully
read, and should rely solely on, the final prospectus relating to the
certificates referred to herein in making their investment decision.
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
THE WESTIN DENVER TABOR CENTER LOAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
-------- ------------
PRINCIPAL BALANCE: $45,000,000 $44,593,725
PREMIUM: None None
ORIGINATION DATE: June 24, 1997
INTEREST RATE: 8.505%
AMORTIZATION: 300 months
HYPERAMORITIZATION: On the Anticipated Repayment Date, interest will
increase by 2%. However, if the loan is purchased
out of the Trust, interest will increase to the
greater of (1) 13.555% or (2) the rate on such date
borne by U.S. Treasuries with a maturity comparable
to the remaining term of the loan plus 7%.
ANTICIPATED REPAYMENT DATE: December 11, 2013
MATURITY DATE: January 11, 2024
BORROWER/SPONSOR: Westin Denver, LLC, a special-purpose Delaware
limited-liability company with Westin Denver Hotel
Company, a Delaware corporation, as its managing
member. The Borrower is an affiliate of Starwood
Hotels and Resorts.
CALL PROTECTION: Prepayment lockout until December 11, 2013. US
Treasury defeasance permitted on or after October
2001.
REMOVAL OF PROPERTY
MANAGER: The lender may terminate the Property Manager (1)
during the existence of an event of default under
the loan, and (2) if the DSCR for a 12-month period
falls below 1.15x to 1.00x.
CASH MANAGEMENT SYSTEM
ACCOUNT: Hard Lockbox
CROSS-
COLLATERALIZATION/DEFAULT: NAP
MEZZANINE LOANS/ PREFERRED
EQUITY: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single Asset
PROPERTY TYPE: Hotel-Full Service
LOCATION: 1672 Lawrence St. Denver, CO 80202
YEAR BUILT/RENOVATED: 1984/1996
THE COLLATERAL: A 19-story full-service hotel with 430 rooms in the
heart of downtown Denver. The hotel is part of a
multi-use condominium complex that includes 557,000
square feet of existing class A high-rise office
space and an upscale urban mall of 60 shops and
restaurants.
PROPERTY MANAGEMENT: Subject to certain exceptions, the lender may
terminate the Property Manager if certain operating
profit goals, occupancy and daily room rate levels
are not achieved.
OCCUPANCY (04/30/1999): 79.3%
TTM NET OPERATING INCOME: $10,218,277
(ENDING 4/30/99)
UNDERWRITTEN NET CASH FLOW: $7,570,937
APPRAISED VALUE: $77,000,000
APPRAISAL DATE: January 1, 1999
CUT-OFF DATE LOAN/ROOM (A): $103,706
CUT-OFF DATE LTV (A): 57.9%
CUT-OFF DATE DSCR (A) (B): 1.74x
- --------------------------------------------------------------------------------
(a) Based on Cut-Off Date Principal Balance of $44,593,725.
(b) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in the final prospectus for any securities actually sold
to you.
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
208 SOUTH LASALLE LOAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
-------- ------------
PRINCIPAL BALANCE: $43,202,188 $42,788,119
PREMIUM: $2,597,812 $2,428,021
ORIGINATION DATE: March 31, 1998
INTEREST RATE: 8.500%
AMORTIZATION: 360 months
HYPERAMORITIZATION: On the Anticipated Repayment Date, interest will
increase by 2%. However, if the loan is purchased
from the Trust, interest will increase to the
lesser of (1) the rate on such date borne by U.S.
Treasuries with a maturity comparable to the
remaining term of the loan plus 6.95%, and (2)
13.50%.
ANTICIPATED REPAYMENT DATE: April 11, 2013
MATURITY DATE: April 11, 2028
BORROWER/SPONSOR: LaSalle Adams, L.L.C., a special-purpose Delaware
limited liability company with Prime Group Realty,
L.P., a Delaware limited partnership, and PGR
Finance II, Inc., a Delaware corporation, as
members.
CALL PROTECTION: Prepayment lockout until the Anticipated Repayment
Date. US Treasury defeasance allowed on or after
October 11, 2001.
REMOVAL OF PROPERTY MANAGER: The lender may terminate the property manager upon
the event of default under the loan.
COLLECTION ACCOUNT: Hard Lockbox
CROSS-
COLLATERALIZATION/DEFAULT: NAP
MEZZANINE LOANS/PREFERRED
EQUITY: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Single asset
PROPERTY TYPE: Office
LOCATION: Chicago, Illinois
YEARS BUILT/RENOVATED: 1914/1996
THE COLLATERAL: A 20-story office building with 880,000 square
feet of GLA located in the heart of Chicago,
Illinois.
PROPERTY MANAGEMENT: Prime Group Realty, L.P., a member of the Borrower
OCCUPANCY (3/31/99): 95%
TTM NET OPERATING INCOME: $7,134,041
(ENDING 3/31/99)
UNDERWRITTEN NET CASH FLOW: $5,491,667
APPRAISED VALUE: $69,000,000
APPRAISAL DATE: June 25, 1999
CUT-OFF DATE LOAN/SF (A): $50.13
CUT-OFF DATE LTV (A): 62.0%
CUT-OFF DATE DSCR (A) (B): 1.38x
PREMIUM %: 5.7%
CUT-OFF DATE PTV: 66.3%
- --------------------------------------------------------------------------------
(a) Based on the Cut-Off Date Principal Balance.
(b) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in the final prospectus for any securities actually sold
to you.
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
ACCOR-M-SIX-III CREDIT TENANT LOAN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN INFORMATION
- --------------------------------------------------------------------------------
ORIGINAL CUT-OFF DATE
PRINCIPAL BALANCE: $40,308,831(a) $40,308,831(a)
PREMIUM : None None
ORIGINATION DATE: April 30, 1998
INTEREST RATE: 7.030%
AMORTIZATION: Monthly Payments as follows:
(6/1/1998-9/11/2008)
Interest Only of $236,142.57
(10/11/2008-5/1/2013)
Principal and Interest of $402,306.49
(6/1/2013-5/1/2018)
Principal and Interest of $442,537.13
Additional balloon payment of $9,119,990 due on
the maturity date.
HYPERAMORITIZATION: None
ANTICIPATED REPAYMENT DATE: None
MATURITY DATE: May 1, 2018
BORROWER/SPONSOR: The borrower is M-Six Limited Partnership, a
Delaware limited partnership. The sponsor is
Accor, a French corporation having a S&P credit
rating of BBB. (b)
CALL PROTECTION: Prepayment lockout until February 1, 2018. US
Treasury defeasance allowed on or after March 31,
2002.
REMOVAL OF PROPERTY MANAGER: NAP
COLLECTION ACCOUNT: Hard Lockbox
CROSS-
COLLATERALIZATION/DEFAULT: Yes
MEZZANINE LOANS/PREFERRED
EQUITY: None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
- --------------------------------------------------------------------------------
SINGLE ASSET/PORTFOLIO: Portfolio of 14 assets
PROPERTY TYPE: Limited Service Hotels
LOCATION: Illinois, Indiana, Massachusetts, Oregon,
Pennsylvania, Tennessee
YEAR BUILT/RENOVATED: 1968-1989/1994-1999
THE COLLATERAL: 14 limited service hotels containing a total of
1,642 rooms and located in 6 states.
PROPERTY MANAGEMENT: The loan documents do not require the borrower to
maintain a property manager for the properties.
UNDERWRITTEN NET CASH FLOW: $236,142
APPRAISED VALUE: $54,600,000
APPRAISAL DATE: Various (April 1, 1998 to July 1, 1998).
CUT-OFF DATE LOAN/ROOM : $24,549
CUT-OFF DATE LTV (C): 91.8%
CUT-OFF DATE DSCR (C) (D): 1.00x
- --------------------------------------------------------------------------------
(a) Accor is a CMAT Pari Passu Note, therefore the principal balance reflects
the CMAT Pari Passu Note participation amount only. The Total Loan Amount
is $49,450,539.
(b) On July 13, 1999, S&P revised its outlook on from stable to negative.
(c) Based on Total Cut-Off Date Principal Balance of $44,593,725.
(d) Based on Underwritten Net Cash Flow.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in the final prospectus for any securities actually sold
to you.
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN THE FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
COLLATERAL TERM SHEET
ACCOR-M-SIX-III CREDIT TENANT LOAN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COLLATERAL DETAILS
- -------------------------------------------------------------------------------------------------------------------------------
ALLOCATED CUT-OFF DATE ALLOCATED CUT-OFF
PROPERTY CITY STATE # UNITS PARTICIPATION AMOUNT DATE TOTAL LOAN AMOUNT
- ----------------------- ------------- ------------------ ---------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Newbury Street Danvers Massachusetts 108 $5,167,799 $6,423,360
10 Roosevelt Road Villa Park Illinois 109 $3,912,762 $4,863,401
6330 Debonair Lane Speedway Indiana 164 $3,838,936 $4,771,639
2400 Biddle Road Medford Oregon 116 $3,765,111 $4,679,876
1535 Milwaukee Avenue Glenview Illinois 111 $3,543,633 $4,404,590
1800 North East Seventh Grants Pass Oregon 122 $3,322,156 $4,129,303
52624 US Hwy 31 N South Bend Indiana 147 $2,657,725 $3,303,442
7707 Lee Highway Chattanooga Tennessee 97 $2,288,597 $2,844,631
88 Burnett Road Chicopee Massachusetts 88 $2,214,771 $2,752,868
8290 Louisiana Street Merrillville Indiana 125 $2,067,120 $2,569,344
1283 Motel 6 Drive Washington Pennsylvania 101 $1,993,294 $2,477,582
95 Wallace Road Nashville Tennessee 126 $1,919,468 $2,385,819
323 Cartwright Road Goodlettsville Tennessee 94 $1,845,642 $2,294,057
1800 Winnetka Circle Rolling Meadows Illinois 134 $1,771,817 $2,202,295
--- ---------- ----------
TOTALS 1,642 $40,308,831 $50,102,207
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in the final prospectus for any securities actually sold
to you.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX F
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625 WAC:
Chicago, IL 60674-4107 WAMM:
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
===================================================================================================================================
Number Of Pages
---------------
<S> <C>
Table Of Contents
REMIC Certificate Report
Other Related Information
Asset Backed Facts Sheets
Delinquency Loan Detail
Mortgage Loan Characteristics
Loan Level Listing
Total Pages Included In This Package
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
--------------------------------------------------------------------------------------------
Information is available for this issue from the following sources
--------------------------------------------------------------------------------------------
LaSalle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (714) 282-5518
ASAP #: 999
Monthly Data File Name: 0999MMYY.EXE
============================================================================================
</TABLE>
F-1
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625 WAC:
Chicago, IL 60674-4107 WAMM:
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
=================================================================================================================================
Original Opening Principal Principal Negative Closing Interest Interest Pass-Through
Class Face Value (1) Balance Payment Adj. or Loss Amortization Balance Payment Adjustment Rate (2)
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Next Rate (3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
========================
========================
</TABLE>
- ----------
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
F-2
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================================
-----------------------------------------------------------------------------------------------------------------
Accrued Excess Interest Beginning Ending
Certificate Certificate Prepay Int. Interest Accrual Unpaid Unpaid Prepayment
Class Interest Shortfall Loss Amount Interest Interest Premiums
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
=================================================================================================================
0.00 0.00 0.00 0.00 0.00 0.00 0.00
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
Advances
--------
Prior Outstanding Current Period Recovered Outstanding
Principal Interest Principal Interest Principal Interest Principal Interest
=================================================================================================================
Servicer 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Trustee: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Fiscal Agent: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
=================================================================================================================
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
=================================================================================================================
================================================================================================================================
</TABLE>
F-3
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================================
=============================================================================================
Servicing Compensation
=============================================================================================
<S> <C>
Current Period Accrued Master Servicing Fees: 0.00
Advanced Interest Paid to Master Servicer in the Current Period: 0.00
Additional Master Servicing Compensation: 0.00
Current Period Special Servicing Fees Paid: 0.00
Current Period Workout Fees Paid: (accrued on corrected mortgage loans only) 0.00
Current Period Liquidation Fees Paid: 0.00
Additional Special Servicing Compensation: 0.00
Endng Pool Count: 0
Ending Pool Balance: 0.00
Current Additional Trust Fund Expenses: 0.00
Cumulative Additional Trust Fund Expenses: 0.00
-----------------------------------------------------------------------------------------------------------
Summary of Appraisal Reductions
-------------------------------
Principal Appraisal Appraisal Date of
# Property Name Loan Number Balance Reduction Amount Date Reduction
===========================================================================================================
1.
2.
3. No Appraisal Reductions as of The Most Recent Due Period
4.
5.
===================================================================================================================================
</TABLE>
F-4
<PAGE>
ABN AMRO Statement Date: 11/17/99
Lasalle Bank N.a. Payment Date: 11/17/99
Prior Payment: Na
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. Lasalle Street Suite 1625
Chicago, Il 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
------------------------------------------------------------------------------------------------------------
REO PROPERTY INFORMATION
------------------------
Stated Actual
# Property Name Property Type State Zip Latest DSCR Prin. Balance Ending Balance
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1.
2.
3. No REOs as of The Most Recent Due Period
4.
5.
--------------------------------------------------------------------------------------------------------------
REO LOAN INFORMATION
--------------------
Revenue/Income Collections in Stated Actual
# Loan Number Appraisal Value Collected Available funds Latest DSCR Prin. Balance Ending Balance
==============================================================================================================
1.
2.
3. No REOs as of The Most Recent Due Period
4.
5.
--------------------------------------------------------------------------------------------------------------
REO LIQUIDATION INFORMATION
---------------------------
Liquidation Proceeds in Liquidations Balance at Date of
# Loan Number Realized Loss Proceeds Available funds Expenses Liquidation Final Recovery
==============================================================================================================
1.
2.
3. NO REO LIQUIDATIONS AS OF THE MOST RECENT DUE PERIOD
4.
5.
====================================================================================================================================
</TABLE>
F-5
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================================
<S> <C> <C> <C>
===================================================================================================================================
</TABLE>
F-6
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
OTHER RELATED INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C>
====================================================================================================================================
</TABLE>
F-7
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
===================================================================================================================================
Delinq Delinq Delinq 3+ Foreclosure/ Curr
1 Month 2 Months Months Bankruptcy REO Modifications Prepayments Weighted Avg.
Distribution ======================================================================================================================
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
11/17/99
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Note: Foreclosure, Bankruptcy and REO Totals are not included in the delinquency aging categories
</TABLE>
F-8
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
DELINQUENT LOAN DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Disclosure Paid Outstanding Out. Property Special
Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Group Date Advance Advances** Advances Description(1) Transfer Date Date Date Date
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
<FN>
A. P&I Advance - Loan in Grace Period 4. Matured Balloon/Assumed Scheduled Payment
B. P&I Advance - Late Payment but less than one month delinq 7. PI Advance - Loan in Foreclosure
1. P&I Advance - Loan delinquent 1 month 8. P&I Advance - Loan in Bankruptcy
2. P&I Advance - Loan delinquent 2 months 9. P&I Advance - REO Loan
3. P&I Advance - Loan delinquent 3 months or More
</FN>
===================================================================================================================================
</TABLE>
- ----------
** Outstanding P&I Advances include the current period P&I Advance
F-9
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
DISTRIBUTION OF PRINCIPAL BALANCES
- ---------------------------------------------------------------
Current Scheduled Number Scheduled Based on
Balances of Loans Balance Balance
===============================================================
- ---------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------
Average Scheduled Balance is
Maximum Scheduled Balance is
Minimum Scheduled Balance is
Distribution of Property Types
-------------------------------------------------
Number Scheduled Based on
Property Types of Loans Balance Balance
=================================================
=================================================
Total 0 0 0.00%
-------------------------------------------------
DISTRIBUTION OF MORTGAGE INTEREST RATES
----------------------------------------------------
Current Mortgage Number Scheduled Based on
Interest Rate of Loans Balance Balance
====================================================
====================================================
Total 0 0 0.00%
----------------------------------------------------
GEOGRAPHIC DISTRIBUTION
- ----------------------------------------------------
Number Scheduled Based on
Geographic Location of Loans Balance Balance
====================================================
- ----------------------------------------------------
Total 0 0 0.00%
- ----------------------------------------------------
F-10
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
LOAN SEASONING
- ---------------------------------------------------------------
Number Scheduled Based on
Number of Years of Loans Balance Balance
===============================================================
1 year or less
1+ to 2 years
2+ to 3 years
3+ to 4 years
4+ to 5 years
5+ to 6 years
6+ to 7 years
7+ to 8 years
8+ to 9 years
9+ to 10 years
10 years or more
===============================================================
Total 0 0 0.00%
- ---------------------------------------------------------------
Weighted Average Seasoning is
DISTRIBUTION OF AMORTIZATION TYPE
- ---------------------------------------------------------------
Number Scheduled Based on
Amortization Type of Loans Balance Balance
===============================================================
===============================================================
Total 0 0 0.00%
- ---------------------------------------------------------------
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
- ----------------------------------------------------
Fully Amortizing Number Scheduled Based on
Mortgage Loans of Loans Balance Balance
====================================================
120 months or less
121 to 180 months
181 to 240 months
241 to 360 months
====================================================
Total 0 0 0.00%
- ----------------------------------------------------
Weighted Average Months to Maturity is
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
- ----------------------------------------------------------
Balloon Number Scheduled Based on
Mortgage Loans of Loans Balance Balance
==========================================================
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 360 months
==========================================================
Total 0 0 0.00%
- ----------------------------------------------------------
Weighted Average Months to Maturity is
DISTRIBUTION OF DSCR
- ---------------------------------------------------------
Debt Service Number Scheduled Based on
Coverage Ratio(1) of Loans Balance Balance
=========================================================
=========================================================
Total 0 0 0.00%
- ---------------------------------------------------------
Weighted Average Debt Service Coverage Ratio is
NOI Aging
- ---------------------------------------------------------
Number Scheduled Based on
NOI Date of Loans Balance Balance
=========================================================
1 year or less
1 to 2 years
2 Years or More
Unknown
=========================================================
Total 0 0 0.00%
- ---------------------------------------------------------
- ----------
(1) Debt Service Coverage Ratios are calculated as described in the
prospectus, values are updated periodically as new NOI figures became
available from borrowers on an asset level.
Neither the Trustee, Servicer, Special Servicer or Underwriter makes
any representation as to the accuracy of the data provided by the
borrower for this calculation.
F-11
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
LOAN LEVEL DETAIL
===================================================================================================================================
Property Operating Ending Loan
Disclosure Type Maturity Statement Principal Note Scheduled Prepayment Status
Control # Group Code Date DSCR Date State Balance Rate P&I Prepayment Date Code (1)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
- ----------
* NOI and DSCR, if available and reportable under the terms of the trust
agreement, are based on information obtained from the related borrower,
and no other party to the agreement shall be held liable for the
accuracy or methodology used to determine such figures.
- --------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace Period
B. P&I Adv - less than one month delinq
1. P&I Adv - delinquent 1 month
2. P&I Adv - delinquent 2 months
3. P&I Adv - delinquent 3+ months
4. Mat. Balloon/Assumed P&I
5. Prepaid in Full
6. Specially Serviced
7. Foreclosure
8. Bankruptcy
9. REO
10. DPO
11. Modification
================================================================================
F-12
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
SPECIALLY SERVICED LOAN DETAIL
=================================================================================================================================
Beginning Specially
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code (1) Comments
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
=================================================================================================================================
<FN>
(1) Legend :
1) Request for waiver of Prepayment Penalty 4) Loan with Borrower Bankruptcy 7) Loans Paid Off
2) Payment default 5) Loan in Process of Foreclosure 8) Loans Returned to
3) Request for Loan Modification or Workout 6) Loan now REO Property Master Servicer
</FN>
=================================================================================================================================
APPENDIX A
</TABLE>
F-13
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
MODIFIED LOAN DETAIL
===================================================================================================================================
Disclosure Modification Modification
Control # Date Description
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
===================================================================================================================================
APPENDIX B
</TABLE>
F-14
<PAGE>
ABN AMRO Statement Date: 11/17/99
LaSalle Bank N.A. Payment Date: 11/17/99
Prior Payment: NA
Administrator: Record Date:
Lora Peloquin (800) 246-5761
135 S. LaSalle Street Suite 1625
Chicago, IL 60674-4107
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS L.L.C., SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
COMMERCIAL MORTGAGE PASS THROUGH CERTIFICATES
SERIES 1999-C2
<TABLE>
<CAPTION>
REALIZED LOSS DETAIL
===================================================================================================================================
Beginning Gross Proceeds Aggregate Net Net Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Date Control # Date Value Balance Proceeds Sched Principal Expenses* Proceeds Sched. Balance Loss
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Current Total 0.00 0.00 0.00 0.00 0.00
Cumulative 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
APPENDIX C
</TABLE>
- ----------
* Aggregate liquidation expenses also include outstanding P&I advances
and unpaid servicing fees, unpaid trustee fees, etc.
F-15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX G
<TABLE>
<S> <C>
BNY Asset Solutions LLC Statement Date:
Administrator: Payment Date:
[ ] Prior Payment: NA
600 East Las Colinas Blvd. Record Date: [ ]
Suite 1300
Irving, Texas 75062
Charlotte, North Carolina 28288-1075
</TABLE>
COMMERCIAL MORTGAGE ASSET TRUST
BNY ASSET SOLUTIONS LLC, SERVICER
LENNAR PARTNERS, INC., SPECIAL SERVICER
SERVICER REPORTS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1999-C2
<TABLE>
<CAPTION>
TABLE OF CONTENTS NUMBER OF PAGES
- ------------------------------------------------------ ----------------
<S> <C>
Form of Comparative Financial Status Report .......... Annex G-1
Form of Historical Loan Modification Report .......... Annex G-2
Form of NOI Adjustment Worksheet ..................... Annex G-3
Form of Operating Statement Status Analysis .......... Annex G-4
Form of Payoff Notification Report ................... Annex G-5
Form of REO Status Report ............................ Annex G-6
Form of Historical Loss Estimate Report .............. Annex G-7
Form of Delinquent Loan Status Report ................ Annex G-8
Form of Servicer Watch List .......................... Annex G-9
Form of Premium Loan Report .......................... Annex G-10
TOTAL PAGES INCLUDED IN THIS PACKAGE .................
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BNY Asset Solutions
Comparative Financial Report
<TABLE>
<CAPTION>
Last Property Inspect Scheduled Loan Paid Thru Annual Debt
Loan# Prospectus ID City State Date Balance Date Service
- ----- ------------- ---- ----- --------------------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
yy/mm
<CAPTION>
Original Underwriting Information 2nd Preceding Annual Operating Information
Basis Year as of Normalized
- ----------------------------------------------------- ------------------------------------------------------------
(1) (1)
Financial Info as of % Total $ (2) Financial Info as of % $ (2)
Date Occ Revenue NOI DSCR Date Occ Total Revenue NOI DSCR
- -------------------- --- ------- --- ---- -------------------- --- ------------- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
yy/mm yy/mm
<CAPTION>
Preceding Annual Operating Information YTD or Trailing 12 Months Financial Information
as of Numbered Actual
- ----------------------------------------------------------- ----------------------------------------------------------------
(1)
Financial Info as of % $ (2) Total $ Occupancy
Date Occ Total Revenue NOI DSCR FS End Date Revenue NOI DSCR Date % Occ
- -------------------- --- ------------- --- ---- -------------------- ------- --- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
yy/mm yy/mm
<CAPTION>
Net Change (3)
TTM & Basis
- ------------------------------------
%
% Total (1)
Occ Revenue DSCR
---- ------- -----
<S> <C> <C>
</TABLE>
G-1
<PAGE>
BNY Asset Solutions
Historical Loan Modification Report
As of Date
<TABLE>
<CAPTION>
S4 S57 S58 P49 P48 P7* P7* P50* P50*
- ------------------------------------------------------------------------------------------------------------------
Balance
When Balance at the
Mod/ Sent to Effective Date # Mths
Prospectus Extension Effect Special of Old for Rate New
ID City State Flag Date Servicer Rehabilitation Rate Change Rate
- ---------- ---- ----- --------- ------ -------- -------------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
This Report is Historical
Total For All Loans:
Total For Loans In Current Month:
# of Loans $ Balance
Modifications:
Maturity Date Extensions:
Total:
<CAPTION>
P25* P11* P11* P47
- ---------------------------------------------------------------------------------------
(2) Est.
Future
Total# Interest
Mths (1) Loss to
for Realized Trust $
Old New Change Loss to (Rate
Old P&I Maturity Maturity of Mod Trust $ Reduction) COMMENT
- ------- -------- -------- ------ -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
G-2
<PAGE>
BNY Asset Solutions
NOI Adjustment Worksheet
As of Date
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Property Overview
Control Number
Current Balance/Paid to Date
Property Name
Property Type
Property Address, City, State
Net Rentable Square Feet
Year Built/Year Renovated
Year of Operations Borrower Adjustment Normalized
Occupancy Rate
Average Rental Rate
</TABLE>
*Occupancy rates are year end or the ending date of the financial statement
for the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INCOME:
Number of Mos. Year
Period Ended Borrower Adjustment Normalized
Statement Classifications Actual
Rental Income (Category 1)
Rental Income (Category 2)
Rental Income (Category 3)
Pass-Through/Escalations
Other Income
Effective Gross Income $ -- $ -- $ -- $ -- $ --
Normalized-Full year financial statements have been reviewed by the servicer
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
General & Admin
Repairs & Maintenance
Management Fees
Payroll and Benefits expense
Advertising & Marketing
Professional Fees
Other Expenses
Ground Rent
TOTAL OPERATING EXPENSES $ -- $ -- $ --
OPERATING EXPENSE RATIO:
NET OPERATING INCOME $ -- $ -- $ --
Leasing Commissions
Tenant Improvements
Replacement Reserve
TOTAL CAPITAL ITEMS $ -- $ -- $ --
NOI AFTER CAPITAL ITEMS $ -- $ -- $ --
Debt Service (per servicer) $ -- $ -- $ --
Cash Flow after Debt Service $ -- $ -- $ --
(1) DSCR: (NOI/Debt Service)
DSCR (after reserves/Cap exp)
Source of Financial Date:
(ex. Operating statements, financial statements, tax return, other)
</TABLE>
G-3
<PAGE>
BNY Asset Solutions
Operating Analysis Status Report
As of Date
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Property Overview
Control Number
Current Balance/Paid to Date
Property Name
Property Type
Property Address, City, State
Net Rentable Square Feet
Year Built/Year Renovated
Year of Operations Underwriting 1994 1995 1996 Trailing
Occupancy Rate
Average Rental Rate
</TABLE>
*Occupancy rates are year end or the ending date of the financial statement
for the period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME: No. of Mos.
Number of Mos. Prior Yr. Cur Yr.
Period Ended Underwriting 1996 1997 1998 98 Trailing 1997-Base 1997-1996
Statement Classifications Baseline Normalized Normalized Normalized as of Variance Variance
Rental Income (Category 1)
Rental Income (Category 2)
Rental Income (Category 3)
Pass-Through/Escalations
Other Income
Effective Gross Income $ -- $ -- $ -- $ -- $ -- % %
Normalized-Full year financial statements have been reviewed by the underwriter or servicer
Servicer will not be expected to normalize these YTD numbers
OPERATING EXPENSES:
Real Estate Taxes
Property Insurance
Utilities
General & Admin
Repairs & Maintenance
Management Fees
Payroll and Benefits expense
Advertising & Marketing
Professional Fees
Other Expenses
Ground Rent
TOTAL OPERATING EXPENSES $ -- $ -- $ -- % %
OPERATING EXPENSE RATIO:
NET OPERATING INCOME $ -- $ -- $ --
Leasing Commissions
Tenant Improvements
Replacement Reserve
TOTAL CAPITAL ITEMS $ -- $ -- $ -- $ --
NOI AFTER CAPITAL ITEMS $ -- $ -- $ -- $ --
Debt Service (per servicer) $ -- $ -- $ -- $ --
Cash Flow after Debt Service $ -- $ -- $ -- $ --
(1) DSCR: (NOI/Debt Service)
DSCR (after reserves/Cap exp)
Source of Financial Date:
(ex. Operating statements, financial statements, tax return, other)
</TABLE>
G-4
<PAGE>
BNY Asset Solutions
Payoff Notification Report
As of Date
<TABLE>
<CAPTION>
S4 S55 S61 S58 P7 P8 P10 P11 P54
Short Name
(When Property Paid Thru Current Maturity
Prospectus ID Appropriate) Type State Scheduled Loan Balance Date Interest Rate Date LTM DSCR
- ------------- ------------ -------- ----- ---------------------- --------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scheduled Payments
Unscheduled Payments
Total:
<CAPTION>
Servicer Estimated Information
Expected Expected
Yield Payment Distribution
Maintenance Date Date
- ----------- -------- ------------
<S> <C> <C>
</TABLE>
G-5
<PAGE>
BNY Asset Solutions
REO Status Report
As of Date
<TABLE>
<CAPTION>
Sq Ft Paid Scheduled Total Total
Prospectus Property Property or Thru Loan P&I Expenses
ID Name Type City State Units Date Balance Advances to Date to Date
- ---------- -------- -------- ---- ----- ----- ---- --------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
None
TOTAL ALL LOANS:
Current Month Only:
<CAPTION>
LTM LTM Cap Value Appraisal
Other Advances Total P&I Total Current Maturity NOI NOI Rate Valuation Using NOI BPO or Internal
Taxes & Escrows Advanced Exposure Monthly P&I Date Date DSC Assign Date & Cap Rate Value
- --------------- --------- -------- ----------- -------- ---- ---- ------ --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Loss using Estimated Total REO Pending
90% Appr Recovery Appraisal Transfer Acquisition Resolution
or BPO % Reduction Realized Date Date Date Comments
- ---------- --------- ------------------ -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
G-6
<PAGE>
BNY Asset Solutions
Historical Loss Estimate Report
As of Date
<TABLE>
<CAPTION>
S4 S55 S61 S57 S58 P45/P7 P75 P45
(c)=b/a (a) (b) (d)
% Latest
Short Name Received Appraisal Effect Net Amt
Prospectus (when Property From of Brokers Date of Sales Received
ID appropriate) Type City State State Opinion Sale Price from Sale
- ---------- ------------ -------- ---- ----- -------- ---------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
None
TOTAL ALL LOANS:
Current Month Only:
<CAPTION>
P7 P37 P39+P38
(e) (f) (g) (h) (I)=d(f+g+h) (k)=I*e (m) (n)=k+m (o)=n/e
Date Minor
Servicing Loss Adj Total Loss Loss % of
Scheduled Total P&I Total Fees Net Actual Losses Passed Minor Adj Passed with Scheduled
Balance Advanced Expenses Expense Proceeds Passed thru thru to Trust thru Adjustment Balance
- --------- --------- -------- -------- -------- ------------- ------ --------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
G-7
<PAGE>
BNY Asset Solutions
Delinquent Loan Status Report
As of Date
<TABLE>
<CAPTION>
Paid Scheduled Total Total
Prospectus Property Sq. Ft. Thru Loan P&I Advances Expenses
ID Name Type City State or Units Date Balance To-Date To-Date
- ---------- -------- -------- ---- ----- -------- ---- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Days Delinquent
None Reported
60+ Days Delinquent
None Reported
30+ Days Delinquent
None Reported
Current and Special Serviced
<CAPTION>
Appraisal
Other Current Current LTM BPO or
Advances Total Monthly Interest Maturity NOI LTM LTM Valuation Internal
Tax & Escrow Exposure P&I Rate Date Date NOI DSCR Value Date Value
- ------------ -------- ------- -------- -------- ---- ---- ---- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Loss Using Estimated FCL Expected
90% Appr. Recovery Transfer Closing Start FCL Sale Workout
or BPO % Date Date Date Date Strategy Comments
- ---------- --------- -------- ------- ----- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
FCL - Foreclosure
LTM - Latest 12 Months either Last Annual or Trailing 12m
Workout Strategy should match the CSSA Loan file using abbreviated words in
place of a code number such as (FCL-In Foreclosure, MOD-Modification, DPO-
Discounted Payoff, NS-Note Sale, BK-Bankruptcy, PP-Payment Plan, TBD-To Be
Determined, App-Appraisal, BPO-Brokers Opinion, Int.-Internal Value)
It is possible to combine the status codes if the loan is going in more than
one direction (ie. FCL/MOD, BK/MOD, BK/FCL/DPO)
***How to determine the cap rate is agreed upon by the Underwriter and
Servicers - to be provided by a third party.
G-8
<PAGE>
BNY Asset Solutions
Servicer Watch List
As of Date
<TABLE>
<CAPTION>
Scheduled Paid
Prospectus Property Loan Thru Maturity LTM
ID Name Type City State Balance Date Date DSCR Comment/Reason on Watch List
- ---------- ---- -------- ---- ----- --------- ---- -------- ---- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total: 0 $0.00
LTM- Last 12 months either trailing or last annual
</TABLE>
G-9
<PAGE>
Commercial Mortgage Asset Trust ("CMAT")
Commercial Mortgage Pass-Through Certificates, Series 1999-C2
BNY ASSET SOLUTIONS LLC, AS SERVICER
PREMIUM LOAN REPORT
AS OF
<TABLE>
<CAPTION>
Financial Anticipated
Pro Sup Info as of Repayment Date
Loan # City State Loan Name Date LTV PTV LTV/PTV DSCR
- ------- ---- ----- --------- ---------- --- --- -------------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans currently in deal with or without information largest to smallest loan
Total/Weighted Average
<CAPTION>
Scheduled
Loan Unamortized Premium Base Interest Base
Balance Premium Balance Rate Rate Amort. Amort.
- ---------- ----------- ------- ---- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
G-10
<PAGE>
PROSPECTUS DATED OCTOBER 4, 1999
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
ASSET SECURITIZATION CORPORATION
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus (the
"Offered Certificates") will be offered from time to time in series. Each
series of Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust fund (with respect to any series, the "Trust
Fund") consisting of a segregated pool of various types of multifamily or
commercial mortgage loans and/or installment contracts for the sale of
multifamily or commercial properties (the "Mortgage Loans"), mortgage-backed
securities evidencing interests therein or secured thereby (the "MBS"), or a
combination of Mortgage Loans and MBS (with respect to any series,
collectively, "Mortgage Assets"). The Trust Fund for a series of Certificates
may also include letters of credit, insurance policies, guarantees, reserve
funds or other types of credit support, or any combination thereof (with
respect to any series, collectively, "Credit Support"), and currency or
interest rate exchange agreements and other financial assets, or any
combination thereof (with respect to any series, collectively, "Cash Flow
Agreements"). See "Description of the Trust Funds", "Description of the
Certificates" and "Description of Credit Support".
Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon only
following the occurrence of certain events, such as the retirement of one or
more other classes of Certificates of such series; or (vi) provide for
distributions of principal sequentially, or based on specified payment
schedules, to the extent of available funds, in each case as described in the
related Prospectus Supplement. Any such classes may include classes of Offered
Certificates. See "Description of the Certificates".
Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any series will be made only from the assets of the related
Trust Fund.
The Certificates of each series will not represent an obligation of or
interest in the Depositor, any Master Servicer, any Special Servicer or any of
their respective affiliates, except to the limited extent described herein and
in the related Prospectus Supplement. Only those Certificates and assets in the
related Trust Fund as are disclosed in the related Prospectus Supplement will
be guaranteed or insured by any governmental agency or instrumentality or by
any other person. The assets in each Trust Fund will be held in trust for the
benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including voluntary and
involuntary prepayments) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein
and in the related Prospectus Supplement.
Prospective investors should review the information appearing under the
caption "Risk Factors" herein and such information as may be set forth under
the caption "Risk Factors" in the related Prospectus Supplement before
purchasing any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as
one or more "real estate mortgage investment conduits" or "financial asset
securitization investment trusts" for federal income tax purposes. See also
"Federal Income Tax Consequences" herein.
PROSPECTIVE INVESTORS SHOULD REVIEW THE DISCUSSION OF MATERIAL RISKS
APPEARING UNDER THE CAPTION "RISK FACTORS" HEREIN COMMENCING ON PAGE 13.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any
Offered Certificates will develop or that, if it does develop, it will
continue. This Prospectus may not be used to consummate sales of a series of
Offered Certificates unless accompanied by a Prospectus Supplement.
Offers of the Offered Certificates may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Method of Distribution" herein and in the related Prospectus
Supplement. All Offered Certificates will be distributed by, or sold by
underwriters managed by:
THE DATE OF THIS PROSPECTUS IS OCTOBER 4, 1999
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each series will, among other things, set forth
with respect to such Certificates, as appropriate: (i) a description of the
class or classes of Certificates, the payment provisions with respect to each
such class and the Pass-Through Rate or method of determining the Pass-Through
Rate with respect to each such class; (ii) the aggregate principal amount and
distribution dates relating to such series and, if applicable, the initial and
final scheduled distribution dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
assets included therein, including the Mortgage Assets and any Credit Support
and Cash Flow Agreements (with respect to the Certificates of any series, the
"Trust Assets"); (iv) the circumstances, if any, under which the Trust Fund may
be subject to early termination; (v) additional information with respect to the
method of distribution of such Certificates; (vi) whether one or more REMIC or
FASIT elections will be made and designation of the regular interests, residual
interests and ownership interests, as applicable; (vii) the aggregate original
percentage ownership interest in the Trust Fund to be evidenced by each class
of Certificates; (viii) information as to any Master Servicer, any Special
Servicer (or provision for the appointment thereof) and the Trustee, as
applicable; (ix) information as to the nature and extent of subordination with
respect to any class of Certificates that is subordinate in right of payment to
any other class; and (x) whether such Certificates will be initially issued in
definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Certificates contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the rules and regulations of
the Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits
can be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices located
as follows: Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 75
Park Place, 14th Floor, New York, New York 10007. The Commission also maintains
a site on the World Wide Web (the "Web") at "http://www.sec.gov" at which users
can view and download copies of reports, proxy and information statements and
other information filed electronically through the Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and any
Prospectus Supplement with respect hereto do not constitute an offer to sell or
a solicitation of an offer to buy any securities other than the Offered
Certificates or an offer of the Offered Certificates to any person in any state
or other jurisdiction in which such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date; however, if any material change occurs
while this Prospectus is required by law to be delivered, this Prospectus will
be amended or supplemented accordingly.
A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, such
reports may be sent on behalf of the related Trust Fund to Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC") and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. If so specified in
the related Prospectus Supplement, such reports may be sent to beneficial
owners identified to the Master Servicer or Trustee. Such reports may also be
available to holders of interests in the Certificates (the
"Certificateholders") upon request to their respective DTC participants. See
"Description of the Certificates--Reports to Certificateholders" and
"Description of the Agreements--Evidence as to Compliance". The Depositor will
file or cause to be filed with the Commission such periodic reports with
respect to each Trust Fund as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder. Reports filed by the Depositor with the Commission
pursuant to the Exchange Act will be filed by means of the EDGAR system and
therefore should be available at the Commission's site on the Web.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of the Offered Certificates evidencing an interest therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or
more classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests to the
Depositor should be directed in writing to its principal executive office at 2
World Financial Center--Building B, New York, New York 10281-1198, Attention:
Secretary, or by telephone at (212) 667-9300. The Depositor has determined that
its financial statements are not material to the offering of any Offered
Certificates. See "Financial Information" herein.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
----
Prospectus Supplement ...................................................... 2
Available Information ...................................................... 2
Incorporation of Certain Information by Reference .......................... 3
Summary of Prospectus ...................................................... 8
Risk Factors ............................................................... 13
Limited Liquidity ......................................................... 13
Limited Assets ............................................................ 13
Average Life of Certificates; Prepayments; Yields ......................... 13
Limited Nature of Ratings ................................................. 14
Risks Associated with Certain Mortgage Loans and Mortgaged Properties ..... 14
Retail Properties ......................................................... 15
Multifamily Properties .................................................... 15
Office Properties ......................................................... 16
Hotel Properties .......................................................... 16
Senior Housing/Healthcare Properties ...................................... 17
Mobile Home Park Properties ............................................... 18
Industrial Properties ..................................................... 18
Balloon Payments .......................................................... 19
Substitution of Mortgage Assets ........................................... 19
Obligor Default ........................................................... 19
Mortgagor Type ............................................................ 19
Junior Mortgage Loans ..................................................... 19
Credit Support Limitations ................................................ 20
Enforceability ............................................................ 20
Environmental Risks ....................................................... 20
Limited Liquidity and Market Value ........................................ 21
ERISA Considerations ...................................................... 21
Certain Federal Tax Considerations Regarding Residual Certificates ........ 21
Certain Federal Tax Considerations Regarding Original Issue Discount ...... 21
Consent ................................................................... 22
Book-Entry Registration ................................................... 22
Description of the Trust Funds ............................................. 23
Mortgage Assets ........................................................... 23
Mortgage Loans ............................................................ 23
Default and Loss Considerations with Respect to the Mortgage Loans ........ 23
Mortgage Loan Information in Prospectus Supplements ....................... 25
Mortgage Underwriting Standards and Procedures ............................ 25
Payment Provisions of the Mortgage Loans .................................. 26
MBS ....................................................................... 26
Collection Accounts ....................................................... 27
Credit Support ............................................................ 27
Cash Flow Agreements ...................................................... 27
Use of Proceeds ............................................................ 28
Yield Considerations ....................................................... 28
General ................................................................... 28
Pass-Through Rate ......................................................... 28
Timing of Payment of Interest and Principal ............................... 28
Principal Prepayments ..................................................... 28
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Prepayments--Maturity and Weighted Average Life ....................................... 29
Other Factors Affecting Weighted Average Life ......................................... 30
Type of Mortgage Loan .............................................................. 30
Removal and Addition of Mortgage Assets ............................................... 30
Foreclosures and Payment Plans ........................................................ 30
Due-on-Sale and Due-on-Encumbrance Clauses ............................................ 30
The Depositor .......................................................................... 31
Description of the Certificates ........................................................ 31
General ............................................................................... 31
Distributions ......................................................................... 33
Available Funds ....................................................................... 33
Distributions of Interest on the Certificates ......................................... 34
Distributions of Principal of the Certificates ........................................ 34
Distributions on the Certificates of Prepayment Premiums or in Respect of Equity 35
Participations
Allocation of Losses and Shortfalls ................................................... 35
Advances in Respect of Delinquencies .................................................. 35
Reports to Certificateholders ......................................................... 35
Termination ........................................................................... 37
Book-Entry Registration and Definitive Certificates ................................... 38
Description of the Agreements .......................................................... 39
Assignment of Mortgage Assets; Repurchases ............................................ 39
Representations and Warranties; Repurchases ........................................... 40
Payments on Mortgage Assets; Deposits to Collection Account ........................... 41
Collection and Other Servicing Procedures ............................................. 42
Special Servicers ..................................................................... 43
Sub-Servicers ......................................................................... 43
Realization Upon Defaulted Whole Loans ................................................ 43
Hazard Insurance Policies ............................................................. 45
Due-on-Sale and Due-on-Encumbrance Provisions ......................................... 46
Retained Interest; Servicing Compensation and Payment of Expenses ..................... 46
Evidence as to Compliance ............................................................. 47
Certain Matters Regarding a Master Servicer, a Special Servicer and the Depositor ..... 47
Event of Default ...................................................................... 48
Rights Upon Event of Default .......................................................... 48
Amendment ............................................................................. 49
Duties of the Trustee ................................................................. 49
The Trustee ........................................................................... 49
Description of Credit Support .......................................................... 49
General ............................................................................... 49
Subordinate Certificates .............................................................. 50
Cross-Support Provisions .............................................................. 50
Insurance or Guarantees with Respect to the Mortgage Assets ........................... 50
Letter of Credit ...................................................................... 50
Insurance Policies and Surety Bonds ................................................... 51
Certificate Guarantee Insurance ....................................................... 51
Reserve Funds ......................................................................... 51
Certain Legal Aspects of Mortgage Loans ................................................ 51
General ............................................................................... 52
Types of Mortgage Instruments ......................................................... 52
Leases and Rents ...................................................................... 52
Personalty ............................................................................ 52
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Installment Contracts ................................................... 53
Junior Mortgages; Rights of Senior Mortgages or Beneficiaries ........... 53
Subordinate Financing ................................................... 54
Foreclosure ............................................................. 55
Judicial Foreclosure .................................................... 55
Non-Judicial Foreclosure/Power of Sale .................................. 55
Limitations on Lender's Rights .......................................... 55
Rights of Redemption .................................................... 57
Anti-Deficiency Legislation ............................................. 57
Leasehold Risks ......................................................... 58
Bankruptcy Laws ......................................................... 58
Environmental Legislation ............................................... 60
Due-on-Sale and Due-on-Encumbrance ...................................... 60
Acceleration on Default ................................................. 61
Default Interest, Prepayment Charges and Prepayments .................... 61
Applicability of Usury Laws ............................................. 61
Alternative Mortgage Instruments ........................................ 62
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 62
Forfeitures in Drug and RICO Proceedings ................................ 62
Certain Laws and Regulations ............................................ 63
Type of Mortgaged Property .............................................. 63
Americans with Disabilities Act ......................................... 63
Federal Income Tax Consequences .......................................... 63
REMIC Certificates ....................................................... 64
General ................................................................. 64
Status of REMIC Certificates ............................................ 64
Qualification as a REMIC ................................................ 65
Taxation of REMIC Regular Certificates .................................. 66
General ............................................................... 66
Original Issue Discount ............................................... 66
Acquisition Premium ................................................... 68
Variable Rate REMIC Regular Certificates .............................. 69
Deferred Interest ..................................................... 70
Market Discount ....................................................... 70
Premium ............................................................... 70
Election to Treat All Interest Under the Constant Yield Method ........ 71
Sale or Exchange of REMIC Regular Certificates ........................ 71
Treatment of Losses ................................................... 71
Taxation of Residual Certificates ....................................... 72
Taxation of REMIC Income .............................................. 72
Basis and Losses ...................................................... 73
Treatment of Certain Items of REMIC Income and Expense ................ 74
Limitations on Offset or Exemption of REMIC Income .................... 74
Tax-Related Restrictions on Transfer of Residual Certificates ......... 75
Sale or Exchange of a Residual Certificate ............................ 77
Mark to Market Regulations ............................................ 77
Taxes That May Be Imposed on the REMIC Pool ............................. 78
Prohibited Transactions ............................................... 78
Contributions to the REMIC Pool After the Startup Day ................. 78
Net Income from Foreclosure Property .................................. 78
Liquidation of the REMIC Pool ......................................... 78
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Administrative Matters ........................................... 79
Limitations on Deduction of Certain Expenses ..................... 79
Taxation of Certain Foreign Investors ............................ 79
REMIC Regular Certificates ..................................... 79
Residual Certificates .......................................... 80
Backup Withholding ............................................... 80
Reporting Requirements ........................................... 81
FASIT Certificates ................................................ 81
General .......................................................... 81
Status of FASIT Regular Certificates ............................. 81
Qualification as a FASIT ......................................... 82
Taxation of FASIT Regular Certificates ........................... 83
Prohibited Transactions Tax ...................................... 83
Taxation of Certain Foreign Investors ............................ 83
Backup Withholding ............................................... 84
Reporting Requirements ........................................... 84
Grantor Trust Certificates ........................................ 84
Standard Certificates ............................................ 84
General ........................................................ 84
Tax Status ..................................................... 85
Premium and Discount ........................................... 85
Recharacterization of Servicing Fees ........................... 86
Sale or Exchange of Standard Certificates ...................... 86
Stripped Certificates ............................................ 87
General ........................................................ 87
Status of Stripped Certificates ................................ 88
Taxation of Stripped Certificates .............................. 88
Reporting Requirements and Backup Withholding .................... 89
Taxation of Certain Foreign Investors ............................ 89
ERISA Considerations .............................................. 90
General .......................................................... 90
Certain Requirements Under ERISA ................................. 90
General ........................................................ 90
Parties in Interest/Disqualified Persons ......................... 90
Delegation of Fiduciary Duty ..................................... 90
Administrative Exemptions ........................................ 91
Governmental Plans ............................................... 91
Unrelated Business Taxable Income; Residual Certificates ......... 91
Legal Investment .................................................. 91
Method of Distribution ............................................ 93
Legal Matters ..................................................... 94
Financial Information ............................................. 94
Rating ............................................................ 94
Index of Principal Definitions .................................... 95
</TABLE>
7
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of material information does not contain all the
material information regarding the Certificates and is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such series. An Index of Principal
Definitions is included at the end of this Prospectus.
TITLE OF CERTIFICATES
Mortgage Pass-Through Certificates, issuable in series (the
"Certificates").
DEPOSITOR
Asset Securitization Corporation, a wholly-owned subsidiary of Nomura
Asset Capital Corporation. See "The Depositor".
MASTER SERVICER
The master servicer (the "Master Servicer"), if any, for each series of
Certificates will be named in the related Prospectus Supplement. See
"Description of the Agreements--Collection and Other Servicing Procedures".
SPECIAL SERVICER
The special servicer (the "Special Servicer"), if any, for each series of
Certificates will be named, or the circumstances in accordance with which a
Special Servicer will be appointed will be described, in the related Prospectus
Supplement. See "Description of the Agreements--Special Servicer".
TRUSTEE
The trustee (the "Trustee") for each series of Certificates will be named
in the related Prospectus Supplement. See "Description of the Agreements--The
Trustee".
ISSUER
The issuer of each series of Certificates will be the related Trust Fund.
THE TRUST ASSETS
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a Trust Fund consisting primarily of:
(A) MORTGAGE ASSETS
The Mortgage Assets with respect to each series of Certificates will
consist of a pool of multifamily and/or commercial mortgage loans and/or
installment contracts ("Installment Contracts") for the sale of commercial
or multifamily properties (collectively, the "Mortgage Loans"), mortgage
pass-through certificates or other mortgage-backed securities evidencing
interests in or secured by Mortgage Loans (collectively, the "MBS") or a
combination of Mortgage Loans and MBS. Except to the extent described in
the related Prospectus Supplement, the Mortgage Loans will not be
guaranteed or insured by the Depositor or any of its affiliates or by any
governmental agency or instrumentality or other person. As more
specifically described herein, the Mortgage Loans will be secured by liens
on, or security interest in, properties consisting of (i) residential
properties consisting of five or more rental or cooperatively-owned
dwelling units (the "Multifamily Properties") or (ii) office buildings,
shopping centers, hotels, motels, nursing homes, hospitals or other
health-care related facilities, mobile home parks, warehouse facilities,
mini-warehouse facilities or self-storage facilities, industrial plants,
mixed use or other types of commercial properties (the "Commercial
Properties" and together with Multifamily Properties, the "Mortgaged
Properties"). The Mortgaged Properties may be located in any one of the
fifty states or the District of Columbia or such other locations as are
disclosed in the related Prospectus Supplement. All Mortgage Loans will
have individual principal balances at
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origination of not less than $25,000 and original terms to maturity of not
more than 40 years. All Mortgage Loans will have been originated by persons
other than the Depositor, and all Mortgage Assets will have been purchased,
either directly or indirectly, by the Depositor on or before the date of
initial issuance of the related series of Certificates. As described herein
and in the Prospectus Supplement, each Mortgage Loan may (i) provide for no
accrual of interest or for accrual of interest thereon at an interest rate
(a "Mortgage Rate") that is fixed over its term or that adjusts from time
to time, or that may be converted from an adjustable to a fixed Mortgage
Rate, or from a fixed to an adjustable Mortgage Rate, from time to time at
the mortgagor's election; (ii) provide for scheduled payments to maturity,
payments that adjust from time to time in accommodate changes in the
Mortgage Rate or to reflect the occurrence of certain events, and may
provide negative amortization or accelerated amortization; (iii) be fully
amortizing or require a balloon payment due on its stated maturity date;
(iv) contain prohibitions on prepayment or require payment of a premium or
a yield maintenance penalty in connection with a prepayment; and (v)
provide for payments of principal, interest or both, on due dates that
occur monthly, quarterly, semi-annually or other interval. See "Description
of the Trust Funds--Mortgage Assets".
(B) COLLECTION ACCOUNT
Each Trust Fund will include one or more accounts (collectively, the
"Collection Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the
related Prospectus Supplement will deposit all payments and collections
received or advanced with respect to the Mortgage Assets and other assets
in the Trust Fund other than certain fees and expenses. A Collection
Account may be maintained as an interest bearing or a non-interest bearing
account, and funds held therein may be invested in certain short-term,
investment grade obligations, as described in the related Prospectus
Supplement. See "Description of the Agreements--Payments on Mortgage
Assets; Deposits to Collection Account".
(C) CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in
the related Trust Fund may be provided to one or more classes of
Certificates of the related series in the form of subordination of one or
more other classes of Certificates of such series or by one or more other
types of credit support, such as a letter of credit, an insurance policy on
the Mortgage Loans, guarantee, certificate guarantee insurance policy,
reserve fund or another type of credit support, or a combination thereof
(any such coverage with respect to the Certificates of any series, "Credit
Support"). The amount and types of coverage, the identification of the
entity providing the coverage (if applicable) and related information with
respect to each type of Credit Support, if any, will be described in the
Prospectus Supplement for a series of Certificates. The Prospectus
Supplement for any series of Certificates evidencing an interest in a Trust
Fund that includes MBS will describe any credit support that is included as
part of the trust fund evidenced or secured by such MBS. See "Risk
Factors--Credit Support Limitations" and "Description of Credit Support".
(D) CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in
the funds and accounts established for the related series will be invested
at a specified rate. The Trust Fund may also include certain other
agreements, such as interest rate exchange agreements, interest rate cap or
floor agreements, currency exchange agreements or similar agreements
provided to reduce the effects of interest rate or currency exchange rate
fluctuations on the Mortgage Assets on one or more classes of Certificates.
The principal terms of any such guaranteed investment contract or other
agreement (any such agreement, a "Cash Flow Agreement"), including
provisions relating to the timing, manner and amount of payments thereunder
and provisions relating to the termination thereof, will be described in
the Prospectus Supplement for the related series. In addition, the related
Prospectus Supplement will provide certain information with respect to the
obligor under any such Cash Flow Agreement. The Prospectus Supplement for
any series of Certificates evidencing an interest in a Trust Fund that
includes MBS will describe any cash flow agreements that are included as
part of the trust fund evidenced or secured by such MBS. See "Description
of the Trust Funds--Cash Flow Agreements".
DESCRIPTION OF CERTIFICATES
Each series of Certificates evidencing an interest in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement and each series of Certificates evidencing an interest in a Trust
Fund the Mortgage
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Assets of which consisting of MBS will be issued pursuant to a Trust Agreement.
Pooling and Servicing Agreements and Trust Agreements are sometimes referred to
herein as "Agreements". Each series of Certificates (including any class or
classes of Certificates of such series not offered hereby) will represent in
the aggregate the entire beneficial ownership interest in the Trust Fund. Each
class of Certificates (other than certain Stripped Interest Certificates, as
defined below) will have a stated principal amount (a "Certificate Balance")
and (other than certain Stripped Principal Certificates, as defined below),
will accrue interest thereon based on a fixed, variable or adjustable interest
rate (a "Pass-Through Rate"). The related Prospectus Supplement will specify
the Certificate Balance and the Pass-Through Rate for each class of
Certificates, as applicable, or in the case of a variable or adjustable
Pass-Through Rate, the method for determining the Pass-Through Rate. Each
series of Certificates will consist of one or more classes or subclasses of
Certificates that may (i) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the
Certificates; (ii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iii) be entitled to interest
distributions, with disproportionately low, nominal or no principal
distributions (collectively, "Stripped Interest Certificates"); (iv) provide
for distributions of accrued interest thereon only following the occurrence of
certain events, such as the retirement of one or more other classes of
Certificates of such series (collectively, "Accrual Certificates"); and/or (v)
provide for payments of principal sequentially, based on specified payment
schedules or other methodologies, to the extent of available funds. Any such
classes or subclasses may include classes or subclasses of Offered
Certificates. The Certificates will not be guaranteed or insured by the
Depositor or any of its affiliates, by any governmental agency or
instrumentality or by any other person, unless otherwise provided in the
related Prospectus Supplement. See "Risk Factors--Limited Assets" and
"Description of the Certificates". The Offered Certificates will not be listed
on any securities exchange and will not be quoted in an automated quotation
system of a registered securities association. This fact may limit the
liquidity of the Offered Certificates. See "Risk Factors--Limited Liquidity and
Market Value."
DISTRIBUTIONS OF INTEREST ON CERTIFICATES
Interest on each class of Offered Certificates (other than certain classes
of Stripped Interest Certificates and Stripped Principal Certificates) of each
series will accrue at the applicable Pass-Through Rate on the outstanding
Certificate Balance thereof and will be distributed to Certificateholders as
provided in the related Prospectus Supplement (each of the specified dates on
which distributions are to be made, a "Distribution Date"). Distributions with
respect to interest on Stripped Interest Certificates may be made on each
Distribution Date on the basis of a notional amount as described in the related
Prospectus Supplement. Distributions of interest with respect to one or more
classes of Certificates may be reduced to the extent of certain delinquencies
and other contingencies described herein and in the related Prospectus
Supplement. See "Risk Factors--Average Life of Certificates; Prepayments;
Yields", "Yield Considerations", and "Description of the
Certificates--Distributions of Interest on the Certificates".
DISTRIBUTIONS OF PRINCIPAL OF CERTIFICATES
The initial aggregate Certificate Balance of the Certificates of each
series (other than certain classes of Stripped Interest Certificates) will
generally not exceed the outstanding principal balance of the Mortgage Assets
as of the close of business on the day of the month specified in the related
Trust Fund (the "Cut-off Date"), after application of scheduled payments due on
or before such date, whether or not received. The Certificate Balance of a
Certificate outstanding from time to time represents the maximum amount that
the holder thereof is then entitled to receive in respect of principal from
future cash flow on the assets in the related Trust Fund. Distributions of
principal will be made on each Distribution Date to the class or classes of
Certificates entitled thereto until the Certificate Balance of such
Certificates have been reduced to zero. Distributions of principal of any class
of Certificates will be made on a pro rata basis among all of the Certificates
of such class. Stripped Interest Certificates with no Certificate Balance will
not receive distributions in respect of principal. See "Description of the
Certificates--Distributions of Principal of the Certificates".
ADVANCES
In connection with a series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS, the Master Servicer
may be obligated as part of its servicing responsibilities to make certain
advances with respect to delinquent scheduled payments on the Mortgage Loans in
such Trust Fund. Advances made by a Master
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Servicer are reimbursable generally from subsequent recoveries in respect of
such Mortgage Loans, and in certain circumstances, from other assets available
in the Trust Fund. The Master Servicer will be entitled to receive interest on
its outstanding advances, payable from amounts in the related Trust Fund. The
Prospectus Supplement for any series of Certificates evidencing an interest in
a Trust Fund that includes MBS will describe any corresponding advancing
obligation of any person in connection with such MBS. See "Description of the
Certificates--Advances in Respect of Delinquencies". Purchasers of any series
of Certificates will be advised of any advances relating to such Certificates
by means of the report to be delivered to Certificateholders in connection with
each distribution. See "Description of the Certificates--Reports to
Certificateholders".
TERMINATION
A series of Certificates may be subject to optional early termination
through the repurchase of the Mortgage Assets in the related Trust Fund. If so
provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, the party specified therein will solicit bids
for the purchase of all of the Mortgage Assets of the Trust Fund under the
circumstances and in the manner set forth therein. See "Description of the
Certificates--Termination".
REGISTRATION OF CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates will initially be represented by one or more
Certificates registered in the name of Cede & Co., as the nominee of DTC. No
person acquiring an interest in Offered Certificates so registered will be
entitled to receive a definitive certificate representing such person's
interest except in the event that definitive certificates are issued under the
limited circumstances described herein. See "Risk Factors--Book-Entry
Registration" and "Description of the Certificates--Book-Entry Registration and
Definitive Certificates".
RISK FACTORS
An investment in the Offered Certificates may include certain material
risks. See "Risk Factors" herein and in the related Prospectus Supplement.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences to Certificateholders will vary
depending on whether one or more elections are made to treat the Trust Fund or
specified portions thereof as one or more "real estate mortgage investment
conduits" (each, a "REMIC") or as one or more "financial asset securitization
investment trusts" (each a "FASIT") under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). The Prospectus Supplement for
each series of Certificates will specify whether one or more such elections
will be made. See "Federal Income Tax Consequences".
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan or other retirement arrangement,
including an individual retirement account, or a Keogh plan which is subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each a "Plan"), or a collective investment fund in
which such Plans are invested, or an insurance company using assets of a
separate account or general account which includes assets of Plans (or which is
deemed pursuant to ERISA to include assets of Plans), or other pensions acting
on behalf of any such Plan or using the assets of any such Plan, which proposes
to cause a Plan to acquire any of the Offered Certificates should carefully
review with its legal advisors whether the purchase or holding of Offered
Certificates could give rise to a transaction that is prohibited or is not
otherwise permissible either under ERISA or Section 4975 of the Code. See
"ERISA Considerations" herein and in the related Prospectus Supplement.
LEGAL INVESTMENT
The related Prospectus Supplement will specify whether the Offered
Certificates will constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984, as amended. Investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See "Legal Investment" herein and in the
related Prospectus Supplement.
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RATING
At the date of issuance, as to each series, each class of Offered
Certificates will be rated not lower than investment grade by one or more
nationally recognized statistical rating agencies (each, a "Rating Agency").
See "Rating" herein and in the related Prospectus Supplement.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single-family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of
Certificates by a holder in any secondary market that may develop may be at a
discount from 100% of their original principal balance or from their purchase
price. Furthermore, secondary market purchasers may look only hereto, to the
related Prospectus Supplement and to the reports to Certificateholders
delivered pursuant to the Agreement as described herein under the heading
"Description of the Certificates--Reports to Certificateholders," "--Book-Entry
Registration and Definitive Certificates" and "Description of the Agreements--
Evidence as to Compliance" for information concerning the Certificates.
Certificateholders will have no redemption rights. Each class of Offered
Certificates of a series will be issued in minimum denominations corresponding
to Certificate Balances or, in the case of Stripped Interest Certificates,
notional amounts specified in the related Prospectus Supplement. Nomura
Securities International, Inc., through one or more of its affiliates,
currently expects to make a secondary market in the Offered Certificates, but
has no obligation to do so.
LIMITED ASSETS
A series of Certificates will not have any claim against or security
interest in the Trust Funds for any other series. If the related Trust Fund is
insufficient to make payments on such Certificates, no other assets will be
available for payment of the deficiency. Additionally, certain amounts
remaining in certain funds or accounts, including the Certificate Account and
any accounts maintained as Credit Support, may be withdrawn under certain
conditions, as described in the related Prospectus Supplement. In the event of
such withdrawal, such amounts will not be available for future payment of
principal of or interest on the Certificates. With respect to a series of
Certificates consisting of one or more classes of Subordinate Certificates, on
any Distribution Date in respect of which losses or shortfalls in collections
on the Mortgage Assets have been incurred, the amount of such losses or
shortfalls will be borne first by one or more classes of the Subordinate
Certificates, and, thereafter, by the remaining classes of Certificates in the
priority and manner and subject to the limitations specified in the related
Prospectus Supplement.
AVERAGE LIFE OF CERTIFICATES; PREPAYMENTS; YIELDS
Prepayments on the Mortgage Assets in any Trust Fund (including principal
prepayments on the Mortgage Loans resulting from both voluntary and involuntary
liquidations) generally will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on the
Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans varies
between pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. There can be no
assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund
or that the rate of payments will conform to any model described herein or in
any Prospectus Supplement. If prevailing interest rates fall significantly
below the applicable mortgage rates, principal prepayments are likely to be
higher than if prevailing rates remain at or above the rates borne by the
Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund.
As a result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A series of Certificates may include one
or more classes of Certificates with priorities of payment and, as a result,
yields on other classes of Certificates, including classes of Offered
Certificates, of such series may be more sensitive to prepayments on Mortgage
Assets. A series of Certificates may include one or more classes offered at a
significant premium or discount. Yields on such classes of Certificates will be
sensitive, and in some cases extremely sensitive, to voluntary and involuntary
prepayments on Mortgage Assets and, where the amount of interest payable with
respect to a class is disproportionately high, as compared to the amount of
principal, as with certain classes of Stripped Interest Certificates, a holder
might, in some prepayment scenarios, fail to recoup its original investment. A
series of Certificates may include one or more classes of Certificates,
including classes of Offered Certificates, that provide for distribution of
principal thereof from amounts attributable to interest accrued but not
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currently distributable on one or more classes of Accrual Certificates and, as
a result, yields on such Certificates will be sensitive to (a) the provisions
of such Accrual Certificates relating to the timing of distributions of
interest thereon and (b) if such Accrual Certificates accrue interest at a
variable or adjustable Pass-Through Rate, changes in such rate. See "Yield
Considerations" herein and, if applicable, in the related Prospectus
Supplement.
In addition, if an election is made to treat the Trust Fund as a FASIT,
the deposit of Replacement Mortgage Assets or Additional Mortgage Assets with
faster or slower rates of amortization and different prepayment provisions will
affect the average life of each class of related Certificates and may also
affect the yields on such classes. To the extent the Depositor removes Mortgage
Assets prior to a prepayment by the related borrower and substitutes a
Replacement Mortgage Asset in its place, such substitution may reduce the
likelihood of a prepayment for Certificateholders and to the extent any
Certificate was purchased at a discount, such substitution will reduce the
actual yield to maturity. Furthermore, in the event that the Depositor elects
to deposit Additional Mortgage Assets into the Trust Fund and to issue new
Certificates corresponding to such Mortgage Assets, the credit enhancement
provided to one or more classes of Certificates may increase or decrease and
the weighted average life of one or more classes of Certificates may lengthen
or shorten. See "Description of the Trust Funds--Addition and Removal of
Mortgage Assets from the Trust Fund" herein and "Yield Considerations" herein
and, if applicable, in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments on
the related Mortgage Assets will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination of the series of Certificates. Such rating will not
address the possibility that prepayment at higher or lower rates than
anticipated by an investor may cause such investor to experience a lower than
anticipated yield or that an investor purchasing a Certificate at a significant
premium might fail to recoup its initial investment under certain prepayment
scenarios. Each Prospectus Supplement will identify any payment to which
holders of Offered Certificates of the related series are entitled that is not
covered by the applicable rating.
The amount, type and nature of credit support, if any, established with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage
loans in a larger group. Such analysis is often the basis upon which each
Rating Agency determines the amount of credit support required with respect to
each such class. There can be no assurance that the historical data supporting
any such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Assets. No assurance can be given that values of any Mortgaged
Properties have remained or will remain at their levels on the respective dates
of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of real estate values generally will limit loss experiences
on the Mortgaged Properties. If the commercial or multifamily residential real
estate markets should experience an overall decline in property values such
that the outstanding principal balances of the Mortgage Loans underlying or
comprising the Mortgage Assets in a particular Trust Fund and any secondary
financing on the related Mortgaged Properties become equal to or greater than
the value of the Mortgaged Properties, the rates of delinquencies, foreclosures
and losses could be higher than those now generally experienced by
institutional lenders. In addition, adverse economic conditions (which may or
may not affect real property values) may affect the timely payment by
mortgagors of scheduled payments of principal and interest on the Mortgage
Loans and, accordingly, the rates of delinquencies, foreclosures and losses
with respect to any Trust Fund. To the extent that such losses are not covered
by Credit Support, such losses will be borne, at least in part, by the holders
of one or more classes of the Certificates of the related series. See
"Description of Credit Support" and "Rating".
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single-family
property. See "Description of the Trust Funds--Mortgage Assets". The ability of
a mortgagor to repay a loan secured by an income-producing property typically
is dependent primarily upon the successful operation of such property rather
than any
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independent income or assets of the mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a mortgagor to repay a
single-family loan typically is dependent primarily upon the mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of
an income-producing property will likely affect both the performance of the
related loan as well as the liquidation value of such property, whereas a
decline in the income of a mortgagor on a single-family property will likely
affect the performance of the related loan but may not affect the liquidation
value of such property.
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants or,
of applicable, a diversity of types of business operated by such tenants.
It is anticipated that all or a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of
mortgagor default, recourse may be had only against the specific multifamily or
commercial property and such other assets, if any, as have been pledged to
secure the Mortgage Loan. With respect to those Mortgage Loans that provide for
recourse against the mortgagor and its assets generally, there can be no
assurance that such recourse will ensure a recovery in respect of a defaulted
Mortgage Loan greater than the liquidation value of the related Mortgaged
Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single-family loans both because the Mortgage Assets in a Trust Fund will
generally consist of a smaller number of loans than would a single-family pool
of comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans.
RETAIL PROPERTIES
Significant factors determining the value of retail properties are the
quality of the tenants as well as fundamental aspects of real estate such as
location and market demographics. The correlation between the success of tenant
businesses and property value is more direct with respect to retail properties
than other types of commercial property because a significant component of the
total rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is "anchored" or "unanchored" is also an important
distinction. Retail properties that are anchored have traditionally been
percived to be less risky. While there is no strict definition of an anchor, it
is generally understood that a retail anchor tenant is proportionately large in
size and is vital in attracting customers to the property. Furthermore, the
correlation between the success of tenant businesses and property value is
increased when the property is a single tenant property.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rent collectible at the retail properties
included in the Mortgaged Properties.
MULTIFAMILY PROPERTIES
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of competing
residential developments in the local market (such as apartment buildings,
manufactured housing communities and site-built single family homes), the
physical attributes of the multifamily apartment building (such as its age and
appearance) and state and local regulations affecting such property. In
addition, the successful operation of an apartment building will depend upon
other factors, such as its reputation, the ability of management to provide
adequate maintenance and insurance, and the types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building
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owners have been the subject of suits under state "Unfair and Deceptive
Practices Acts" and other general consumer protection statutes for coercive,
abusive or unconscionable leasing and sales practices. A few states offer more
significant protection. For example, there are provisions that limit the basis
on which a landlord may terminate a tenancy or increase its rent or prohibit a
landlord from terminating a tenancy solely by reason of the sale of the owner's
building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases determined through mediation
or binding arbitration. In many cases, the rent control laws do not permit
vacancy decontrol. Local authority to impose rent control is preempted by state
law in certain states, and rent control is not imposed at the state level in
those states. In some states, however, local rent control ordinances are not
preempted for tenants having short-term or month-to-month leases, and
properties there may be subject to various forms of rent control with respect
to those tenants. Any limitations on a borrower's ability to raise property
rents may impair such borrower's ability to repay its Mortgage Loan from its
net operating income or the proceeds of a sale or refinancing of the related
Mortgaged Property.
Owners of residential rental real estate property meeting the definition
of low-income housing pursuant to Section 42 of the Code (the "Section 42
Properties") may receive low-income housing tax credits ("Tax Credits") from
their respective state or local allocating agency. The Section 42 Property may
be subject to certain restrictions on maximum tenant income or maximum rental
rates. If a Section 42 Property owner does not maintain compliance with such
Tax Credit restrictions, that owner may lose its Tax Credit related to the
period of noncompliance and face the partial recapture of previously taken Tax
Credits. There is also the possibility that a change in law could eliminate the
Tax Credits. Any limitation on a borrower's ability to raise property rents or
rent to high-income tenants and any payment obligation of a borrower resulting
from recapture of a previously taken Tax Credit, may impair such borrower's
ability to repay its Mortgage Loan obligation from its net operating income or
the proceeds of a sale or refinancing of the related Section 42 Property.
Adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels. Occupancy and rent levels may also
be affected by construction of additional housing units, local military base or
factory closings and national and local politics, including current or future
rent stabilization and rent control laws and agreements. In addition, the level
of mortgage interest rates may encourage tenants to purchase single-family
housing. The housing and construction quality of a particular building may
affect the occupancy level as well as the rents that may be charged for
individual units. The characteristics of a neighborhood may change over time or
in relation to newer developments.
OFFICE PROPERTIES
Significant factors determining the value of office properties are the
quality of the tenants in the building, the physical attributes of the building
in relation to competing buildings and the strength and stability of the market
area as a desirable business location. Office properties may be adversely
affected if there is an economic decline in the business operated by the
tenants. The risk of such an adverse effect is increased if revenue is
dependent on a single tenant or if there is a significant concentration of
tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life issues such as schools and cultural amenities. A central
business district may have an economy which is markedly different from that of
a suburb. The local economy will impact on an office property's ability to
attract stable tenants on a consistent basis. In addition, the cost of
refitting office space of a new tenant is often more costly than for other
property types.
HOTEL PROPERTIES
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions, either
local, regional or national, may limit the amount that can be charged for a
room and
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may result in a reduction in occupancy levels. The construction of competing
hotels can have similar effects. To meet competition in the industry and to
maintain economic values, continuing expenditures must be made for modernizing,
refurbishing, and maintaining existing facilities prior to the expiration of
their anticipated useful lives. Because hotel rooms are generally rented for
short periods of time, hotels tend to respond more quickly to adverse economic
conditions and competition than do other commercial properties. Furthermore,
the financial strength and capabilities of the owner and operator of a hotel
may have a substantial impact on such hotel's quality of service and economic
performance. Additionally, the hotel and lodging industry is generally seasonal
in nature and this seasonality can be expected to cause periodic fluctuations
in room and other revenues, occupancy levels, room rates and operating
expenses. The demand for particular accommodations may also be affected by
changes in travel patterns caused by changes in energy prices, strikes,
relocation of highways, the construction of additional highways and other
factors.
Hotel properties may be franchises of national or regional hotel chains.
The viability of any such hotel property depends in part on the continued
existence and financial strength of the franchisor, the public perception of
the franchise service mark and the duration of the franchise licensing
agreements. The transferability of franchise license agreements may be
restricted and, in the event of a foreclosure on any such hotel property, the
mortgage may not have the right to use the franchise license without the
franchisor's consent. Conversely, a lender may be unable to remove a franchisor
that it desires to replace following a foreclosure. Further, in the event of a
foreclosure on a hotel property, it is unlikely that the Trustee (or Master
Servicer or Special Servicer) or purchaser of such hotel property would be
entitled to the rights under any liquor license for such hotel property and
such party would be required to apply in its own right for such license or
licenses. There can be no assurance that a new license could be obtained or
that it could be obtained promptly.
SENIOR HOUSING/HEALTHCARE PROPERTIES
Significant factors determining the value of senior housing and healthcare
properties include federal and state laws, competition with similar properties
on a local and regional basis and the continued availability of revenue from
government reimbursement programs, primarily Medicaid and Medicare. Providers
of long-term nursing care and other medical services are subject to federal and
state laws that relate to the adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies and
additions to facilities and services and, to the extent dependent on patients
whose fees are reimbursed by private insurers, to the reimbursement policies of
such insurers. In addition, facilities where such care or other medical
services are provided are subject to periodic inspection by governmental
authorities to determine compliance with various standards necessary for
continued licensing under state law and continued participation in the Medicaid
and Medicare reimbursement programs. The failure of any such borrowers to
maintain or renew any required license or regulatory approval could prevent it
from continuing operations at a Mortgaged Property (in which case no revenues
would be received from such property or portion thereof requiring licensing)
or, if applicable, bar it from participation in government reimbursement
programs. Furthermore, in the event of foreclosure, there can be no assurance
that the Trustee (or Master Servicer or Special Servicer) or purchaser in a
foreclosure sale would be entitled to the rights under such licenses and such
party may have to apply in its own right for such a license. There can be no
assurance that a new license could be obtained.
Under applicable federal and state laws and regulations, Medicare and
Medicaid, only the provider who actually furnished the related medical goods
and services generally may sue for or enforce its rights to reimbursement.
Accordingly, in the event of foreclosure, none of the Trustee, the Master
Servicer, the Special Servicer or a subsequent lessee or operator of the
property would generally be entitled to obtain from federal or state
governments any outstanding reimbursement payments relating to services
furnished at the respective properties prior to such foreclosure.
The operators of such nursing homes are likely to compete on a local and
regional basis with others that operate similar facilities, some of which
competitors may be better capitalized, may offer services not offered by such
operators or may be owned by non-profit organizations or government agencies
supported by endowments, charitable contributions, tax revenues and other
sources not available to such operators. The successful operation of a
Mortgaged Property that is a nursing home will generally depend upon the number
of competing facilities in the local market, as well as upon other factors such
as its age, appearance, reputation and management, the types of services it
provides and the quality of care and the cost of that care.
Nursing home facilities may receive a substantial portion of their
revenues from government reimbursement programs, primarily Medicaid and
Medicare. Medicaid and Medicare are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, government payors have employed cost-containment
measures that limit payments to
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health care providers, and there are currently under construction various
proposals for national health care reform that could further limit those
payments. Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse
the cost of caring for program beneficiaries. If not, net operating income of
the Mortgaged Properties that receive revenues from those sources, and
consequently the ability of the related borrowers to meet their Mortgage Loan
obligations, could be adversely affected.
MOBILE HOME PARK PROPERTIES
Loans secured by liens on mobile home park properties pose risks not
associated with loans secured by liens on other types of income-producing real
estate.
The successful operation of a mobile home park property will generally
depend upon the number of competing mobile home park communities and other
residential developments in the local market, such as apartment buildings,
other mobile home park communities, and site-built single family homes, as well
as upon other factors such as its location, age, appearance, reputation, the
ability of management to provide adequate maintenance and insurance, and the
types of services it provides.
Mobile home park properties are "special purpose" properties that could
not be readily converted to general residential, retail or office use. Thus, if
the operation of any of the mobile home park properties becomes unprofitable
due to competition, age of the improvements or other factors such that the
borrower becomes unable to meet its obligations on the related Mortgage Loan,
the liquidation value of that mobile home park property may be substantially
less, relative to the amount owing on the related Mortgage Loan, than would be
the case if the mobile home park property were readily adaptable to other uses.
Certain states regulate the relationship of a mobile home park community
owner and its tenants. Commonly, these laws require a written lease, good cause
for eviction, disclosure of fees, and notification to residents of changed land
use, while prohibiting unreasonable rules, retaliatory evictions, and
restrictions on a resident's choice of unit vendors. For example, there are
provisions that limit the basis on which a landlord may terminate a mobile home
owner's tenancy or increase its rent and generally prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's mobile home.
In addition to state regulation of the landlord tenant relationship,
numerous counties and municipalities impose rent control on mobile home park
communities. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
approved by a governmental agency, or to increases deteremined through
mediation or binding arbitration. In many cases, the rent control laws do not
permit vacancy decontrol, or permit vacancy decontrol only in the relatively
rare event that the mobile home is removed from the mobile home park. Local
authority to impose rent control on mobile home park communities is preempted
by state law in certain states and rent control is not imposed at the state
level in those states. In some states, however, local rent control ordinances
are not preempted for tenants having short-term or month-to-month leases, and
the Mortgaged Properties in such states may be subject to various forms of rent
control with respect to those tenants. Any limitations on the Mortgaged
Borrowers' ability to raise property rents may impair their ability to repay
the related Mortgage Loan from their net operating income or the proceeds of a
sale or refinancing of the related Mortgaged Properties.
The location and construction quality of common area improvements to a
mobile home park housing community may affect the occupancy level as well as
the rents that may be charged for the individual mobile home parks. The
characteristics of a mobile home park community may change over time or in
relation to other developments. The effects of poor construction quality on
common area improvements will increase over time in the form of increased
maintenance and capital improvements. Even good construction will deteriorate
over time if the property manager does not schedule and perform adequate
maintenance in a timely fashion.
INDUSTRIAL PROPERTIES
Significant factors determining the value of industrial properties are the
quality of tenants, building design and adaptability and the location of the
properties. Industrial properties may be adversely affected if there is an
economic decline in the business operated by the tenants. The risk of such an
adverse effect is increased if revenue is dependent on a single tenant or if
there is a significant concentration of tenants in a particular business or
industry (as is frequently the case with industrial properties).
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Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay depths,
divisibility, truck turning radius and overall functionality and accessibility.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
BALLOON PAYMENTS
Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Mortgage
Loans with balloon payments involve a greater degree of risk because the
ability of a mortgagor to make a balloon payment typically will depend upon its
ability either to timely refinance the loan or to timely sell the related
Mortgaged Property. The ability of a mortgagor to accomplish either of these
goals will be affected by a number of factors, including the level of available
mortgage rates at the time of sale or refinancing, the mortgagor's equity in
the related Mortgaged Property, the financial condition and operating history
of the mortgagor and the related Mortgaged Property, tax laws, rent control
laws (with respect to certain Multifamily Properties and mobile home parks),
reimbursement rates (with respect to certain hospitals, nursing homes and
convalescent homes), renewability of operating licenses, prevailing general
economic conditions and the availability of credit for commercial or
multifamily, as the case may be, real properties generally.
SUBSTITUTION OF MORTGAGE ASSETS
In the event that an election is made to treat the Trust Fund as a FASIT,
the related Prospectus Supplement will describe the extent to which any
Mortgage Asset may be removed or added to the Trust Fund and the terms and
conditions for such removal or addition. The related Prospectus Supplement will
also describe the manner in which Certificateholders will be informed of the
removal of any Mortgage Asset from, and the addition of any Additional Mortgage
Asset to, the Trust Fund. See "Description of the Trust Fund--Addition and
Removal of Mortgage Assets from the Trust Fund" herein.
OBLIGOR DEFAULT
In order to maximize recoveries on defaulted Mortgage Loans, a Master
Servicer typically will have considerable flexibility to extend and modify
Mortgage Loans that are in default or as to which a payment default is
reasonably foreseeable, including in particular with respect to balloon
payments. In addition, a Master Servicer or a Special Servicer may receive a
work out fee based on receipts from or proceeds of such Mortgage Loans. While a
Master Servicer generally will be required to determine that any such extension
or modification is likely to produce a greater recovery on a present value
basis than liquidation, there can be no assurance that such flexibility with
respect to extensions or modifications or payment of a work out fee will
increase the present value of receipts from or proceeds of Mortgage Loans that
are in default or as to which a default is reasonably foreseeable. The recent
foreclosure and delinquency experience with respect to loans serviced by a
Master Servicer or, if applicable, any Special Servicer or significant
Sub-Servicer will be provided in the related Prospectus Supplement.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. Partnerships, corporations and
certain other types of organizations generally limit the liability of the
beneficial owners of such organizations for the obligations of such
organizations, and therefore limit the recourse of a lender to the assets of
such beneficial owners. The mortgagor's sophistication and form of organization
may increase the likelihood of protracted litigation or bankruptcy in default
situations.
JUNIOR MORTGAGE LOANS
Certain of the Mortgage Loans may be secured by junior Mortgages which are
subordinate to senior mortgages or deeds of trust held by other lenders or
institutional investors. The rights of any Trust Fund (and therefore the
Certificateholders), as beneficiary under a junior Mortgage, are subordinate to
those of the mortgagee or beneficiary under the senior mortgage or deed of
trust, including the prior rights of the senior mortgage or beneficiary to
receive rents, hazard insurance and condemnation proceeds and to cause the
Mortgaged Property securing the Mortgage Loan to be sold
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upon default of the mortgagor or trustor, thereby extinguishing the Trust
Fund's junior Mortgage unless the Servicer or the Special Servicer asserts the
Trust Fund's subordinate interest in the Mortgaged Property in foreclosure
litigation or satisfies the defaulted senior loan. See "Certain Legal Aspects
of Mortgage Loans--Junior Mortgages; Rights of Senior Mortgages or
Beneficiaries" herein.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the
conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Credit Support may not cover all potential losses or
risks; for example, Credit Support may or may not cover fraud or negligence by
a mortgage loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates). Although subordination
is intended to reduce the risk to holders of Senior Certificates of delinquent
distributions or ultimate losses, the amount of subordination will be limited
and may decline under certain circumstances. Any limits with respect to the
aggregate amount of claims under any related Credit Support may be exhausted
before the principal of the lower priority classes of Certificates of a series
has been repaid. As a result, the impact of significant losses and shortfalls
on the Mortgage Assets may fall primarily upon those classes of Certificates
having a lower priority of payment. Moreover, if a form of Credit Support
covers more than one series of Certificates (each, a "Covered Trust"), holders
of Certificates evidencing an interest in a Covered Trust will be subject to
the risk that such Credit Support will be exhausted by the claims of other
Covered Trusts.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies, other losses or other factors. There can, however, be
no assurance that the loss experience on the related Mortgage Assets will not
exceed such assumed levels. See "--Limited Nature of Ratings", "Description of
the Certificates" and "Description of Credit Support".
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of
the mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to
the lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to
collect rents. Such assignments may not be perfected as security interests
prior to actual possession of the cash flows. Some state laws may require that
the lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect
of the mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans--Leases and Rents".
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), a lender may be liable, as an "owner" or
"operator," for the costs of addressing releases or threatened releases of
hazardous substances that require remedial action at a property, if agents or
employees of the lender have
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become sufficiently involved in the operations of the mortgagor, regardless of
whether the environmental damage or threat was caused by a prior owner. A
lender also risks such liability on foreclosure of the mortgage. Each Pooling
and Servicing Agreement will provide that the Master Servicer, acting on behalf
of the Trust Fund, may not acquire title to a Mortgaged Property securing a
Mortgage Loan or take over its operation unless the Master Servicer has
previously determined, based upon a report prepared by a person who regularly
conducts environmental audits, that (i) the Mortgaged Property is in compliance
with applicable environmental laws and regulations or, if not, that taking such
actions as are necessary to bring the Mortgaged Property in compliance
therewith is reasonably likely to produce a greater recovery on a present value
basis than not taking such actions and (ii) there are no circumstances or
conditions that have resulted in any contamination or, if circumstances or
conditions have resulted in any contamination or if such circumstances or
conditions require remedial action, taking such actions with respect to the
affected Mortgaged Property is reasonably likely to produce a greater recovery
on a present value basis that not taking such actions. See "Certain Legal
Aspects of Mortgage Loans--Environmental Legislation".
LIMITED LIQUIDITY AND MARKET VALUE
There is currently no secondary market for the Offered Certificates. In
addition, the Offered Certificates will not be listed on any securities
exchange and will not be quoted in an automated quotation system of a
registered securities association. While the underwriter with respect to a
series of Certificates may intend to make a secondary market in the related
Offered Certificates, underwriters are under no obligation to do so.
Accordingly, there can be no assurance that a secondary market for any series
of Offered Certificates will develop. Moreover, if a secondary market does
develop, there can be no assurance that it will provide holders of Offered
Certificates with liquidity of investment or that it will continue for the life
of the Offered Certificates. Lack of liquidity could result in a substantial
decrease in the market value of the Offered Certificates. In addition, the
market value of the Offered Certificates at any time may be affected by many
factors, including then prevailing interest rates, and no representation is
made by any person or entity as to the market value of any Offered Certificates
at any time.
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series. See "ERISA Considerations".
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
Holders of Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "Federal Income Tax
Consequences--REMIC Certificates". Accordingly, under certain circumstances,
holders of Offered Certificates that constitute Residual Certificates may have
taxable income and tax liabilities arising from such investment during a
taxable year in excess of the cash received during such period. The requirement
that holders of Residual Certificates report their pro rata share of the
taxable income and net loss of the REMIC will continue until the Certificate
Balances of all classes of Certificates of the related series have been reduced
to zero, even though holders of Residual Certificates have received full
payment of their stated interest and principal. A portion (or, in certain
circumstances, all) of such Certificateholder's share of the REMIC taxable
income may be treated as "excess inclusion" income to such holder which (i)
generally, will not be subject to offset by losses from other activities, (ii)
for a tax-exempt holder, will be treated as unrelated business taxable income
and (iii) for a foreign holder, will not qualify for exemption from withholding
tax. Individual holders of Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
Residual Certificates are subject to certain restrictions on transfer. Because
of the special tax treatment of Residual Certificates, the taxable income
arising in a given year on a Residual Certificate will not be equal to the
taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on the Residual Certificate may be significantly
less than that of a corporate bond or stripped instrument having similar cash
flow characteristics.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
Accrual Certificates will be, and certain of the other Classes of
Certificates of a series may be, issued with "original issue discount" for
federal income tax purposes, which generally will result in recognition of some
taxable income in advance of the receipt of cash attributable to such income.
See "Federal Income Tax Consequences--REMIC Certificates--Taxation of REMIC
Regular Certificates".
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CONSENT
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of all series or a similar means of allocating decision-making
under the Agreement ("Voting Rights") will be required to direct, and will be
sufficient to bind all Certificateholders to, certain actions, including
amending the related Agreement in certain circumstances. See "Description of
the Agreements--Events of Default", "--Rights Upon Event of Default" and
"--Amendment".
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will
not be recognized by the Trustee as "Certificateholders" (as that term is to be
used in the related Agreement). Hence, until such time, Certificateholders will
be able to exercise the rights of Certificateholders only indirectly through
DTC and its participating organizations. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
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DESCRIPTION OF THE TRUST FUNDS
MORTGAGE ASSETS
The primary assets of each Trust Fund (the "Mortgage Assets") will include
(i) Multifamily and/or Commercial Loans and/or Installment Contracts
(collectively, the "Mortgage Loans") or (ii) pass-through certificates or other
mortgage-backed securities evidencing interests in or secured by one or more
Mortgage Loans ("MBS"). Any MBS that are included in the assets of a Trust Fund
(i) will have been either (a) previously registered under the Securities Act of
1933, as amended (the "Securities Act"), or (b) eligible for sale under Rule
144(k) of the Securities Act and (ii) will have been acquired in bona fide
secondary market transactions from third parties not including the issuer of
such MBS or any affiliate of such issuer. As used herein, "Mortgage Loans"
refers to both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage
Loans that secure, or interests in which are evidenced by, MBS are herein
sometimes referred to as Underlying Mortgage Loans. Mortgage Loans that are not
Underlying Mortgage Loans are sometimes referred to as "Whole Loans". The
Mortgage Assets will not be guaranteed or insured by the Depositor or any of
its affiliates. The Prospectus Supplement will describe any guarantee or
insurance relating to the Mortgage Assets by any governmental agency or
instrumentality or by any other person. Each Mortgage Asset will be selected by
the Depositor for inclusion in a Trust Fund from among those purchased, either
directly or indirectly, from a prior holder thereof (a "Mortgage Asset
Seller"), which prior holder may or may not be the originator of such Mortgage
Loan or the issuer of such MBS and may be an affiliate of the Depositor.
MORTGAGE LOANS
The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of
five or more rental or cooperatively-owned dwelling units in high-rise,
mid-rise or garden apartment buildings ("Multifamily Properties" and the
related loans, "Multifamily Loans") or (ii) office buildings, retail stores,
hotels or motels, nursing homes, hospitals or other health care-related
facilities, mobile home parks, warehouse facilities, mini-warehouse facilities
or self-storage facilities, industrial plants, mixed use or other types of
commercial properties ("Commercial Properties" and the related loans,
"Commercial Loans") located in any one of the fifty states or the District of
Columbia or such other locations as are disclosed in the related Prospectus
Supplement, provided that Mortgage Loans secured by Mortgaged Properties
located outside the United States or the District of Columbia will not
represent more than 10% of the aggregate principal balance of the Mortgage
Loans in any of the Trust Funds. The Mortgage Loans will be secured by
mortgages or deeds of trust or other similar security instruments creating a
first or more junior lien on Mortgaged Properties. Multifamily Property may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
The Mortgaged Properties may include leasehold interest in properties, the
title to which is held by third party lessors. The term of any such leasehold
will exceed the term of the mortgage note by at least ten years. Each Mortgage
Loan will have been originated by a person (the "Originator") other than the
Depositor. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages or deeds of trust (the "Mortgages")
creating a lien on the Mortgaged Properties. Mortgage Loans will generally also
be secured by an assignment of leases and rents and/or operating or other cash
flow guarantees relating to the Mortgage Loan.
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
Mortgage Loans secured by commercial and multifamily properties are
markedly different from owner-occupied single-family home mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. The Mortgage Loans will be non-recourse
loans, which means that, absent special facts, the mortgagee may look only to
the Net Operating Income from the property for repayment of the mortgage debt,
and not to any other of the mortgagor's assets, in the event of the mortgagor's
default. Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important measure of the risk of
default on such a loan. The "Debt Service Coverage Ratio" of a Mortgage Loan at
any given time is the ratio of the Net Operating Income for a twelve-month
period to the annualized scheduled payments on the Mortgage Loan. "Net
Operating Income" is typically defined as total operating revenues (including
primarily rental income and any expense reimbursement, ancillary income, late
charges and deposit forfeitures) minus total operating expenses (including
primarily expenses for advertising, general administration, management fees and
disbursements, utilities, repairs and maintenance, insurance, real estate taxes
and replacement
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reserves based solely on the mortgagor's estimates of the useful lives of
various assets). Net Operating Income does not reflect capital expenditures or
partnership expenses. The Net Operating Income of a Mortgaged Property will
fluctuate over time and may be sufficient or insufficient to cover debt service
on the related Mortgage Loan at any given time.
As the primary component of Net Operating Income, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and self-
storage facilities, tend to be affected more rapidly by changes in market or
business conditions than do properties leased, occupied or used for longer
periods, such as (typically) warehouses, retail stores, office buildings and
industrial plants. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus
Supplement, in some cases leases of Mortgaged Properties may provide that the
lessee, rather than the mortgagor, is responsible for payment of certain of
these expenses ("Net Leases"); however, because leases are subject to default
risks as well when a tenant's income is insufficient to cover its rent and
operating expenses, the existence of such "net of expense" provisions will only
temper, not eliminate, the impact of expense increases on the performance of
the related Mortgage Loan.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing may be particularly subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines
in rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of
a mortgage loan as a measure of risk of loss if a property must be liquidated
upon a default by the mortgagor. The "Loan-to-Value Ratio" of a Mortgage Loan
at any given time is the ratio (expressed as a percentage) of the then
outstanding principal balance of the Mortgage Loan to the Value of the related
Mortgaged Property. The "Value" of a Mortgaged Property, other than with
respect to Refinance Loans, is generally the lesser of (a) the appraised value
determined in an appraisal obtained by the originator at origination of such
loan and (b) the sales price for such property. Refinance Loans are loans made
to refinance existing loans. The Value of the Mortgaged Property securing a
Refinance Loan is the appraised value thereof determined in an appraisal
obtained at the time of origination of the Refinance Loan. The Value of a
Mortgaged Property as of the date of initial issuance of the related series of
Certificates may be less than the value at origination and will fluctuate from
time to time based upon changes in economic conditions and the real estate
market.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods presents analytical challenges. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and create significantly different results, or
where a high Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio
(or vice versa), the analysis of default and loss risks is even more difficult.
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While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Mortgage Loans from
single-family mortgage loans and provide insight to the risks associated with
income-producing real estate, there is no assurance that such factors will in
fact have been considered by the Originators of the Mortgage Loans, or that,
for a particular Mortgage Loan, they are complete or relevant. See "Risk
Factors--Risks Associated with Certain Mortgage Loans and Mortgaged
Properties", "--Balloon Payments", "--Mortgagor Default" and "--Mortgagor
Type".
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans constituting related
Trust Assets, including (i) the aggregate outstanding principal balance and the
largest, smallest and average outstanding principal balance of the Mortgage
Loans as of the applicable Cut-off Date, (ii) the type of property securing the
Mortgage Loans (e.g., Multifamily Property or Commercial Property and the type
of property in each such category), (iii) the original and remaining terms to
maturity of the Mortgage Loans, and the seasoning of the Mortgage Loans, (iv)
the earliest and latest origination date and maturity date and weighted average
original and remaining terms to maturity of the Mortgage Loans, (v) the
Loan-to-Value Ratios at origination of the Mortgage Loans, (vi) the Mortgage
Rates or range of Mortgage Rates and the weighted average Mortgage Rate borne
by the Mortgage Loans, (vii) the geographical distribution of the Mortgaged
Properties on a state-by-state basis, (viii) information with respect to
prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted average
Retained Interest, if any, (x) with respect to Mortgage Loans with adjustable
Mortgage Rates ("ARM Loans"), the adjustment dates, the highest, lowest and
weighted average margin, and the maximum Mortgage Rate variation at the time of
any adjustment and over the life of the ARM Loan, (xi) the Debt Service
Coverage Ratio either at origination or as of a more recent date (or both) and
(xii) information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under "Description of the Trust Funds--Mortgage
Assets--Default and Loss Considerations with Respect to the Mortgage Loans"
above. If specific information respecting the Mortgage Loans is not known to
the Depositor at the time Certificates are initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and specific information will be set forth in a report which will
be available to purchasers of the related Certificates at or before the initial
issuance thereof and will be filed as part of a Current Report on Form 8-K with
the Commission within fifteen days after such initial issuance.
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES
The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage
Loans may be originated by an affiliate of the Depositor in contemplation of
the transactions contemplated by this Prospectus and the related Prospectus
Supplement or may be have been originated by third-parties and acquired by the
Depositor directly or through its affiliates in negotiated transactions.
Underwriting procedures are intended to evaluate, among other things, the
income derived from the Mortgaged Property, the capabilities of the management
of the project, including a review of management's past performance record, its
management reporting and control procedures (to determine its ability to
recognize and respond to problems) and its accounting procedures to determine
cash management ability, the obligor's credit standing and repayment ability
and the value and adequacy of the Mortgaged Property as collateral. Mortgage
Loans insured by the Federal Housing Administration ("FHA"), a division of the
United States Department of Housing and Urban Development ("HUD"), will have
been originated by mortgage lenders which are approved by HUD as an FHA
mortgagee in the orginated course of their real estate lending activities and
will comply with the underwriting policies of FHA.
The adequacy of a Mortgaged Property as security for repayment will
generally have been determined by appraisal by appraisers selected in
accordance with preestablished guidelines established by or acceptable to the
loan originator for appraisers or other appropriate market studies. If so
specified in the related Prospectus Supplement, the appraiser must have
personally inspected the property and verified that it was in good condition
and that construction, if new, has been completed. An appraisal can be based
upon, among other things, a cash flow analysis and/or a market data analysis of
recent sales of comparable properties or a replacement cost analysis based on
the current cost of constructing or purchasing a similar property.
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No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that appreciation of
real estate values generally will limit loss experiences on commercial
properties or multifamily properties. If the commercial real estate market
should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans and any additional financing on the
Mortgaged Properties in a particular Mortgage Pool become equal to or greater
than the value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. Even where Credit Support covers all losses
resulting from defaults and foreclosure, the effect of defaults and
foreclosures may be to increase prepayment experience on the Mortgage Loans,
thus shortening weighted average life and affecting yield to maturity.
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
The Mortgage Loans generally will (i) have individual principal balances
at origination of not less than $25,000, (ii) have original terms to maturity
of not more than 40 years and (iii) provide for payments of principal, interest
or both, on due dates that occur monthly, quarterly or semi-annually or at such
other interval as is specified in the related Prospectus Supplement. Mortgage
Loan may: (i) provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a "Mortgage Rate") that is fixed over its term or
that adjusts from time to time, or that may be converted from an adjustable to
a fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from
time to time at the mortgagor's election; (ii) provide for scheduled payments
to maturity or payments that adjust from time to time to accommodate changes in
the Mortgage Rate or to reflect the occurrence of certain events, and may
provide for negative amortization or accelerated amortization; (iii) be fully
amortizing or require a balloon payment due on its stated maturity date; and
(iv) contain prohibitions on prepayment (a "Lock-out Period" and the date of
expiration thereof, a "Lock-out Date") or require payment of a premium or a
yield maintenance penalty (a "Prepayment Premium") in connection with a
prepayment, in each case as described in the related Prospectus Supplement. In
the event that holders of any class or classes of Offered Certificates will be
entitled to all or a portion of any Prepayment Premiums collected in respect of
Mortgage Loans, the related Prospectus Supplement will specify the method or
methods by which any such amounts will be allocated. A Mortgage Loan may also
contain provisions entitling the mortgagee to a share of profits realized from
the operation or disposition of the Mortgaged Property ("Equity
Participations"), as described in the related Prospectus Supplement. In the
event that holders of any class or classes of Offered Certificates will be
entitled to all or a portion of an Equity Participation, the related Prospectus
Supplement will specify the terms and provisions of the Equity Participation
and the method or methods by which distributions in respect thereof will be
allocated among such Certificates.
In the event that an election is made to treat the Trust Fund as a FASIT,
the Depositor may also have the right to issue new Certificates having a
Certificate Balance equal to all or a portion of the aggregate outstanding
principal balance of any Additional Mortgage Assets deposited into the Trust
Fund. The new Certificates may be in the form of an increase in the Certificate
Balance of an existing class of Certificates or in the form a new class of
Certificates. The related Prospectus Supplement will set forth the terms and
conditions under which the Depositor may issue such new Certificates. See
"Description of the Trust Fund--Addition and Removal of Mortgage Assets from
the Trust Fund" herein.
MBS
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). A seller (the "MBS Issuer") and/or servicer (the "MBS
Servicer") of the underlying Mortgage Loans will have entered into the MBS
Agreement with a trustee or a custodian under the MBS Agreement (the "MBS
Trustee"), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans evidenced by the MBS.
The MBS Issuer of any MBS may include the Depositor or an affiliate of the
Depositor. Any MBS (i) will have been issued in an offering exempt from the
registration requirements of the 1933 Act and, if offered in a private
placement, will have been held by persons other than the issuer of such MBS or
its affiliates for at least two years or (ii) will have been issued in an
offering registered under the 1933 Act, and thus may include one or more
Classes of Certificates.
Distributions of principal and interest will be made on MBS on the dates
specified in the related Prospectus Supplement. The MBS may be issued in one or
more classes with characteristics similar to the classes of Certificates
described in this Prospectus. Principal and interest distributions will be made
on the MBS by the MBS Trustee or the MBS
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Servicer. The MBS Issuer or the MBS Servicer or another person specified in the
related Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the MBS after a certain date or under other
circumstances specified in the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination of other credit
support similar to that described for the Certificates under "Description of
Credit Support" may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function
of certain characteristics of the Mortgage Loans evidenced or secured by such
MBS and other factors and generally will have been established for the MBS on
the basis of requirements of either any Rating Agency that may have assigned a
rating to the MBS or the initial purchasers of the MBS. In addition, MBS may
consist of classes of MBS which are subordinate to other classes of MBS of the
same series.
The Prospectus Supplement for a series of Certificates evidencing
interests in Mortgage Assets that included MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount and type of the MBS to be included in the Trust Fund, (ii) the original
and remaining term to stated maturity of the MBS, if applicable, (iii) the
pass-through or bond rate of the MBS or formula for determining such rates,
(iv) the applicable payment provisions for the MBS, (v) the MBS Issuer, MBS
Servicer and MBS Trustee, as applicable, (vi) certain characteristics of the
credit support, if any, such as subordination, reserve funds, insurance
policies, letters of credit or guarantees relating to the related Underlying
Mortgage Loans or directly to such MBS, (vii) the characteristics of any
subordination to which such MBS may be subject, (viii) the terms on which the
related Underlying Mortgage Loans for such MBS or the MBS may, or are required
to, be purchased prior to their maturity, (ix) the terms on which Mortgage
Loans may be substituted for those originally underlying the MBS, (x) the
servicing fees payable under the MBS Agreement, (xi) to the extent available to
the Depositor, the type of information in respect of the Underlying Mortgage
Loans described under "Description of the Trust Funds-- Mortgage
Assets--Mortgage Loan Information in Prospectus Supplements" and (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS.
COLLECTION ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Collection Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will deposit all payments and collections received or
advanced with respect to the Mortgage Assets and other assets in the Trust
Fund. A Collection Account may be maintained as an interest bearing or a
non-interest bearing account, and funds held therein may be invested in certain
short-term, investment grade obligations.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in
the related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy for the Mortgage Loans,
certificate guarantee insurance, guarantee, reserve fund or another type of
credit support, or a combination thereof (any such coverage with respect to the
Certificates of any series, "Credit Support"). The amount and types of
coverage, the identification of the entity providing the coverage (if
applicable) and related information with respect to each type of Credit
Support, if any, will be described in the Prospectus Supplement for a series of
Certificates. See "Risk Factors--Credit Support Limitations" and "Description
of Credit Support".
CASH FLOW AGREEMENTS
The Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for the related series
will be invested at a specified rate. The Trust Fund may also include certain
other agreements, such as interest rate exchange agreements, interest rate cap
or floor agreements, currency exchange agreements or similar agreements
provided to reduce the effects of interest rate or currency exchange rate
fluctuations on the Mortgage Assets on one or more classes of Certificates. The
principal terms of any such guaranteed investment contract or other agreement
(any such agreement, a "Cash Flow Agreement"), including, without limitation,
provisions relating to the timing, manner and amount of payments thereunder and
provisions relating to the termination thereof, will be described in the
Prospectus Supplement for the related series. In addition, the related
Prospectus Supplement will provide certain information with respect to the
obligor under any such Cash Flow Agreement.
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USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor primarily to the purchase of Trust Assets. Any
remaining proceeds will be used by the Depositor for general corporate purposes
(such as paying its allocable share of rent, administrative expenses and the
cost of services rendered by employees of its affiliates) and
transaction-specific expenses (including, but not limited to, obtaining any
external credit enhancement, establishing any reserve funds and paying other
costs incurred in connection with structuring and issuing the Certificates).
The Depositor expects to sell the Certificates from time to time, but the
timing and amount of offerings of Certificates will depend on a number of
factors, including the volume of Mortgage Assets acquired by the Depositor,
prevailing interest rates, availability of funds and general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Mortgage Assets in the related Trust Fund. See "Risk
Factors--Average Life of Certificates; Prepayments; Yields".
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Assets in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the
Pass-Through Rate for each class of such Certificates or in the case of a
variable or adjustable Pass-Through Rate, the method of determining the
Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage Asset
on the Pass-Through Rate of one or more classes of Certificates; and whether
the distributions of interest on the Certificates of any class will be
dependent, in whole or in part, on the performance of any obligor under a Cash
Flow Agreement. In the event that an election is made to treat the Trust Fund
as a FASIT, the related Prospectus Supplement will describe the effect, if any,
that any removal of Mortgage Assets and the related deposit of Replacement
Mortgage Assets and any deposit of Additional Mortgage Assets may have on the
Pass-Through Rates for the related classes of Certificates.
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. If the Interest Accrual Period ends on a date other than a
Distribution Date for the related series, the yield realized by the holders of
such Certificates may be lower than the yield that would result in the Interest
Accrual Period ended on such Distribution Date. In addition, interest accrued
for an Interest Accrual period for one or more classes of Certificates may be
calculated on the assumption that distributions of principal (and additions to
the Certificate Balance of Accrual Certificates) and allocations of losses on
the Mortgage Assets may be made on the first day of the Interest Accrual Period
for a Distribution Date and not on such Distribution Date. Such method would
produce a lower effective yield than if interest were calculated on the basis
of the actual principal amount outstanding during an Interest Accrual Period.
The Interest Accrual Period for any class of Offered Certificates will be
described in the related Prospectus Supplement.
PRINCIPAL PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). The rate at which principal prepayments occur on the
Mortgage Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the level of prevailing interest
rates, the availability of mortgage credit and economic, demographic,
geographic, tax, legal and other factors. In general, however, if prevailing
interest rates fall significantly below the Mortgage Rates on the Mortgage
Loans comprising or underlying the Mortgage Assets in a particular Trust Fund,
such Mortgage Loans are likely to be the subject of higher principal
prepayments than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. In this regard, it should be noted that certain Mortgage Assets
may consist of Mortgage Loans with different Mortgage Rates and the stated
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pass-through or pay-through interest rate of certain MBS may be a number of
percentage points higher or lower than certain of the Underlying Mortgage
Loans. The rate of principal payments on some or all of the classes of
Certificates of a series will correspond to the rate of principal payments on
the Mortgage Assets in the related Trust Fund and is likely to be affected by
the existence of Lock-out Periods and Prepayment Premium provisions of the
Mortgage Loans underlying or comprising such Mortgage Assets, and by the extent
to which the servicer of any such Mortgage Loan is able to enforce such
provisions. Mortgage Loans with a Lock-out Period or a Prepayment Premium
provision, to the extent enforceable, generally would be expected to experience
a lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-out Periods or with lower Prepayment
Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Certificate offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions or
principal that is slower than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. In either
case, the effect of voluntary and involuntary prepayments of the Mortgage
Assets on the yield on one or more classes of the Certificates of such series
in the related Trust Fund may be mitigated or exacerbated by any provisions for
sequential or selective distribution of principal to such classes.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Certificate, the greater the effect on
such investor's yield to maturity. The effect of an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
In the event that an election is made to treat the Trust Fund as a FASIT,
to the extent the Depositor removes Mortgage Assets prior to a prepayment by
the related borrower and substitutes Replacement Mortgage Assets in its place,
such substitution may reduce the likelihood of a prepayment for
Certificateholders and to the extent any Certificate was purchased at a
discount, such substitution will reduce the actual yield to maturity. In
addition, in the event that the Depositor elects to deposit Additional Mortgage
Assets into the Trust Fund and to issue new Certificates corresponding to such
Mortgage Assets, the credit enhancement provided to one or more classes of
Certificates may increase or decrease and the weighted average life of one or
more classes of Certificates may lengthen or shorten.
PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
certificates may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related series.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets is
paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
Mortgage Assets. If any Mortgage Loans comprising or underlying the Mortgage
Assets in a particular Trust Fund have actual terms to maturity of less than
those assumed in calculating final scheduled Distribution Dates for the classes
of Certificates of the related series, one or more classes of such Certificates
may be fully paid prior to their respective final scheduled Distribution Dates,
even in the absence of prepayments. Accordingly, the prepayment experience of
the Mortgage Assets will, to some extent, be a function of the mix of Mortgage
Rates and maturities of the Mortgage Loans comprising or underlying such
Mortgage Assets. See "Description of the Trust Funds".
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model or the Standard Prepayment Assumption ("SPA") prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each
month relative to the then outstanding
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principal balance of a pool of loans for the life of such loans. SPA represents
an assumed rate of prepayment each month relative to the then outstanding
principal balance of a pool of loans. A prepayment assumption of 100% SPA
assumes prepayment rates of 0.2% per annum of the then outstanding principal
balance of such loans in the first month of the life of the loans and an
additional 0.2% per annum in each month thereafter until the thirtieth month.
Beginning in the thirtieth month and in each month thereafter during the life
of the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum
each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR and SPA were
developed based upon historical prepayment experience for single-family loans.
Thus, it is likely that prepayment of any Mortgage Loans comprising or
underlying the Mortgage Assets for any series will not conform to any
particular level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average
life of each life of Offered Certificates of such series and the percentage of
the Initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Mortgage Assets are made at rates
corresponding to various prepayment rates. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual
weighted average life of the Certificates. It is unlikely that prepayment of
any Mortgage Loans comprising or underlying the Mortgage Assets for any series
will conform to any particular prepayment rate.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
TYPE OF MORTGAGE LOAN
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a work out. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may be given considerable flexibility to modify Mortgage Loans
that are in default or as to which a default is reasonably foreseeable. Any
defaulted balloon payment or modification that extends the maturity of a
Mortgage Loan will tend to extend the weighted average life of the
Certificates, thereby lengthening the period of time elapsed from the date of
issuance of a Certificate until it is retired.
REMOVAL AND ADDITION OF MORTGAGE ASSETS
In the event that an election is made to treat the Trust Fund as a FASIT,
the deposit of Replacement Mortgage Assets or Additional Mortgage Assets with
faster or slower rates of amortization and different prepayment provisions will
affect the average life of each class of related Certificates. See "Description
of the Trust Fund--Addition and Removal of Mortgage Assets from the Trust Fund"
herein.
FORECLOSURES AND PAYMENT PLANS
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation to
the number of Mortgage Loans that are repaid in accordance with their terms
will affect the weighted average life of the Mortgage Loans comprising or
underlying the Mortgage Assets and that of the related series of Certificates.
Servicing decisions made with respect to the Mortgage Loans, including the use
of payment plans prior to a demand for acceleration and the restructuring of
Mortgage Loans in bankruptcy proceeds, may also have an effect upon the payment
patterns of particular Mortgage Loans and thus the weighted average life of the
Certificates.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates. A number of the Mortgage Loans comprising or
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underlying the Mortgage Assets may include "due-on-sale" clauses or
"due-on-encumbrance" clauses that allow the holder of the Mortgage Loans to
demand payment in full of the remaining principal balance of the Mortgage Loans
upon sale or certain other transfers of or the creation of encumbrances upon
the related Mortgaged Property. With respect to any Whole Loans, the Master
Servicer will, if required by the related Agreement, on behalf of the Trust
Fund, employ its usual practices in determining whether to exercise any such
right that the Trustee may have as mortgagee to accelerate payment of the Whole
Loan. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale and
Due-on-Encumbrance" and "Description of the Agreements--Due-on-Sale and
Due-on-Encumbrance Provisions".
THE DEPOSITOR
Asset Securitization Corporation, the Depositor, is a Delaware corporation
organized on June 23, 1992 for the purpose of acquiring Mortgage Assets and
selling interests therein or bonds secured thereby. It is a wholly owned
subsidiary of The Capital Company of America LLC, which is in turn an indirect
wholly owned subsidiary of Nomura Holding America Inc., a United States-based
holding company, incorporated in Delaware, which is wholly owned by The Nomura
Securities Co., Ltd., a Japanese corporation. The Nomura Securities Co., Ltd.
is engaged in the domestic and international securities business. The Depositor
maintains its principal office at Two World Financial Center--Building B, 21st
Floor, New York, New York 10281-1198. Its telephone number is (212) 667-9300.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes or subclasses of Certificates
that may be senior (collectively, "Senior Certificates") or subordinate
(collectively, "Subordinate Certificates") Certificates. Each series may
consist of one or more of the types of Certificates described below.
Types of Certificates classified by interest payments can include:
<TABLE>
<CAPTION>
CATEGORY OF CLASS DEFINITION
- -------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Ascending Rate ................. Certificates that have predetermined Pass-Through Rates that change one or more
times on dates determined before issuance.
Fixed Rate ..................... Certificates with Pass-Through Rates that are fixed throughout the life of such
Certificates.
Floating Rate .................. Certificates with Pass-Through Rates that are reset periodically based on an index and
that vary directly with changes in the index.
Inverse Floating Rate .......... Certificates with Pass-Through Rates that are reset periodically based on an index and
that vary inversely with changes in the index.
Stripped Interest .............. Certificates that receive some or all of the interest payments made on the underlying
Mortgage Loans or other Trust Fund assets and little or no principal. Stripped Interest
Certificates have either a nominal or a notional principal amount. A nominal principal
amount represents actual principal that will be paid on the class. It is referred to as
nominal since it is extremely small compared to other classes of Certificates. A notional
principal amount is the amount used as a reference to calculate the amount of interest
due on a Stripped Interest Certificate that is not entitled to any principal.
Stripped Principal. ............ Certificates that do not receive any interest.
WAC (or Weighted Average
Coupon) ....................... Certificates whose Pass-Through Rate represents a blended interest rate that may
change from period to period.
</TABLE>
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<TABLE>
<CAPTION>
CATEGORY OF CLASS DEFINITION
- ------------------------------------- --------------------------------------------------------------------------------------------
<S> <C>
Accrual ............................. Certificates that accrete all or a portion of their interest, which is added to the
outstanding principal balance. This accretion may continue until the class of Certificates
begins receiving principal payments, until some other event has occurred or until the
class is retired.
Types of Certificates classified by allocation of principal distributions can include:
PAC (or Planned Amortization
Class) ............................. Certificates that are designed to receive principal payments using a predetermined
schedule derived by assuming two constant prepayment rates for the underlying
Mortgage Loans. A PAC schedule will reflect a "structuring range" both above and
below the Prepayment Assumption for the related series. The PAC Certificates in any
series may include two or more "types". The PAC Certificates within any type have a
single structuring range. The different types have different structuring ranges and/or
different principal payment priorities.
Scheduled ........................... Certificates that are designed to receive principal payments using a predetermined
schedule, but that are not designated as PAC or TAC Certificates. Classes consisting of
both PAC and TAC components are also designated as Scheduled Classes.
Sequential Pay ...................... Certificates that receive principal payments in a prescribed sequence, that do not have
predetermined schedules and that under all circumstances receive payments of principal
continuously from the first Distribution Date on which they receive principal until they
are retired. Sequential Pay Certificates may receive principal payments concurrently
with one or more other classes of Sequential Pay Certificates. A single class of
Certificates that receives principal payments before or after all other classes in the same
series may be identified as a Sequential Pay Certificate.
Sticky Jump/Non-Sticky Jump ......... Certificates whose principal payment priorities change temporarily or permanently
upon the occurrence of one or more "trigger" events. A Sticky Jump Certificate "jumps"
to its new priority on the first Distribution Date when the trigger condition is met and
retains ("sticks" to) that priority until retired. If the principal payment change is not
permanent, the Certificate is referred to as a Non-Sticky Jump.
Strip ............................... Certificates that receive a constant proportion, or "strip", of the principal payments on
the underlying Mortgage Loans or other Trust Fund assets.
Support (or Companion) .............. Certificates that receive principal payments on any Payment Date only if scheduled
payments have been made on specified PAC, TAC and/or Scheduled Classes.
TAC (or Targeted Amortization
Class) ............................. Certificates that are designed to receive principal payments using a predetermined
schedule derived by assuming a single constant prepayment rate for the underlying
Mortgage Loans. The TAC Certificates in any series may include two or more "types".
The different types have different principal payment priorities and/or have schedules
that are derived from different assumed prepayment rates.
Index Allocation Class .............. Certificates whose principal payment allocations are based on the value of an index.
</TABLE>
The Prospectus Supplement for any series including classes similar to any
of those described above will contain a complete description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of classes; (ii) the
risk that Stripped Interest Certificates purchased at a premium may not return
their purchase prices under rapid prepayment scenarios and (iii) the degree to
which an investor's yield is sensitive to principal prepayment. Any class of
Certificates may be divided into two or more subclasses of Certificates.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts specified in the related Prospectus
Supplement. The transfer of any Offered Certificates may be registered and such
Certificates may be exchanged without the payment of any
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service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more classes of Certificates of a series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "Risk Factors--Book-Entry
Registration" and "Description of the Certificates--Book-Entry Registration and
Definitive Certificates". Definitive Certificates will be exchangeable for
other Certificates of the same class and series of a like aggregate Certificate
Balance or notional amount but of different authorized denominations. See "Risk
Factors--Limited Liquidity" and "--Limited Assets".
In the event that an election is made to treat the Trust Fund as a FASIT,
the Depositor may also have the right to issue new Certificates having a
Certificate Balance equal to all or a portion of the aggregate outstanding
principal balance of any Additional Mortgage Assets deposited into the Trust
Fund. The new Certificates may be in the form of an increase in the Certificate
Balance of an existing class of Certificates or in the form of a new class of
Certificates. The related Prospectus Supplement will set forth the terms and
conditions under which the Depositor may issue such new Certificates. See
"Description of the Trust Fund--Addition and Removal of Mortgage Assets from
the Trust Fund" herein.
DISTRIBUTIONS
Distributions allocable to principal and interest on the Certificates of
each series will be made by or on behalf of the Trustee on each Distribution
Date as specified in the related Prospectus Supplement from the Available Funds
for such series on such Distribution Date. Distributions (other than the final
distribution) will be made to the persons in whose names the Certificates are
registered (the "Record Date"), and the amount of each distribution will be
determined (the "Determination Date") as of the close of business on the date
specified in the related Prospectus Supplement. All distributions with respect
to each class of Certificates on each Distribution Date will be allocated pro
rata among the outstanding Certificates in such class. Payments will be made
either by wire transfer in immediately available funds to the account of a
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has so notified the Trustee or its designee
no later than the date specified in the related Prospectus Supplement (and, if
so provided in the related Prospectus Supplement, holds Certificates in the
requisite amount specified therein), or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register; provided,
however, that the final distribution in retirement of the Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee or its agent specified in the notice to Certificateholders of such
final distribution.
AVAILABLE FUNDS
All distributions on the Certificates of each series on each Distribution
Date will be made from the Available Funds described below, in accordance with
the terms described in the related Prospectus Supplement. "Available Funds" for
each Distribution Date will generally equal the sum of the following amounts:
(i) the total amount of all cash on deposit in the related Collection
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but due
on a date subsequent to the related Collection Period (a "Collection
Period" with respect to any Distribution Date will usually commence on the
second day of the month in which the immediately preceding Distribution
Date occurs, or the day after Cut-off Date in the case of the first
Collection Period, and will end on the first day of the month of the
related Distribution Date),
(b) all prepayments, together with related payments of the interest
thereon, Liquidation Proceeds, Insurance Proceeds, and other unscheduled
recoveries received subsequent to the related Prepayment Period, as
defined in the related Prospectus Supplement, and
(c) all amounts in the Collection Account that are due or reimbursable
to the Depositor, the Trustee, a Mortgage Asset Seller, a Sub-Servicer or
the Master Servicer or that are payable in respect of certain expenses of
the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Collection Account, including
any net amounts paid under any Cash Flow Agreements;
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(iii) all advances made by a Master Servicer with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer with respect to interest shortfalls resulting
from voluntary and involuntary prepayments during the related Prepayment
Period; and
(v) to the extent not on deposit in the related Collection Account as of
the corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate. The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or, in the case of a variable or adjustable Pass-Through Rate, the method for
determining the Pass-Through Rate. Interest on the Certificates will typically
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual
Certificates, which will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances, specified
in the related Prospectus Supplement, and any class of Stripped Principal
Certificates that are not entitled to any distributions of interest) based on
the Accrued Certificate Interest for such class and such Distribution Date,
subject to the sufficiency of the portion of the Available Distribution Amount
allocable to such class on such Distribution Date. Prior to the time interest
is distributable on any class of Accrual Certificates, Accrued Certificate
Interest on such class will be added to the Certificate Balance thereof on each
Distribution Date. With respect to each class of Certificates and each
Distribution Date (other than certain classes of Stripped Interest
Certificates), "Accrued Certificate Interest" will be equal to interest accrued
during the related Interest Accrual Period on the outstanding Certificate
Balance thereof immediately prior to the Distribution Date, at the applicable
Pass-Through Rate, reduced to reflect prepayment interest shortfalls as
described below (for this purpose, the term "prepayment" includes prepayments,
in whole or in part, and liquidations due to default). Accrued Certificate
Interest on Stripped Interest Certificates will be equal to interest accrued on
the outstanding notional amount thereof immediately prior to each Distribution
Date, at the applicable Pass-Through Rate, reduced as described below. The
method of determining the notional amount for any class of Stripped Interest
Certificates will be described in the related Prospectus Supplement. Reference
to notional amount is solely for convenience in certain calculations and does
not represent the right to receive any distributions of principal. The Accrued
Certificate Interest on each class of Certificates will be reduced in the event
of prepayment interest shortfalls, which are shortfalls in collections of
interest for a full accrual period resulting from prepayments prior to the due
date in such accrual period on the Mortgage Loans comprising or underlying the
Mortgage Assets in the Trust Fund for the related series, with such shortfall
allocated among all of the classes of Certificates of that series in the manner
specified in the related Prospectus Supplement. See "Risk Factors--Average Life
of Certificates; Prepayments; Yields" and "Yield Considerations".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a Certificate will be reduced to the extent of distributions of
principal thereon from time to time, and by the amount of losses allocated to
such Certificate incurred in respect of the related Mortgage Assets, may be
increased in respect of deferred interest on the related Mortgage Loans to the
extent provided in the related Prospectus Supplement and, in the case of
Accrual Certificates prior to the Distribution Date on which distributions of
interest are required to commence, will be increased by any Accrued Certificate
Interest. The initial aggregate Certificate Balance of all classes of
Certificates of a series will not be greater than the outstanding aggregate
principal balance of the related Mortgage Assets as of the applicable Cut-off
Date. The initial aggregate Certificate Balance of a series and each class
thereof will be specified in the related Prospectus Supplement. Distributions
of principal will be made on each Distribution
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Date to the class or classes of Certificates entitled thereto in accordance
with the provisions described in such Prospectus Supplement until the
Certificate Balance of such class has been reduced to zero. Stripped Interest
Certificates with no Certificate Balance are not entitled to any distributions
of principal.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF
EQUITY PARTICIPATIONS
Prepayment Premiums or payments in respect of Equity Participations that
are collected on the Mortgage Assets in the related Trust Fund will be
distributed on each Distribution Date to the class or classes of Certificates
entitled thereto in accordance with the provisions described in the related
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
With respect to a series of Certificates consisting of one or more classes
of Subordinate Certificates, on any Distribution Date in respect of which
losses or shortfalls in collections on the Mortgage Assets have been incurred,
the amount of such losses or shortfalls will be borne first by a class of
Subordinate Certificates in the priority and manner and subject to the
limitations specified in the related Prospectus Supplement. See "Description of
Credit Support" for a description of the types of protection that may be
included in a Trust Fund against losses and shortfalls on Mortgage Assets
comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS, the Master Servicer,
if required by the related Agreement, will be required as part of its servicing
responsibilities to advance on or before each Distribution Date its own funds
or funds held in the Collection Account that are not included in the Available
Funds for such Distribution Date, in an amount equal to the aggregate of
payments of principal (other than any balloon payments) and interest (net of
related servicing fees and Retained Interest) that were due on the Whole Loans
in such Trust Fund during the related Collection Period and were delinquent on
the related Determination Date, subject to the Master Servicer's good faith
determination that such advances will be reimbursable from (a) Related Proceeds
(as defined below) or (b) in the case of a series of Certificates that includes
one or more classes of Subordinate Certificates and if so provided in the
related Prospectus Supplement, the greater of (x) the outstanding Certificate
Balance of such Subordinate Certificates and (y) Related Proceeds. See
"Description of Credit Support".
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Advances of the
Master Servicer's funds will typically be reimbursable only out of related
recoveries on the Mortgage Loans (including amounts received under any form of
Credit Support) respecting which such advances were made (as to any Mortgage
Loan, "Related Proceeds"); provided, however, that any such advance will be
reimbursable from any amounts in the Collection Account to the extent that the
Master Servicer shall determine that such advance (a "Nonrecoverable Advance")
is not ultimately recoverable from Related Proceeds. If advances have been made
by the Master Servicer from excess funds in the Collection Account, the Master
Servicer is required to replace such funds in the Collection Account on any
future Distribution Date to the extent that funds in the Collection Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date. The obligations of the Master Servicer to make
advances may be secured by a cash advance reserve fund or a surety bond.
Information regarding the characteristics of, and the identity of any obligor
on, any such surety bond, will be set forth in the related Prospectus
Supplement.
The Master Servicer will be entitled to receive interest at the rate
specified in the related Prospectus Supplement on its outstanding advances and
will be entitled to pay itself such interest periodically from general
collections on the Mortgage Loans prior to any payment to Certificateholders or
as otherwise provided in the related Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
REPORTS TO CERTIFICATEHOLDERS
With each distribution to holders of any class of Certificates of a
series, a Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such holder, to the
Depositor and to such other parties as may be specified in the related
Agreement, a statement setting forth, in each case to the extent applicable and
available:
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(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer, any Special Servicer and any Sub-Servicer and such other customary
information as any such Master Servicer or the Trustee deems necessary or
desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of unreimbursed advances at the close of business on such
Distribution Date;
(vi) the aggregate principal balance of the Mortgage Assets at the close
of business on such Distribution Date;
(vii) the number and aggregate principal balance of Mortgage Loans in
respect of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are delinquent
and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the aggregate
amount of unreimbursed servicing expenses and unreimbursed advances in respect
thereof, (e) the aggregate amount of any interest accrued and payable on
related servicing expenses and related advances assuming such Mortgage Loan is
subsequently liquidated through foreclosure, (f) whether a notice of
acceleration has been sent to the mortgagor and, if so, the date of such
notice, (g) whether foreclosure proceedings have been commenced and, if so, the
date so commenced and (h) if such Mortgage Loan is more than three months
delinquent and foreclosure has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related
Collection Period or Prepayment Period, as applicable (other than by payment in
full), (a) the loan number thereof, (b) the manner in which it was liquidated,
(c) the aggregate amount of liquidation proceeds received, (d) the portion of
such liquidation proceeds payable or reimbursable to the Master Servicer in
respect of such Mortgage Loan and (e) the amount of any loss to
Certificateholders;
(x) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Collection Period or
Prepayment Period, as applicable, (a) the loan number of the related Mortgage
Loan, (b) the date of acquisition, (c) the book value, (d) the principal
balance of the related Mortgage Loan immediately following such Distribution
Date (calculated as if such Mortgage Loan were still outstanding taking into
account certain limited modifications to the terms thereof specified in the
Agreement), (e) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (f) if applicable, the aggregate
amount of interest accrued and payable on related servicing expenses and
related advances;
(xi) with respect to any such REO Property sold during the related Due
Period or Prepayment Period, as applicable, (a) the loan number of the related
Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the portion of
such sales proceeds payable or reimbursable to the Master Servicer or a Special
Servicer in respect of such REO Property or the related Mortgage Loan and (d)
the amount of any loss to Certificateholders in respect of the related Mortgage
Loan;
(xii) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date, separately
identifying any reduction in such Certificate Balance due to the allocation of
any loss and increase in the Certificate Balance of a class of Accrual
Certificates in the event that Accrued Certificate Interest has been added to
such balance;
(xiii) the aggregate amount of principal prepayments made during the
related Prepayment Period;
(xiv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xv) the amount remaining in the reserve fund, if any, as of the close of
business on such Distribution Date;
(xvi) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
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(xvii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xviii) in the case of Certificates with an adjustable Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to the next succeeding
Distribution Date as calculated in accordance with the method specified in the
related Prospectus Supplement;
(xix) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the close
of business on such Distribution Date; and
(xx) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees collected
during the related Collection Period or Prepayment Period, as applicable. In
the case of information furnished pursuant to subclauses (i)-(iv) above, the
amounts shall be expressed as a dollar amount per minimum denomination of
Certificates or for such other specified portion thereof. The Prospectus
Supplement for each series of Offered Certificates will describe any additional
information to be included in reports to the holders of such Certificates.
In addition, in the event that an election is made to treat the Trust Fund
as a FASIT, the related Prospectus Supplement will set forth the manner in
which Certificateholders will be informed of the removal of any Mortgage Assets
from, and the deposit of any Replacement Mortgage Assets or Additional Mortgage
Assets to, the Trust Fund.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer, if any, or the Trustee, as provided in the related
Prospectus Supplement, shall furnish to each person who at any time during the
calendar year was a holder of a Certificate a statement containing the
information set forth in subclauses (i)-(iv) above, aggregated for such
calendar year or the applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Master Servicer or the Trustee shall
be deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Master Servicer or the Trustee pursuant to
any requirements of the Code as are from time to time in force. See
"Description of the Certificates-- Book-Entry Registration and Definitive
Certificates".
TERMINATION
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Collection Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement
following the earlier of (i) the final payment or other liquidation of the last
Mortgage Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Mortgage Loan subject thereto and (ii) the purchase of all
of the assets of the Trust Fund by the party entitled to effect such
termination. In no event, however, will the trust created by the Agreement
continue beyond the date specified in the related Prospectus Supplement.
Written notice of termination of the Agreement will be given to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency appointed by the
Trustee, which will be specified in the notice of termination.
If so specified in the related Prospectus Supplement, upon the reduction
of the aggregate Certificate Balance of a series of Certificates by a specified
percentage (which percentage will exceed 90%), certain parties (which may
include the Depositor, the Servicer, the Special Servicer, the holders of
certain Classes of Certificates or such other party as is identified therein)
will have the option to effect an early termination through the repurchase of
the assets in the related Trust Fund by the party specified therein. If so
provided in the related Prospectus Supplement, the party specified therein will
solicit bids for the purchase of all assets of the Trust Fund under the
circumstances and in the manner set forth therein; provided, however, that the
Trustee will not be permitted to accept any bid for the purchase of the assets
of such Trust Fund which is less than the greater of (1) the aggregate fair
market value of all the Mortgage Loans and REO Properties then included in the
Trust Fund, as mutually determined by the Master Servicer and the Trustee, and
(2) the sum of (i) the aggregate Purchase Price of all the Mortgage Loans then
included in the Trust Fund, (ii) the aggregate amount of unreimbursed advances,
if any, with interest thereon at the rate specified in the related Prospectus
Supplement and (iii) the fair market value of all REO Properties then included
in the Trust Fund, as determined by an appraiser mutually agreed upon by the
Master Servicer and the Trustee. Upon the termination of a Trust Fund and the
sale of the assets of the Trust Fund neither the Trust Fund, the Trustee, the
Depositor, the Master Servicer, the Special Servicer nor the holders of any
Class of Certificates will have any liability with respect to the sale of the
assets of the Trust Fund; provided however that the
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foregoing will not limit or otherwise affect any Certificateholders rights
under any of the federal securities laws. In the event that the fair market
value of any REO Properties included in the Trust Fund at the time of any such
termination is less than the principal balance of the related Mortgage Loans, a
Realized Loss may occur in connection with such termination.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the Prospectus Supplement for a series of Certificates,
the Offered Certificates of one or more classes of such series will be issued
as Book-Entry Certificates, and each such class will be represented by one or
more single Certificates registered in the name of the depository, The
Depository Trust Company ("DTC").
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 UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants
include Nomura Securities International, Inc., securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Holders of Certificates that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, such Certificateholders will receive all
distributions of principal of and interest on the Offered Certificates from the
Trustee or the applicable paying agent through DTC and its Participants. Under
a book-entry format, Certificateholders will receive payments after the related
Distribution Date because, while payments are required to be forwarded to Cede
& Co. ("Cede"), as nominee for DTC, on each such date, DTC will forward such
payments to its Participants which thereafter will be required to forward them
to Indirect Participants or Certificateholders. The only "Certificateholder"
(as such term is used in the Agreement) will be Cede, as nominee of DTC, and
the Certificateholders will not be recognized by the Trustee as
Certificateholders under the Agreement. Certificateholders will be permitted to
exercise the rights of Certificateholders under the related Agreement only
indirectly through DTC and its Participants who in turn will exercise their
rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, 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 and interest on the
Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificateholders.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC the Certificates are credited.
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificateholders or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Depositor advises the Trustee in writing that DTC is no longer willing or able
to properly discharge its responsibilities as depository with respect to the
Certificates and the Depositor is unable to locate a qualified successor or
(ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificates. Under
surrender by DTC of the certificate or certificates representing such
Certificates and instructions for reregistration, the Trustee will issue
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such Certificates in the form of Definitive Certificates, and thereafter the
Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement. In the event that Definitive
Certificates are issued or DTC ceases to be the clearing agency for the
Certificates, the Agreement will provide that the applicable Certificateholders
will be notified of such event.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer
appointed as of the date of the Pooling and Servicing Agreement and the
Trustee. The Certificates of each series evidencing interests in a Trust Fund
consisting exclusively of MBS will be issued pursuant to a Trust Agreement
between the Depositor and a Trustee. Any Master Servicer, any such Special
Servicer and the Trustee with respect to any series of Certificates will be
named in the related Prospectus Supplement. The provisions of each Agreement
will vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust Fund. A form of a Pooling and Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summaries describe certain provisions
that may appear in each Agreement. The Prospectus Supplement for a series of
Certificates will describe any provision of the Agreement relating to such
series that materially differs from the description thereof contained in this
Prospectus. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for each Trust Fund and the related Prospectus Supplement. As used
herein with respect to any series, the term "Certificate" refers to all of the
Certificates of that series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires. The Depositor
will provide a copy of the Agreement (without exhibits) relating to any series
of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to Asset Securitization Corporation, Two
World Financial Center--Building B, 21st Floor, New York, New York 10281-1198.
Attention: Secretary.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
cause the Mortgage Assets included in the related Trust Fund to be assigned to
the Trustee, together with all principal and interest received by or on behalf
of the Depositor on or with respect to such Mortgage Assets after the Cut-off
Date, other than principal and interest due on or before the Cut-off Date and
other than any Retained Interest. The Trustee will, concurrently with such
assignment, deliver the Certificates to the Depositor in exchange for the
Mortgage Assets and the other assets comprising the Trust Fund for such series.
Each Mortgage Asset will be identified in a schedule appearing as an exhibit to
the related Agreement. Such schedule will include detailed information in
respect of each Mortgage Loan included in the related Trust Fund such as the
address of the related Mortgaged Property and type of such property, the
Mortgage Rate and, if applicable, the applicable index, margin, adjustment date
and any rate cap information, the original and remaining term to maturity, the
original and outstanding principal balance and balloon payment, if any, the
Value, Loan-to-Value Ratio and Debt Service Coverage Ratio as of the date
indicated and payment and prepayment provisions, if applicable and in respect
of each MBS included in the related Trust Fund, including without limitation,
the MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or bond rate or
formula for determining such rates, the issue date and original and remaining
term to maturity, if applicable, the original and outstanding principal amount
and payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, including the Mortgage Note endorsed, without recourse, to the
order of the Trustee, the Mortgage with evidence of recording indicated thereon
(except for any Mortgage not returned from the public recording office, in
which case the Depositor will deliver or cause to be delivered a copy of such
Mortgage together with its certificate that the original of such Mortgage was
delivered to such recording office) and an assignment of the Mortgage to the
Trustee in recordable form. The Depositor will promptly cause the assignment of
each related Whole Loan to be recorded in the appropriate public office for
real property records, except in the State of California or in other states
where, in the opinion of counsel acceptable to the Trustee, such recording is
not required to protect the Trustee's interest in the Whole Loan against the
claim of any subsequent transferee or any successor to or creditor of the
Depositor, the Master Servicer, the relevant Mortgage Asset Seller or any other
prior holder of the Whole Loan.
The Trustee (or the custodian) will review such Whole Loan documents
within a specified period of days after receipt thereof, and the Trustee (or
the custodian) will hold such documents in trust for the benefit of the
Certificateholders. If any such document is found to be missing or defective in
any material respect, the Trustee (or such custodian) shall take
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such action as required in the Agreement, which may include immediately
notifying the Master Servicer and the Depositor. If the Mortgage Asset Seller,
upon notification, cannot cure the omission or defect within a specified number
of days after receipt of such notice, the Mortgage Asset Seller will be
obligated, within a specified number of days of receipt of such notice, to
repurchase the related Whole Loan from the Trustee at the Purchase Price or
substitute for such Mortgage Loan. There can be no assurance that a Mortgage
Asset Seller will fulfill this repurchase or substitution obligation. Although
the Master Servicer is obligated to use its best efforts to enforce such
obligation to the extent of its obligations with respect to a Warranting Party
as described under "--Representations and Warranties; Repurchases", neither the
Master Servicer nor the Depositor will be obligated to repurchase or substitute
for such Mortgage Loan if the Mortgage Asset Seller defaults on its obligation.
This repurchase or substitution obligation may constitute the sole remedy
available to the Certificateholders or the Trustee for omission of, or a
material defect in, a constituent document.
With respect to each MBS, the Depositor will deliver or cause to be
delivered to the Trustee (or the custodian) the original certificate or other
definitive evidence of the MBS, together with bond power or other instruments,
certifications or documents required to transfer fully the MBS to the Trustee
for the benefit of the Certificateholders in accordance with the related MBS
Agreement. The Depositor will promptly cause the Trustee to be registered, with
the applicable persons, as the holder of the MBS.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
The Depositor may make or assign certain representations and warranties
pursuant to the related Agreement with respect to each Whole Loan constituting
a Mortgage Asset in the related Trust Fund, as of a specified date (the person
making such representations and warranties, the "Warranting Party") covering,
by way of example, the following types of matters: (i) the accuracy of the
information set forth for such Whole Loan on the schedule of Mortgage Assets
appearing as an exhibit to the Agreement; (ii) the existence of title insurance
insuring the lien priority of the Whole Loan; (iii) the authority of the
Mortgage Asset Seller to sell the Whole Loan; (iv) the payment status of the
Whole Loan and the status of payments of taxes, assessments and other charges
affecting the related Mortgaged Property; (v) the existence of customary
provisions in the related Mortgage Note and Mortgage to permit realization
against the Mortgaged Property of the benefit of the security of the Mortgage;
and (vi) the existence of hazard and extended perils insurance coverage on the
Mortgaged Property.
Any Warranting Party shall be a Mortgage Asset Seller or an affiliate
thereof or such other person acceptable to the Depositor and shall be
identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. In the event of a breach of any such representation or warranty,
the Warranting Party may be obligated pursuant to the related Agreement to cure
such breach or repurchase or replace the affected Whole Loan as described
below. Since the representations and warranties may not address events that may
occur following the date as of which they were made, the Warranting Party will
have a cure, repurchase or substitution obligation in connection with a breach
of such a representation and warranty only if the relevant event that causes
such breach occurs prior to such date. Such party would have no such
obligations if the relevant event that causes such breach occurs after such
date. However, the Depositor will not include any Whole Loan in the Trust Fund
for any series of Certificates if anything has come to the Depositor's
attention that would cause it to believe that the representations and
warranties made in respect of such Whole Loan will not be accurate and complete
in all material respects as of the date of initial issuance of the related
series of Certificates.
Each Agreement will provide that the Master Servicer and/or Trustee will
be required to notify promptly the relevant Warranting Party of any breach of
any representation or warranty made by or on behalf of it in respect of a Whole
Loan that materially and adversely affects the value of such Mortgage Loan or
the interests therein of the Certificateholders. If such Warranting Party
cannot cure such breach within a specified period following the date on which
such party was notified of such breach, then such Warranting Party will be
obligated to repurchase such Mortgage Loan from the Trustee within a specified
period from the date on which the Warranting Party was notified of such breach,
at the Purchase Price therefor. As to any Whole Loan, the "Purchase Price" will
typically equal to the sum of the unpaid principal balance thereof plus unpaid
accrued interest thereon at the Mortgage Rate from the date as to which
interest was last paid to the end of the accrual period in which the relevant
purchase is to occur. If so provided in the Prospectus Supplement for a series,
a Warranting Party, rather than repurchase a Mortgage Loan as to which a breach
has occurred, will have the option, within a specified period after initial
issuance of such series of Certificates, to cause the removal of such Mortgage
Loan
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from the Trust Fund and substitute in its place one or more other Whole Loans,
in accordance with the standards described in the related Prospectus
Supplement. The Master Servicer will be required under the applicable Agreement
to use its best efforts to enforce such obligations of the Warranting Party for
the benefit of the Trustee and the holders of the Certificates, following the
practices it would employ in its good faith business judgment were it the owner
of such Whole Loan. This repurchase or substitution obligation will constitute
the sole remedy available to holders of Certificates or the Trustee for a
breach of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute for
a Whole Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such obligations
with respect to Whole Loans.
With respect to a Trust Fund that includes MBS, the related Prospectus
Supplement will describe any representations or warranties made or assigned by
the Depositor with respect to such MBS, the person making them and the remedies
for breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. Upon a breach of any such
representation of the Master Servicer which materially and adversely affects
the interests of the Certificateholders, the Master Servicer will be obligated
to cure the breach in all material respects.
PAYMENTS ON MORTGAGE ASSETS; DEPOSITS TO COLLECTION ACCOUNT
The Master Servicer, if any, and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more Collection Accounts for the collection of payments on the related Mortgage
Assets, which must be either (i) maintained with a bank or trust company, and
in a manner, satisfactory to the Rating Agency or Agencies rating any class of
Certificates of such series or (ii) an account or accounts the deposits in
which are insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC")
(to the limits established by the FDIC) and the uninsured deposits in which are
otherwise secured such that the Certificateholders have a claim with respect to
the funds in the Collection Account or a certified first priority security
interest against any collateral securing such funds that is superior to the
claims of any other depositors or general creditors of the institution with
which the Collection Account is maintained. The collateral eligible to secure
amounts in the Collection Account is limited to United States government
securities and other investment grade investments specified in the Agreement
("Permitted Investments"). A Collection Account may be maintained as an
interest bearing or a non-interest bearing account and the funds held therein
may be invested pending each succeeding Distribution Date in Permitted
Investments. Any interest or other income earned on funds in the Collection
Account will generally be paid to a Master Servicer or its designee as
additional servicing compensation. The Collection Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards set forth above. If
permitted by the Rating Agency or Agencies and so specified in the related
Prospectus Supplement, a Collection Account may contain funds relating to more
than one series of mortgage pass-through certificates and may contain other
funds respecting payments on mortgage loans belonging to the Master Servicer or
serviced or master serviced by it on behalf of others.
A Master Servicer or the Trustee will deposit or cause to be deposited in
the Collection Account for each Trust Fund on a daily basis, unless otherwise
provided in the Agreement and described in the related Prospectus Supplement,
the following payments and collections received, or advances made, by the
Master Servicer or the Trustee or on its behalf subsequent to the Cut-off Date
(other than payments due on or before the Cut-off Date, and exclusive of any
amounts representing a Retained Interest):
(i) all payments on account of principal, including principal prepayments,
and on account of modification or assumption fees, on the Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets, including
any late charges or default interest collected, and to the extent that any
class or classes of Certificates is entitled thereto, all payments on account
of Prepayment Premiums or Equity Participations, in each case net of any
portion thereof retained by a Master Servicer or a Sub-Servicer as its
servicing compensation and net of any Retained Interest;
(iii) all proceeds of the hazard insurance policies (to the extent such
proceeds are not applied to the restoration of the property or released to the
mortgagor in accordance with the normal servicing procedures of a Master
Servicer or the
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related Sub-Servicer, subject to the terms and conditions of the related
Mortgage and Mortgage Note) (collectively, "Insurance Proceeds") and all other
amounts received and retained in connection with a taking of a Mortgaged
Property by exercise of a power of eminent domain or condemnation or the
liquidation of defaulted Mortgage Loans, by foreclosure or otherwise
("Liquidation Proceeds"), together with the net proceeds on a monthly basis
with respect to any Mortgaged Properties acquired for the benefit of
Certificateholders by foreclosure or by deed in lieu of foreclosure or
otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as described
under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of any Mortgage Loan or property in respect thereof
purchased by the Master Servicer, the Depositor, any Sub-Servicer or any
Mortgage Asset Seller as described under "Description of the Agreements--
Assignment of Mortgage Assets; Repurchases"--and "--Representations and
Warranties; Repurchases", exclusive of the Retained Interest, if any, in
respect of such Mortgage Loan, and all proceeds of any Mortgage Asset purchased
as described under "Description of the Certificates--Termination";
(viii) all payments required to be deposited in the Collection Account
with respect to any deductible clause in any blanket insurance policy described
under "--Hazard Insurance Policies"; and
(ix) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit of
the Master Servicer or the Trustee, as the case may be, of funds held in the
Collection Account.
The Agreement for a series of Certificates may provide that a special
trust account (the "REO Account") will be established and maintained in order
to be used in connection with REO Properties and, if specified in the related
Prospectus Supplement, certain other Mortgaged Properties. To the extent set
forth in the Agreement, certain withdrawals from the REO Account will be made
to, among other things, (i) make remittances to the Collection Account as
required by the Agreement, (ii) pay taxes, assessments, insurance premiums,
other amounts necessary for the proper operation, management and maintenance of
the REO Properties and such Mortgaged Properties and certain third-party
expenses in accordance with the Agreement and (iii) provide for the
reimbursement of certain expenses in respect of the REO Properties and such
Mortgaged Properties.
The amount at any time credited to the REO Account will be fully insured
to the maximum coverage possible or will be invested in Permitted Investments
that mature, or are subject to withdrawal or redemption, on or before the
business day on which such amounts are required to be remitted to the Master
Servicer for deposit in the Collection Account. The income from the investment
of funds in the REO Account in Permitted Investments shall be deposited in the
REO Account for remittance to the Collection Account, and the risk of loss of
funds in the REO Account resulting from such investments will be borne by the
Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Sub-Servicers, is required to
make reasonable efforts to collect all scheduled payments under the Whole Loans
and will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans
and held for its own account, provided such procedures are consistent with the
Agreement and any related hazard insurance policy or instrument of Credit
Support included in the related Trust Fund described herein or under
"Description of Credit Support". Each Master Servicer will be required to
perform the customary functions of a servicer of comparable loans, including
collecting payments from mortgagors; maintaining hazard insurance policies as
described herein and in any related Prospectus Supplement, and filing and
settling claims thereunder; maintaining escrow or impoundment accounts of
mortgagors for payment of taxes, insurance and other items required to be paid
by any mortgagor pursuant to the Whole Loan; processing assumptions or
substitutions, although the Master Servicer is generally required to exercise
due-on-sale clauses to the extent such exercise is permitted by law and would
not adversely affect insurance coverage; attempting to cure delinquencies;
supervising foreclosures; inspecting and managing Mortgaged Properties under
certain circumstances; and maintaining accounting records relating to the Whole
Loans. The Master Servicer will be responsible for filing and settling claims
in respect of particular Whole Loans under any applicable instrument of Credit
Support. See "Description of Credit Support".
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Consistent with the general servicing standard set forth above, the Master
Servicer may, in its discretion, waive any late payment charge in respect of a
late Whole Loan payment and, only upon determining that the coverage under any
related hazard insurance policy or instrument of Credit Support will not be
affected, extend or cause to be extended the due dates for payments due on a
Whole Loan for a period not greater than that specified in the applicable
Agreement.
The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the general servicing standards set
forth above so long as the modification, waiver or amendment will not (i)
affect the amount or timing of any payments of principal or interest on the
Whole Loan or (ii) in its judgment, materially impair the security for the
Whole Loan or reduce the likelihood of timely payment of amounts due thereon.
The Master Servicer also may agree to any modification, waiver or amendment
that would so affect or impair the payments on, or the security for, a Whole
Loan if (i) in its judgment, a material default on the Whole Loan has occurred
or a payment default is imminent and (ii) in its judgment, such modification,
waiver or amendment will minimize the loss that might otherwise be experienced
with respect to the Whole Loan. The Master Servicer is required to notify the
Trustee in the event of any modification, waiver or amendment of any Whole
Loan.
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, generally
in the event that a Mortgage Loan is in default or if certain events occur that
indicate that a default is imminent, a special servicer (the "Special
Servicer") may be appointed to perform certain servicing functions in
connection with such Mortgage Loan. The related Prospectus Supplement will set
forth certain information with respect to the Special Servicer and will
describe the rights, obligations and compensation of a Special Servicer. A
Master Servicer will only be responsible for the duties and obligations of a
Special Servicer to the extent set forth in the Prospectus Supplement. A
Special Servicer may be an affiliate of the Depositor and may have other
business relationships with the Depositor and its affiliates.
SUB-SERVICERS
A Master Servicer and/or any Special Servicer may each delegate their
respective servicing obligations in respect of the Whole Loans to third-party
servicers (each, a "Sub-Servicer"), but such Master Servicer and/or Special
Servicer will remain obligated under the related Agreement. The sub-servicing
agreement between a Master Servicer and/or Special Servicer and a Sub-Servicer
(a "Sub-Servicing Agreement") will be consistent with the terms of the related
Agreement and will not result in a withdrawal or downgrading of the rating of
any class of Certificates issued pursuant to such Agreement. Although each
Sub-Servicing Agreement will be a contract solely between the Master Servicer
or Special Servicer, as applicable, and the Sub-Servicer, the related Agreement
will provide that, if for any reason the Master Servicer or Special Servicer
for such series of Certificates is no longer acting in such capacity, the
Trustee or any successor Master Servicer or Special Servicer must recognize the
Sub- Servicer's rights and obligations under such Sub-Servicing Agreement.
The Master Servicer or Special Servicer, as applicable, will be solely
liable for all fees owed by it to any Sub-Servicer, irrespective of whether the
Master Servicer's or Special Servicer's compensation pursuant to the related
Agreement is sufficient to pay such fees. However, a Sub-Servicer may be
entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer will
be reimbursed by the Master Servicer or Special Servicer, as applicable, for
certain expenditures which it makes, generally to the same extent the Master
Servicer or Special Servicer, as applicable, would be reimbursed under an
Agreement. See "--Retained Interest, Servicing Compensation and Payment of
Expenses".
The Master Servicer or Special Servicer, as applicable, may require any
Sub-Servicer to agree to indemnify the Master Servicer or Special Servicer for
any liability or obligation sustained by the Master Servicer or Special
Servicer in connection with any act or failure to act by the Sub-Servicer in
its servicing capacity. An Agreement may require a Sub-Servicer to maintain a
fidelity bond and an errors and omissions policy with respect to its officers,
employees and other persons acting on its behalf or on behalf of the Master
Servicer or Special Servicer.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
operating income or the diversion of that income from the service of payments
due under the Mortgage Loan, and may call into question such mortgagor's
ability to make timely payment of taxes and to pay for necessary maintenance of
the related Mortgaged Property. The Master Servicer is required to monitor any
Whole Loan which is in default, contact the mortgagor concerning the default,
evaluate whether the causes of the default can be cured over a reasonable
period without significant impairment of the value of the
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Mortgaged Property, initiate corrective action in cooperation with the
mortgagor if cure is likely, inspect the Mortgaged Property and take such other
actions as it would normally take with respect to similar loans serviced for
its own portfolio. A significant period of time may elapse before the Master
Servicer is able to assess the success of such corrective action or the need
for additional initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the
jurisdiction in which the Mortgaged Property is located. Under federal
bankruptcy law, in certain cases the Master Servicer may not be permitted to
accelerate a Whole Loan or to foreclose on a Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans".
If so specified in the Prospectus Supplement for a series of Certificates
that includes one or more subordinate classes, any holder or holders of a class
of Subordinate Certificates having the lowest priority of payment may purchase
from the Trust Fund at the purchase price described in such Supplement any
Whole Loan as to which the number of scheduled payments thereunder specified in
such Supplement are delinquent.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the servicing standard described herein and a default on the
related Mortgage Loan has occurred or, in the Master Servicer's judgment, is
imminent. The Master Servicer may not, however, acquire title to any Mortgaged
Property or take any action that would cause the Trust Fund to be an "owner" or
an "operator" within the meaning of certain federal or state environmental
laws, unless the Master Servicer has also previously determined, based on a
report prepared by a person who regularly conducts environmental audits (which
report will be an expense of the Trust Fund), that:
(i) The Mortgaged Property is in compliance with applicable environmental
laws or, if not, that it would be in the best economic interest of the Trust
Fund to take such actions as are necessary to cause the Mortgaged Property to
comply therewith (the cost of which actions will be an expense of the Trust
Fund); and
(ii) There are no circumstances or conditions present at the Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation, or, if such
substances, materials or wastes are present for which such action could be
required, that it would be in the best economic interest of the Trust Fund to
take such actions with respect to the Mortgaged Property (the cost of which
actions will be an expense of the Trust Fund).
If title to any Mortgaged Property is acquired by the Trust Fund, the
Master Servicer, pursuant to the related Agreement and on behalf of the Trust
Fund, will be required to sell the Mortgaged Property prior to the close of the
third calendar year beginning after the year of acquisition, unless the Trustee
receives (i) an opinion of independent counsel to the effect that the holding
of the property by the Trust Fund subsequent to two years after its acquisition
will not result in the imposition of a tax on the Trust Fund or cause the Trust
Fund to fail to qualify as a REMIC under the Code at any time that any
Certificate is outstanding or (ii) an extension from the Internal Revenue
Service.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Any such
property acquired by the Trust Fund will be managed in a manner consistent with
the management and operation by the Master Servicer of similar property owned
by it.
The limitations imposed by the Agreement and the REMIC or FASIT provisions
of the Code (if a REMIC election or FASIT election, respectively, has been made
with respect to the related Trust Fund) on the operations and ownership of any
Mortgaged Property acquired on behalf of the Trust Fund may result in the
recovery of an amount less than the amount that would otherwise be recovered.
See "Certain Legal Aspects of Mortgage Loans--Foreclosure".
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems
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necessary or advisable to realize upon the defaulted Whole Loan. If the
proceeds of any liquidation of the property securing the defaulted Whole Loan
are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings
and which are reimbursable under the Agreement, the Trust Fund will realize a
loss in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Collection Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
If any property securing a defaulted Whole Loan is damaged and proceeds,
if any, from the related hazard insurance policy are insufficient to restore
the damaged property to a condition sufficient to permit recovery under the
related instrument of Credit Support, if any, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be
recoverable by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the obligor
under each instrument of Credit Support, and will take such reasonable steps as
are necessary to receive payment or to permit recovery thereunder with respect
to defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Whole Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from the
Collection Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See "--Hazard Insurance Policies" and "Description
of Credit Support".
HAZARD INSURANCE POLICIES
Any Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for coverage of the standard form of fire insurance
policy with extended coverage customary in the state in which the Mortgaged
Property is located. Such coverage generally will be in general in an amount
equal to the lesser of the principal balance owing on such Whole Loan and the
amount necessary to fully compensate for any damage or loss to the improvements
on the Mortgaged Property on a replacement cost basis, but in either case not
less than the amount necessary to avoid the application of any co-insurance
clause contained in the hazard insurance policy. The ability of the Master
Servicer to assure that hazard insurance proceeds are appropriately applied may
be dependent upon its being named as an additional insured under an hazard
insurance policy and under any flood insurance policy referred to below, or
upon the extent to which information in this regard is furnished by mortgagors.
All amounts collected by the Master Servicer under any such policy (except for
amounts to be applied to the restoration or repair of the Mortgaged Property or
released to the mortgagor in accordance with the Master Servicer's normal
servicing procedures, subject to the terms and conditions of the related
Mortgage and Mortgage Note) will be deposited in the Collection Account. The
Agreement will provide that the Master Servicer may satisfy its obligation to
cause each mortgagor to maintain such a hazard insurance policy by the Master
Servicer's maintaining a blanket policy insuring against hazard losses on the
Whole Loans. If such blanket policy contains a deductible clause, the Master
Servicer will be required to deposit in the Collection Account all sums that
would have been deposited therein but for such clause. The Master Servicer will
also be required to maintain a fidelity bond and errors and omission policy
with respect to its officers and employees that provides coverage against
losses that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions in failing to maintain
insurance, subject to certain limitations as to amount of coverage, deductible
amounts, conditions, exclusions and exceptions.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental
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actions, floods and other water-related causes, earth movement (including
earthquakes, landslides and mudflows), wet or dry rot, vermin, domestic animals
and certain other kinds of uninsured risks. When a Mortgaged Property securing
a Whole Loan is located at origination in a federally designated flood area,
each Agreement requires the Master Servicer to cause the mortgagor to acquire
and maintain flood insurance in an amount equal in general to the lesser of (i)
the amount necessary to fully compensate for any damage or loss to the
improvements which are part of the Mortgaged Property or a replacement cost
basis and (ii) the maximum amount of insurance available under the federal
flood insurance program, whether or not the area is participating in the
program.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Under the terms of the Whole Loans, mortgagors will be required to present
claims to insurers under hazard insurance policies maintained on the related
Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master
Servicer to present or cause to be presented such claims is dependent upon the
extent to which information in this regard is furnished to the Master Servicer
by mortgagors.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged Property,
or due-on-sale clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon any sale or other transfer of the related Mortgaged Property.
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to the creation of any other lien or encumbrance on the Mortgaged
Property or due-on-encumbrance clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon the creation of any other lien or encumbrance
upon the Mortgaged Property. The Master Servicer, on behalf of the Trust Fund,
will determine whether to exercise any right the Trustee may have as mortgagee
to accelerate payment of any such Whole Loan or to withhold its consent to any
transfer or further encumbrance in accordance with the general servicing
standard described herein under "Description of the Agreements--Collection and
Other Servicing Procedures".
Any fee collected by or on behalf of the Master Servicer for entering into
an assumption agreement will be retained by or on behalf of the Master Servicer
as additional servicing compensation. See "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance".
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify
whether there will be any Retained Interest in the Mortgage Assets, and, if so,
the owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related
Agreement. A "Retained Interest" in a Mortgage Asset represents a specified
portion of the interest payable thereon. The Retained Interest will be deducted
from mortgagor payments as received and will not be part of the related Trust
Fund.
A Master Servicer's primary servicing compensation with respect to a
series of Certificates will come from the periodic payment to it of a portion
of the interest payment on each Whole Loan. Since any Retained Interest and a
Master Servicer's primary compensation are percentages of the principal balance
of each Mortgage Asset, such amounts will decrease in accordance with the
amortization schedule of the Mortgage Loans underlying or comprising such
Mortgage Asset. The Prospectus Supplement with respect to a series of
Certificates evidencing interests in a Trust Fund that includes Whole Loans may
provide that, as additional compensation, the Master Servicer or the
Sub-Servicers may retain all or a portion of assumption fees, modification
fees, late payment charges or Prepayment Premiums collected from mortgagors and
any interest or other income which may be earned on funds held in the
Collection Account or any Sub-Servicing Account. Any Sub-Servicer will receive
a portion of the Master Servicer's compensation as its sub-servicing
compensation.
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In addition to amounts payable to any Sub-Servicer, a Master Servicer may,
to the extent provided in the related Prospectus Supplement, pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants, payment of
expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement. Certain other expenses, including certain expenses
relating to defaults and liquidations on the Mortgage Loans and, to the extent
so provided in the related Prospectus Supplement, interest thereon at the rate
specified therein, and the fees of any Special Servicer, may be borne by the
Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each Agreement relating to Mortgage Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the examination by such firm conducted
substantially in compliance with either the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, the
servicing by or on behalf of the Master Servicer of mortgage loans under
pooling and servicing agreements substantially similar to each other (including
the related Agreement) was conducted in compliance with the terms of such
agreements except for any significant exceptions or errors in records that, in
the opinion of the firm, either the Audit Program for Mortgages serviced for
FHLMC, or paragraph 4 of the Uniform Single Audit Program for Mortgage Bankers,
requires it to report. In rendering its statement such firm may rely, as to
matters relating to the direct servicing of mortgage loans by Sub-Servicers,
upon comparable statements for examinations conducted substantially in
compliance with the Uniform Single Audit Program for Mortgage Bankers or the
Audit Program for Mortgages serviced for FHLMC (rendered within one year of
such statement) of firms of independent public accountants with respect to the
related Sub-Servicer.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of a Master Servicer will be obtainable by Certificateholders without charge
upon written request to the Master Servicer at the address set forth in the
related Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER, A SPECIAL SERVICER AND THE
DEPOSITOR
The Master Servicer, if any, under each Agreement will be named in the
related Prospectus Supplement. The entity serving as Master Servicer may be an
affiliate of the Depositor and may have other normal business relationships
with the Depositor or Depositor's affiliates.
The Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only if such resignation, and the appointment
of a successor, will not result in a downgrading of the rating of any class of
Certificates or upon a determination that its duties under the Agreement are no
longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor servicer has assumed the Master
Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that neither any Master Servicer, the
Depositor nor any director, officer, employee, or agent of a Master Servicer or
the Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. Each Agreement will further provide that any Master Servicer, the
Depositor and any director, officer, employee or agent of a Master Servicer or
the Depositor will be entitled to indemnification by the related Trust Fund and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (unless any such loss, liability or expense is otherwise
reimbursable pursuant to the Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of
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reckless disregard of obligations and duties thereunder. In addition, each
Agreement will provide that neither any Master Servicer nor the Depositor will
be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its respective responsibilities under the Agreement
and which in its opinion may involve it in any expense or liability. Any such
Master Servicer or the Depositor may, however, in its discretion undertake any
such action which it may deem necessary or desirable with respect to the
Agreement and the rights and duties of the parties thereto and the interests of
the Certificateholders thereunder. In such event, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs
and liabilities of the Certificateholders, and the Master Servicer or the
Depositor, as the case may be, will be entitled to be reimbursed therefor and
to charge the Collection Accounts.
Any person into which the Master Servicer may be merged or consolidated,
or any person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the successor of the Master Servicer under the related
Agreement, provided that such person satisfies the criteria specified in the
Agreement.
If the Master Servicer retains a Special Servicer, the standard of care
for, and any indemnification to be provided to, the Special Servicer will be
set forth in the related Agreement.
EVENT OF DEFAULT
Events of Default under the related Agreement for a Trust Fund that
includes Whole Loans will, in general, consist of (i) any failure by the Master
Servicer to distribute or cause to be distributed to Certificateholders, or to
remit to the Trustee for distribution to Certificateholders, any required
payment that continues unremedied for five days after the giving of written
notice of such failure to the Master Servicer by the Trustee or the Depositor,
or to the Master Servicer, the Depositor and the Trustee by the holders of
Certificates evidencing not less than 25% of the Voting Rights, (ii) any
failure by the Master Servicer duly to observe or perform in any material
respect any of its other covenants or obligations under the Agreement which
continues unremedied for thirty days (fifteen days in the case of a failure to
pay the premium for any insurance policy or instrument of Credit Support
required to be maintained pursuant to the Agreement) after the giving of
written notice of such failure to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights; and
(iii) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by or on behalf of
the Master Servicer indicating its insolvency or inability to pay its
obligations.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, the Trustee shall, terminate
all of the rights and obligations of the Master Servicer under the Agreement
relating to such Trust Fund and in and to the Mortgage Loans (other than any
Retained Interest of the Master Servicer), whereupon the Trustee will succeed
to all of the responsibilities, duties and liabilities of the Master Servicer
under the Agreement (except that if the Trustee is prohibited by law from
obligating itself to make advances regarding delinquent mortgage loans, then
the Trustee will not be so obligated) and will be entitled to similar
compensation arrangements. In the event that the Trustee is unwilling or unable
so to act, it may or, at the written request of the holders of Certificates
entitled to at least 51% of the Voting Rights, it shall appoint, or petition a
court of competent jurisdiction for the appointment of, a loan servicing
institution acceptable to the Rating Agency with a net worth at the time of
such appointment of at least $15,000,000 to act as successor to the Master
Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may agree
upon the servicing compensation to be paid, which in no event may be greater
than the compensation payable to the Master Servicer under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights have made written request
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for fifteen days has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of the
trusts or powers vested in it by any Agreement or to make any investigation of
matters arising thereunder 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 Certificates covered by such Agreement, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
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AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer, if any, and the
Trustee, without the consent of any of the holders of Certificates covered by
the Agreement, to cure any ambiguity, to correct, modify or supplement any
provision therein, or to make any other provisions with respect to matters or
questions arising under the Agreement which are not inconsistent with the
provisions thereof, provided that such action will not adversely affect in any
material respect the interests of any holder of Certificates covered by the
Agreement. An Agreement may also be amended by the Depositor, the Master
Servicer, if any, and the Trustee with the consent of the holders of
Certificates evidencing not less than 66% of the Voting Rights, for any
purpose; provided, however, that no such amendment may (i) reduce in any manner
the amount of or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without the consent of the
holder of such Certificate, (ii) adversely affect in any material respect the
interests of the holders of any class of Certificates in a manner other than as
described in (i), without the consent of the holders of Certificates of such
class evidencing not less than 66% of the aggregate Voting Rights of such class
or (iii) reduce the aforesaid percentage of Voting Rights required for the
consent to any such amendment without the consent of the holders of all
Certificates covered by such Agreement then outstanding. However, with respect
to any series of Certificates as to which one or more REMIC or FASIT elections
is to be made, the Trustee will not consent to any amendment of the Agreement
unless it shall first have received an opinion of counsel to the effect that
such amendment will not cause the Trust Fund (or designated portion thereof) to
fail to qualify as a REMIC or FASIT, as applicable, at any time that the
related Certificates are outstanding.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Mortgage Loan or related document and
is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any
Special Servicer in respect of the Certificates or the Mortgage Loans, or
deposited into or withdrawn from the Certificate Account or any other account
by or on behalf of the Master Servicer or any Special Servicer. If no Event of
Default has occurred and is continuing, the Trustee is required to perform only
those duties specifically required under the related Agreement. However, upon
receipt of the various certificates, reports or other instruments required to
be furnished to it, the Trustee is required to examine such documents and to
determine whether they conform to the requirements of the Agreement.
THE TRUSTEE
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association or trust company
serving as Trustee may have typical banking relationships with the Depositor
and its affiliates and with any Master Servicer and its affiliates.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Mortgage Assets. Credit
Support may be in the form of the subordination of one or more classes of
Certificates, letters of credit, insurance policies on the Mortgage Loans,
certificate guarantee insurance, guarantees, the establishment of one or more
reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may be structured
so as to be drawn upon by more than one series to the extent described therein.
Credit Support will generally not provide protection against all risks of
loss and will not guarantee repayment of the entire Certificate Balance of the
Certificates and interest thereon. If losses or shortfalls occur that exceed
the amount covered by Credit Support or that are not covered by Credit Support,
Certificateholders will bear their allocable share of deficiencies. Moreover,
holders of Certificates of a Covered Trust will be subject to the risk that
such Credit Support will be exhausted by the claims of other Covered Trusts
prior to such Covered Trust receiving any of its intended share of such
coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Mortgage Assets, the related
Prospectus Supplement will include a description of (a) the nature and amount
of coverage under such
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Credit Support, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount of
coverage under such Credit Support may be reduced and under which such Credit
Support may be terminated or replaced and (d) the material provisions relating
to such Credit Support. Additionally, the related Prospectus Supplement will
set forth certain information with respect to the obligor under any instrument
of Credit Support, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place or incorporation and
the jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and
its stockholders' or policyholders' surplus, if applicable, as of the date
specified in the Prospectus Supplement. See "Risk Factors--Credit Support
Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. The rights of the
holders of Subordinate Certificates to receive distributions of principal and
interest from the Certificate Account on any Distribution Date will be
subordinated to such rights of the holders of Senior Certificates to the extent
specified in the related Prospectus Supplement. The subordination of a class
may apply only in the event of (or may be limited to) certain types of losses
or shortfalls. The relative interests of the Senior Certificates and the
Subordinate Certificates of a Series may be subject to adjustment from time to
time on the basis of distributions received in respect thereof. The related
Prospectus Supplement will set forth information concerning the amount of
subordination of a class or classes of Subordinate Certificates in a series,
the circumstances in which such subordination will be applicable and the
manner, if any, in which the amount of subordination will be effected. If one
or more classes of Subordinate Certificates of a series are Offered
Certificates, the related Prospectus Supplement will provide information as to
the sensitivity of distributions on such Certificates based on certain default
assumptions.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one group
of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE MORTGAGE ASSETS
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered for various default risks by insurance policies or
guarantees, or the MBS comprising the Mortgage Assets in the related Trust Fund
will be covered by the types of Credit Support described herein. A copy of any
such material instrument for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by one or more letters of credit, issued by a bank
or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, equal to the percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or one or more classes of Certificates. If so specified in
the related Prospectus Supplement, the letter of credit may permit draws in the
event of only certain types of losses. The amount available under the letter of
credit will, in all cases, be reduced to the extent of the unreimbursed
payments thereunder. The obligations of the L/C Bank under the letter of credit
for each series of Certificates will expire at the earlier of the date
specified in the related Prospectus Supplement or the termination of the Trust
Fund. A copy of any such letter of credit for a series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within 15
days of issuance of the Certificates of the related series.
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INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by insurance policies and/or surety bonds provided
by one or more insurance companies or sureties. Such instruments may cover,
with respect to one or more classes of Certificates of the related series,
timely distributions of interest and/or full distributions of principal on the
basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related Prospectus Supplement. A copy of any such
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the Certificates of the related series.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a series of Certificates will be
provided by one or more insurance companies. Such certificate guarantee
insurance will guarantee, with respect to one or more classes of Certificates
of the applicable series, timely distributions of interest and full
distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement,
the certificate guarantee insurance will also guarantee against any payment
made to a Certificateholder which is subsequently recovered as a "voidable
preference" payment under the Bankruptcy Code. A copy of the certificate
guarantee insurance for a series, if any, will be filed with the Commission as
an exhibit to a Current Report on Form 8-K to be filed with the Commission
within 15 days of issuance of the Certificates of the applicable series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by one or more reserve funds in which cash, a letter
of credit, Permitted Investments, a demand note or a combination thereof will
be deposited, in the amounts so specified in such Prospectus Supplement. The
reserve funds for a series may also be funded over time by depositing therein a
specified amount of the distributions received on the related Mortgage Assets
as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. Reserve funds may be
established to provide limited protection against only certain types of losses
and shortfalls. Following each Distribution Date amounts in a reserve fund in
excess of any amount required to be maintained therein may be released from the
reserve fund under the conditions and to the extent specified in the related
Prospectus Supplement and will not be available for further application to the
Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments. Any reinvestment income or other gain from such investments will
be credited to the related Reserve Fund for such series, and any loss resulting
from such investments will be charged to such Reserve Fund. However, such
income may be payable to any related Master Servicer or another service
provider as additional compensation. Whether a Reserve Fund, if any, for a
series will be a part of the Trust Fund will be disclosed in the related
Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund may
be applied to make distributions to Certificateholders and use of investment
earnings from the Reserve Fund, if any.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state, nor
to encompass the laws of all states in which the security for the Mortgage
Loans is situated. The summaries are qualified in their entirety by reference
to the applicable federal and state laws governing the Mortgage Loans. See
"Description of the Trust Funds--Mortgage Assets".
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GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which may
be mortgages, deeds of trust, or deeds to secure debt, depending upon the
prevailing practice and law in the state in which the Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". Any of the foregoing types of
mortgages will create a lien upon, or grant a title interest in, the subject
property, the priority of which will depend on the terms of the particular
security instrument, as well as separate, recorded, contractual arrangements
with others holding interests in the mortgaged property, the knowledge of the
parties to such instrument as well as the order of recordation of the
instrument in the appropriate public recording office. However, recording does
not generally establish priority over governmental claims for real estate taxes
and assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "mortgagor" includes
the trustor under a deed of trust and a grantor under a deed to secure debt.
Under a deed of trust, the mortgagor grants the property, irrevocably until the
debt is paid, in trust, generally with a power of sale as security for the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties. By executing a deed to secure debt, the grantor conveys title to,
as opposed to merely creating a lien upon, the subject property to the grantee
until such time as the underlying debt is repaid, generally with a power of
sale as security for the indebtedness evidenced by the related mortgage note.
As used in this Prospectus, unless the context otherwise requires, the term
"mortgagee" means the lender and, in the case of the deed of trust, the trustee
thereunder in certain cases. In case the mortgagor under a mortgage is a land
trust, there would be an additional party because legal title to the property
is held by a land trustee under a land trust agreement for the benefit of the
mortgagor. At origination of a mortgage loan involving a land trust, the
mortgagor executes a separate undertaking to make payments on the mortgage
note. The mortgagee's authority under a mortgage, the trustee's authority under
a deed of trust and the grantee's authority under a deed to secure debt are
governed by the express provisions of the mortgage, the law of the state in
which the real property is located, certain federal laws (including, without
limitation, the Soldiers' and Sailor's Civil Relief Act of 1940) and, in some
cases, in deed of trust transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no unremedied default. If the
mortgagor defaults and such default is not remedied by the mortgagor within the
cure period, if any, the license terminates and the lender is entitled to
collect the rents. Local law may require that the lender take possession of the
property and/or obtain a court-appointed receiver before becoming entitled to
collect the rents. In most States, hotel and motel room rates are considered
accounts receivable under the Uniform Commercial Code ("UCC"); generally these
rates are either assigned by the mortgagor, which remains entitled to collect
such rates absent a default, or pledged by the mortgagor, as security for the
loans. In general, the lender must file financing statements in order to
perfect its security interest in the rates and must file continuation
statements, generally every five years, to maintain perfection of such security
interest. Even if the lender's security interest in room rates is perfected
under the UCC, the lender will generally be required to commence a foreclosure
or otherwise take possession of the property in order to collect the room rates
after a default. Even after a foreclosure, the potential rent payments from the
property may be less than the periodic payments that had been due under the
mortgage. For instance, the net income that would otherwise be generated from
the property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or
as the result of excessive maintenance, repair or other obligations which a
lender succeeds to as landlord.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute "fixtures" under applicable state
real property law,
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and hence, would not be subject to the lien of a mortgage. Such property is
generally pledged or assigned as security to the lender under the UCC. In order
to perfect its security interest therein, the lender generally must file UCC
financing statements and, to maintain perfection of such security interest,
file continuation statements generally every five years.
INSTALLMENT CONTRACTS
The Mortgage Loans included in a Trust Fund may also consist of
Installment Contracts. Under an Installment Contract the seller (hereinafter
referred to in this Section as the "lender") retains legal title to the
property and enters into an agreement with the purchaser (hereinafter referred
to in this Section as the "borrower") for the payment of the purchase price,
plus interest, over the term of such contract. Only after full performance by
the borrower of the contract is the lender obligated to convey title to the
real estate to the borrower. As with mortgage or deed of trust financing,
during the effective period of the Installment Contract, the borrower is
generally responsible for maintaining the property in good condition and for
paying real estate taxes, assessments and hazard insurance premiums associated
with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the buyer's equitable interest in the property is forfeited. The lender in
such a situation does not have to foreclose in order to obtain title to the
property, although in some cases a quiet title action is in order if the
borrower has filed the Installment Contract in local land records and an
ejectment action may be necessary to recover possession. In a few states,
particularly in cases of borrower default during the early years of an
Installment Contract, the courts will permit ejectment of the buyer and a
forfeiture of his or her interest in the property. However, most state
legislatures have enacted provisions by analogy to mortgage law protecting
borrowers under Installment Contracts from the harsh consequences of
forfeiture. Under such statutes, a judicial or nonjudicial foreclosure may be
required, the lender may be required to give notice of default and the borrower
may be granted some grace period during which the contract may be reinstated
upon full payment of the default amount and the borrower may have a
post-foreclosure statutory redemption right. In other states, courts in equity
may permit a borrower with significant investment in the property under an
Installment Contract for the sale of real estate to share in the proceeds of
sale of the property after the indebtedness is repaid or may otherwise refuse
to enforce the forfeiture clause. Nevertheless, generally speaking, the
lender's procedures for obtaining possession and clear title under an
Installment Contract for the sale of real estate in a given state are simpler
and less time-consuming and costly than are the procedures for foreclosing and
obtaining clear title to a mortgaged property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES OR BENEFICIARIES
Some of the Mortgage Loans included in the Mortgage Pool for a series will
be secured by junior mortgages or deeds of trust which are subordinate to
senior mortgages or deeds of trust held by other lenders or institutional
investors. The rights of the Trust Fund (and therefore the Certificateholders),
as beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the Master Servicer asserts its
subordinate interest in a property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding
the amounts expended to the balance due on the junior loan. Absent a provision
in the senior mortgage, no notice of default is required to be given to the
junior mortgagee.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgage or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under the senior mortgage or deed of trust will have the prior
right to collect any insurance proceeds payable under a hazard insurance policy
and any award of damages in connection with the condemnation and to apply the
same to the indebtedness secured by the senior mortgage or deed of trust.
Proceeds in excess of the amount of senior mortgage indebtedness will, in most
cases, be applied to the indebtedness of a junior mortgage or trust deed to
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the extent the junior mortgage or deed of trust so provides. The laws of
certain states may limit the ability of mortgagees or beneficiaries to apply
the proceeds of hazard insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of hazard insurance to repair the damage unless the security of
the mortgagee or beneficiary has been impaired. Similarly, in certain states,
the mortgagee or beneficiary is entitled to the award for a partial
condemnation of the real property security only to the extent that its security
is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments on the property and, when due,
all encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to
perform any of these obligations, the mortgagee or beneficiary is given the
right under the mortgage or deed of trust to perform the obligation itself, at
its election, with the mortgagor or trustor agreeing to reimburse the mortgagee
or beneficiary for any sums expended by the mortgagee or beneificary on behalf
of the trustor. All sums so expended by the mortgagee or beneficiary become
part of the indebtedness secured by the mortgage or deed of trust.
The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute lease unless the mortgagee or beneficiary executes a
written agreement with the tenant not to disturb the tenant's possession of its
premises in the event of a foreclosure. A senior mortgagee or beneficiary may
refuse to consent to matters approved by a junior mortgagee or beneficiary with
the result that the value of the security for the junior mortgage or deed of
trust is diminished. For example, a senior mortgagee or beneficiary may decide
not to approve a lease or to refuse to grant to a tenant a non-disturbance
agreement. If, as a result, the lease is not executed, the value of the
mortgaged property may be diminished.
SUBORDINATE FINANCING
Where the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and
the senior loan does not, a mortgagor may be more likely to repay sums due on
the junior loan than those on the senior loan. Second, acts of the senior
lender that prejudice the junior lender or impair the junior lender's security
may create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent any existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions
taken by junior lenders can impair the security available to the senior lender
and can interfere with or delay the taking of action by the senior lender.
Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or
similar proceedings by the senior lender.
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FORECLOSURE
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its
obligations under the note or mortgage and, by reason thereof, the indebtedness
has been accelerated, the mortgagee has the right to institute foreclosure
proceedings to sell the mortgaged property at public auction to satisfy the
indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power of sale granted in
the mortgage instrument. There are other foreclosure procedures available in
some states that are either infrequently used or available only in certain
limited circumstances, such as strict foreclosure.
JUDICIAL FORECLOSURE
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest
of record in the real property and all parties in possession of the property,
under leases or otherwise, whose interests are subordinate to the mortgage.
Delays in completion of the foreclosure may occasionally result from
difficulties in locating defendants. When the lender's right to foreclosure is
contested, the legal proceedings can be costly and time-consuming. Upon
successful completion of a judicial foreclosure proceeding, the court generally
issues a judgment of foreclosure and appoints a referee or other officer to
conduct a public sale of the mortgaged property, the proceeds of which are used
to satisfy the judgment. Such sales are made in accordance with procedures that
vary from state to state.
NON-JUDICIAL FORECLOSURE/POWER OF SALE
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be contained
in any other type of mortgage instrument. A power of sale allows a non-judicial
public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such
sale, the trustee under a deed of trust must record a notice of default and
notice of sale and send a copy to the mortgagor and to any other party who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, in some states the trustee must provide notice to any other party
having an interest of record in the real property, including junior
lienholders. 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. The
mortgagor or junior lienholder may then have the right, during a reinstatment
period required in some states, to cure the default by paying the entire actual
amount in arrears (without acceleration) plus the expenses incurred in
enforcing the obligation. In other states, the mortgagor or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Generally,
the procedure for public sale, the parties entitled to notice, the method of
giving notice and the applicable time periods are governed by state law and
vary among the states. Foreclosure of a deed to secure debt is also generally
accomplished by a non-judicial sale similar to that required by a deed of
trust, except that the lender or its agent, rather than a trustee, is typically
empowered to perform the sale in accordance with the terms of the deed to
secure debt and applicable law.
LIMITATIONS ON LENDER'S RIGHTS
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative and expensive actions to determine the cause of
the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g.,
the mortgagor failed to maintain the mortgaged property adequately or the
mortgagor executed a junior mortgage on the
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mortgaged property. The exercise by the court of its equity powers will depend
on the individual circumstances of each case presented to it. Finally, some
courts have been faced with the issue of whether federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that a mortgagor receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have upheld the reasonableness
of the notice provisions or have found that a public sale under a mortgage
providing for a power of sale does not involve sufficient state action to
afford constitutional protections to the mortgagor.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes require several years to complete.
Also, a third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. Potential buyers may be reluctant to purchase property
at a foreclosure sale as a result of the 1980 decision of the United States
Court of Appeals for the Fifth Circuit in Durrett v. Washington National
Insurance Company and other decisions that have followed its reasoning. The
court in Durrett held that even a non-collusive, regularly conducted
foreclosure sale was a fraudulent transfer under the federal Bankruptcy Code,
as amended from time to time (11 U.S.C.) and, therefore, could be rescinded in
favor of the bankrupt's estate, if (i) the foreclosure sale was held while the
debtor was insolvent and not more than one year prior to the filing of the
bankruptcy petition and (ii) the price paid for the foreclosed property did not
represent "fair consideration" ("reasonably equivalent value" under the
Bankruptcy Code). Although the reasoning and result of Durrett in respect of
the Bankruptcy Code was rejected by the United States Supreme Court in May
1994, the case could nonetheless be persuasive to a court applying a state
fraudulent conveyance law which has provisions similar to those construed in
Durrett. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to the lesser of fair market value and
the underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs and
expenses which may be recovered by a lender. Thereafter, subject to the
mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property. For
example, the lender will have the obligation to pay debt service on any senior
mortgages, to pay taxes, obtain casualty insurance and to make such repairs at
its own expense as are necessary to render the property suitable for sale.
Frequently, the lender employs a third party management company to manage and
operate the property. The costs of operating and maintaining a commercial or
multifamily residential property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties which are hotels, motels or restaurants or nursing
or convalescent homes or hospitals may be particularly significant because of
the expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's and
the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's 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.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at certain types of properties be cleaned up before a property
may be resold. In addition, a lender may be responsible under federal or state
law for the cost of cleaning up a mortgaged property that is environmentally
contaminated. See "--Environmental Legislation". Generally state law controls
the amount of foreclosure expenses and costs, including attorneys' fees, that
may be recovered by a lender.
A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior mortgages
to avoid their foreclosure. In addition, in the event that the foreclosure of a
junior mortgage triggers the enforcement of a "due-on-sale" clause contained in
a senior mortgage, the junior mortgagee may be required to pay the full amount
of the senior mortgage to avoid its foreclosure. Accordingly, with respect to
those Mortgage Loans which are junior mortgage loans, if the lender purchases
the property the lender's title will be subject to all senior mortgages, prior
liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are
generally applied first to the costs, fees and expenses of sale, to unpaid real
estate taxes and assessments and then in satisfaction of the indebtedness
secured by the mortgage under which the sale was conducted. Any proceeds
remaining after satisfaction of senior mortgage debt are generally
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payable to the holders of junior mortgages and other liens and claims in order
of their priority, whether or not the mortgagor is in default. Any additional
proceeds are generally payable to the mortgagor. The payment of the proceeds to
the holders of junior mortgages may occur in the foreclosure action of the
senior mortgage or a subsequent ancillary proceeding or may require the
institution of separate legal proceedings by such holders.
In connection with a series of Certificates for which an election is made
to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC
Regulations and the Agreement may require the Master Servicer to hire an
independent contractor to operate any foreclosed property relating to Whole
Loans.
RIGHTS OF REDEMPTION
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the mortgagor, and all persons who have an
interest in the property which is subordinate to the mortgage being foreclosed,
from exercise of their "equity of redemption". The doctrine of equity of
redemption provides that, until the property covered by a mortgage has been
sold in accordance with a properly conducted foreclosure and foreclosure sale,
those having an interest which is subordinate to that of the foreclosing
mortgagee have an equity of redemption and may redeem the property by paying
the entire debt with interest. In addition, in some states, when a foreclosure
action has been commenced, the redeeming party must pay certain costs of such
action. Those having an equity of redemption must generally be made parties and
joined in the foreclosure proceeding in order for their equity of redemption to
be cut off and terminated.
The equity of redemption is generally a common-law (non-statutory) right
which exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale price.
In other states, redemption may be authorized if the former mortgagor pays only
a portion of the sums due. The effect of a statutory 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 from
a foreclosure sale 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 expenses of ownership until the redemption period has expired. In
some states, a post-sale statutory right of redemption may exist following a
judicial foreclosure, but not following a trustee's sale under a deed of trust.
Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held beyond the close of the third calendar
year following the year of acquisition. With respect to a series of
Certificates for which an election is made to qualify the Trust Fund or a part
thereof as a REMIC, the Agreement will permit foreclosed property to be held
beyond the close of such third calendar year if the Trustee receives (i) an
extension from the Internal Revenue Service or (ii) an opinion of counsel to
the effect that holding such property for such period is permissible under the
REMIC Regulations.
ANTI-DEFICIENCY LEGISLATION
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the
option of bringing a personal action against the mortgagor on the debt without
first exhausting such security; 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. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor
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following a judicial sale to the excess of the outstanding debt over the fair
market value of the property at the time of the public sale. The purpose of
these statutes is generally to prevent a lender from obtaining a large
deficiency judgment against the former mortgagor as a result of low or no bids
at the judicial sale.
LEASEHOLD RISKS
Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these risks
is that the ground lease creating the leasehold estate could terminate, leaving
the leasehold mortgagee without its security. The ground lease may terminate
if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground
lessee or the ground lessor. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground leases
that secure Mortgage Loans may not contain some of these protective provisions,
and mortgages may not contain the other protections discussed in the next
paragraph. Protective ground lease provisions include the right of the
leasehold mortgagee to receive notices from the ground lessor of any defaults
by the the mortgagor; the right to cure such defaults, with adequate cure
periods; if a default is not susceptible of cure by the leasehold mortgagee,
the right to acquire the leasehold estate through foreclosure or otherwise; the
ability of the ground lease to be assigned to and by the leasehold mortgagee or
purchaser at a foreclosure sale and for the concomitant release of the ground
lessee's liabilities thereunder; and the right of the leasehold mortgagee to
enter into a new ground lease with the ground lessor on the same terms and
conditions as the old ground lease in the event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground
lessor's bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (11
U.S.C.) (the "Bankruptcy Code"), although the enforceability of such clause has
not been established. Without the protections described in the foregoing
paragraph, a leasehold mortgagee may lose the collateral securing its leasehold
mortgage. In addition, terms and conditions of a leasehold mortgage are subject
to the terms and conditions of the ground lease. Although certain rights given
to a ground lessee can be limited by the terms of a leasehold mortgage, the
rights of a ground lessee or a leasehold mortgagee with respect to, among other
things, insurance, casualty and condemnation will be governed by the provisions
of the ground lease.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect
the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. The
outstanding amount of the loan secured by the real property may be reduced to
the then-current value of the property (with a corresponding partial reduction
of the amount of lender's security interest) pursuant to a confirmed plan or
lien avoidance proceeding, thus leaving the lender a general unsecured creditor
for the difference between such value and the outstanding balance of the loan.
Other modifications may include the modification or denial of enforceability of
due-on-sale or due-on-encumbrance clauses, the reduction in the amount of each
scheduled payment, which reduction may result from a reduction in the rate of
interest and/or the alteration of the repayment schedule (with or without
affecting the unpaid principal balance of the loan), and/or an extension (or
reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been
entered in state court (provided no sale of the property had yet occurred)
prior to the filing of the debtor's petition. This may be done even if the full
amount due under the original loan is never repaid.
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The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues in
the post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary "based on the equities of the case." Thus, unless a
court orders otherwise, revenues from a Mortgaged Property generated after the
date the bankruptcy petition is filed will constitute "cash collateral" under
the Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the Mortgaged Properties and the cash collateral is "adequately protected" as
such term is defined and interpreted under the Bankruptcy Code. It should be
noted, however, that the court may find that the lender has no security
interest in either pre-petition or post-petition revenues if the court finds
that the loan documents do not contain language covering accounts, room rents,
or other forms of personalty necessary for a security interest to attach to
hotel revenues.
To the extent that a mortgagor's ability to make payment on a mortgage
loan is dependent on its receipt of payments of rent under a lease of the
related property, such ability may be impaired by the commencement of a
bankruptcy proceeding relating to a lessee under such lease. Under the
Bankruptcy Code, the commencement of a bankruptcy proceeding in which the
lessee is the debtor results in a stay in bankruptcy against the commencement
or continuation of any state court proceeding for past due rent, for
accelerated rent, for damages or for a summary eviction order with respect to a
default under the lease that occurred prior to the filing of the lessee's
petition.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk or
an unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. In addition, pursuant to Section 502(b)(6) of the
Bankruptcy Code, a lessor's damages for lease rejection in respect of future
rent installments are limited to the rent reserved by the lease, without
acceleration, for the greater of one year, or 15%, not to exceed three years,
of the remaining term of the lease.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise accept.
Moreover, the laws of certain states also give priority to certain tax liens
over the lien of a mortgage or deed of trust. Under the Bankruptcy Code, if the
court finds that actions of the mortgagee have been unreasonable, the lien of
the related mortgage may be subordinated to the claims of unsecured creditors.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil", a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the first bankrupt
entity extended to the second and the rights of creditors of the second entity
impaired in the fashion set forth above in the discussion of ordinary
bankruptcy principles. Depending on facts and circumstances not wholly in
existence at the time a loan is originated or transferred to the Trust Fund,
the application of any of these doctrines to one or more of the mortgagors in
the context of the bankruptcy of one or more of their affiliates could result
in material impairment of the rights of the Certificateholders. For each
mortgagor that is described as a "special purpose entity", "single purpose
entity" or "bankruptcy-remote entity" in the Prospectus Supplement, the
activities that may be conducted by such mortgagor and its ability to incur
debt are restricted by the applicable Mortgage or the organizational documents
of such mortgagor in such manner as is intended to make the likelihood of a
bankruptcy proceeding being commenced by or against such mortgagor remote, and
such mortgagor has been organized and is designed to operate in
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a manner such that its separate existence should be respected notwithstanding a
bankruptcy proceeding in respect of one or more affiliated entities of such
mortgagor. However, the Depositor makes no representation as to the likelihood
of the institution of a bankruptcy proceeding by or in respect of any mortgagor
or the likelihood that the separate existence of any mortgagor would be
respected if there were to be a bankruptcy proceeding in respect of any
affiliated entity of a mortgagor.
ENVIRONMENTAL LEGISLATION
A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens (a "superlien") including those of existing
mortgages; in those states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed to
the contamination. Many states have laws similar to CERCLA. CERCLA excludes
from the definition of "owner or operator" any person "who, without
participating in the mangement of . . . [the] facility, holds indicia of
ownership primarily to protect his security interest" ("secured-creditor
exemption").
A lender may lose its secured-creditor exemption and be held liable under
CERCLA as an owner or operator, if such lender or its employees or agents
participate in management of the property. Also, if the lender takes title to
or possession of the property, the secured-creditor exemption may be deemed to
be unavailable, and the lender may be liable to the government or private
parties for clean-up or other remedial costs pursuant to CERCLA.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed the CERCLA secured-creditor exemption. The Court held that a
mortgagee need not have involved itself in the day-to-day operations of the
mortgaged property or in decisions relating to hazardous waste in order to be
liable under CERCLA; rather, liability could attach to a mortgagee if its
involvement in the management of the property is sufficiently broad to support
the inference that it had the capacity to influence the mortgagor's treatment
of hazardous waste. Such capacity to influence could be inferred from the
extent of the mortgagee's involvement in the mortgagor's financial management.
A subsequent decision by the United States Court of Appeals for the Ninth
Circuit in In re Bergsoe Metal Corp. disagreed with the Fleet Factors opinion,
ruling that a secured lender had no liability absent "some actual management of
the facility" on the part of the lender. The scope of the secured-creditor
exemption is thus unclear.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental contamination, but
that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described above
if such remedial costs were incurred.
Unless otherwise provided in the related Prospectus Supplement, the
Warranting Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a "Phase I assessment" as
described in and meeting the requirements of the then current version of
Chapter 5 of the Federal National Mortgage Association Multifamily Guide has
been received and reviewed. In addition, the Agreement may provide that the
Master Servicer, acting on behalf of the Trustee, will not acquire title to a
Mortgaged Property or take over its operation unless the Master Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits, that (a) there are no circumstances or
conditions present at the Mortgaged Property relating to substances for which
some investigation or clean-up action could be required or that it would be in
the best economic interest of the Trust Fund to take such actions with respect
to the affected Mortgaged Property and (b) that the Mortgaged Property is in
compliance with applicable environmental laws or that it would be in the best
economic interest of the Trust Fund to take the actions necessary to comply
with such laws. See "Description of the Agreements--Realization Upon Defaulted
Whole Loans".
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers
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the mortgaged property. Certain of these clauses may provide that, upon an
attempted breach thereof by the mortgagor of an otherwise non-recourse loan,
the mortgager becomes personally liable for the mortgage debt. The
enforceability of due-on-sale clauses has been the subject of legislation or
litigation in many states and, in some cases, the enforceability of these
clauses was limited or denied. However, with respect to certain loans the
Garn-St Germain Depository Institutions Act of 1982 preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms subject to certain limited exceptions. Unless otherwise
provided in the related Prospectus Supplement, a Master Servicer, on behalf of
the Trust Fund, will determine whether to exercise any right the Trustee may
have as mortgagee to accelerate payment of any such Mortgage Loan or to
withhold its consent to any transfer or further encumbrance in accordance with
the general servicing standard described herein under "Description of the
Agreements--Collection and Other Servicing Procedures".
ACCELERATION ON DEFAULT
Some of the Mortgage Loans included in a Trust Fund will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the borrower. The courts of all
states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of any state, however, may refuse to foreclose a mortgage or deed
of trust when an acceleration of the indebtedness would be inequitable or
unjust or the circumstances would render the acceleration unconscionable.
Furthermore, in some states, the borrower may avoid foreclosure and reinstate
an accelerated loan by paying only the defaulted amounts and the costs and
attorneys' fees incurred by the lender in collecting such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from the
borrower may be deemed a waiver of the forfeiture clause. State courts also may
impose equitable grace periods for payment of arrearages or otherwise permit
reinstatement of the contract following a default. Not infrequently, if a
borrower under an Installment Contract has significant equity in the property,
equitable principles will be applied to reform or reinstate the contract or to
permit the borrower to share the proceeds upon a foreclosure sale of the
property if the sale price exceeds the debt.
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if
payments are not timely made, and in some circumstances may provide for
prepayment fees or yield maintenance penalties if the obligation is paid prior
to maturity or prohibit such prepayment for a specified period. In certain
states, there are or may be specific limitations upon the late charges which a
lender may collect from a mortgagor for delinquent payments. Certain states
also limit the amounts that a lender may collect from a mortgagor as an
additional charge if the loan is prepaid. The enforceability, under the laws of
a number of states of provisions providing for prepayment fees or penalties
upon, or prohibition of, an involuntary prepayment is unclear, and no assurance
can be given that, at the time a Prepayment Premium is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
make such payment, or the provisions of any such prohibition, will be
enforceable under applicable state law. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher Mortgage
Rates, may increase the likelihood of refinancing or other early retirements of
the Mortgage Loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
application of the federal law. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on mortgage loans covered by Title V. Certain
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that first mortgage loans secured by primarily residential
properties that are originated on or after January 1, 1980 are subject to
federal
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preemption. Therefore, in a state that has not taken the requisite action to
reject application of Title V or to adopt a provision limiting discount points
or other charges prior to origination of such mortgage loans, any such
limitation under such state's usury law would not apply to such mortgage loans.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St Germain
Act ("Title VIII"). Title VIII provides that, notwithstanding any state law to
the contrary, state-chartered banks may originate alternative mortgage
instruments in accordance with regulations promulgated by the Comptroller of
the Currency with respect to origination of alternative mortgage instruments by
national banks, state-chartered credit unions may originate alternative
mortgage instruments in accordance with regulations promulgated by the National
Credit Union Administration (the "NCUA") with respect to origination of
alternative mortgage instruments by federal credit unions, and all other
non-federally chartered housing creditors, including state-chartered savings
and loan associations, state-chartered savings banks and mortgage banking
companies, may originate alternative mortgage instruments in accordance with
the regulations promulgated by the Federal Home Loan Bank Board (now the Office
of Thrift Supervision) with respect to origination of alternative mortgage
instruments by federal savings and loan associations. Title VIII provides that
any state may reject applicability of the provision of Title VIII by adopting,
prior to October 15, 1985, a law or constitutional provision expressly
rejecting the applicability of such provisions. Certain states have taken such
action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies
to mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
mortgagors who enter military service (including reservists who are called to
active duty) after origination of the related Mortgage Loan, no information can
be provided as to the number of loans that may be affected by the Relief Act.
Application of the Relief Act would adversely affect, for an indeterminate
period of time, the ability of any servicer to collect full amounts of interest
on certain of the Mortgage Loans. Any shortfalls in interest collections
resulting from the application of the Relief Act would result in a reduction of
the amounts distributable to the holders of the related series of Certificates
and would not be covered by advances or any form of Credit Support (if any)
provided in connection with such Certificates. In addition, the Relief Act
imposes limitations that would impair the ability of the servicer to foreclose
on an affected Mortgage Loan during the mortgagor's period of active duty
status, and, under certain circumstances, during an additional three month
period thereafter. Thus, in the event that such a Mortgage Loan goes into
default, there may be delays and losses occasioned thereby.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction.
The government must publish notice of the forfeiture proceeding and may give
notice to all parties "known to have an alleged interest in the property",
including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(i.e., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care institutions.
Mortgages on Mortgaged Properties which are owned by the borrower under a
condominium form of ownership are subject to the declaration, by-laws and other
rules and regulations of the condominium association. Mortgaged Properties
which are hotels or motels may present additional risk to the lender in that:
(i) hotels and motels are typically operated pursuant to franchise, management
and operating agreements which may be terminable by the operator; and (ii) the
transferability of the hotel's operating, liquor and other licenses to the
entity acquiring the hotel either through purchase or foreclosure is subject to
the vagaries of local law requirements. In addition, Mortgaged Properties which
are multifamily residential properties or cooperatively owned multifamily
properties may be subject to rent control laws, which could impact the future
cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
borrower of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the borrower is subject.
FEDERAL INCOME TAX CONSEQUENCES
The following represents the opinion of Cadwalader, Wickersham & Taft as
to the matters discussed herein. The following is a general discussion of the
anticipated material federal income tax consequences of the purchase, ownership
and disposition of Certificates. The discussion below does not purport to
address all federal income tax consequences that may be applicable to
particular categories of investors, some of which may be subject to special
rules. The authorities on which this discussion is based are subject to change
or differing interpretations, and any such change or interpretation could apply
retroactively. This discussion reflects the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as regulations
(the "REMIC Regulations") promulgated by the U.S. Department of Treasury (the
"Treasury"). Investors should consult their own tax advisors in determining the
federal, state, local and other tax consequences to them of the purchase,
ownership and disposition of Certificates.
For purposes of this discussion, where the applicable Prospectus
Supplement provides for a fixed retained yield with respect to the Mortgage
Assets underlying a series of Certificates, references to the Mortgage will be
deemed to refer to that portion of the Mortgage Assets held by the Trust Fund
which does not include the Retained Interest. References to a "holder" or
"Certificateholder" in this discussion generally mean the beneficial owner of a
Certificate. For purposes of this discussion, unless otherwise specified, the
term "Mortgage Loans" will be used to refer to Mortgage Loans, MBS and
Installment Contracts.
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REMIC CERTIFICATES
GENERAL
With respect to a particular series of Certificates, an election may be
made to treat the Trust Fund or one or more segregated pools of assets therein
as one or more REMICs within the meaning of Code Section 860D. A Trust Fund or
a portion thereof as to which a REMIC election will be made will be referred to
as a "REMIC Pool". For purposes of this discussion, Certificates of a series as
to which one or more REMIC elections are made are referred to as "REMIC
Certificates" and will consist of one or more Classes of "REMIC Regular
Certificates" and one Class of "Residual Certificates" in the case of each
REMIC Pool. Qualification as a REMIC requires ongoing compliance with certain
conditions. With respect to each series of REMIC Certificates, Cadwalader,
Wickersham & Taft, tax counsel to the Depositor, has advised the Depositor that
in the firm's opinion, assuming (i) the making of such an election, (ii)
compliance with the Agreement and (iii) compliance with any changes in the law,
including any amendments to the Code or applicable Treasury regulations
thereunder, each REMIC Pool will qualify as a REMIC. In such case, the REMIC
Regular Certificates will be considered to be "regular interests" in the REMIC
Pool and generally will be treated for federal income tax purposes as if they
were newly originated debt instruments, and the Residual Certificates will be
considered to be "residual interests" in the REMIC Pool. The Prospectus
Supplement for each series of Certificates will indicate whether one or more
REMIC elections with respect to the related Trust Fund will be made, in which
event references to "REMIC" or "REMIC Pool" herein shall be deemed to refer to
each such REMIC Pool. If so specified in the applicable Prospectus Supplement,
the portion of a Trust Fund as to which a REMIC election is not made may be
treated as a grantor trust for federal income tax purposes. See "--Grantor
Trust Certificates".
STATUS OF REMIC CERTIFICATES
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi) but only in the same proportion that the assets
of the REMIC Pool would be treated as "loans . . . secured by an interest in
real property which is . . . residential real property" (such as single family
or multifamily properties, but not commercial properties) within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C), and otherwise will not qualify for such treatment. REMIC
Certificates held by a real estate investment trust will constitute "real
estate assets" within the meaning of Code Section 856(c)(4)(A), and interest on
the REMIC Regular Certificates and income with respect to Residual Certificates
will be considered "interest on obligations secured by mortgages on real
property or on interests in real property" within the meaning of Code Section
856(c)(3)(B) in the same proportion that, for both purposes, the assets of the
REMIC Pool would be so treated. If at all times 95% or more of the assets of
the REMIC Pool qualify for each of the foregoing respective treatments, the
REMIC Certificates will qualify for the corresponding status in their entirety.
For purposes of Code Section 856(c)(4)(A), payments of principal and interest
on the Mortgage Loans that are reinvested pending distribution to holders of
REMIC Certificates qualify for such treatment. Where two REMIC Pools are a part
of a tiered structure they will be treated as one REMIC for purposes of the
tests described above respecting asset ownership of more or less than 95%. In
addition, if the assets of the REMIC include Buy-Down Mortgage Loans, it is
possible that the percentage of such assets constituting "qualifying real
property loans" or "loans . . . secured by an interest in real property" for
purposes of Code Section 7701(a)(19)(C)(v), respectively, may be required to be
reduced by the amount of the related Buy-Down Funds. Offered Certificates will
represent "qualified mortgages," within the meaning of Code Section 860G(a)(3),
for other REMICs and "permitted assets," within the meaning of Code Section
860L(c), for financial asset securitization investment trusts. REMIC
Certificates held by a regulated investment company will not constitute
"Government securities" within the meaning of Code Section 851(b)(4)(A)(i).
REMIC Certificates held by certain financial institutions will constitute an
"evidence of indebtedness" within the meaning of Code Section 582(c)(1). The
Small Business Job Protection Act of 1996 (the "SBJPA of 1996") repealed the
reserve method for bad debts of domestic building and loan associations and
mutual savings banks, and thus has eliminated the asset category of "qualifying
real property loans" in former Code Section 593(d) for taxable years beginning
after December 31, 1995. The requirement in the SBJPA of 1996 that such
institutions must "recapture" a portion of their existing bad debt reserves is
suspended if a certain portion of their assets are maintained in "residential
loans" under Code Section 7701(a)(19)(C)(v), but only if such loans were made
to acquire, construct or improve the related real property and not for the
purpose of refinancing. However, no effort will be made to identify the portion
of the Mortgage Loans of any Series meeting this requirement, and no
representation is made in this regard.
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QUALIFICATION AS A REMIC
In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in the
Code. The REMIC Pool must fulfill an asset test, which requires that no more
than a de minimis portion of the assets of the REMIC Pool, as of the close of
the third calendar month beginning after the "Startup Day" (which for purposes
of this discussion is the date of issuance of the REMIC Certificates) and at
all times thereafter, may consist of assets other than "qualified mortgages"
and "permitted investments". The REMIC Regulations provide a safe harbor
pursuant to which the de minimis requirement is met if at all times the
aggregate adjusted basis of the nonqualified assets is less than 1% of the
aggregate adjusted basis of all the REMIC Pool's assets. An entity that fails
to meet the safe harbor may nevertheless demonstrate that it holds no more than
a de minimis amount of nonqualified assets. A REMIC also must provide
"reasonable arrangements" to prevent its residual interest from being held by
"disqualified organizations" and must furnish applicable tax information to
transferors or agents that violate this requirement. See "Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--
Disqualified Organizations".
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, such as the Mortgage Certificates, regular interests in another REMIC,
such as Mortgage Certificates in a trust as to which a REMIC election has been
made, loans secured by timeshare interests and loans secured by shares held by
a tenant stockholder in a cooperative housing corporation, provided, in
general, (i) the fair market value of the real property security (including
buildings and structural components thereof) is at least 80% of the principal
balance of the related Mortgage Loan or mortgage loan underlying the Mortgage
Certificate either at origination or as of the Startup Day (an original
loan-to-value ratio of not more than 125% with respect to the real property
security) or (ii) substantially all the proceeds of the Mortgage Loan or the
underlying mortgage loan were used to acquire, improve or protect an interest
in real property that, at the origination date, was the only security for the
Mortgage Loan or underlying mortgage loan. If the Mortgage Loan has been
substantially modified other than in connection with a default or reasonably
foreseeable default, it must meet the loan-to-value test in (i) of the
preceding sentence as of the date of the last such modification). A qualified
mortgage includes a qualified replacement mortgage, which is any property that
would have been treated as a qualified mortgage if it were transferred to the
REMIC Pool on the Startup Day and that is received either (i) in exchange for
any qualified mortgage within a three-month period thereafter or (ii) in
exchange for a "defective obligation" within a two-year period thereafter. A
"defective obligation" includes (i) a mortgage in default or as to which
default is reasonably foreseeable, (ii) a mortgage as to which a customary
representation or warranty made at the time of transfer to the REMIC Pool has
been breached, (iii) a mortgage that was fraudulently procured by the
mortgagor, and (iv) a mortgage that was not in fact principally secured by real
property (but only if such mortgage is disposed of within 90 days of
discovery). A Mortgage Loan that is "defective" as described in clause (iv)
that is not sold or, if within two years of the Startup Day, exchanged, within
90 days of discovery, ceases to be a qualified mortgage after such 90-day
period.
The REMIC Regulations provide that obligations secured by interests in
manufactured housing which qualify as "single family residences" within the
meaning of Code Section 25(e)(10) may be treated as "qualified mortgages" of a
REMIC. Under Code Section 25(e)(10), 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. With respect to each series with respect
to which Contracts are included in a REMIC Pool, the Depositor will represent
and warrant that each of the manufactured homes securing the Contracts meets
this definition of "single family residence".
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13 months,
until the next scheduled distribution to holders of interests in the REMIC
Pool. A qualified reserve asset is any intangible property held for investment
that is part of any reasonably required reserve maintained by the REMIC Pool to
provide for payments of expenses of the REMIC Pool or amounts due on the
regular or residual interests in the event of defaults (including
delinquencies) on the qualified mortgages, lower than expected reinvestment
returns, prepayment interest shortfalls and certain other contingencies. The
reserve fund will be disqualified if more than 30% of the gross income from the
assets in such fund for the year is derived from the sale or other disposition
of property held for less than three months, unless required to prevent a
default on the regular interests caused
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by a default on one or more qualified mortgages. A reserve fund must be reduced
"promptly and appropriately" as payments on the Mortgage Loans are received.
Foreclosure property is real property acquired by the REMIC Pool in connection
with the default or imminent default of a qualified mortgage and generally not
held beyond the close of the third calendar year after the year of acquisition,
subject to an extension granted by the Internal Revenue Service (the
"Service").
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet certain requirements. All of the interests in a REMIC
Pool must be either of the following: (i) one or more classes of regular
interests or (ii) a single class of residual interests on which distributions,
if any, are made pro rata. A regular interest is an interest in a REMIC Pool
that is issued on the Startup Day with fixed terms, is designated as a regular
interest, and unconditionally entitles the holder to receive a specified
principal amount (or other similar amount), and provides that interest payments
(or other similar amounts), if any, at or before maturity either are payable
based on a fixed rate or a qualified variable rate, or consist of a specified,
nonvarying portion of the interest payments on qualified mortgages. Such a
specified portion may consist of a fixed number of basis points, a fixed
percentage of the total interest, or a fixed or qualified variable or inverse
variable rate on some or all of the qualified mortgages minus a different fixed
or qualified variable rate. The specified principal amount of a regular
interest that provides for interest payments consisting of a specified,
nonvarying portion of interest payments on qualified mortgages may be zero. A
residual interest is an interest in a REMIC Pool other than a regular interest
that is issued on the Startup Day and that is designated as a residual
interest. An interest in a REMIC Pool may be treated as a regular interest even
if payments of principal with respect to such interest are subordinated to
payments on other regular interests or the residual interest in the REMIC Pool,
and are dependent on the absence of defaults or delinquencies on qualified
mortgages or permitted investments, lower than reasonably expected returns on
permitted investments, unanticipated expenses incurred by the REMIC Pool or
prepayment interest shortfalls. Accordingly, the REMIC Regular Certificates of
a series will constitute one or more classes of regular interests, and the
Residual Certificates with respect to that series will constitute a single
class of residual interests on which distributions are made pro rata.
If an entity, such as the REMIC Pool, 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 such year
and thereafter. 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 the REMIC Regular Certificates may be treated
as equity interests therein. The Code, however, authorizes the Treasury
Department to issue 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 the REMIC Pool would occur absent
regulatory relief. Investors should be aware, however, that the Conference
Committee Report to the Tax Reform Act of 1986 (the "1986 Act") indicates that
the relief may be accompanied by sanctions, such as the imposition of a
corporate tax on all or a portion of the REMIC Pool's income for the period of
time in which the requirements for REMIC status are not satisfied.
TAXATION OF REMIC REGULAR CERTIFICATES
GENERAL
In general, interest, original issue discount and market discount on a
REMIC Regular Certificate will be treated as ordinary income to a holder of the
REMIC Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a REMIC Regular Certificate will be treated as a return
of capital to the extent of the Regular Certificateholder's basis in the REMIC
Regular Certificate allocable thereto. Regular Certificateholders must use the
accrual method of accounting with regard to REMIC Regular Certificates,
regardless of the method of accounting otherwise used by such Regular
Certificateholders.
ORIGINAL ISSUE DISCOUNT
Accrual Certificates will be, and other Classes of REMIC Regular
Certificates may be, issued with "original issue discount" within the meaning
of Code Section 1273(a). Holders of any Class of REMIC Regular Certificates
having original issue discount generally must include original issue discount
in ordinary income for federal income tax purposes as it accrues, in accordance
with the constant yield method that takes into account the compounding of
interest, in advance of receipt of the cash attributable to such income. The
following discussion is based in part on temporary and final Treasury
regulations issued on February 2, 1994 (the "OID Regulations"), as amended on
June 14, 1996, under Code Sections 1271 through 1273 and 1275 and in part on
the provisions of the 1986 Act. Regular Certificateholders should be aware,
however,
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that the OID Regulations do not adequately address certain issues relevant to
prepayable securities, such as the REMIC Regular Certificates. To the extent
such issues are not addressed in such regulations, the Depositor intends to
apply the methodology described in the Conference Committee Report to the 1986
Act. No assurance can be provided that the Service will not take a different
position as to those matters not currently addressed by the OID Regulations.
Moreover, the OID Regulations include an anti-abuse rule allowing the Service
to apply or depart from the OID Regulations where necessary or appropriate to
ensure a reasonable tax result in light of the applicable statutory provisions.
A tax result will not be considered unreasonable under the anti-abuse rule in
the absence of a substantial effect on the present value of a taxpayer's tax
liability. Investors are advised to consult their own tax advisors as to the
discussion herein and the appropriate method for reporting interest and
original issue discount with respect to the REMIC Regular Certificates.
Each REMIC Regular Certificate (except to the extent described below with
respect to a REMIC Regular Certificate on which principal is distributed by
random lot ("Random Lot Certificates")) will be treated as a single installment
obligation for purposes of determining the original issue discount includible
in a Regular Certificateholder's income. The total amount of original issue
discount on a REMIC Regular Certificate is the excess of the "stated redemption
price at maturity" of the REMIC Regular Certificate over its "issue price". The
issue price of a Class of REMIC Regular Certificates offered pursuant to this
Prospectus generally is the first price at which a substantial amount of REMIC
Regular Certificates of that Class is sold to the public (excluding bond
houses, brokers and underwriters). Although unclear under the OID Regulations,
the Depositor intends to treat the issue price of a Class as to which there is
no substantial sale as of the issue date or that is retained by the Depositor
as the fair market value of that Class as of the issue date. The issue price of
a REMIC Regular Certificate also includes the amount paid by an initial Regular
Certificateholder for accrued interest that relates to a period prior to the
issue date of the REMIC Regular Certificate, unless the Regular
Certificateholder elects on its federal income tax return to exclude such
amount from the issue price and to recover it on the first Distribution Date.
The stated redemption price at maturity of a REMIC Regular Certificate always
includes the original principal amount of the REMIC Regular Certificate, but
generally will not include distributions of stated interest if such interest
distributions constitute "qualified stated interest". Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the REMIC Regular Certificate.
Distributions of interest on an Accrual Certificate, or on other REMIC Regular
Certificates with respect to which deferred interest will accrue, will not
constitute qualified stated interest, in which case the stated redemption price
at maturity of such REMIC Regular Certificates includes all distributions of
interest as well as principal thereon. Likewise, the Depositor intends to treat
an "interest only" class, or a class on which interest is substantially
disproportionate to its principal amount (a so-called "super-premium" class) as
having no qualified stated interest. Where the interval between the issue date
and the first Distribution Date on a REMIC Regular Certificate is shorter than
the interval between subsequent Distribution Dates, the interest attributable
to the additional days will be included in the stated redemption price at
maturity.
Under a de minimis rule, original issue discount on a REMIC 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 REMIC Regular
Certificate multiplied by the weighted average maturity of the REMIC Regular
Certificate. For this purpose, the weighted average maturity of the REMIC
Regular Certificate is computed as the sum of the amounts determined by
multiplying the number of full years (i.e., rounding down partial years) from
the issue date until each distribution is scheduled to be made by a fraction,
the numerator of which is the amount of each distribution included in the
stated redemption price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at maturity of the REMIC
Regular Certificate. The Conference Committee Report to the 1986 Act provides
that the schedule of such distributions should be determined in accordance with
the assumed rate of prepayment of the Mortgage Loans (the "Prepayment
Assumption") and the anticipated reinvestment rate, if any, relating to the
REMIC Regular Certificates. The Prepayment Assumption with respect to a Series
of REMIC Regular Certificates will be set forth in the related Prospectus
Supplement. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the REMIC
Regular Certificate is held as a capital asset. However, under the OID
Regulations, Regular Certificateholders may elect to accrue all de minimis
original issue discount as well as market discount and market premium under the
constant yield method. See "Election to Treat All Interest Under the Constant
Yield Method".
A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the original
issue discount on the REMIC Regular Certificate accrued during an accrual
period for each day on which it holds the REMIC Regular Certificate, including
the date of purchase but excluding the
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date of disposition. The Depositor will treat the monthly period ending on the
day before each Distribution Date as the accrual period. With respect to each
REMIC Regular Certificate, a calculation will be made of the original issue
discount that accrues during each successive full accrual period (or shorter
period from the date of original issue) that ends on the day before the related
Distribution Date on the REMIC Regular Certificate. The Conference Committee
Report to the 1986 Act states that the rate of accrual of original issue
discount is intended to be based on the Prepayment Assumption. Other than as
discussed below with respect to a Random Lot Certificate, the original issue
discount accruing in a full accrual period would be the excess, if any, of (i)
the sum of (a) the present value of all of the remaining distributions to be
made on the REMIC Regular Certificate as of the end of that accrual period that
are included in the REMIC Regular Certificate's stated redemption price at
maturity and (b) the distributions made on the REMIC Regular Certificate during
the accrual period that are included in the REMIC Regular Certificate's stated
redemption price at maturity, over (ii) the adjusted issue price of the REMIC
Regular Certificate at the beginning of the accrual period. The present value
of the remaining distributions referred to in the preceding sentence is
calculated based on (i) the yield to maturity of the REMIC Regular Certificate
at the issue date, (ii) events (including actual prepayments) that have
occurred prior to the end of the accrual period and (iii) the Prepayment
Assumption. For these purposes, the adjusted issue price of a REMIC Regular
Certificate at the beginning of any accrual period equals the issue price of
the REMIC Regular Certificate, increased by the aggregate amount of original
issue discount with respect to the REMIC Regular Certificate that accrued in
all prior accrual periods and reduced by the amount of distributions included
in the REMIC Regular Certificate's stated redemption price at maturity that
were made on the REMIC Regular Certificate in such prior periods. The original
issue discount accruing during any accrual period (as determined in this
paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
according to an appropriate allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the REMIC Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a Series of REMIC
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of REMIC Regular Certificates and
either an increase or decrease in the daily portions of original issue discount
with respect to such REMIC Regular Certificates.
In the case of a Random Lot Certificate, the Depositor intends to
determine the yield to maturity of such Certificate based upon the anticipated
payment characteristics of the Class as a whole under the Prepayment
Assumption. In general, the original issue discount accruing on each Random Lot
Certificate in a full accrual period would be its allocable share of the
original issue discount with respect to the entire Class, as determined in
accordance with the preceding paragraph. However, in the case of a distribution
in retirement of the entire unpaid principal balance of any Random Lot
Certificate (or portion of such unpaid principal balance), (a) the remaining
unaccrued original issue discount allocable to such Certificate (or to such
portion) will accrue at the time of such distribution, and (b) the accrual of
original issue discount allocable to each remaining Certificate of such Class
(or the remaining unpaid principal balance of a partially redeemed Random Lot
Certificate after a distribution of principal has been received) will be
adjusted by reducing the present value of the remaining payments on such Class
and the adjusted issue price of such Class to the extent attributable to the
portion of the unpaid principal balance thereof that was distributed. The
Depositor believes that the foregoing treatment is consistent with the "pro
rata prepayment" rules of the OID Regulations, but with the rate of accrual of
original issue discount determined based on the Prepayment Assumption for the
Class as a whole. Investors are advised to consult their tax advisors as to
this treatment.
ACQUISITION PREMIUM
A purchaser of a REMIC Regular Certificate at a price greater than its
adjusted issue price but less than its stated redemption price at maturity will
be required to include in gross income the daily portions of the original issue
discount on the REMIC Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over such adjusted issue
price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively, such
a subsequent purchaser may elect to treat all such acquisition premium under
the constant yield method, as described below under the heading "Election to
Treat All Interest Under the Constant Yield Method".
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VARIABLE RATE REMIC REGULAR CERTIFICATES
REMIC Regular Certificates may provide for interest based on a variable
rate. Under the OID Regulations, interest is treated as payable at a variable
rate if, generally, (i) the issue price does not exceed the original principal
balance by more than a specified amount and (ii) the interest compounds or is
payable at least annually at current values of (a) one or more "qualified
floating rates", (b) a single fixed rate and one or more qualified floating
rates, (c) a single "objective rate", or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate". A floating rate is
a qualified floating rate if variations in the rate can reasonably be expected
to measure contemporaneous variations in the cost of newly borrowed funds,
where such rate is subject to a fixed multiple that is greater than 0.65 but
not more than 1.35. Such rate may also be increased or decreased by a fixed
spread or subject to a fixed cap or floor, or a cap or floor that is not
reasonably expected as of the issue date to affect the yield of the instrument
significantly. An objective rate is any rate (other than a qualified floating
rate) that is determined using a single fixed formula and that is based on
objective financial or economic information, provided that such information is
not (i) within the control of the issuer or a related party or (ii) unique to
the circumstances of the issuer or a related party. A qualified inverse
floating rate is a rate equal to a fixed rate minus a qualified floating rate
that inversely reflects contemporaneous variations in the cost of newly
borrowed funds; an inverse floating rate that is not a qualified inverse
floating rate may nevertheless be an objective rate. A Class of REMIC Regular
Certificates may be issued under this Prospectus that does not have a variable
rate under the foregoing rules, for example, a Class that bears different rates
at different times during the period it is outstanding such that it is
considered significantly "front-loaded" or "back-loaded" within the meaning of
the OID Regulations. It is possible that such a Class may be considered to bear
"contingent interest" within the meaning of the OID Regulations. The OID
Regulations, as they relate to the treatment of contingent interest rate by
their terms not applicable to REMIC Regular Certificates. However, if final
regulations dealing with contingent interest with respect to REMIC Regular
Certificates apply the same principles as the OID Regulations, such regulations
may lead to different timing of income inclusion that would be the case under
the OID Regulations. Furthermore, application of such principles could lead to
the characterization of gain on the sale of contingent interest REMIC Regular
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate treatment of any REMIC Regular Certificate that does
not pay interest at a fixed rate or variable rate as described in this
paragraph.
Under the REMIC Regulations, a REMIC Regular Certificate (i) bearing a
rate that qualifies as a variable rate under the OID Regulations that is tied
to current values of a variable rate (or the highest, lowest or average of two
or more variable rates, including a rate based on the average cost of funds of
one or more financial institutions), or a positive or negative multiple of such
a rate (plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the Mortgage Loans, including such
a rate that is subject to one or more caps or floors, or (ii) bearing one or
more such variable rates for one or more periods or one or more fixed rates for
one or more periods, and a different variable rate or fixed rate for other
periods qualifies as a regular interest in a REMIC. Accordingly, unless
otherwise indicated in the applicable Prospectus Supplement, the Depositor
intends to treat REMIC Regular Certificates that qualify as regular interests
under this rule in the same manner as obligations bearing a variable rate for
original issue discount reporting purposes.
The amount of original issue discount with respect to a REMIC Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "Original Issue Discount" with the yield to maturity and
future payments on such REMIC Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the REMIC Regular
Certificate based on the initial rate (or, if different, the value of the
applicable variable rate as of the pricing date) for the relevant Class. Unless
otherwise specified in the applicable Prospectus Supplement, the Depositor
intends to treat such variable interest as qualified stated interest, other
than variable interest on an interest-only or super-premium Class, which will
be treated as non-qualified stated interest includible in the stated redemption
price at maturity. Ordinary income reportable for any period will be adjusted
based on subsequent changes in the applicable interest rate index.
Although unclear under the OID Regulations, the Depositor intends to treat
REMIC Regular Certificates bearing an interest rate that is a weighted average
of the net interest rates on Mortgage Loans or Mortgage Certificates having
fixed or adjustable rates, as having qualified stated interest. In the case of
adjustable rate Mortgage Loans, the applicable index used to compute interest
on the Mortgage Loans in effect on the pricing date (or possibly the issue
date) will be deemed to be in effect beginning with the period in which the
first weighted average adjustment date occurring after the issue date occurs.
Adjustments will be made in each accrual period either increasing or decreasing
the amount or ordinary income reportable to reflect the actual Pass-Through
Rate on the REMIC Regular Certificates.
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DEFERRED INTEREST
Under the OID Regulations, all interest on a REMIC Regular Certificate as
to which there may be Deferred Interest is includible in the stated redemption
price at maturity thereof. Accordingly, any Deferred Interest that accrues with
respect to a Class of REMIC Regular Certificates may constitute income to the
holders of such REMIC Regular Certificates prior to the time distributions of
cash with respect to such Deferred Interest are made.
MARKET DISCOUNT
A purchaser of a REMIC Regular Certificate also may be subject to the
market discount rules of Code Section 1276 through 1278. Under these Code
sections and the principles applied by the OID Regulations in the context of
original issue discount, "market discount" is the amount by which the
purchaser's original basis in the REMIC Regular Certificate (i) is exceeded by
the then-current principal amount of the REMIC Regular Certificate or (ii) in
the case of a REMIC Regular Certificate having original issue discount, is
exceeded by the adjusted issue price of such REMIC Regular Certificate at the
time of purchase. Such purchaser generally will be required to recognize
ordinary income to the extent of accrued market discount on such REMIC Regular
Certificate as distributions includible in the stated redemption price at
maturity thereof are received, in an amount not exceeding any such
distribution. Such market discount would accrue in a manner to be provided in
Treasury regulations and should take into account the Prepayment Assumption.
The Conference Committee Report to the 1986 Act provides that until such
regulations are issued, such market discount would accrue either (i) on the
basis of a constant interest rate or (ii) in the ratio of stated interest
allocable to the relevant period to the sum of the interest for such period
plus the remaining interest as of the end of such period, or in the case of a
REMIC Regular Certificate issued with original issue discount, in the ratio of
original issue discount accrued for the relevant period to the sum of the
original issue discount accrued for such period plus the remaining original
issue discount as of the end of such period. Such purchaser also generally will
be required to treat a portion of any gain on a sale or exchange of the REMIC
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 as partial
distributions in reduction of the stated redemption price at maturity were
received. Such purchaser will be required to defer deduction of a portion of
the excess of the interest paid or accrued on indebtedness incurred to purchase
or carry a REMIC Regular Certificate over the interest distributable thereon.
The deferred portion of such interest expense in any taxable year generally
will not exceed the accrued market discount on the REMIC Regular Certificate
for such year. 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 or the REMIC Regular Certificate is disposed of. As an
alternative to the inclusion of market discount in income on the foregoing
basis, the Regular Certificateholder may elect to include market discount in
income currently as it accrues on all market discount instruments acquired by
such Regular Certificateholder in that taxable year or thereafter, in which
case the interest deferral rule will not apply. See "Election to Treat All
Interest Under the Constant Yield Method" below regarding an alternative manner
in which such election may be deemed to be made.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if such market discount is less than 0.25% of the
remaining stated redemption price at maturity of such REMIC Regular Certificate
multiplied by the weighted average maturity of the REMIC Regular Certificate
(determined as described above in the third paragraph under "Original Issue
Discount") remaining after the date of purchase. It appears that de minimis
market discount would be reported in a manner similar to de minimis original
issue discount. See "Original Issue Discount" above. Treasury regulations
implementing the market discount rules have not yet been issued, and therefore
investors should consult their own tax advisors regarding the application of
these rules. Investors should also consult Revenue Procedure 92-67 concerning
the elections to include market discount in income currently and to accrue
market discount on the basis of the constant yield method.
PREMIUM
A REMIC Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased at
a premium. If the Regular Certificateholder holds such REMIC Regular
Certificate as a "capital asset" within the meaning of Code Section 1221, the
Regular Certificateholder may elect under Code Section 171 to amortize such
premium under the constant yield method. Treasury Regulations issued under Code
Section 171 do not by their terms apply to REMIC Regular Certificates, which
are prepayable based on prepayments on the underlying Mortgage Loans. However,
the Conference Committee Report to the 1986 Act indicates a Congressional
intent that the same rules that will apply to the accrual of market discount on
installment obligations will also apply to amortizing bond premium under Code
Section 171 on installment obligations such as the REMIC Regular Certificates,
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although it is unclear whether the alternatives to the constant yield method
described above under "Market Discount" are available. Amortizable bond premium
will be treated as an offset to interest income on a REMIC Regular Certificate
rather than as a separate deduction item. See "Election to Treat All Interest
Under the Constant Yield Method" below regarding an alternative manner in which
the Code Section 171 election may be deemed to be made.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
A holder of a debt instrument such as a REMIC Regular Certificate may
elect to treat all interest that accrues on the instrument using the constant
yield method, with none of the interest being treated as qualified stated
interest. For purposes of applying the constant yield method to a debt
instrument subject to such an election, (i) "interest" includes stated
interest, original issue discount, de minimis original issue discount, market
discount and de minimis market discount, as adjusted by any amortizable bond
premium or acquisition premium and (ii) the debt instrument is treated as if
the instrument were issued on the holder's acquisition date in the amount of
the holder's adjusted basis immediately after acquisition. It is unclear
whether, for this purpose, the initial Prepayment Assumption would continue to
apply or if a new prepayment assumption as of the date of the holder's
acquisition would apply. A holder generally may make such an election on an
instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt instrument
with amortizable bond premium or with market discount, the holder is deemed to
have made elections to amortize bond premium or to report market discount
income currently as it accrues under the constant yield method, respectively,
for all debt instruments acquired by the holder in the same taxable year or
thereafter. The election is made on the holder's federal income tax return for
the year in which the debt instrument is acquired and is irrevocable except
with the approval of the Service. Investors should consult their own tax
advisors regarding the advisability of making such an election.
SALE OR EXCHANGE OF REMIC REGULAR CERTIFICATES
If a Regular Certificateholder sells or exchanges a REMIC Regular
Certificate, the Regular Certificateholder will recognize gain or loss equal to
the difference, if any, between the amount received and its adjusted basis in
the REMIC Regular Certificate. The adjusted basis of a REMIC Regular
Certificate generally will equal the cost of the REMIC Regular Certificate to
the seller, increased by any original issue discount or market discount
previously included in the seller's gross income with respect to the REMIC
Regular Certificate and reduced by amounts included in the stated redemption
price at maturity of the REMIC Regular Certificate that were previously
received by the seller, by any amortized premium and by any recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a REMIC
Regular Certificate realized by an investor who holds the REMIC Regular
Certificate as a capital asset will be capital gain or loss and will be
long-term or short-term depending on whether the REMIC Regular Certificate has
been held for the long-term capital gain holding period (currently more than
one year). Such gain will be treated as ordinary income (i) if a REMIC Regular
Certificate is held as part of a "conversion transaction" as defined in Code
Section 1258(c), up to the amount of interest that would have accrued on the
Regular Certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate under Code Section 1274(d) in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior distribution of
property that was held as a part of such transaction, (ii) in the case of a
non-corporate taxpayer, to the extent such taxpayer has made an election under
Code Section 163(d)(4) to have net capital gains taxed as investment income at
ordinary rates, or (iii) to the extent that such gain does not exceed the
excess, if any, of (a) the amount that would have been includible in the gross
income of the holder if its yield on such REMIC Regular Certificate were 110%
of the applicable Federal rate as of the date of purchase, over (b) the amount
of income actually includible in the gross income of such holder with respect
to the REMIC Regular Certificate. In addition, gain or loss recognized from the
sale of a REMIC Regular Certificate by certain banks or thrift institutions
will be treated as ordinary income or loss pursuant to Code Section 582(c).
Generally, short-term capital gains of certain non-corporate taxpayers are
subject to the same tax rate as the ordinary income of such taxpayers (39.6%)
for property held for not more than one year, and long-term capital gains of
such taxpayers are subject to a maximum tax rate of 20% for property held for
more than one year. The maximum tax rate for corporations is the same with
respect to both ordinary income and capital gains.
TREATMENT OF LOSSES
Holders of REMIC Regular Certificates will be required to report income
with respect to REMIC Regular Certificates on the accrual method of accounting,
without giving effect to delays or reductions in distributions attributable
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to defaults or delinquencies on the Mortgage Loans allocable to a particular
class of REMIC Regular Certificates, except to the extent it can be established
that such losses are uncollectible. Accordingly, the holder of a REMIC Regular
Certificate may have income, or may incur a diminution in cash flow as a result
of a default or delinquency, but may not be able to take a deduction (subject
to the discussion below) for the corresponding loss until a subsequent taxable
year. To the extent the rules of Code Section 166 regarding bad debts are
applicable, it appears that holders of REMIC Regular Certificates that are
corporations or that otherwise hold the REMIC Regular Certificates in
connection with a trade or business should in general be allowed to deduct as
an ordinary loss any such loss sustained during the taxable year on account of
any such REMIC Regular Certificates becoming wholly or partially worthless, and
that, in general, holders of REMIC Regular Certificates that are not
corporations and do not hold the REMIC Regular Certificates in connection with
a trade or business will be allowed to deduct as a short-term capital loss any
loss with respect to principal sustained during the taxable year on account of
a portion of any class or subclass of such REMIC Regular Certificates becoming
wholly worthless. Although the matter is not free from doubt, non-corporate
holders of REMIC Regular Certificates should be allowed a bad debt deduction at
such time as the principal balance of any class or subclass of such REMIC
Regular Certificates is reduced to reflect losses resulting from any liquidated
Mortgage Loans. The Service, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect such
losses only after all Mortgage Loans remaining in the Trust Fund have been
liquidated or such class of REMIC Regular Certificates has been otherwise
retired. The Service could also assert that losses on the REMIC Regular
Certificates are deductible based on some other method that may defer such
deductions for all holders, such as reducing future cash flow for purposes of
computing original issue discount. This may have the effect of creating
"negative" original issue discount which would be deductible only against
future positive original issue discount or otherwise upon termination of the
Class. Holders of REMIC Regular Certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such REMIC Regular Certificates. While losses
attributable to interest previously reported as income should be deductible as
ordinary losses by both corporate and non-corporate holders the Service may
take the position that losses attributable to accrued original issue discount
may only be deducted as capital losses in the case of non-corporate holders who
do not hold REMIC Regular Certificates in connection with a trade or business.
Special loss rules are applicable to banks and thrift institutions, including
rules regarding reserves for bad debts. Such taxpayers are advised to consult
their tax advisors regarding the treatment of losses on REMIC Regular
Certificates.
TAXATION OF RESIDUAL CERTIFICATES
TAXATION OF REMIC INCOME
Generally, the "daily portions" of REMIC taxable income or net loss will
be includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("Residual Certificateholders"), and
will not be taxed separately to the REMIC Pool. The daily portions of REMIC
taxable income or net loss of a Residual Certificateholder are determined by
allocating the REMIC Pool's taxable income or net loss for each calendar
quarter ratably to each day in such quarter and by allocating such daily
portion among the Residual Certificateholders in proportion to their respective
holdings of Residual Certificates in the REMIC Pool on such day. 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 (i) the
limitations on deductibility of investment interest expense and expenses for
the production of income do not apply, (ii) all bad loans will be deductible as
business bad debts and (iii) the limitation on the deductibility of interest
and expenses related to tax-exempt income will apply. The REMIC Pool's gross
income includes interest, original issue discount income and market discount
income, if any, on the Mortgage Loans, (reduced by amortization of any premium
on the Mortgage Loans), plus issue premium on the Regular Certificates, plus
income on reinvestment of cash flows and reserve assets, plus any cancellation
of indebtedness income upon allocation of realized losses to the REMIC Regular
Certificates. The REMIC Pool's deductions include interest and original issue
discount expense on the REMIC Regular Certificates, servicing fees on the
Mortgage Loans, other administrative expenses of the REMIC Pool and realized
losses on the Mortgage Loans. The requirement that Residual Certificateholders
report their pro rata share of taxable income or net loss of the REMIC Pool
will continue until there are no Certificates of any class of the related
series outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the REMIC Regular Certificates, on the other hand. In the
event that an interest in the Mortgage Loans is acquired by the REMIC Pool at a
discount, and one or more of such Mortgage Loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to
receive a corresponding
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amount of cash because (i) the prepayment may be used in whole or in part to
make distributions in reduction of principal on the REMIC Regular Certificates
and (ii) the discount on the Mortgage Loans which is includible in income may
exceed the deduction allowed upon such distributions on those REMIC Regular
Certificates on account of any unaccrued original issue discount relating to
those REMIC Regular Certificates. When there is more than one class of REMIC
Regular Certificates that distribute principal sequentially, this mismatching
of income and deductions is particularly likely to occur in the early years
following issuance of the REMIC Regular Certificates when distributions in
reduction of principal are being made in respect of earlier classes of REMIC
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 REMIC Regular Certificates are made. Taxable income may
also be greater in earlier years than in later years as a result of the fact
that interest expense deductions, expressed as a percentage of the outstanding
principal amount of such a series of REMIC Regular Certificates, may increase
over time as distributions in reduction of principal are made on the lower
yielding classes of REMIC Regular Certificates, whereas to the extent that the
REMIC Pool includes fixed rate Mortgage Loans, interest income with respect to
any given Mortgage Loan will remain constant over time as a percentage of the
outstanding principal amount of that loan. Consequently, Residual
Certificateholders must have sufficient other sources of cash to pay any
federal, state or local income taxes due as a result of such mismatching or
unrelated deductions against which to offset such income, subject to the
discussion of "excess inclusions" below under "Limitations on Offset or
Exemption of REMIC Income". The timing of such mismatching of income and
deductions described in this paragraph, if present with respect to a series of
Certificates, may have a significant adverse effect upon the Residual
Certificateholder's after-tax rate of return. In addition, a Residual
Certificateholder's taxable income during certain periods may exceed the income
reflected by such Residual Certificateholder for such periods in accordance
with generally accepted accounting principles. Investors should consult their
own accountants concerning the accounting treatment of their investment in
Residual Certificates.
BASIS AND LOSSES
The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Certificateholder is limited to the adjusted basis of
the Residual Certificate as of the close of the quarter (or time of disposition
of the Residual Certificate if earlier), determined without taking into account
the net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate is the amount paid for such Residual Certificate. Such
adjusted basis will be increased by the amount of taxable income of the REMIC
Pool reportable by the Residual Certificateholder and will be decreased (but
not below zero), first, by a cash distribution from the REMIC Pool and, second,
by the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. Any loss that is disallowed on account of this limitation
may be carried over indefinitely with respect to the Residual Certificateholder
as to whom such loss was disallowed and may be used by such Residual
Certificateholder only to offset any income generated by the same REMIC Pool.
A Residual Certificateholder will not be permitted to amortize directly
the cost of its Residual Certificate as an offset to its share of the taxable
income of the related REMIC Pool. However, that taxable income will not include
cash received by the REMIC Pool that represents a recovery of the REMIC Pool's
basis in its assets. Such recovery of basis by the REMIC Pool will have the
effect of amortization of the issue price of the Residual Certificates over
their life. However, in view of the possible acceleration of the income of
Residual Certificateholders described above under "Taxation of REMIC Income",
the period of time over which such issue price is effectively amortized may be
longer than the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a residual
interest as zero rather than such negative amount for purposes of determining
the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate
is greater that the corresponding portion of the REMIC Pool's basis in the
Mortgage Loans, the Residual Certificateholder will not recover a portion of
such basis until termination of the REMIC Pool unless future Treasury
regulations provide for periodic adjustments to the REMIC income otherwise
reportable by such holder. The REMIC Regulations currently in effect do not so
provide. See "Treatment of Certain Items of REMIC Income and Expense--Market
Discount" below regarding the basis of Mortgage Loans to the REMIC Pool and
"Sale or Exchange of a Residual Certificate" below regarding possible treatment
of a loss upon termination of the REMIC Pool as a capital loss.
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TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
Although the Depositor intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. The Depositor makes no representation as to the
specific method that it will use for reporting income with respect to the
Mortgage Loans and expenses with respect to the REMIC Regular Certificates, and
different methods could result in different timing of reporting of taxable
income or net loss to Residual Certificateholders or differences in capital
gain versus ordinary income.
Original Issue Discount. Generally, the REMIC Pool's deductions for
original issue discount will be determined in the same manner as original issue
discount income on REMIC Regular Certificates as described above under
"Taxation of REMIC Regular Certificates--Original Issue Discount" and
"--Variable Rate REMIC Regular Certificates", without regard to the de minimis
rule described therein.
Deferred Interest. Any Deferred Interest that accrues with respect to any
adjustable rate Mortgage Loans held by the REMIC Pool will constitute income to
the REMIC Pool and will be treated in a manner similar to the Deferred Interest
that accrues with respect to REMIC Regular Certificates as described above
under "Taxation of REMIC Regular Certificates--Deferred Interest".
Market Discount. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool allocable
to such Mortgage Loans is exceeded by their unpaid principal balances. The
REMIC Pool's basis in such Mortgage Loans is generally the fair market value of
the Mortgage Loans immediately after the transfer thereof to the REMIC Pool.
The REMIC Regulations provide that such basis is equal in the aggregate to the
issue prices of all regular and residual interests in the REMIC Pool (or the
fair market value thereof at the Closing Date, in the case of a retained
Class). In respect of Mortgage Loans that have market discount to which Code
Section 1276 applies, the accrued portion of such market discount would be
recognized currently as an item of ordinary income in a manner similar to
original issue discount. Market discount income generally should accrue in the
manner described above under "Taxation of REMIC Regular Certificates--Market
Discount".
Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate of
the issue prices (or the fair market value of retained Classes) of the regular
and residual interests in the REMIC Pool immediately after the transfer thereof
to the REMIC Pool. In a manner analogous to the discussion above under
"Taxation of REMIC Regular Certificates--Premium", a REMIC Pool that holds a
Mortgage Loan as a capital asset under Code Section 1221 may elect under Code
Section 171 to amortize premium on whole mortgage loans or mortgage loans
underlying MBS that were originated after September 27, 1985 or on Agency
Securities, or Private Mortgage-Backed Securities that are REMIC regular
interests under the constant yield method. Amortizable bond premium will be
treated as an offset to interest income on the Mortgage Loans, rather than as a
separate deduction item. To the extent that the mortgagors with respect to the
Mortgage Loans are individuals, Code Section 171 will not be available for
premium on Mortgage Loans (including underlying mortgage loans) originated on
or prior to September 27, 1985. Premium with respect to such Mortgage Loans may
be deductible in accordance with a reasonable method regularly employed by the
holder thereof. The allocation of such premium pro rata among principal
payments should be considered a reasonable method; however, the Service may
argue that such premium should be allocated in a different manner, such as
allocating such premium entirely to the final payment of principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
A portion or all of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Certificateholder will be subject to
special treatment. That portion, referred to as the "excess inclusion", is
equal to the excess of REMIC taxable income for the calendar quarter allocable
to a Residual Certificate over the daily accruals for such quarterly period of
(i) 120% of the long-term applicable Federal rate that would have applied to
the Residual Certificate (if it were a debt instrument) on the Startup Day
under Code Section 1274(d), multiplied by (ii) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, plus the amount of
such daily accruals of REMIC income described in this paragraph for all prior
quarters, decreased by any distributions made with respect to such Residual
Certificate prior to the beginning of such quarterly period. Accordingly, the
portion of the REMIC Pool's taxable income that will be treated as excess
inclusions will be a larger portion of such income as the adjusted issue price
of the Residual Certificates diminishes.
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The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carryforwards, on such Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the Residual
Certificateholder is an organization subject to the tax on unrelated business
income imposed by Code Section 511, the Residual Certificateholder's excess
inclusions will be treated as unrelated business taxable income of such
Residual Certificateholder for purposes of Code Section 511. In addition, REMIC
taxable income is subject to 30% withholding tax with respect to certain
persons who are not U.S. Persons (as defined below under "Tax-Related
Restrictions on Transfer of Residual Certificates--Foreign Investors"), and the
portion thereof attributable to excess inclusions is not eligible for any
reduction in the rate of withholding tax (by treaty or otherwise). See
"Taxation of Certain Foreign Investors--Residual Certificates" below. Finally,
if a real estate investment trust or a regulated investment company owns a
Residual Certificate, a portion (allocated under Treasury regulations yet to be
issued) of dividends paid by the real estate investment trust or a regulated
investment company could not be offset by net operating losses of its
shareholders, would constitute unrelated business taxable income for tax-exempt
shareholders, and would be ineligible for reduction of withholding to certain
persons who are not U.S. Persons. The SBJPA of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from Residual Certificates that have "significant value"
within the meaning of the REMIC Regulations, effective for taxable years
beginning after December 31, 1995, except with respect to Residual Certificates
continuously held by thrift institutions since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Holder. First, alternative minimum taxable income for a Residual
Holder is determined without regard to the special rule, discussed above, that
taxable income cannot be less than excess inclusions. Second, a Residual
Holder's alternative minimum taxable income for a taxable year cannot be less
than the excess inclusions for the year. Third, the amount of any alternative
minimum tax net operating loss deduction must be computed without regard to any
excess inclusions. These rules are effective for taxable years beginning after
December 31, 1986, unless a Residual Holder elects to have such rules apply
only to taxable years beginning after August 20, 1996.
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total anticipated excess inclusions with respect to such
Residual Certificate for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The REMIC
Regulations provide that the anticipated excess inclusions are based on actual
prepayment experience to the date of the transfer and projected payments based
on the Prepayment Assumption. The present value rate equals the applicable
Federal rate under Code Section 1274(d) as of the date of the transfer for a
term ending with the last calendar quarter in which excess inclusions are
expected to accrue. Such a tax generally would be imposed on the transferor of
the Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a Disqualified Organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. The tax also may be waived by the Treasury Department if
the Disqualified Organization promptly disposes of the residual interest and
the transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions on the Residual Certificate that are allocable
to the interest in the Pass-Through Entity during the period such interest is
held by such Disqualified Organization, and (ii) the highest marginal federal
corporate income tax rate. Such tax would be deductible from the ordinary gross
income of the Pass-Through Entity for the taxable year. The Pass-Through Entity
would not be liable for such tax if it has received an affidavit from such
record holder that it is not a Disqualified Organization or stating such
holder's taxpayer identification number and, during the period such person is
the record holder of the Residual Certificate, the Pass-Through Entity does not
have actual knowledge that such affidavit is false.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a Residual Certificate, all interests in the electing
large partnership are treated as held by Disqualified Organizations for
purposes of the tax
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imposed upon a Pass-Through Entity by Section 860E(c) of the Code. An exception
to this tax, otherwise available to a Pass-Through Entity that is furnished
certain affidavits by record holders of interests in the entity and that does
not know such affidavits are false, is not available to an electing large
partnership.
For these purposes, (i) "Disqualified Organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors
is not selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, (ii) "Pass-Through
Entity" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis and (iii) an "electing large partnership"
means any partnership having more than 100 members during the preceding tax
year (other than certain service partnerships and commodity pools), which elect
to apply simplified reporting provisions under 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.
The Agreement with respect to a series of Certificates will provide that
no legal or beneficial interest in a Residual Certificate may be transferred
unless (i) the proposed transferee provides to the transferor and the Trustee
an affidavit providing its taxpayer identification number and stating that such
transferee is the beneficial owner of the Residual Certificate, is not a
Disqualified Organization and is not purchasing such Residual Certificates on
behalf of a Disqualified Organization (i.e., as a broker, nominee or middleman
thereof), and (ii) the transferor provides a statement in writing to the
Depositor and the Trustee that it has no actual knowledge that such affidavit
is false. Moreover, the Agreement will provide that any attempted or purported
transfer in violation of these transfer restrictions will be null and void and
will vest no rights in any purported transferee. Each Residual Certificate with
respect to a series will bear a legend referring to such restrictions on
transfer, and each Residual Certificateholder will be deemed to have agreed, as
a condition of ownership thereof, to any amendments to the related Agreement
required under the Code or applicable Treasury regulations to effectuate the
foregoing restrictions. Information necessary to compute an applicable excise
tax must be furnished to the Service and to the requesting party within 60 days
of the request, and the Depositor or the Trustee may charge a fee for computing
and providing such information.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" (as defined below) to a Residual Certificateholder (other than a
Residual Certificateholder who is not a U.S. Person, as defined below under
"Foreign Investors") is disregarded for all federal income tax purposes if a
significant purpose of the transferor is to impede the assessment or collection
of tax. 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 the transfer, (i) 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 (ii)
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 under "Disqualified
Organizations". 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 (i) the transferor conducted,
at the time of the transfer, a reasonable investigation of the financial
condition of the transferee and found that the transferee historically had paid
its debts as they came due and found no significant evidence to indicate that
the transferee would not continue to pay its debts as they came due in the
future, and (ii) the transferee represents to the transferor that it
understands that, as the holder of the noneconomic residual interest, the
transferee may incur tax liabilities in excess of 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 Certificates will require the transferee of a Residual Certificate to
certify to the matters in the preceding sentence as part of the affidavit
described above under the heading "Disqualified Organizations". The transferor
must have no actual knowledge or reason to know that such statements are false.
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Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless
such transferee's income is effectively connected with the conduct of a trade
or business within the United States. A Residual Certificate is deemed to have
tax avoidance potential unless, at the time of the transfer, (i) the future
value of expected distributions equals at least 30% of the anticipated excess
inclusions after the transfer, and (ii) the transferor reasonably expects that
the transferee will receive sufficient distributions from the REMIC Pool at or
after the time at which the excess inclusions accrue and prior to the end of
the next succeeding taxable year for the accumulated withholding tax liability
to be paid. If the non-U.S. Person transfers the Residual Certificate back to a
U.S. Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.
The Prospectus Supplement relating to a series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
Person" means a citizen or resident of the United States, a corporation or
partnership (except as provided in applicable Treasury regulations) created or
organized in or under the laws of the United States, any state or the District
of Columbia, including any entity treated as a corporation or partnership for
federal income tax purposes, an estate that is subject to U.S. federal income
tax regardless of the source of its income or a trust if a court within the
United States is able to exercise primary supervision over the administration
of such trust, and one or more such U.S. Persons have the authority to control
all substantial decisions of such trust (or, to the extent provided in
applicable Treasury regulations, certain trusts in existence on August 20, 1996
which are eligible to elect to be treated as U.S. Persons).
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under "Taxation
of Residual Certificates--Basis and Losses") of such Residual Certificateholder
in such Residual Certificate at the time of the sale or exchange. In addition
to reporting the taxable income of the REMIC Pool, a Residual Certificateholder
will have taxable income to the extent that any cash distribution to it from
the REMIC Pool exceeds such adjusted basis on that Distribution Date. Such
income will be treated as gain from the sale or exchange of the Residual
Certificate. It is possible that the termination of the REMIC Pool may be
treated as a sale or exchange of a Residual Certificateholder's Residual
Certificate, in which case, if the Residual Certificateholder has an adjusted
basis in such Residual Certificateholder's Residual Certificate remaining when
its interest in the REMIC Pool terminates, and if such Residual
Certificateholder holds such Residual Certificate as a capital asset under Code
Section 1221, then such Residual Certificateholder will recognize a capital
loss at that time in the amount of such remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate
in effect at the time the taxpayer entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii) in
the case of a non-corporate taxpayer, to the extent such taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss
recognized from the sale of a Residual Certificate by certain banks or thrift
institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 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 such sale or disposition, acquires (or enters into any other
transaction that results in the application of Section 1091) 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.
MARK TO MARKET REGULATIONS
Prospective purchasers of the Residual Certificates should also be aware
that Service has promulgated final regulations (the "Mark to Market
Regulations") under Code Section 475 relating to the requirement that a
securities
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dealer mark to market securities held for sale to customers. The Mark to Market
Regulations provide that a Residual Certificate is not treated as a security
and thus may not be marked to market. The Mark to Market Regulations apply to
all Residual Certificates acquired on or after January 4, 1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
PROHIBITED TRANSACTIONS
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Certificateholders, but rather
will be taxed directly to the REMIC Pool at a 100% rate. Prohibited
transactions generally include (i) the disposition of a qualified mortgage
other than for (a) substitution within two years of the Startup Day for a
defective (including a defaulted) obligation (or repurchase in lieu of
substitution of a defective (including a defaulted) obligation at any time) or
for any qualified mortgage within three months of the Startup Day, (b)
foreclosure, default or imminent default of a qualified mortgage, (c)
bankruptcy or insolvency of the REMIC Pool or (d) a qualified (complete)
liquidation, (ii) the receipt of income from assets that are not the type of
mortgages or investments that the REMIC Pool is permitted to hold, (iii) the
receipt of compensation for services or (iv) the receipt of gain from
disposition of cash flow investments other than pursuant to a qualified
liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction
to sell REMIC Pool property to prevent a default on REMIC Regular Certificates
as a result of a default on qualified mortgages or to facilitate a clean-up
call (generally, an optional termination to save administrative costs when no
more than a small percentage of the Certificates is outstanding). The REMIC
Regulations indicate that the modification of a Mortgage Loan generally will
not be treated as a disposition if it is occasioned by a default or reasonably
foreseeable default, an assumption of the Mortgage Loan, the waiver of a
due-on-sale or due-on-encumbrance clause or the conversion of an interest rate
by a mortgagor pursuant to the terms of a convertible adjustable rate Mortgage
Loan.
CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (i) during the
three months following the Startup Day, (ii) made to a qualified reserve fund
by a Residual Certificateholder, (iii) in the nature of a guarantee, (iv) made
to facilitate a qualified liquidation or clean-up call and (v) as otherwise
permitted in Treasury regulations yet to be issued.
NET INCOME FROM FORECLOSURE PROPERTY
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property", determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
"foreclosure property" for a period not exceeding the close of the third
calendar year beginning after the year in which the REMIC Pool acquired such
property, with a possible extension. Net income from foreclosure property
generally means gain from the sale of a foreclosure property that is inventory
property and gross income from foreclosure property other than qualifying rents
and other qualifying income for a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable Prospectus Supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan. In addition, unless otherwise disclosed in the
applicable Prospectus Supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC Pool.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC
Pool will not be subject to the prohibited transaction rules on the sale of its
assets, provided that the REMIC Pool credits or distributes in liquidation all
of the sale proceeds plus its cash (other than amounts retained to meet claims)
to holders of REMIC Regular Certificates and Residual Certificateholders within
the 90-day period.
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ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes in
a manner similar to a partnership. The form for such income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The
Trustee will be required to sign the REMIC Pool's returns. Treasury regulations
provide that, except where there is a single Residual Certificateholder for an
entire taxable year, the REMIC Pool will be subject to the procedural and
administrative rules of the Code applicable to partnerships, including the
determination by the Service of any adjustments to, among other things, items
of REMIC income, gain, loss, deduction or credit in a unified administrative
proceeding. The Residual Certificateholder owning the largest percentage
interest in the Residual Certificates will be obligated to act as "tax matters
person", as defined in applicable Treasury regulations, with respect to the
REMIC Pool. Each Residual Certificateholder will be deemed, by acceptance of
such Residual Certificates, to have agreed (i) to the appointment of the tax
matters person as provided in the preceding sentence and (ii) to the
irrevocable designation of the Master Servicer as agent for performing the
functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (i) 3% of the
excess, if any, of adjusted gross income over $100,000 ($50,000 in the case of
a married individual filing a separate return) (subject to adjustments for
post-1991 inflation) or (ii) 80% of the amount of itemized deductions otherwise
allowable for such year. In the case of a REMIC Pool, such deductions may
include deductions under Code Section 212 for the Servicer Fee and all
administrative and other expenses relating to the REMIC Pool, any similar fees
paid to the issuer or guarantor of the Agency Certificates or the Private
Mortgage-Backed Securities or Contracts, or any similar expenses allocated to
the REMIC Pool with respect to a regular interest it holds in another REMIC.
Such investors who hold REMIC Certificates either directly or indirectly
through certain pass-through entities may have their pro rata share of such
expenses allocated to them as additional gross income, but may be subject to
such limitation on deductions. In addition, such expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Temporary
Treasury regulations provide that the additional gross income and corresponding
amount of expenses generally are to be allocated entirely to the holders of
Residual Certificates in the case of a REMIC Pool that would not qualify as a
fixed investment trust in the absence of a REMIC election. However, such
additional gross income and limitation on deductions will apply to the
allocable portion of such expenses to holders of REMIC Regular Certificates, as
well as holders of Residual Certificates, where such REMIC Regular Certificates
are issued in a manner that is similar to pass-through certificates in a fixed
investment trust. In general, such allocable portion will be determined based
on the ratio that a REMIC Certificateholder's income, determined on a daily
basis, bears to the income of all holders of REMIC Regular Certificates and
Residual Certificates with respect to a REMIC Pool. As a result, individuals,
estates or trusts holding REMIC Certificates (either directly or indirectly
through a grantor trust, partnership, S corporation, REMIC, or certain other
pass-through entities described in the foregoing temporary Treasury
regulations) may have taxable income in excess of the interest income at the
pass-through rate on REMIC Regular Certificates that are issued in a single
Class or otherwise consistently with fixed investment trust status or in excess
of cash distributions for the related period on Residual Certificates. Unless
otherwise indicated in the applicable Prospectus Supplement, all such expenses
will be allocable to the Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
REMIC REGULAR CERTIFICATES
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S Persons (as defined below), will be considered "portfolio interest"
and, therefore, generally will not be subject to 30% United States withholding
tax, provided that such Non-U.S. Person (i) is not a "10-percent shareholder"
within the meaning of Code Section 871(h)(3)(B) or a controlled foreign
corporation described in Code Section 881(c)(3)(C) and (ii) provides the
Trustee, or the person who would otherwise be required to withhold tax from
such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial owner
and stating, among other things, that the beneficial owner of the REMIC Regular
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Certificate is a Non-U.S. Person. If such statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
REMIC Regular Certificate is effectively connected with the conduct of a trade
or business within the United States by such Non-U.S. Person. In the latter
case, such Non-U.S. Person will be subject to United States federal income tax
at regular rates. Prepayment Premiums distributable to Regular
Certificateholders who are Non-U.S. Persons may be subject to 30% United States
withholding tax. Investors who are Non-U.S. Persons should consult their own
tax advisors regarding the specific tax consequences to them of owning a REMIC
Regular Certificate. The term "Non-U.S. Person" means any person who is not a
U.S. Person.
The IRS recently issued final regulations (the "New Regulations") which
would provide alternative methods of satisfying the beneficial ownership
certification requirement described above. The New Regulations are effective
January 1, 2001, current withholding will remain valid until the earlier of
December 31, 2000 or the due date of expiration of the certificate under the
rules as currently in effect. The New Regulations will require, in the case of
Offered Certificates held by a foreign partnership, that (x) the certification
described above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule would apply
in the case of tiered partnerships. Non-U.S. Persons should consult their own
tax advisors concerning the application of the certification requirements in
the New Regulations.
RESIDUAL CERTIFICATES
The Conference Committee Report to the 1986 Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to the
conditions described in "REMIC Regular Certificates" above, but only to the
extent that (i) the Mortgage Loans (including mortgage loans underlying MBS)
were issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of
assets therein (as to which a separate REMIC election will be made), to which
the Residual Certificate relates, consists of obligations issued in "registered
form" within the meaning of Code Section 163(f)(1). Generally, whole mortgage
loans will not be, but MBS and regular interests in another REMIC Pool will be,
considered obligations issued in registered form. Furthermore, a Residual
Certificateholder will not be entitled to any exemption from the 30%
withholding tax (or lower treaty rate) to the extent of that portion of REMIC
taxable income that constitutes an "excess inclusion". See "Taxation of
Residual Certificates--Limitations on Offset or Exemption of REMIC Income". If
the amounts paid to Residual Certificateholders who are Non-U.S. Persons are
effectively connected with the conduct of a trade or business within the United
States by such Non-U.S. Persons, 30% (or lower treaty rate) withholding will
not apply. Instead, the amounts paid to such Non-U.S. Persons will be subject
to United States federal income tax at regular rates. If 30% (or lower treaty
rate) withholding is applicable, such amounts generally will be taken into
account for purposes of withholding only when paid or otherwise distributed (or
when the Residual Certificate is disposed of) under rules similar to
withholding upon disposition of debt instruments that have original issue
discount. See "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors" above concerning the disregard of certain
transfers having "tax avoidance potential". Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences
to them of owning Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the REMIC Regular Certificates, and proceeds from
the sale of the REMIC Regular Certificates to or through certain brokers, may
be subject to a "backup" withholding tax under Code Section 3406 of 31% on
"reportable payments" (including interest distributions, original issue
discount, and, under certain circumstances, principal distributions) unless the
Regular Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the Trustee, its agent or the broker who effected the sale of the REMIC Regular
Certificate, or such Certificateholder is otherwise an exempt recipient under
applicable provisions of the Code. Any amounts to be withheld from distribution
on the REMIC Regular Certificates would be refunded by the Service or allowed
as a credit against the Regular Certificateholder's federal income tax
liability. The New Regulations change certain of the rules relating to certain
presumptions currently available relating to information reporting and backup
withholding. Non-U.S. Persons are urged to contact their own tax advisors
regarding the application to them of backup withholding and information
reporting.
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REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the REMIC Regular
Certificates will be made annually to the Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders
of record of REMIC Regular Certificates or beneficial owners who own REMIC
Regular Certificates through a broker or middleman as nominee. All brokers,
nominees and all other non-exempt holders of record of REMIC Regular
Certificates (including corporations, non-calendar year taxpayers, securities
or commodities dealers, real estate investment trusts, investment companies,
common trust funds, thrift institutions and charitable trusts) may request such
information for any calendar quarter by telephone or in writing by contacting
the person designated in Service Publication 938 with respect to a particular
series of REMIC Regular Certificates. Holders through nominees must request
such information from the nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice
to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool to
each Residual Certificateholder by the end of the month following the close of
each calendar quarter (41 days after the end of a quarter under proposed
Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of REMIC
Regular Certificates, and filed annually with the Service concerning Code
Section 67 expenses (see "Limitations on Deduction of Certain Expenses" above)
allocable to such holders. Furthermore, under such regulations, information
must be furnished quarterly to Residual Certificateholders, furnished annually
to holders of REMIC Regular Certificates, and filed annually with the Service
concerning the percentage of the REMIC Pool's assets meeting the qualified
asset tests described above under "Status of REMIC Certificates".
FASIT CERTIFICATES
GENERAL
If so specified in the applicable Prospectus Supplement, an election will
be made to treat the Trust Fund or specified assets thereof (such portion of
the Trust Fund, the "Trust FASIT"), as a FASIT within the meaning of Code
Section 860L(a). The Offered Certificates will be designated as classes of
regular interests and the Class O Certificate will be designated as the sole
class of ownership interest in the Trust FASIT. Assuming (i) the making of an
appropriate election, (ii) compliance with the Pooling and Servicing Agreement,
as applicable, and (iii) compliance with any changes in the law, including any
amendments to the Code or applicable temporary or final Treasury regulations
thereunder, in the opinion of Cadwalader, Wickersham & Taft, (a) the Trust
FASIT will qualify as a FASIT, (b) one Class thereof (the "FASIT Ownership
Certificate" or the "Class O Certificate") will represent the sole class of
ownership interest in the Trust FASIT, and (c) the remaining Classes thereof
(the "FASIT Regular Certificates") will represent "regular interests" in the
Trust FASIT. Only the FASIT Regular Certificates are offered pursuant to this
Prospectus. References herein to the REMIC Regulations are to Treasury
regulations issued under Sections 860A through 860G of the Code to the extent
such sections are incorporated by reference into the FASIT Provisions. If so
specified in the applicable Prospectus Supplement, the portion of a Trust Fund
as to which a FASIT election is not made may be treated as a grantor trust for
federal income tax purposes. See "Grantor Trust Certificates."
STATUS OF FASIT REGULAR CERTIFICATES
FASIT Regular Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Sections
856(c)(4)(A) and interest on the FASIT Regular Certificates will be considered
"interest on obligations secured by mortgages on real property or on interests
in real property" within the meaning of Code Section 856(c)(3)(B) in the same
proportion that, for both purposes, the assets of the Trust FASIT and the
income thereon would be so treated. FASIT Certificates held by a domestic
building and loan association will be treated as "regular interest[s] in a
FASIT" under Code Section 7701(a)(19)(C)(xi), but only in the proportion that
the Trust FASIT holds "loans secured by an interest in real property which is .
. . residential real property" within the meaning of Code Section
7701(a)(19)(C)(v). For this purpose, Mortgage Loans secured by multifamily
residential housing should qualify. It is also likely that Mortgage Loans
secured by nursing homes and assisted living facilities would qualify as "loans
secured by an interest in . . . health institutions or facilities, including
structures designed or used primarily for residential purposes for
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. . . persons under care" within the meaning of Code Section
7701(a)(19)(C)(vii). If at all times 95% or more of the assets of the Trust
FASIT or the income thereon qualify for the foregoing treatments, the FASIT
Certificates will qualify for the corresponding status in their entirety.
Mortgage Loans which have been defeased with Treasury obligations and the
income therefrom will not qualify for the foregoing treatments. Accordingly,
the FASIT Regular Certificates may not be a suitable investment for investors
who require a specific amount or percentage of assets or income meeting the
foregoing treatments. For purposes of Code Section 856(c)(4)(A), payments of
principal and interest on a Mortgage Loan that are reinvested pending
distribution to holders of FASIT Regular Certificates should qualify for such
treatment. FASIT Regular Certificates held by a regulated investment company
will not constitute "government securities" within the meaning of Code Section
851(b)(4)(A)(i). FASIT Regular Certificates held by certain financial
institutions will constitute an "evidence of indebtedness" within the meaning
of Code Section 582(c)(1).
QUALIFICATION AS A FASIT
In order for the Trust FASIT to qualify as a FASIT, there must be ongoing
compliance on the part of the applicable portion of the Trust Fund with the
requirements set forth in the Code. The FASIT must fulfill an asset test, which
requires that substantially all of the assets of the FASIT, as of the close of
the third calendar month beginning after the "Startup Day" (which for purposes
of this discussion is the date of the initial issuance of the FASIT
Certificates) and at all times thereafter, must consist of cash or cash
equivalents, certain debt instruments (other than debt instruments issued by
the owner of the FASIT or a related party) and hedges (and contracts to acquire
the same), foreclosure property and regular interests in another FASIT or in a
REMIC. Based on identical statutory language applicable to REMICs, it appears
that the "substantially all" requirement should be met if at all times the
aggregate adjusted basis of the nonqualified assets is less than one percent of
the aggregate adjusted basis of all the FASIT's assets. The FASIT Provisions
also require the FASIT ownership interest and certain "high-yield" regular
interests (described below) to be held only by certain fully taxable domestic
corporations. The Pooling and Servicing Agreement provides that no legal or
beneficial interest in the Class O Certificate or any Class of Certificates
which the Depositor determines to be a high-yield regular interest may be
transferred or registered unless certain conditions, designed to prevent
violation of this requirement, are met.
Permitted debt instruments must bear interest, if any, at a fixed or
qualified variable rate. Permitted hedges include interest rate or foreign
currency notional principal contracts, letters of credit, insurance, guarantees
of payment default and similar instruments to be provided in regulations, and
which are reasonably required to guarantee or hedge against the FASIT's risks
associated with being the obligor on interests issued by the FASIT. Foreclosure
property is real property acquired by the FASIT in connection with the default
or imminent default of a qualified mortgage, provided the Depositor had no
knowledge or reason to know as of the date such asset was acquired by the FASIT
that such a default had occurred or would occur. Foreclosure property may
generally not be held beyond the close of the third taxable year after the
taxable year of the holder of the Class O Certificate in which the FASIT
acquired such property, with one extension available from the Internal Revenue
Service.
In addition to the foregoing requirements, the various interests in a
FASIT also must meet certain requirements. All of the interests in a FASIT must
be either of the following: (a) one or more classes of regular interests or (b)
a single class of ownership interest. A regular interest is an interest in a
FASIT that is issued on or after the Startup Day with fixed terms, is
designated as a regular interest, and (i) unconditionally entitles the holder
to receive a specified principal amount (or other similar amount), (ii)
provides that interest payments (or other similar amounts), if any, at or
before maturity either are payable based on a fixed rate or a qualified
variable rate, (iii) has a stated maturity of not longer than 30 years, (iv)
has an issue price not greater than 125% of its stated principal amount, and
(v) has a yield to maturity not greater than 5 percentage points higher than
the related applicable Federal rate (as defined in Code Section 1274(d)). A
regular interest that is described in the preceding sentence except that it
fails to meet one or more of requirements (i), (ii), (iv) or (v) is a
"high-yield" regular interest. A high-yield regular interest that fails
requirement (ii) must consist of a specified, nonvarying portion of the
interest payments on the permitted assets, by reference to the REMIC rules. An
ownership interest is an interest in a FASIT other than a regular interest that
is issued on the Startup Day, is designated an ownership interest and is held
by a single, fully-taxable, domestic corporation. An interest in a FASIT may be
treated as a regular interest even if payments of principal with respect to
such interest are subordinated to payments on other regular interests or the
ownership interest in the FASIT, and are dependent on the absence of defaults
or delinquencies on permitted assets lower than reasonably expected returns on
permitted assets, unanticipated expenses incurred by the FASIT or prepayment
interest shortfalls. Accordingly, based on the foregoing, in the opinion of
Cadwalader, Wickersham & Taft, the FASIT Regular Certificates of a Series will
constitute classes of regular interests, and the Class O Certificate of a
Series will represent the sole class of ownership interest in the Trust FASIT.
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If an entity fails to comply with one or more of the ongoing requirements
of the Code for status as a FASIT during any taxable year, the Code provides
that the entity or applicable portion thereof will not be treated as a FASIT
thereafter. In this event, any entity that holds mortgage loans and is the
obligor with respect to debt obligations with two or more maturities, such as
the Trust Fund, may be treated as a separate association taxable as a
corporation, and the FASIT Certificates may be treated as equity interests
therein. The legislative history to the FASIT Provisions indicates, however,
that an entity can continue to be a FASIT if loss of its status was
inadvertent, it takes prompt steps to requalify and other requirements that may
be provided in Treasury regulations are met. Loss of FASIT status results in
retirement of all regular interests and their reissuance. If the resulting
instruments would be treated as equity under general tax principles,
cancellation of debt income may result.
TAXATION OF FASIT REGULAR CERTIFICATES
General. The FASIT Regular Certificates generally will be treated for
federal income tax purposes as newly-originated debt instruments. In general,
interest, original issue discount ("OID") and market discount on a FASIT
Regular Certificate will be treated as ordinary income to the holder of a FASIT
Regular Certificate, and principal payments (other than principal payments that
do not exceed accrued market discount) on a FASIT Regular Certificate will be
treated as a return of capital to the extent of the Certificateholder's basis
allocable thereto. Certificateholders must use the accrual method of accounting
with respect to FASIT Regular Certificates, regardless of the method of
accounting otherwise used by such Certificateholders.
Except as set forth in the applicable Prospectus Supplement, the
discussions above under the headings "REMIC Certificates--Taxation of REMIC
Regular Certificates--Original Issue Discount," "--Acquisition Premium,"
"--Market Discount," "--Premium," "--Election to Treat All Interest Under the
Constant Yield Method," and "--Treatment of Losses" will apply to the FASIT
Regular Certificates. The discussion under the headings "--Sale or Exchange of
REMIC Regular Certificates" will also apply to the FASIT Regular Certificates,
except that the treatment of a portion of the gain on a REMIC Regular Interest
as ordinary income to the extent the yield thereon did not exceed 110% of the
applicable Federal rate will not apply.
PROHIBITED TRANSACTIONS TAX
Income from certain transactions by a FASIT, called prohibited
transactions, are taxable to the holder of the ownership interest in that FASIT
at a 100% rate. Prohibited transactions generally include (i) the disposition
of a permitted asset other than for (a) foreclosure, default, or imminent
default of a qualified mortgage, (b) bankruptcy or insolvency of the FASIT, (c)
a qualified (complete) liquidation, (d) substitution for another permitted debt
instrument or distribution of the debt instrument to the holder of the
ownership interest to reduce overcollateralization, but only if a principal
purpose of acquiring the debt instrument which is disposed of was not the
recognition of gain (or the reduction of a loss) on the withdrawn asset as a
result of an increase in the market value of the asset after its acquisition by
the FASIT or (e) the retirement of a Class of FASIT regular interests, (ii) the
receipt of income from nonpermitted assets, (iii) the receipt of compensation
for services, or (iv) the receipt of any income derived from a loan originated
by the FASIT. It is unclear the extent to which tax on such transactions could
be collected from the Trust FASIT directly under the applicable statutes rather
than from the holder of the Class O Certificate. However, under the Pooling and
Servicing Agreement, any such prohibited transactions tax that is not payable
by a party thereto as a result of its own actions will be paid by the Trust
FASIT and will reduce Available Funds. It is not anticipated that the Trust
FASIT will engage in any prohibited transactions.
TAXATION OF CERTAIN FOREIGN INVESTORS
The federal income tax treatment of Non-U.S. Persons who own FASIT Regular
Certificates is the same as that described above under "REMIC
Certificates--Taxation of Certain Foreign Investors--REMIC Regular
Certificates."
High-yield FASIT Regular Certificates may not be sold to or beneficially
owned by Non-U.S. Persons. Any such purported transfer will be null and void
and, upon the Trustee's discovery of any purported transfer in violation of
this requirement, the last preceding owner of such FASIT Regular Certificates
will be restored to ownership thereof as completely as possible. Such last
preceding owner will, in any event, be taxable on all income with respect to
such FASIT Regular Certificates for federal income tax purposes. The Pooling
and Servicing Agreement provides that, as a condition to transfer of a
high-yield FASIT Regular Certificate, the proposed transferee must furnish an
affidavit as to its status as a U.S. Person and otherwise as a permitted
transferee.
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BACKUP WITHHOLDING
Distributions made on the FASIT Regular Certificates, and proceeds from
the sale of the FASIT Regular Certificates to or through certain brokers, may
be subject to a "backup" withholding tax under Code Section 3406 in the same
manner as described above under "REMIC Certificates--Backup Withholding."
REPORTING REQUIREMENTS
Reports of accrued interest, OID, if any, and information necessary to
compute the accrual of any market discount on the FASIT Regular Certificates
will be made annually to the Internal Revenue Service and to investors in the
same manner as described above under "REMIC Certificates--Reporting
Requirements" with respect to REMIC Regular Certificates.
GRANTOR TRUST CERTIFICATES
STANDARD CERTIFICATES
GENERAL
In the event that no election is made to treat a Trust Fund (or a
segregated pool of assets therein) with respect to a series of Certificates
that are not designated as "Stripped Certificates", as described below, as a
REMIC (Certificates of such a series hereinafter referred to as "Standard
Certificates"), in the opinion of Cadwalader, Wickersham & Taft, tax counsel to
the Depositor, the Trust Fund will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code and not as an association taxable
as a corporation or a "taxable mortgage pool" within the meaning of Code
Section 7701(i). Where there is no fixed retained yield with respect to the
Mortgage Loans underlying the Standard Certificates, the holder of each such
Standard Certificate (a "Standard Certificateholder") in such series will be
treated as the owner of a pro rata undivided interest in the ordinary income
and corpus portions of the Trust Fund represented by its Standard Certificate
and will be considered the beneficial owner of a pro rata undivided interest in
each of the Mortgage Loans, subject to the discussion below under
"Recharacterization of Servicing Fees". Accordingly, the holder of a Standard
Certificate of a particular series will be required to report on its federal
income tax return its pro rata share of the entire income from the Mortgage
Loans represented by its Standard Certificate, including interest at the coupon
rate on such Mortgage Loans, original issue discount (if any), prepayment fees,
assumption fees, and late payment charges received by the Master Servicer, in
accordance with such Standard Certificateholder's method of accounting. A
Standard Certificateholder generally will be able to deduct its share of the
Servicing Fee and all administrative and other expenses of the Trust Fund in
accordance with its method of accounting, provided that such amounts are
reasonable compensation for services rendered to that Trust Fund. However,
investors who are individuals, estates or trusts who own Standard Certificates,
either directly or indirectly through certain pass-through entities, will be
subject to limitation with respect to certain itemized deductions described in
Code Section 67, including deductions under Code Section 212 for the Servicing
Fee and all such administrative and other expenses of the Trust Fund, to the
extent that such deductions, in the aggregate, do not exceed two percent of an
investor's adjusted gross income. In addition, Code Section 68 provides that
itemized deductions otherwise allowable for a taxable year of an individual
taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of
adjusted gross income over $100,000 ($50,000 in the case of a married
individual filing a separate return) (subject to adjustments for post-1991
inflation), or (ii) 80% of the amount of itemized deductions otherwise
allowable for such year. As a result, such investors holding Standard
Certificates, directly or indirectly through a pass-through entity, may have
aggregate taxable income in excess of the aggregate amount of cash received on
such Standard Certificates with respect to interest at the pass-through rate on
such Standard Certificates. In addition, such expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Moreover,
where there is fixed retained yield with respect to the Mortgage Loans
underlying a series of Standard Certificates or where the Servicing Fee is in
excess of reasonable servicing compensation, the transaction will be subject to
the application of the "stripped bond" and "stripped coupon" rules of the Code,
as described below under "Stripped Certificates" and "Recharacterization of
Servicing Fees", respectively.
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TAX STATUS
In the opinion of Cadwalader, Wickersham & Taft, tax counsel to the
Depositor, Standard Certificates will have the following status for federal
income tax purposes:
1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) will be considered
to represent "loans secured by an interest in real property" within the meaning
of Code Section 7701(a)(19)(C)(v), provided that the real property securing the
Mortgage Loans represented by that Standard Certificate is of the type
described in such section of the Code.
2. A Standard Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code Section
856(c)(4)(A) to the extent that the assets of the related Trust Fund consist of
qualified assets, and interest income on such assets will be considered
"interest on obligations secured by mortgages on real property" to such extent
within the meaning of Code Section 856(c)(3)(B).
3. A Standard Certificate owned by a REMIC will be considered to represent
an "obligation. . . which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A) to the extent that
the assets of the related Trust Fund consist of "qualified mortgages" within
the meaning of Code Section 860G(a)(3).
4. A Certificate owned by a "financial asset securitization investment
trust" within the meaning of Code Section 860L(c) will be considered to
represent "permitted assets" within the meaning of Code Section 860L(c) to the
extent that the assets of the Trust Fund consist of "debt instruments" or other
permitted assets within the meaning of Code Section 860L(c).
PREMIUM AND DISCOUNT
Standard Certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described above under "REMIC
Certificates--Taxation of Residual Certificates--Premium".
Original Issue Discount. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans
as to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Code provisions or, under certain circumstances, by
the presence of "teaser rates" on the Mortgage Loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to such
income. Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual. However,
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires
the obligation after its initial issuance at a price greater than the sum of
the original issue price and the previously accrued original issue discount,
less prior payments of principal. Accordingly, if such Mortgage Loans acquired
by a Standard Certificateholder are purchased at a price equal to the then
unpaid principal amount of such Mortgage Loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of such Mortgage Loans (i.e., points) will be includible by
such holder.
Market Discount. Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the Mortgage Loans will be
determined and will be reported as ordinary income generally in the manner
described above under "REMIC Certificates--Taxation of REMIC Regular
Certificates--Market Discount", except that the ratable accrual methods
described therein will not apply. Rather, the holder will accrue market
discount pro rata over the life of the Mortgage Loans, unless the constant
yield method is elected. Unless indicated otherwise in the applicable
Prospectus Supplement, no prepayment assumption will be assumed for purposes of
such accrual.
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RECHARACTERIZATION OF SERVICING FEES
If the Servicing Fee paid to the Master Servicer were deemed to exceed
reasonable servicing compensation, the amount of such excess would represent
neither income nor a deduction to Certificateholders. In this regard, there are
no authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable in
the context of this or similar transactions or whether, in the case of the
Standard Certificate, the reasonableness of servicing compensation should be
determined on a weighted average or loan-by-loan basis. If a loan-by-loan basis
is appropriate, the likelihood that such amount would exceed reasonable
servicing compensation as to some of the Mortgage Loans would be increased.
Service guidance indicates that a servicing fee in excess of reasonable
compensation ("excess servicing") will cause the Mortgage Loans to be treated
under the "stripped bond" rules. Such guidance provides safe harbors for
servicing deemed to be reasonable and requires taxpayers to demonstrate that
the value of servicing fees in excess of such amounts is not greater than the
value of the services provided.
Accordingly, if the Service's approach is upheld, a servicer who receives
a servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage Loans.
Under the rules of Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from the right
to receive some or all of the principal payments on the obligation would result
in treatment of such Mortgage Loans as "stripped coupons" and "stripped bonds".
Subject to the de minimis rule discussed below under "--Stripped Certificates",
each stripped bond or stripped coupon could be considered for this purpose as a
non-interest bearing obligation issued on the date of issue of the Standard
Certificates, and the original issue discount rules of the Code would apply to
the holder thereof. While Standard Certificateholders would still be treated as
owners of beneficial interests in a grantor trust for federal income tax
purposes, the corpus of such trust could be viewed as excluding the portion of
the Mortgage Loans the ownership of which is attributed to the Master Servicer,
or as including such portion as a second class of equitable interest.
Applicable Treasury regulations treat such an arrangement as a fixed investment
trust, since the multiple classes of trust interests should be treated as
merely facilitating direct investments in the trust assets and the existence of
multiple classes of ownership interests is incidental to that purpose. In
general, such a recharacterization should not have any significant effect upon
the timing or amount of income reported by a Standard Certificateholder, except
that the income reported by a cash method holder may be slightly accelerated.
See "Stripped Certificates" below for a further description of the federal
income tax treatment of stripped bonds and stripped coupons.
SALE OR EXCHANGE OF STANDARD CERTIFICATES
Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the
Mortgage Loans and the other assets represented by the Standard Certificate. In
general, the aggregate adjusted basis will equal the Standard
Certificateholder's cost for the Standard Certificate, increased by the amount
of any income previously reported with respect to the Standard Certificate and
decreased by the amount of any losses previously reported with respect to the
Standard Certificate and the amount of any distributions received thereon.
Except as provided above with respect to market discount on any Mortgage Loans,
and except for certain financial institutions subject to the provisions of Code
Section 582(c), any such gain or loss would be capital gain or loss if the
Standard Certificate was held as a capital asset. However, gain on the sale of
a Standard Certificate will be treated as ordinary income (i) if a Standard
Certificate is held as part of a "conversion transaction" as defined in Code
Section 1258(c), up to the amount of interest that would have accrued on the
Standard Certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was held
as a part of such transaction or (ii) in the case of a non-corporate taxpayer,
to the extent such taxpayer has made an election under Code Section 163(d)(4)
to have net capital gains taxed as investment income at ordinary income rates.
Long-term capital gains of certain non-corporate taxpayers are subject to a
lower maximum tax rate (20%) than ordinary income or short-term capital gains
of such taxpayers (39.6%). The maximum tax rate for corporations is the same
with respect to both ordinary income and capital gains.
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STRIPPED CERTIFICATES
GENERAL
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership
of the right to receive some or all of the interest payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of this discussion,
Certificates that are subject to those rules will be referred to as "Stripped
Certificates".
The Certificates will be subject to those rules if (i) the Depositor or
any of its affiliates retains (for its own account or for purposes of resale),
in the form of fixed retained yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (ii) the Master Servicer is
treated as having an ownership interest in the Mortgage Loans to the extent it
is paid (or retains) servicing compensation in an amount greater than
reasonable consideration for servicing the Mortgage Loans (see "Standard
Certificates--Recharacterization of Servicing Fees" above) and (iii)
Certificates are issued in two or more classes or subclasses representing the
right to non-pro-rata percentages of the interest and principal payments on the
Mortgage Loans.
In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Mortgage Loan and/or "stripped coupons" with respect
to its pro rata share of all or a portion of the interest payments on each
Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Master Servicer, to the extent that such fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates--Recharacterization of Servicing Fees". Although
not free from doubt, for purposes of reporting to Stripped Certificateholders,
the servicing fees will be allocated to the Stripped Certificates in proportion
to the respective entitlements to distributions of each class (or subclass) of
Stripped Certificates for the related period or periods. The holder of a
Stripped Certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under "Standard
Certificates--General", subject to the limitation described therein.
Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that such stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where such Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate Mortgage Loans, in the opinion of
Cadwalader, Wickersham & Taft, tax counsel to the Depositor, (i) the Trust Fund
will be treated as a grantor trust under subpart E, Part 1 of subchapter J of
the Code and not as an association taxable as a corporation or a "taxable
mortgage pool" within the meaning of Code Section 7701(i), and (ii) each
Stripped Certificate should be treated as a single installment obligation for
purposes of calculating original issue discount and gain or loss on
disposition. This treatment is based on the interrelationship of Code Section
1286, Code Sections 1272 through 1275, and the OID Regulations. While under
Code Section 1286 computations with respect to Stripped Certificates arguably
should be made in one of the ways described below under "Taxation of Stripped
Certificates--Possible Alternative Characterizations," the OID Regulations
state, in general, that two or more debt instruments issued by a single issuer
to a single investor in a single transaction should be treated as a single debt
instrument for original issue discount purposes. The Agreement requires that
the Trustee make and report all computations described below using this
aggregate approach, unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount.
In addition, under these regulations, a Stripped Certificate that represents a
right to payments of both interest and principal may be viewed either as issued
with original issue discount or market discount (as described below), at a de
minimis original issue discount, or, presumably, at a premium. This treatment
suggests that the interest component of such a Stripped Certificate would be
treated as qualified stated interest under the OID Regulations. Further, these
final regulations provide that the purchaser of such a Stripped Certificate
will be required to account for any discount as market discount rather than
original issue discount if either (i) the initial discount with respect to the
Stripped Certificate was treated as zero under the de minimis rule, or (ii) no
more than 100 basis points in excess of reasonable servicing is stripped off
the related Mortgage Loans. Any such market discount would be reportable as
described under "REMIC Certificates--Taxation of REMIC Regular
Certificates--Market Discount," without regard to the de minimis rule therein,
assuming that a prepayment assumption is employed in such computation.
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STATUS OF STRIPPED CERTIFICATES
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the Mortgage Loans. Although the issue is not free from doubt, in the
opinion of Cadwalader, Wickersham & Taft, tax counsel to the Depositor,
Stripped Certificates owned by applicable holders should be considered to
represent "real estate assets" within the meaning of Code Section 856(c)(4)(A),
"obligation[s] principally secured by an interest in real property" within the
meaning of Code Section 860G(a)(3)(A), and "loans secured by an interest in
real property" within the meaning of Code Section 7701(a)(19)(C)(v), and
interest (including original issue discount) income attributable to Stripped
Certificates should be considered to represent "interest on obligations secured
by mortgages on real property" within the meaning of Code Section 856(c)(3)(B),
provided that in each case the Mortgage Loans and interest on such Mortgage
Loans qualify for such treatment. The application of such Code provisions to
Buy-Down Mortgage Loans is uncertain. See "Standard Certificates--Tax Status"
above.
TAXATION OF STRIPPED CERTIFICATES
Original Issue Discount. Except as described above under "General", each
Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a Stripped Certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into account
the compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the 1986
Act, the amount of original issue discount required to be included in the
income of a holder of a Stripped Certificate (referred to in this discussion as
a "Stripped Certificateholder") in any taxable year likely will be computed
generally as described above under "REMIC Certificates--Taxation of REMIC
Regular Certificates--Original Issue Discount" and "--Variable Rate REMIC
Regular Certificates". However, with the apparent exception of a Stripped
Certificate issued with de minimis original issue discount as described above
under "General", the issue price of a Stripped Certificate will be the purchase
price paid by each holder thereof, and the stated redemption price at maturity
will include the aggregate amount of the payments to be made on the Stripped
Certificate to such Stripped Certificateholder, presumably under the Prepayment
Assumption.
If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the
amount of such original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each Mortgage
Loan represented by such Stripped Certificateholder's Stripped Certificate.
While the matter is not free from doubt, the holder of a Stripped Certificate
should be entitled in the year that it becomes certain (assuming no further
prepayments) that the holder will not recover a portion of its adjusted basis
in such Stripped Certificate to recognize an ordinary loss equal to such
portion of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not be
made if the Mortgage Loans are prepaid could lead to the interpretation that
such interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to prepayable securities such as
the Stripped Certificates. However, if final regulations dealing with
contingent interest with respect to the Stripped Certificates apply the same
principles as the OID Regulations, such regulations may lead to different
timing of income inclusion that would be the case under the OID Regulations.
Furthermore, application of such principles could lead to the characterization
of gain on the sale of contingent interest Stripped Certificates as ordinary
income. Investors should consult their tax advisors regarding the appropriate
tax treatment of Stripped Certificates.
Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "REMIC Certificates--Taxation of REMIC Regular Certificates--Sale
or Exchange of REMIC Regular Certificates". To the extent that a subsequent
purchaser's purchase price is exceeded by the remaining payments on the
Stripped Certificates, such subsequent purchaser will be required for federal
income tax purposes to accrue and report such excess as if it were original
issue discount in the manner described above. It is not clear for this purpose
whether the assumed prepayment rate that is to be used in the case of a
Stripped Certificateholder other than an original Stripped Certificateholder
should be the Prepayment Assumption or a new rate based on the circumstances at
the date of subsequent purchase.
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Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible interpretations
of the applicable Code provisions. For example, the Stripped Certificateholder
may be treated as the owner of (i) one installment obligation consisting of
such Stripped Certificate's pro rata share of the payments attributable to
principal on each Mortgage Loan and a second installment obligation consisting
of such Stripped Certificate's pro rata share of the payments attributable to
interest on each Mortgage Loan, (ii) as many stripped bonds or stripped coupons
as there are scheduled payments of principal and/or interest on each Mortgage
Loan or (iii) a separate installment obligation for each Mortgage Loan,
representing the Stripped Certificate's pro rata share of payments of principal
and/or interest to be made with respect thereto. Alternatively, the holder of
one or more classes of Stripped Certificates may be treated as the owner of a
pro rata fractional undivided interest in each Mortgage Loan to the extent that
such Stripped Certificate, or classes of Stripped Certificates in the
aggregate, represent the same pro rata portion of principal and interest on
each such Mortgage Loan, and a stripped bond or stripped coupon (as the case
may be), treated as an installment obligation or contingent payment obligation,
as to the remainder. Final regulations issued on December 28, 1992 regarding
original issue discount on stripped obligations make the foregoing
interpretations less likely to be applicable. The preamble to those regulations
states that they are premised on the assumption that an aggregation approach is
appropriate for determining whether original issue discount on a stripped bond
or stripped coupon is de minimis, and solicits comments on appropriate rules
for aggregating stripped bonds and stripped coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped Certificateholder
at any time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such
information will include the amount of original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee may
not be equal to the proper amount of original issue discount required to be
reported as taxable income by a Certificateholder, other than an original
Certificateholder that purchased at the issue price. In particular, in the case
of Stripped Certificates, unless provided otherwise in the applicable
Prospectus Supplement, such reporting will be based upon a representative
initial offering price of each class of Stripped Certificates. The Trustee will
also file such original issue discount information with the Service. If a
Certificateholder fails to supply an accurate taxpayer identification number or
if the Secretary of the Treasury determines that a Certificateholder has not
reported all interest and dividend income required to be shown on his federal
income tax return, 31% backup withholding may be required in respect of any
reportable payments, as described above under "REMIC Certificates--Backup
Withholding".
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Standard Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Standard
Certificateholder or Stripped Certificateholders on the sale or exchange of
such a Certificate also will be subject to federal income tax at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will
be subject to the same certification requirements, described above under "REMIC
Certificates--Taxation of Certain Foreign Investors--REMIC Regular
Certificates".
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on employee benefit
plans and on certain other retirement plans and arrangements, including
individual retirement accounts, Keogh plans, collective investment funds,
insurance company separate accounts, and some insurance company general
accounts in which such plans, accounts or arrangements are invested, which are
subject to ERISA and the Code (all of which are hereinafter referred to for
purposes of this discussion as "Plans") and on persons who are fiduciaries with
respect to such Plans. The following is a general discussion of such
requirements, and certain applicable exceptions to and administrative
exemptions from such requirements.
Before purchasing any Offered Certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition to
such purchase under the requirements of ERISA, whether any prohibited
transaction class-exemption or any individual administrative prohibited
transaction exemption (as described below) applies, including whether the
appropriate conditions set forth therein would be met, or whether any statutory
prohibited transaction exemption is applicable, and further should consult the
applicable Prospectus Supplement relating to such Series of Certificates.
CERTAIN REQUIREMENTS UNDER ERISA
GENERAL
In accordance with ERISA's general fiduciary standards, before investing
in a Certificate a Plan fiduciary should determine whether to do so is
permitted under the governing Plan instruments and is appropriate for the Plan
in view of its overall investment policy and the composition and
diversification of its portfolio. A Plan fiduciary should especially consider
the ERISA requirement of investment prudence and the sensitivity of the return
on the Certificates to the rate of principal repayments (including voluntary
prepayments by the mortgagors and involuntary liquidations) on the Mortgage
Loans, as discussed in "Yield Considerations" herein.
PARTIES IN INTEREST/DISQUALIFIED PERSONS
Other provisions of ERISA (and corresponding provisions of the Code)
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan (so-called "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code, including, in both cases, Plan fiduciaries). The
Depositor, Master Servicer or the Trustee or certain affiliates thereof, might
be considered or might become "parties in interest" or "disqualified persons"
with respect to a Plan. If so, the acquisition or holding of Certificates by or
on behalf of such Plan could be considered to give rise to a "prohibited
transaction" within the meaning of ERISA and the Code unless an administrative
exemption described below or some other exemption is available. Special caution
should be exercised before the assets of a Plan are used to purchase a
Certificate if, with respect to such assets, the Depositor, the Master Servicer
or the Trustee or an affiliate thereof, either: (a) has investment discretion
with respect to the investment of such assets of such Plan; or (b) has
authority or responsibility to give, or regularly gives investment advice with
respect to such assets for a fee and pursuant to an agreement or understanding
that such advice will serve as a primary basis for investment decisions with
respect to such assets and that such advice will be based on the particular
investment needs of the Plan.
DELEGATION OF FIDUCIARY DUTY
Further, if the assets included in a Trust Fund were deemed to constitute
Plan assets, it is possible that a Plan's investment in the Certificates might
be deemed to constitute a delegation, under ERISA, of the duty to manage Plan
assets by the fiduciary deciding to invest in the Certificates, and certain
transactions involved in the operation of the Trust Fund might be deemed to
constitute prohibited transactions under ERISA and the Code. Neither ERISA nor
the Code define the term "plan assets."
The U.S. Department of Labor (the "Department") has published final
regulations (the "Regulations") concerning whether or not a Plan's assets would
be deemed to include an interest in the underlying assets of an entity (such as
a Trust Fund) for purposes of the reporting and disclosure and general
fiduciary responsibility provisions of ERISA, as well as for the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" (such as a Certificate) in such an entity.
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Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of a
Trust Fund. However, the Depositor cannot predict in advance, nor can there be
any continuing assurance, whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of all classes of equity interests are held by "benefit plan
investors," which are defined as Plans, IRAs, and employee benefit plans not
subject to ERISA (for example, governmental plans). However, this exception is
tested immediately after each acquisition of an equity interest in the entity
whether upon initial issuance or in the secondary market.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained individual administrative ERISA prohibited transaction exemptions
which can only apply to the purchase and holding of mortgage-backed securities
which, among other conditions, are sold in an offering with respect to which
such underwriter 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
Certificates, the related Prospectus Supplement will refer to such possibility,
as well as provide a summary of the conditions to the applicability.
GOVERNMENTAL PLANS
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such a governmental plan may be subject
to a federal, state, or local law, which is, to a material extent, similar to
the provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and the
availability of any exemptive relief under Similar Law.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code Section
501(a), including most varieties of ERISA Plans, may give rise to "unrelated
business taxable income" as described in Code Sections 511-515 and 860E.
Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a "Disqualified
Organization," which term as defined above includes certain tax-exempt entities
not subject to Code Section 511 including certain governmental plans, as
discussed above under the caption "Federal Income Tax Consequences--REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on
Transfer of Residual Certificates--Disqualified Organizations."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that
potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA of their acquisition and ownership of
Certificates.
The sale of Certificates to an employee benefit plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by plans generally
or by any particular plan, or that this investment is appropriate for plans
generally or for any particular plan.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). The appropriate characterization
of those Certificates not qualifying as "mortgage related securities"
("Non-SMMEA Certificates") under various legal investment restrictions, and
thus the ability of investors subject to these restrictions to purchase such
Certificates, may be subject to significant interpretive uncertainties.
Generally, only Classes of Certificates that (i) are rated in one of the
two highest rating categories by one or more Rating Agencies and (ii) are part
of a Series evidencing interests in a Trust Fund consisting of loans secured by
first liens and originated by certain types of Originators as specified in
SMMEA, will be "mortgage related securities" for purposes of SMMEA. As
"mortgage related securities," such Classes will constitute legal investments
for persons, trusts,
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corporations, partnerships, associations, business trusts and business entities
(including, but not limited to, state-chartered depository institutions and
insurance companies, as well as trustees and state government employee
retirement systems) 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 that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or instrumentality
thereof constitute legal investments for such entities.
Pursuant to SMMEA, a number of states enacted legislation, on or before
the October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" to
include, in relevant part, Certificates satisfying the rating and qualified
Originator requirements for "mortgage related securities," but evidencing
interests in a Trust Fund consisting, in whole or in part, of first liens on
one or more parcels of real estate upon which are located one or more
commercial structures, states were authorized to enact legislation, on or
before September 23, 2001, specifically referring to Section 347 and
prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of Certificates. Section 347 also
provides that the enactment by a state of any such legislative restrictions
shall not affect the validity of any contractual commitment to purchase, hold
or invest in securities qualifying as "mortgage related securities" solely by
reason of Section 347 that was made, and shall not require the sale or
disposition of any securities acquired, prior to the enactment of such state
legislation. Accordingly, the investors affected by any such legislation, when
and if enacted, will be authorized to invest in Certificates qualifying as
"mortgage related securities" only to the extent provided in such legislation.
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 "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such 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 regulatory authority may prescribe. In
this connection, the Office of the Comptroller of the Currency (the "OCC") has
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards in 12
C.F.R. Section 1.5 concerning "safety and soundness" and retention of credit
information), certain "Type IV securities," defined in 12 C.F.R. Section
1.2(l) to include certain "commercial mortgage-related securities" and
"residential mortgage-related securities." As so defined, "commercial
mortgage-related security" and "residential mortgage-related security" mean, in
relevant part, "mortgage related security" within the meaning of SMMEA,
provided that, in the case of a "commercial mortgage-related security," it
"represents ownership of a promissory note or certificate of interest or
participation that is directly secured by a first lien on one or more parcels
of real estate upon which one or more commercial structures are located and
that is fully secured by interests in a pool of loans to numerous obligors." In
the absence of any rule or administrative interpretation by the OCC defining
the term "numerous obligors," no representation is made as to whether any Class
of Certificates will qualify as "commercial mortgage-related securities," and
thus as "Type IV securities," for investment by national banks. The National
Credit Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R.
Part 703, which permit federal credit unions to invest in "mortgage related
securities" under certain limited circumstances, other than stripped mortgage
related securities, residual interests in mortgage related securities, and
commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140. The Office of Thrift Supervision (the
"OTS") has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," which
thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the Certificates.
All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Investment Securities and
End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal
Financial Institutions Examination Council, which has been adopted by the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the OCC and the OTS effective May 26, 1998, and by the NCUA
effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), and legal
risks) applicable to all securities (including mortgage pass-through securities
and mortgage-derivative products) used for investment purposes.
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Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain Series, Classes or subclasses may be deemed unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
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, provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any Certificates issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.
Except as to the status of certain Classes of Certificates as "mortgage
related securities," no representations are made as to the proper
characterization of the Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase Certificates under applicable legal investment
restrictions. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the Certificates) may adversely affect the liquidity of the
Certificates.
Accordingly, all investors whose investment activities are subject to
legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their legal advisors in
determining whether and to what extent the Certificates of any class constitute
legal investments or are subject to investment, capital or other restrictions
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the Prospectus Supplement will be
offered in Series through one or more of the various methods described below.
The Prospectus Supplement for each Series of Certificates will describe the
method of offering being utilized for that Series, the public offering or
purchase price of the Certificates and the net proceeds to the Depositor from
such sale. If so specified in the Prospectus Supplement, one or more Classes of
Certificates may be offered for sale only outside of the United States and only
to non-U.S. persons and foreign branches of U.S. banks (or in such other manner
and to such other persons as may be specified therein) and will not be offered
hereby.
The Certificates will be offered through the following 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 Certificates may be
made through any combination of these methods:
1. Negotiated firm commitment underwriting and public reoffering by
underwriters;
2. Placements by the Depositor to institutional investors through
affiliated or unaffiliated dealers or agents; and
3. Direct placements by the Depositor to institutional investors.
If underwriters are used in a sale of any Certificates, such Certificates
will be acquired by the underwriters for their own account and may be resold.
The distribution of the Certificates may be effected from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale or at
the time of commitment therefor. If so specified in the related Prospectus
Supplement, the Certificates will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by Nomura Securities International, Inc. ("Nomura") acting as
underwriter with other underwriters, if any, named therein. Asset
Securitization Corporation, the Depositor, is a wholly-owned subsidiary of
Nomura Asset Capital Corporation ("Nomura Capital"). Nomura and Nomura Capital
are both wholly-owned subsidiaries of Nomura Holding America Inc. See "The
Depositor" herein.
In connection with the sale of the Certificates, underwriters, dealers or
placement agents may receive compensation from the Depositor or from purchasers
of the Certificates in the form of discounts, concessions or commissions.
Underwriters, agents and dealers participating in the distributions of the
Certificates may be deemed to be underwriters in connection with such
Certificates, and any discounts or commissions received by them from the Issuer
and any profit on the resale of the Certificates by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "1933 Act").
Any sales by the Depositor directly to investors, whether using an
affiliated or other placement agent or otherwise, may be made from time to time
in one or more transactions, including negotiated transactions, at a fixed
offering price or
93
<PAGE>
at varying prices to be determined at the time of sale or the time of
commitment therefor. The Prospectus Supplement with respect to any Series of
Certificates offered other than through underwriters will contain information
regarding the nature of such offering and any agreements to be entered into
between the Depositor and dealers or purchasers of the Certificates for such
Series.
The underwriting agreement pertaining to a sale of a series of
Certificates will provide that the obligations of Nomura and any underwriters
will be subject to certain conditions precedent, that the underwriters will be
obligated to purchase all such Certificates if any are purchased, and that the
Depositor will indemnify Nomura and any underwriters against certain civil
liabilities, including liabilities under the 1933 Act, or will contribute to
payments Nomura and any underwriters may be required to make in respect
thereof.
In the ordinary course of business, Nomura and the Depositor may engage in
various securities and financing transactions, including repurchase agreements
to provide interim financing of the Depositor's mortgage loans pending the sale
of such mortgage loans or interests therein, including the Certificates.
All or part of any Class of Certificates may be reacquired by the
Depositor or acquired by an affiliate of the Depositor in a secondary market
transaction or from an affiliate (including Nomura). Such Certificates may then
be included in a trust fund, the beneficial ownership of which will be
evidenced by one or more classes of mortgage-backed certificates, including
subsequent series of Certificates offered pursuant to this Prospectus and a
Prospectus Supplement.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with reoffers and sales by
them of Certificates. Holders of Certificates should consult with their legal
advisors in this regard prior to any such reoffer or sale.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by Nomura in connection with offers and sales related
to market-making transactions in Certificates previously offered hereunder in
transactions in which Nomura acts as principal. Nomura may also act as agent in
such transactions. Sales may be made at negotiated prices determined at the
time of sale.
LEGAL MATTERS
The legality of the Certificates of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft, New York, New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial investments.
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 organization. Each security rating should be evaluated independently of
any other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE(S) ON WHICH TERM IS
DEFINED IN THE PROSPECTUS
--------------------------
<S> <C>
1933 Act ............................. 93
1986 Act ............................. 66
1998 Policy Statement ................ 92
Accrual Certificates ................. 10
Accrued Certificate Interest ......... 34
ADA .................................. 63
Agreements ........................... 10
anchored ............................. 15
ARM Loans ............................ 25
Bankruptcy Code ...................... 58
BIF .................................. 41
Book-Entry Certificates .............. 33
Cash Flow Agreement .................. 9, 27
Cash Flow Agreements ................. Cover
Cede ................................. 2, 38
CERCLA ............................... 20
Certificate Balance .................. 10
Certificateholder .................... 38, 63
Certificateholders ................... 2
Certificates ......................... 8
Class O Certificate .................. 81
clearing agency ...................... 38
clearing corporation ................. 38
Code ................................. 11, 63
Collection Account ................... 9, 27
Collection Period .................... 33
Commercial Loans ..................... 23
Commercial Properties ................ 8, 23
Commission ........................... 2
Cooperatives ......................... 23
Covered Trust ........................ 20
CPR .................................. 29
Credit Support ....................... Cover, 9, 27
Crime Control Act .................... 62
Cut-off Date ......................... 10
Debt Service Coverage Ratio .......... 23
Definitive Certificates .............. 33, 38
Department ........................... 90
Determination Date ................... 33
Disqualified Organization ............ 76, 91
Distribution Date .................... 10
DTC .................................. 2, 38
EDGAR ................................ 2
Equity Participations ................ 26
ERISA ................................ 11, 90
Exchange Act ......................... 2
FASIT ................................ 11
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE(S) ON WHICH TERM IS
DEFINED IN THE PROSPECTUS
--------------------------
<S> <C>
FASIT Ownership Certificate ......... 81
FASIT Regular Certificates .......... 81
FDIC ................................ 41
FHA ................................. 25
HUD ................................. 25
income paying ....................... 93
Indirect Participants ............... 38
Installment Contracts ............... 8
Insurance Proceeds .................. 42
L/C Bank ............................ 50
Liquidation Proceeds ................ 42
Loan-to-Value Ratio ................. 24
Lock-out Date ....................... 26
Lock-out Period ..................... 26
Mark to Market Regulations .......... 77
Master Servicer ..................... 8
MBS ................................. Cover, 8, 23
MBS Agreement ....................... 26
MBS Issuer .......................... 26
MBS Servicer ........................ 26
MBS Trustee ......................... 26
Mortgage Asset Seller ............... 23
Mortgage Assets ..................... Cover, 23
Mortgage Loans ...................... Cover, 8, 23, 63
Mortgage Notes ...................... 23
Mortgage Rate ....................... 9, 26
mortgage related securities ......... 11, 91, 92, 93
Mortgaged Properties ................ 8
Mortgages ........................... 23
Multifamily Loans ................... 23
Multifamily Properties .............. 8, 23
NCUA ................................ 62, 92
Net Leases .......................... 24
Net Operating Income ................ 23
New Regulations ..................... 80
Nomura .............................. 93
Nomura Capital ...................... 93
Nonrecoverable Advance .............. 35
Non-SMMEA Certificates .............. 91
OCC ................................. 92
Offered Certificates ................ Cover
OID ................................. 83
OID Regulations ..................... 66
operator ............................ 20, 44
Original Issue Discount ............. 69, 70
Originator .......................... 23
OTS ................................. 92
owner ............................... 20, 44
Participants ........................ 38
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE(S) ON WHICH TERM IS
DEFINED IN THE PROSPECTUS
--------------------------
<S> <C>
Pass-Through Entity ..................... 75, 76
Pass-Through Rate ....................... 10
Permitted Investments ................... 41
Plan .................................... 11
plan assets ............................. 90, 91
Plans ................................... 90
Prepayment Assumption ................... 67
Prepayment Premium ...................... 26
Random Lot Certificates ................. 67
Rating Agency ........................... 12
Record Date ............................. 33
Regular Certificateholder ............... 66
Regulations ............................. 90
Related Proceeds ........................ 35
Relief Act .............................. 62
REMIC ................................... 11, 64
REMIC Certificates ...................... 64
REMIC Pool .............................. 64
REMIC Regular Certificates .............. 64, 80
REMIC Regulations ....................... 63
REO Account ............................. 42
Residual Certificateholders ............. 72
Residual Certificates ................... 64
RICO .................................... 62
SAIF .................................... 41
Section 42 Properties ................... 16
Securities Act .......................... 23
Senior Certificates ..................... 10, 31
Service ................................. 66
Similar Law ............................. 91
SMMEA ................................... 91
SPA ..................................... 29
Special Servicer ........................ 8, 43
Standard Certificateholder .............. 84
Standard Certificates ................... 84
Startup Day ............................. 65, 82
Stripped Certificateholder .............. 88
Stripped Certificates ................... 84, 86, 87
Stripped Interest Certificates .......... 10
Stripped Principal Certificates ......... 10
Subordinate Certificates ................ 10, 31
Sub-Servicer ............................ 43
Sub-Servicing Agreement ................. 43
Tax Credits ............................. 16
Title V ................................. 61
Title VIII .............................. 62
Treasury ................................ 63
Trust Assets ............................ 2
Trust FASIT ............................. 81
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
PAGE(S) ON WHICH TERM IS
DEFINED IN THE PROSPECTUS
--------------------------
<S> <C>
Trust Fund ............... Cover
Trustee .................. 8
UCC ...................... 52
unanchored ............... 15
U.S. Person .............. 77
Value .................... 24
Voting Rights ............ 22
Warranting Party ......... 40
Web ...................... 2
</TABLE>
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<PAGE>
This diskette contains a spreadsheet file that can be put on a
user-specified hard drive or network drive. The file is "CMAT Annexes.xls". The
file "CMAT Annexes.xls" is a Microsoft Excel , Version 5.0 spreadsheet. The
file provides, in electronic format, certain loan level information shown in
ANNEX A, ANNEX B and ANNEX C of the Prospectus Supplement.
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a screen will appear requesting a password.
Please "click" the "read only" option. At that point a securities law legend
will be displayed. READ THE LEGEND CAREFULLY.
- ---------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the certificates offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
-------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Prospectus Supplement
Table of Contents ......................................... S-4
Summary of Prospectus Supplement .......................... S-9
Risk Factors and Other Special Considerations ............. S-31
Description of the Mortgage Pool .......................... S-53
Description of the Offered Certificates. .................. S-87
Prepayment and Yield Considerations. ...................... S-103
The Mortgage Loan Sellers. ................................ S-114
The Pooling and Servicing Agreement. ...................... S-114
Certain Legal Aspects of Mortgage Loans for
Mortgaged Properties Located in California .............. S-142
Use of Proceeds. .......................................... S-142
Certain Federal Income Tax Consequences. .................. S-142
Certain ERISA Considerations .............................. S-145
Legal Investment .......................................... S-147
Legal Matters ............................................. S-147
Rating .................................................... S-147
Underwriting .............................................. S-148
Index of Significant Definitions .......................... S-149
Annex A--Characteristics of the Notes ..................... A-1
Annex B--Characteristics of the Mortgaged
Properties .............................................. B-1
Annex C--Characteristics of the Premium Loans ............. C-1
Annex D--Global Clearance, Settlement and Tax .............
Documentation Procedures .................................. D-1
Annex E--Structural and Collateral Term Sheet ............. E-1
Annex F--Form of Trustee Reports .......................... F-1
Annex G--Form of Servicing Reports ........................ G-1
Prospectus
Prospectus Supplement ..................................... 2
Available Information ..................................... 2
Incorporation of Certain Information by Reference ......... 3
Summary of Prospectus ..................................... 8
Risk Factors .............................................. 13
Description of the Trust Funds ............................ 23
Use of Proceeds ........................................... 28
Yield Considerations ...................................... 28
The Depositor ............................................. 31
Description of the Certificates ........................... 31
Description of the Agreements ............................. 39
Description of Credit Support ............................. 49
Certain Legal Aspects of Mortgage Loans ................... 51
Federal Income Tax Consequences ........................... 63
REMIC Certificates ........................................ 64
FASIT Certificates ........................................ 81
Grantor Trust Certificates ................................ 84
ERISA Considerations ...................................... 90
Legal Investment .......................................... 91
Method of Distribution .................................... 93
Legal Matters ............................................. 94
Financial Information ..................................... 94
Rating .................................................... 94
Index of Principal Definitions ............................ 95
</TABLE>
Through and including January , 2000, all dealers effecting transactions
in the Offered Certificates, whether or not participating in this offering, may
be required to deliver a prospectus supplement and prospectus. This is in
addition to dealers' obligation to deliver a prospectus supplement and
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
$693,269,000
(Approximate)
COMMERCIAL MORTGAGE
ASSET TRUST
Class A-1, Class A-2,
Class A-3, Class B,
Class C, Class D,
Class E and Class F
Commercial Mortgage
Pass-Through Certificates
Series 1999-C2
-------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------
Co-Lead Managers and Joint Bookrunners
GOLDMAN, SACHS & CO.
NOMURA SECURITIES
INTERNATIONAL, INC.
-------------------------------------
DONALDSON, LUFKIN & JENRETTE
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