<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-75209
THE INFORMATION CONTAINED IN THIS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 13, 2000
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 30, 2000)
$734,519,000 (APPROXIMATE)
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
KEYBANK NATIONAL ASSOCIATION
BRIDGER COMMERCIAL REALTY FINANCE LLC
and
SALOMON BROTHERS REALTY CORP.
Mortgage Loan Sellers
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-KEY1
--------------
INVESTING IN THE CERTIFICATES INVOLVES RISKS. YOU SHOULD REVIEW CAREFULLY
THE FACTORS SET FORTH UNDER "RISK FACTORS" COMMENCING ON PAGE S-15 OF THIS
PROSPECTUS SUPPLEMENT AND PAGE 7 IN THE ACCOMPANYING PROSPECTUS.
The certificates are asset backed securities issued by the trust. The
certificates are not obligations of Prudential Securities Secured Financing
Corporation or its affiliates or any other person, and are not guaranteed or
insured by any person.
This prospectus supplement may be used to offer and sell the certificates
only if it is accompanied by the prospectus dated March 30, 2000. The trust
fund:
o The trust fund will consist primarily of a pool of 167 mortgage loans.
o The mortgage loans are generally secured by first liens on commercial
and multifamily properties.
o As of June 1, 2000 the mortgage loans had an aggregate principal balance
of $818,406,907.
The certificates:
o The trust fund will issue 19 classes of certificates.
o Only the certificates described on the following table are being offered
by this prospectus supplement and the prospectus.
o The certificates accrue interest from June 1, 2000.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL CLASS INITIAL SCHEDULED CERTIFICATE
CERTIFICATE PASS-THROUGH FINAL DISTRIBUTION RATING
BALANCE RATE DATE (MOODY'S/S&P)
--------------- -------------- -------------------- --------------
<S> <C> <C> <C> <C>
Class A-1 Certificates ......... $134,000,000 % June 15, 2009 Aaa/AAA
Class A-2 Certificates ......... $471,621,000 % February 15, 2010 Aaa/AAA
Class B Certificates ........... $ 34,782,000 % March 15, 2010 Aa2/AA
Class C Certificates ........... $ 40,920,000 % April 15, 2010 A2/A
Class D Certificates ........... $ 10,230,000 % April 15, 2010 A3/A-
Class E Certificates ........... $ 10,230,000 % May 15, 2010 Baa1/BBB+
Class F Certificates ........... $ 18,414,000 % September 15, 2010 Baa2/BBB
Class G Certificates ........... $ 14,322,000 % December 15, 2010 Baa3/BBB-
</TABLE>
--------------------------------------------------------------------------------
(Footnotes to table on pages S-1 and S-2)
--------------
On or about June , 2000, Prudential Securities Secured Financing
Corporation will sell these securities to Prudential Securities Incorporated,
Salomon Smith Barney Inc. and McDonald Investments Inc., which will sell the
offered certificates from time to time in negotiated transactions or otherwise
at varying prices to be determined at the time of sale. The depositor will
receive approximately $ in sale proceeds, plus accrued interest, less
expenses. Prudential Securities Incorporated, Salomon Smith Barney Inc. and
McDonald Investments Inc. expect to deliver the offered certificates to
purchasers in book-entry form only through the facilities of The Depository
Trust Company in the United States, or Clearstream Banking, societe anonyme,
Luxembourg, or the Euroclear System, in Europe on or about June , 2000.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JUNE , 2000.
<PAGE>
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Commercial Mortgage Pass-Through Certificates, Series 2000-KEY1
Geographic Overview of Mortgage Pool
WAGHINGTON
6 properties
$37,635,167
4.60% of total
OREGON
3 properties
$8,153,835
1.00% of total
NEVADA
7 properties
$39,781,780
4.86% of total
CALIFORNIA
34 properties
$186,745,147
22.82% of total
ARIZONA
3 properties
$8,328,450
1.02% of total
NEW MEXICO
1 property
$4,865,678
0.59% of total
COLORADO
4 properties
$13,004,495
1.59% of total
KANSAS
2 properties
$3,476,644
0.42% of total
TEXAS
20 properties
$99,484,346
12.16% of total
OKLAHOMA
1 property
$742,358
0.09% of total
LOUISIANA
2 properties
$6,818,009
0.83% of total
KENTUCKY
2 properties
$11,211,303
1.37% of total
FLORIDA
7 properties
$18,190,292
2.22% of total
GEORGIA
3 properties
$12,824,770
1.57% of total
TENNESSEE
2 properties
$19,222,742
2.35% of total
VIRGINIA
4 properties
$29,548,534
3.61% of total
MARYLAND
3 properties
$46,239,958
5.65% of total
DISTRICT OF COLUMBIA
3 properties
$5,908,937
0.72 of total
DELAWARE
4 properties
$7,393,340
0.90% of total
NEW JERSEY
7 properties
$28,612,319
3.50% of total
RHODE ISLAND
1 property
$995,605
0.12% of total
MASSACHUSETTS
2 properties
$12,053,531
1.47% of total
NEW YORK
12 PROPERTIES
$39,266,731
4.80% of total
PENNSYLVANIA
10 properties
$31,037,407
3.79% of total
OHIO
5 properties
$14,311,452
1.75% of total
INDIANA
3 properties
$23,077,791
2.82% of total
MICHIGAN
4 properties
$13,265,117
1.62% of total
WISCONSIN
1 property
$2,722,580
0.33% of total
ILLINOIS
7 properties
$25,170,000
3.08% of total
MINNESOTA
5 properties
$12,876,079
1.57% of total
MISSOURI
3 properties
$8,060,266
0.98% of total
NEBRASKA
1 property
$30,410,327
3.72% of total
UTAH
2 properties
$2,978,693
0.36% of total
IDAHO
2 properties
$6,670,589
0.82% of total
ALASKA
3 properties
$7,322,635
0.89% of total
[ ] < 1.00%
of Initial Pool Balance
[ ] 1.01 - 5.00%
of Initial Pool Balance
[ ] 5.01 - 10.00%
of Initial Pool Balance
[ ] > 10.00%
of Initial Pool Balance
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the certificates is provided in two separate documents
that progressively provide more detail:
o the accompanying prospectus, which provides general information, some
of which may not apply to a particular class of certificates,
including your class; and
o this prospectus supplement, which describes the specific terms of your
class of certificates.
You should rely only on the information contained in this prospectus
supplement and accompanying prospectus. You should read both this prospectus
supplement and the prospectus before investing in any of the offered
certificates.
IF THE DESCRIPTION OF THE CERTIFICATES VARIES BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
Cross-references are included in this prospectus supplement and in the
prospectus which direct you to more detailed descriptions of a particular
topic. You can also find references to key topics in the table of contents on
page iii and the table of contents in the prospectus on page 2. You can find
the definitions of terms that are used in this prospectus supplement beginning
on page S-139 in this prospectus supplement and under the caption "Glossary"
beginning on page 119 in the prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including the
prospectus and a form of this prospectus supplement). The prospectus and this
prospectus supplement do not contain all of the information contained in the
registration statement. For further information regarding the documents
referred to in the prospectus and this prospectus supplement, you should refer
to the registration statement and the exhibits to the registration statement.
The registration statement and the exhibits can be inspected and copied at the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and the SEC's regional offices at Seven World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1500, Chicago, Illinois 60661. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington D.C. 20549. In addition, the SEC maintains a public
access site on the Internet through the World Wide Web at which site reports,
information statements and other information, including all electronic filings,
may be viewed. The Internet address of the World Wide Web site is
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that the
depositor files with it, which means that the depositor can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of the prospectus and this
prospectus supplement. Information that the depositor files later with the SEC
will automatically update the information in the prospectus and this prospectus
supplement. In all cases, you should rely on the later information over
different information included in the prospectus or this prospectus supplement.
The depositor incorporates by reference any future annual, monthly and special
reports and proxy materials filed with respect to any trust fund until we
terminate offering the certificates. The depositor has determined that its
financial statements are not material to the offering of any of the
certificates. See "Financial Information." As a recipient of this prospectus,
you may request a copy of any document the depositor incorporates by reference,
except exhibits to the documents
i
<PAGE>
(unless the exhibits are specifically incorporated by reference), at no cost,
by writing or calling: Prudential Securities Secured Financing Corporation, One
New York Plaza, New York, New York 10292, attention: David Rodgers, (212)
214-1000.
---------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS AND SUBSCRIPTIONS.
ii
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
Important Notice About Information
Presented In This Prospectus
Supplement And The
Accompanying Prospectus ................ i
Where You Can Find More
Information ............................ i
Summary ................................... S-1
Risk Factors .............................. S-15
Description Of The Mortgage Pool .......... S-49
Prudential Securities Secured
Financing Corporation .................. S-78
Mortgage Loan Sellers ..................... S-78
Description Of The Certificates ........... S-83
Yield And Maturity Considerations ......... S-94
Master Servicer And Special Servicer....... S-103
The Pooling And Servicing
Agreement .............................. S-104
Certain Legal Aspects of the
Mortgage Loans ......................... S-128
Material Federal Income Tax
Consequences ........................... S-131
Erisa Considerations ...................... S-132
Legal Investment .......................... S-136
Plan Of Distribution ...................... S-137
Use Of Proceeds ........................... S-137
Legal Matters ............................. S-137
Ratings ................................... S-138
Glossary .................................. S-139
Annex A--Mortage Loan
Characteristics ........................ A-1
Annex B--Additional Multifamily
Loan Characteristics ................... B-1
Annex C--Additional Step Loan and
Interest-Only Loan Characteristics ..... C-1
Annex D--Affiliated Borrowers ............. D-1
Annex E--Form or Statement to
Certificateholders ..................... E-1
Annex F--Structural and Collateral
Term Sheet and Top Ten Loan
Description ............................ F-1
Prospectus
Important Notice about Information
Presented in this Prospectus and the
Accompanying Prospectus
Supplement ............................. 3
Where You Can Find More
Information ............................ 4
Reports ................................... 4
Summary of Prospectus ..................... 6
Risk Factors .............................. 7
The Depositor ............................. 23
Use of Proceeds ........................... 24
Description of the Certificates ........... 24
The Mortgage Pools ........................ 30
Servicing of the Mortgage Loans ........... 35
Credit Enhancement ........................ 45
Material Legal Aspects of the
Mortgage Loans ......................... 50
Material Federal Income Tax
Consequences ........................... 72
State and Other Considerations ............ 111
ERISA Considerations ...................... 111
Legal Investment .......................... 114
Plan of Distribution ...................... 116
Legal Matters ............................. 117
Financial Information ..................... 117
Rating .................................... 117
Glossary .................................. 119
iii
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SUMMARY
The following summary is a short description of the main terms of the
offering of the securities. This summary does not contain all of the
information that may be important to you. To fully understand the terms of the
offering of the securities, you will need to read both this prospectus
supplement and the prospectus.
<TABLE>
<CAPTION>
APPROXIMATE
INITIAL CERTIFICATE APPROXIMATE PERCENTAGE OF
BALANCE OR NOTIONAL RATINGS PERCENTAGE OF CUT-OFF SUBORDINATED
CLASS BALANCE (1) MOODY'S/S&P (2) DATE BALANCE SECURITIES
----- ----------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Offered Certificates
Class A-1 (3) $134,000,000 Aaa/AAA 16.37% 26.00%
Class A-2 (3) $471,621,000 Aaa/AAA 57.63% 26.00%
Class B $ 34,782,000 Aa2/AA 4.25% 21.75%
Class C $ 40,920,000 A2/A 5.00% 16.75%
Class D $ 10,230,000 A3/A- 1.25% 15.50%
Class E $ 10,230,000 Baa1/BBB+ 1.25% 14.25%
Class F $ 18,414,000 Baa2/BBB 2.25% 12.00%
Class G $ 14,322,000 Baa3/BBB- 1.75% 10.25%
Private Certificates (not offered hereby)
Class X $818,406,907 Aaa/AAAr NAP NAP
Class H $ 32,736,000 NR/BB+ 4.00% 6.25%
Class J $ 4,092,000 Ba2/BB 0.50% 5.75%
Class K $ 6,138,000 Ba3/BB- 0.75% 5.00%
Class L $ 12,276,000 NR/B+ 1.50% 3.50%
Class M $ 10,230,000 B2/NR 1.25% 2.25%
Class N $ 6,138,000 B3/NR 0.75% 1.50%
Class O $ 12,277,907 NR/NR 1.50% 0.00%
</TABLE>
--------
(1) The initial certificate principal balances or notional balance for each
class of certificates may vary by up to 5%.
(2) Ratings are by Moody's and S&P. 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. A security
rating does not address the likelihood or frequency of prepayments (both
voluntary and involuntary), the possibility that you might suffer a lower
than expected yield, the likelihood of receipt of prepayment premiums or
yield maintenance charges, any allocation of prepayment interest
shortfalls, or the likelihood of collection by the master servicer of
default interest.
(3) The percentages indicated under the column "Approximate Percentage of
Subordinated Securities" with respect to the Class A-1 and Class A-2
Certificates represent the approximate credit support for the Class A-1
and Class A-2 Certificates in the aggregate.
S-1
<PAGE>
<TABLE>
<CAPTION>
EXPECTED
WEIGHTED AMORTIZATION PERIOD
AVERAGE LIFE (MONTH/YEAR)
CLASS PASS-THROUGH RATE (YEARS)(1) (1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Offered Certificates
Class A-1 (2) 5.689 7/2000- 6/2009
Class A-2 (2) 9.311 6/2009- 2/2010
Class B 9.661 2/2010- 3/2010
Class C 9.774 3/2010- 4/2010
Class D 9.792 4/2010- 4/2010
Class E 9.850 4/2010- 5/2010
Class F 10.037 5/2010- 9/2010
Class G 10.258 9/2010-12/2010
Private Certificates (not offered hereby)
Class X (7) 9.036 7/2000-8/2019
Class H 10.660 12/2010- 9/2011
Class J 11.208 9/2011- 9/2011
Class K 11.352 9/2011-12/2011
Class L 11.600 12/2011- 2/2012
Class M 11.693 2/2012- 3/2012
Class N 12.368 3/2012- 1/2013
Class O 13.897 1/2013- 8/2019
</TABLE>
--------
(1) Assumes a prepayment scenario of 0% CPR, with each ARD Loan prepaying in
full on the related Anticipated Repayment Date, and no defaults. See
"Yield and Maturity Considerations--Weighted Average Life" herein.
(2) The pass-through rates for the Class A-1 and Class A-2 Certificates for
each distribution date will be equal to the fixed rates per annum set
forth in the table; provided, in each case, that the pass-through rates
will not exceed the Weighted Average Net Mortgage Rate.
(3) Initial Pass-Through Rate. The pass-through rate for the Class , Class
and Class Certificates will be a per annum rate equal to the Weighted
Average Net Mortgage Rate, less %, % and %, respectively.
(4) Initial Pass-Through Rate. The pass-through rate will be a per annum rate
equal to the Weighted Average Net Mortgage Rate, less %.
(5) Initial Pass-Through Rate. The pass-through rate will be a per annum rate
equal to the Weighted Average Net Mortgage Rate, less %.
(6) Initial Pass-Through Rate. The pass-through rate will be a per annum rate
equal to the Weighted Average Net Mortgage Rate, less %.
(7) Initial Pass-Through Rate. The related pass-through rate will be a per
annum rate equal to a fraction, (a) the numerator of which is the excess
of (i) the Weighted Average Net Mortgage Rate multiplied by the Class X
notional balance over (ii) the weighted averages of the pass-through
rates of the Class A-1, Class A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N
and Class O Certificates multiplied by the sum of the Class A-1, Class
A-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
J, Class K, Class L, Class M, Class N and Class O Certificate Balances,
and (b) the denominator of which is the Class X notional balance.
The Class R-I, Class R-II and Class R-III Certificates are not represented
in this table and are not offered hereby.
S-2
<PAGE>
RELEVANT PARTIES
DEPOSITOR.............. Prudential Securities Secured Financing Corporation
MASTER SERVICER........ Key Corporate Capital Inc. d/b/a Key Commercial
Mortgage
SPECIAL SERVICER....... Lennar Partners, Inc.
TRUSTEE................ The Chase Manhattan Bank.
MORTGAGE LOAN SELLERS... The mortgage loans will be purchased from KeyBank
National Association (92 mortgage loans, representing
approximately 59.0% of the cut-off date balance),
Bridger Commercial Realty Finance LLC (55 mortgage
loans, representing approximately 21.6% of the cut-off
date balance) and Salomon Brothers Realty Corp (20
mortgage loans, representing approximately 19.4% of
the cut-off date balance). KeyBank National
Association acquired 62 mortgage loans, representing
approximately 38.9% of the cut-off date balance, from
National Realty Finance L.C.
TRANSFEROR............. Prudential Securities Credit Corp., LLC
UNDERWRITERS........... Prudential Securities Inc., Salomon Smith Barney
Inc. and McDonald Investment Inc.
CONTROLLING CLASS...... The most subordinate class of principal balance
certificates that has at least 25% of its initial
principal balance still outstanding. If no class has
at least 25% of its initial principal balance still
outstanding, the most subordinate class of principal
balance certificates still outstanding will be the
controlling class.
DIRECTING
CERTIFICATEHOLDER...... The Controlling Class certificateholder selected by
the holders of more than 50% of the percentage
interests in the Controlling Class. The master
servicer and the special servicer must notify the
directing certificateholder before taking certain
actions. The directing certificateholder may replace
the special servicer without cause.
SIGNIFICANT DATES AND PERIODS
CUT-OFF DATE........... June 1, 2000.
CLOSING DATE........... On or about June , 2000.
DETERMINATION DATE..... The 11th day of any month, or if the 11th day is not
a business day, the next succeeding business day. The
first Determination Date will be July 11, 2000.
S-3
<PAGE>
DISTRIBUTION DATE...... The 15th day of each month, or if that day is not a
business day, the next succeeding business day,
provided, however, that no distribution date will fall
on a date that is fewer than four business days after
the related Determination Date. The first distribution
date will be July 17, 2000.
SCHEDULED FINAL
DISTRIBUTION DATE...... The distribution date on which a class principal
balance would become zero if there are no defaults,
delinquencies, prepayments, modifications or
extensions of the mortgage loans after June 1, 2000.
<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DISTRIBUTION DATE
--------------------- -------------------
<S> <C>
Class A-1 ......... June 15, 2009
Class A-2 ......... February 15, 2010
Class B ........... March 15, 2010
Class C ........... April 15, 2010
Class D ........... April 15, 2010
Class E ........... May 15, 2010
Class F ........... September 15, 2010
Class G ........... December 15, 2010
</TABLE>
It is very unlikely that these assumptions will hold
true.
RATED FINAL
DISTRIBUTION DATE...... The distribution date occurring two years after the
latest amortization date for any of the mortgage
loans as of the closing date. The Rated Final
Distribution Date is May 17, 2032.
RECORD DATE............ For each distribution date, the close of business on
the last business day of the prior month.
INTEREST ACCRUAL
PERIOD For each distribution date, the prior calendar month.
COLLECTION PERIOD...... The period beginning on the day after the
Determination Date in the preceding month and ending
on the Determination Date in the month in which the
payment is made. The Collection Period for the first
distribution date will begin on the day after the
cut-off date.
DUE DATE............... The day on which payments on a particular mortgage
loan are due (disregarding any applicable grace
periods). The due date for all of the mortgage loans
is the first day of the month.
S-4
<PAGE>
OVERVIEW OF THE CERTIFICATES
The trust fund will issue 19 classes of certificates in an aggregate
principal amount equal to $818,406,907. Eight of those classes of certificates
are being offered by this prospectus supplement. The remaining classes of
certificates will be issued separately in a private offering.
The Classes offered hereby are:
Class A-1
Class A-2
Class B
Class C
Class D
Class E
Class F
Class G
The certificates will be paid solely from collections on the mortgage
loans in the mortgage pool and funds on deposit in certain accounts. The
certificates are asset backed securities issued by the trust. The certificates
are not obligations of Prudential Securities Secured Financing Corporation or
its affiliates or any other person, and are not guaranteed or insured by any
person.
We are offering only the offered certificates to you with this prospectus
supplement and the prospectus, and are not offering the private certificates to
you.
Information on Class X Certificates is included in this summary. Class X
represents an interest-only strip with a notional balance equal to the
aggregate of all classes of certificates in the trust fund. Class X receives
interest payments pro rata with Class A-1 and Class A-2 and prior to Class B,
Class C, Class D, Class E, Class F and Class G.
S-5
<PAGE>
CERTIFICATE DESIGNATIONS
In this prospectus supplement, we will refer to the following groups of
certificates by the indicated designations:
<TABLE>
<CAPTION>
DESIGNATION RELATED CLASSES
-------------------------------------------- ----------------------------------------------------
<S> <C>
Offered certificates .................... Classes A-1, A-2, B, C, D, E, F and G
Private certificates .................... Classes X, H, J, K, L, M, N, O, R-I, R-II and R-III
Senior certificates ..................... Classes A-1, A-2 and X
Principal balance certificates .......... A-1, A-2, B, C, D, E, F, G, H, J, K, L, M, N and O
Interest only certificates .............. Class X
Subordinate certificates ................ Classes B, C, D, E, F, G, H, J, K, L, M, N and O
Residual certificates ................... Classes R-I, R-II and R-III
</TABLE>
DENOMINATIONS.......... We will issue the offered certificates in the
following denominations:
o the Class A-1 and Class A-2 Certificates in
minimum denominations of $25,000 and
multiples of $1.00 in excess of $25,000;
o the Class B Certificates in minimum
denominations of $50,000 and multiples of
$1.00 in excess of $50,000; and
o Class C, Class D, Class E, Class F and
Class G Certificates in minimum
denominations of $100,000 and multiples of
$1.00 in excess of $100,000.
DISTRIBUTIONS TO SENIOR
CERTIFICATES.......... On each distribution date, funds available for
distribution from the mortgage loans, net of
prepayment premiums, will be distributed to the
holders of the senior certificates in the following
order:
o Interest on Senior Certificates: to pay
interest pro rata to the holders of the
senior certificates in an amount equal to
their interest entitlement.
o Principal on Class A-1 and Class A-2
Certificates: to pay principal from the
funds available for principal distributions
to the holders of the Class A-1 and Class
A-2 Certificates, in that order, until
reduced to zero. If the principal amount of
each class of principal balance
certificates other than the Class A-1 and
Class A-2 Certificates has been reduced to
zero, funds available for principal
distributions will be distributed to the
holders of the Class A-1 and Class A-2
Certificates, pro rata, rather than
sequentially.
S-6
<PAGE>
o Reimbursement of Class A-1 and Class A-2
Losses: to reimburse the holders of the
Class A-1 and Class A-2 Certificates, pro
rata, for any losses on the mortgage loans
that resulted in an unreimbursed reduction
of the principal balances of those
certificates.
DISTRIBUTIONS TO
SUBORDINATE
CERTIFICATES.......... On each distribution date, following the above
distributions on the senior certificates, the trustee
will distribute the remaining portion of the funds
available for distribution to the holders of each
class of subordinate certificates in alphabetical
order of class designation. In the case of each class
of subordinate certificates, the payments will be as
follows:
o first, distributions of interest in an
amount equal to the class's interest
entitlement;
o second, to pay principal from the funds
available for principal distributions, if
the principal balance of the Class A-1 and
Class A-2 Certificates and each other class
of subordinate certificates, if any, with
an earlier alphabetical class designation
has been reduced to zero; and
o third, to reimburse the class for any
losses on the mortgage loans that resulted
in an unreimbursed reduction of the
principal balance of that class of
certificates.
Each class of subordinate certificates will receive
distributions only after all required distributions
have been made on the senior certificates and each
other class of subordinate certificates, if any, with
an earlier alphabetical class designation.
DISTRIBUTION OF
PREPAYMENT PREMIUMS... Any prepayment premium collected on a mortgage loan
during a Collection Period will be distributed on the
next distribution date as and to the extent set forth
in this prospectus supplement.
SUBORDINATION.......... The rights of the subordinate certificates to
receive payments of principal and interest will be
subordinated to the rights of the senior certificates.
Each class of subordinate certificates is also
subordinate to the rights of holders of each other
class of subordinate certificates with an earlier
alphabetical class designation.
Entitlement to receive principal and interest on any
distribution date is depicted in descending order. No
principal will be paid on the next class of
certificates until the principal balance of the
previous class of certificates has been reduced to
zero. The manner
S-7
<PAGE>
in which mortgage loan losses are allocated is
depicted in ascending order.
<TABLE>
<S> <C>
Class A-1, Class
A-2,
Class X
Class B
Class C
Class D
Class E
Class F
Class G
Class H through O
</TABLE>
Subordination results from:
o applying the funds available from the
mortgage loans in the order described
above; and
o allocating losses on the mortgage loans and
certain default-related and unanticipated
expenses of the trust to the certificates
in reverse order of their alphabetical
class designations.
After the balances of all subordinate certificates
have been reduced to zero, losses are allocated to
the Class A-1 and Class A-2 Certificates in
proportion to their class principal balances.
The certificates have no other form of credit
enhancement.
CLEARANCE AND
SETTLEMENT............. You must hold your certificates in book-entry form. In
the United States, we will deliver through the
facilities of The Depository Trust Company. In Europe,
we may deliver through the facilities of Clearstream
Banking, societe anonyme, Luxembourg, or the Euroclear
System. DTC, Clearstream or Euroclear rules and
operating procedures govern transfers within the
system.
S-8
<PAGE>
ADVANCES............... The master servicer must make advances for
delinquent payments of principal (except for
delinquent balloon payments) and/or interest on the
loans. The master servicer must also make advances to
cover certain servicing expenses. If the master
servicer fails to make a required advance, the trustee
must make it.
Advances are required only if the advancing party
determines in its reasonable discretion that they are
ultimately recoverable from future collections on the
related mortgage loan or mortgaged property.
All advances will accrue interest at the "prime
rate."
To the extent not offset by collected late payment
charges or default interest on the related loan,
payments of advance interest will reduce the cash
available to pay interest on the most subordinate
class of certificates then outstanding.
For more detailed information, you should refer to
"The Pooling and Servicing Agreement--Advances" in
this prospectus supplement.
APPRAISAL REDUCTIONS... If certain adverse events or circumstances occur or
exist with respect to a loan or the related mortgaged
property, the special servicer must obtain a new
appraisal of the mortgaged property. If the principal
balance of the loan, plus certain other amounts due
under the loan, is more than 90% of the new appraised
value plus certain reserves pledged as collateral for
the loan, the amount of interest that the master
servicer is required to advance will be reduced. Due
to the payment priorities, this reduction in advances
will reduce the cash available to pay interest on the
most subordinate class of certificates then
outstanding.
EARLY TERMINATION...... The trust fund may be terminated and therefore the
certificates may be redeemed early by designated
entities when the outstanding aggregate scheduled
principal balance of the mortgage loans is reduced to
1% of the cut-off date balance of the mortgage loans.
For more detailed information, you should refer to
"Description of the Certificates--Early Termination"
in this prospectus supplement.
S-9
<PAGE>
THE TRUST FUND
THE TRUST FUND......... The trust fund will use the net proceeds from the
issuance and sale of the certificates to purchase, on
the closing date, the assets that make up the mortgage
pool from the depositor. The depositor will use a
portion of the funds from the issuance and sale of the
securities to purchase the commercial mortgages
directly or indirectly from KeyBank National
Association, Bridger Commercial Realty Finance LLC and
Salomon Brothers Realty Corp. as mortgage loan
sellers.
The assets of the mortgage pool will consist of fixed
rate commercial mortgage loans that are secured by
first liens on commercial and multifamily properties
or ground leases thereon. The mortgage loans will
have a total outstanding principal balance of
$818,406,907 as of June 1, 2000.
PROPERTY OF THE
TRUST FUND............... The trust fund will primarily include the following,
to the extent provided in the pooling and servicing
agreement:
o the mortgage loans and collections on the
mortgage loans on and after the cut-off
date;
o any mortgaged property that has been
foreclosed upon by master servicer or the
special servicer on behalf of the trust
fund;
o the collection account and the distribution
account;
o rights to proceeds under certain insurance
policies that cover the mortgaged
properties;
o rights and remedies for any breaches of
representations, warranties and covenants
made by the mortgage loan sellers; and
o other rights under the documents relating
to the mortgage loans, the mortgages and
the mortgaged properties.
The composition of the assets making up the mortgage
pool is described in this prospectus supplement and
in the schedules to this prospectus supplement, which
constitute an integral part of this prospectus
supplement.
THE MORTGAGE POOL...... The assets of the trust fund will primarily consist
of the mortgage loans. Each mortgage loan constitutes
the obligation of one or more persons to repay a
specified sum with interest. The mortgage loans will
be secured by first liens on the fee simple or
leasehold estate in one or more commercial or
multifamily residential properties.
The composition of the mortgage loans in the mortgage
pool as of the cut-off date is summarized below. For
more detailed
S-10
<PAGE>
information, you should refer to the section in this
prospectus supplement titled "Description of the
Mortgage Pool" and to the Annex A attached to this
prospectus supplement.
The "cut-off date balance" is the aggregate of the
cut-off date principal balances of the mortgage
loans.
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE)
<TABLE>
<S> <C>
CUT-OFF DATE BALANCE (PLUS OR MINUS 5%) ....................... $818,406,907
NUMBER OF MORTGAGE LOANS ...................................... 167
AVERAGE CUT-OFF DATE LOAN BALANCE ............................. $ 4,900,640
HIGHEST CUT-OFF DATE LOAN BALANCE ............................. $30,410,327
LOWEST CUT-OFF DATE LOAN BALANCE .............................. $ 351,672
WEIGHTED AVERAGE MORTGAGE RATE (GROSS) ........................ 8.195%
WEIGHTED AVERAGE MORTGAGE RATE (NET) .......................... 8.123%
RANGE OF MORTGAGE RATES (NET) ................................. 6.808% -- 9.608%
WEIGHTED AVERAGE REMAINING AMORTIZATION TERM (MONTHS) ......... 335.1
RANGE OF AMORTIZATION TERMS (MONTHS) .......................... 137 -- 359
WEIGHTED AVERAGE UNDERWRITTEN DSCR ............................ 1.306x
RANGE OF DSCRS ................................................ 1.13x -- 1.83x
WEIGHTED AVERAGE LTV .......................................... 71.52%
RANGE OF LTVS ................................................. 31.53 -- 91.39%
WEIGHTED AVERAGE BALLOON/ARD LTV .............................. 62.28%
PERCENTAGE OF CUT-OFF DATE BALANCE MADE UP OF:
BALLOON LOANS (EXCLUDING ARD LOANS) .......................... 88.1 %
ARD LOANS .................................................... 10.9 %
FULLY AMORTIZING LOANS ....................................... 1.0 %
RANGE OF MATURITY YEARS/ARD DATES ............................. 2005 -- 2019
</TABLE>
S-11
<PAGE>
A first lien on a fee simple or leasehold estate in a mortgaged property
secures each loan.
o Fee--159 loans (representing approximately 96.3% of the cut-off date
balance)
o Leasehold--5 loans (representing approximately 1.9% of the cut-off
date balance)
o Both fee and leasehold--3 loans (representing approximately 1.8% of
the cut-off date balance)
The mortgage pool includes 5 separate sets of cross-collateralized loans.
The largest of these sets constitutes approximately 2.5% of the cut-off date
balance.
The mortgage loans generally are not insured or guaranteed by any person
or entity. You should consider all of the loans to be non-recourse loans.
162 loans (representing approximately 99.0% of the cut-off date balance)
are Balloon Loans. 10 of these Balloon Loans (representing approximately 10.9%
of the cut-off date balance) are ARD Loans.
Property types included in the mortgage pool include:
o retail--39 properties (representing approximately 29.9% of the cut-off
date balance)
o multifamily--46 properties (representing approximately 27.8% of the
cut-off date balance)
o office--31 properties (representing approximately 19.9% of the cut-off
date balance)
o industrial--20 properties (representing approximately 9.8% of the
cut-off date balance)
o hospitality--3 properties (representing approximately 3.6% of the
cut-off date balance)
o manufactured housing--30 properties (representing approximately 5.6%
of the cut-off date balance)
o mixed use--6 properties (representing approximately 2.8% of the
cut-off date balance)
o self-storage--4 properties (representing approximately 0.6% of the
cut-off date balance)
Loans secured by properties located in California and Texas each represent
10% or more of the cut-off date balance. Also, loans secured by properties
located in Maryland represent 5% or more, but less than 10%, of the cut-off
date balance. None of the remaining 32 jurisdictions have mortgaged properties
securing loans representing 5% or more of the cut-off date balance.
No set of mortgage loans to a single borrower or to a single group of
affiliated borrowers constitutes more than approximately 2.49% of the cut-off
date balance.
77 mortgaged properties (representing approximately 47.6% of the cut-off
date balance) are at least 20% occupied by a major tenant or the borrower.
96 loans (representing approximately 76.7% of the cut-off date balance)
permit the borrower to defease its loan, subject to certain conditions.
Information with respect to the prepayment provisions of the mortgage
loans and a Prepayment Lockout/Premium Analysis chart is included in this
prospectus supplement.
S-12
<PAGE>
OTHER FEATURES
FEDERAL TAX STATUS..... Elections will be made to treat designated portions
of the trust fund as three separate "real estate
mortgage investment conduits", each referred to as a
"REMIC". All of the offered certificates will
constitute "regular interests" in a REMIC. The offered
certificates generally will be treated as newly
originated debt instruments for federal income tax
purposes. Certain classes not part of the offered
certificates will constitute "residual interests" in a
REMIC. This means you will be required to include in
income all interest on our certificates in accordance
with the accrual method of accounting, regardless of
your usual method of accounting. The Class , and
Certificates are expected to be treated for federal
income tax reporting purposes as having been issued
with original issue discount.
If you are a mutual savings bank or domestic building
and loan association, the offered certificates held
by you will represent interests in "qualifying real
property loans" within the meaning of Section 593(d)
of the Tax Code. If you are a REIT, the offered
certificates held by you will constitute "real estate
assets" within the meaning of Section 856(c)(5)(B) of
the Tax Code, and income with respect to offered
certificates will be considered "interest on
obligations secured by mortgages on real property or
on interests in property" within the meaning of
Section 856(c)(3)(B) of the Tax Code. If you are a
domestic building and loan association, the offered
certificates held by you will generally constitute a
"regular or residual interest in a REMIC" within the
meaning of Section 7701(a)(19)(C)(xi) of the Tax Code
only to the extent that the mortgage loans are
secured by multifamily apartment buildings.
For additional information concerning the application
of United States federal income tax laws to the trust
fund and the certificates, you should refer to the
section in the prospectus titled "Material Federal
Income Tax Consequences."
ERISA.................. The Class A-1 and Class A-2 Certificates and the
Class X Certificates are generally eligible for
purchase by employee benefit plans, subject to certain
considerations discussed in the sections in this
prospectus supplement and the prospectus titled "ERISA
Considerations."
The other classes of offered certificates, however,
may not be acquired by any employee benefit plan or
an individual retirement plan. This prohibition does
not apply to an insurance company investing assets of
its general account under circumstances that
S-13
<PAGE>
would qualify for an exemption under Sections I and
III of prohibited transaction class exemption 95-60.
You should refer to sections in this prospectus
supplement and the prospectus titled "ERISA
Considerations." If you are a benefit plan fiduciary
considering purchase of the certificates of any class
you should, among other things, consult with your
counsel to determine whether all required conditions
have been satisfied.
SMMEA.................. The offered certificates will not constitute
mortgage-related securities pursuant to SMMEA. For
more information, you should refer to sections in the
prospectus supplement and the prospectus titled "Legal
Investment."
S-14
<PAGE>
RISK FACTORS
You should carefully consider the following risks and those in the
prospectus under "Risk Factors" before making an investment decision. Your
investment in the offered certificates will involve some degree of risk. If
any of the following risks are realized, your investment could be materially
and adversely affected. In addition, other risks unknown to us or which we
currently consider immaterial may also impair your investment. You can find
the definitions of capitalized terms that are used in this section beginning
on page S-139 in this prospectus supplement and under the caption "Glossary"
beginning on page 119 in the prospectus.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of a
variety of factors, including the risks described below and elsewhere in this
prospectus supplement and the prospectus.
THE REPAYMENT OF A MULTIFAMILY The mortgage loans are secured by various
OR COMMERCIAL MORTGAGE LOAN IS types of income-producing commercial
DEPENDENT ON THE CASH FLOW properties. Because, among other things,
PRODUCED BY THE PROPERTY, WHICH commercial lending typically involves
CAN BE VOLATILE AND larger loans, it is generally thought to
INSUFFICIENT TO ALLOW TIMELY expose a lender to greater risk than
PAYMENT ON YOUR CERTIFICATES. one-to-four family residential lending.
The repayment of a commercial mortgage
loan is typically dependent upon the
ability of the applicable mortgaged
property to produce cash flow. Even the
liquidation value of a commercial
mortgaged property is determined, in
substantial part, by the amount of the
mortgaged property's cash flow or its
potential to generate cash flow. However,
net operating income and cash flow can be
volatile and may be insufficient to cover
debt service on the loan at any given
time.
A large number of factors may adversely
affect the net operating income, cash flow
and property value of the mortgaged
properties. Some of these factors relate
to the mortgaged property itself, such as:
(1) the age, design and construction
quality of the mortgaged property;
(2) perceptions regarding the safety,
convenience and attractiveness of the
mortgaged property;
(3) the proximity and attractiveness of
competing properties;
(4) the adequacy of the mortgaged
property's management and
maintenance;
(5) increases in operating expenses at
the mortgaged property and in
relation to competing properties;
(6) an increase in the capital
expenditures needed to maintain the
mortgaged property or make
improvements;
S-15
<PAGE>
(7) the dependence upon a single tenant,
or a concentration of tenants in a
particular business or industry;
(8) a decline in the financial condition
of a major tenant;
(9) an increase in vacancy rates; and
(10) a decline in rental rates as leases
are renewed or entered into with new
tenants.
Others factors are more general in nature,
such as:
(1) national, regional or local economic
conditions, including plant closings,
military base closings, industry
slowdowns and unemployment rates;
(2) local real estate conditions, such as
an oversupply of competing
properties, space or housing;
(3) demographic factors;
(4) decreases in consumer confidence;
(5) changes in consumer tastes and
preferences; and
(6) retroactive changes in building
codes.
The volatility of net operating income
will be influenced by many of the
foregoing factors, as well as by:
(1) the length of tenant leases;
(2) the creditworthiness of tenants;
(3) tenant defaults;
(4) in the case of rental properties, the
rate at which new rentals occur; and
(5) the property's "operating leverage"
(i.e., the percentage of total
property expenses in relation to
revenue, the ratio of fixed operating
expenses to those that vary with
revenues, and the level of capital
expenditures required to maintain the
property and to retain or replace
tenants).
A decline in the real estate market or in
the financial condition of a major tenant
will tend to have a more immediate effect
on the net operating income of properties
with short-term revenue sources and may
lead to higher rates of delinquency or
defaults under loans.
MULTIFAMILY PROPERTIES ARE 46 of the mortgaged properties,
SUBJECT TO UNIQUE RISKS WHICH representing approximately 27.8% of the
MAY REDUCE PAYMENTS ON YOUR cut-off date balance, are multifamily
CERTIFICATES. properties. Mortgage loans that are
secured by liens on those types of
properties are exposed to unique risks
particular to those types
S-16
<PAGE>
of properties. Some significant factors
affecting the value and successful
operation of a multifamily rental property
include:
(1) the location of the property;
(2) the number of competing residential
developments in the local market
(such as apartment buildings,
manufactured housing communities and
single family homes);
(3) the physical attributes of the
multifamily building (such as its age
and appearance);
(4) state and local regulations affecting
the property.
(5) its reputation;
(6) the ability of management to provide
adequate maintenance and insurance;
and
(7) the types of services provided by the
property.
Some 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 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 provide for decontrol
of rental rates upon vacancy of individual
units. Any limitations on a borrower's
ability to raise property rents may impair
that 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.
S-17
<PAGE>
Adverse economic conditions, either
local, regional or national, may:
(1) limit the amount of rent that can be
charged for rental units;
(2) adversely affect tenants' ability to
pay rent; and
(3) result in a reduction in timely rent
payments or a reduction in occupancy
levels without a corresponding
decrease in expenses.
Construction of additional housing units,
local military base closings, company
relocations and closings and national and
local politics, including current or
future rent stabilization and rent control
laws and agreements may also affect
occupancy and rent levels. Because
multifamily rental property is typically
leased on a short-term basis, its
occupancy rate may be subject to rapid
decline, including for some of the
foregoing reasons. In addition, reductions
in the level of mortgage interest rates
may encourage tenants in multifamily
rental properties to purchase
single-family housing rather than continue
to lease housing. In addition, the
characteristics of a neighborhood may
change over time or in relation to newer
developments reducing the mortgage
property's value and its cash flow.
Finally, the cost of operating a
multifamily rental property may increase,
including the cost of utilities and the
costs of required capital expenditures.
Also, multifamily rental properties may be
subject to rent control laws or affordable
housing-related use restrictions reserving
a portion of the units for low-end and
moderate-income tenants which could impact
the future cash flows of those properties.
COOPERATIVELY-OWNED APARTMENT Generally, a tenant-shareholder of a
BUILDINGS ARE SUBJECT TO cooperative corporation must make a
ADDITIONAL RISKS WHICH MAY monthly maintenance payment to the
REDUCE PAYMENTS ON YOUR cooperative corporation that owns the
CERTIFICATES. subject apartment building. That payment
represents the tenant-shareholder's
proportional share of the corporation's
payments with respect to the mortgage loan
secured by the property, and all real
property taxes, maintenance expenses and
other capital and ordinary expenses with
respect to the property, less any other
income that the cooperative corporation
may realize. In addition to risks
generally associated with real estate,
adverse economic conditions, either local,
regional or national, may impair the
financial conditions of individual
tenant-shareholders or their ability to
sublet the subject apartments, reducing
the likelihood tenants can make required
maintenance payments. In addition, the
lender on any mortgage loan secured by a
cooperatively-owned apartment
S-18
<PAGE>
building will be subject to all the risks
that it would have in connection with
lending on the security of a multifamily
rental property. In addition, if in
connection with any cooperative conversion
of an apartment building, the sponsor
holds the shares allocated to a large
number of the apartment units, any lender
secured by a mortgage on that building
will be subject to a risk associated with
that sponsor's creditworthiness.
SPECIAL LOW-INCOME HOUSING TAX Some multifamily rental properties are
CREDITS MAY NOT ALWAYS BE eligible to receive low-income housing tax
AVAILABLE TO THE BORROWER DUE credits pursuant to Section 42 of the Tax
TO RENT CONTROL LAWS AND LACK Code. However, rent limitations associated
OF INTERESTED TENANTS WHICH MAY therewith may adversely affect the ability
RESULT IN REDUCED PAYMENTS ON of the applicable borrowers to increase
YOUR CERTIFICATES. rents to maintain those mortgaged
properties in proper condition during
periods of rapid inflation or declining
market value of the mortgaged properties.
In addition, the income restrictions on
tenants imposed by Section 42 of the Tax
Code may reduce the number of eligible
tenants in those mortgaged properties and
result in a reduction in occupancy rates
applicable thereto. Furthermore, some
eligible tenants may not find any
differences in rents between the rental
properties eligible to receive tax credits
under Section 42 of the Tax Code and other
multifamily rental properties in the same
area to be a sufficient economic incentive
to reside at a Section 42 Property, which
may have fewer amenities or otherwise be
less attractive as a residence. All of
these conditions and events may increase
the possibility that a borrower may be
unable to meet its obligations under its
mortgage loan.
CONDOMINIUM PROJECTS ARE 3 of the mortgaged properties,
SUBJECT TO ADDITIONAL RISKS representing approximately 1.7% of the
WHICH MAY REDUCE PAYMENTS ON cut-off date balance, are secured in whole
YOUR CERTIFICATES or in part by the related borrower's
ownership interest in all or a portion of
the units/space in a residential or
commercial condominium project and the
related voting rights in the owner's
association for the project. In each case,
the related borrower does not have a
controlling vote in the owners'
association which is comprised of both
residential and commercial unit owners.
Despite having less than a controlling
voting interest, the consent of the
related borrowers would be necessary to
effect substantial changes in the
condominium regime that would be expected
to materially affect the current use and
operation of the related properties. Due
to the nature of condominiums and each
borrower's ownership interest therein, a
default on any of these mortgage loans
will not allow the holder of the mortgage
loan the same flexibility in realizing
upon the underlying mortgaged property as
is generally available with respect to
properties that are not condominiums. The
rights of other unit owners, the governing
documents of the owners' association and
the state and local laws applicable to
S-19
<PAGE>
condominiums must be considered and
respected. Consequently, servicing and
realizing upon the collateral of these
pooled mortgage loans could subject the
trust to greater delay, expense and risk
than a loan secured by a property that is
not a condominium.
OFFICE PROPERTIES ARE SUBJECT 31 of the mortgaged properties,
TO UNIQUE RISKS WHICH MAY representing approximately 19.9% of the
REDUCE PAYMENTS ON YOUR cut-off date balance, are office
CERTIFICATES. properties. Mortgage loans that are
secured by liens on office properties are
exposed to unique risks particular to
office properties. Some of the significant
factors affecting the value and successful
operation of an office property include:
(1) the quality of the tenants in the
building;
(2) the physical attributes of the
building in relation to competing
buildings;
(3) the location of the building with
respect to the central business
district or population centers;
(4) demographic trends within the
metropolitan area, including any
trend to move away from or towards
the central business district;
(5) social trends combined with space
management trends (which may change
towards options such as
telecommuting);
(6) tax incentives offered to businesses
by cities or suburbs adjacent to or
near the city where the building is
located; and
(7) the strength and stability of the
market area as a desirable business
location.
In addition to risks generally associated
with real estate, cash flows from mortgage
loans secured by office properties are
also significantly affected by the
following factors:
(1) adverse changes in population and
economic growth, which generally
create demand for office space;
(2) local competitive conditions,
including the supply of office space
or construction of new competitive
office buildings;
(3) the quality and management philosophy
of the management of office
properties;
(4) the attractiveness of the properties
and the surrounding neighborhood to
tenants and their customers or
clients; and
S-20
<PAGE>
(5) the necessity of major repairs or
improvements to satisfy the needs of
tenants.
An economic decline in the businesses
operated by its tenants may reduce the
office property's value and cash flow. An
economic decline may also result in one or
more significant tenants ceasing
operations at those locations (which may
occur on account of a voluntary decision
not to renew a lease, bankruptcy or
insolvency of those tenants, the tenants'
general cessation of business activities
or for other reasons). The risk of an
economic decline 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.
The expiration of space leases and the
ability of the respective borrowers to
renew or relet the space on comparable
terms affect repayment of the related
mortgage loans. Even if vacated space is
successfully relet, the costs associated
with reletting, including tenant
improvements, leasing commissions and free
rent, could be substantial and could
reduce cash flow from the office
properties. The correlation between the
success of tenant businesses and property
value is increased when the property is a
single tenant property.
Office properties are also subject to
competition with other office properties
in the same market. Competition is
affected by a building's:
(1) age;
(2) condition;
(3) design (including floor sizes and
layout);
(4) access to transportation;
(5) availability of parking; and
(6) ability to offer amenities to its
tenants (including sophisticated
building systems, such as fiberoptic
cables, satellite communications or
other base building technological
features); office properties that are
not equipped to accommodate the needs
of modern business may become
functionally obsolete and thus
non-competitive.
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 factors such as labor cost and quality,
tax environment and quality of life
matters, such as housing costs, schools
and cultural amenities. A central business
district may have a substantially
different economy from
S-21
<PAGE>
that of a suburb. The local economy will
affect an office property's ability to
attract stable tenants on a consistent
basis. In addition, the cost of refitting
office space for a new tenant is often
higher than for other property types.
RETAIL PROPERTIES ARE SUBJECT 39 of the mortgaged properties,
TO UNIQUE RISKS WHICH MAY representing approximately 29.9% of the
REDUCE PAYMENTS ON YOUR cut-off date balance, are retail
CERTIFICATES. properties. Mortgage loans that are
secured by liens on retail properties are
exposed to unique risks particular to
those types of properties.
Retail properties generally derive all or
a substantial percentage of their income
from lease payments from commercial
tenants. Income from and the market value
of retail properties are affected by
various factors including, but not limited
to, the following:
(1) the ability to lease space in those
properties;
(2) the ability of tenants to meet their
lease obligations;
(3) the possibility of a significant
tenant becoming bankrupt or
insolvent; and
(4) other 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. Declines in tenant sales will cause
a corresponding decline in percentage
rents, and may also cause those tenants to
become unable to pay their base rent or
other occupancy costs. The default by a
tenant under its lease could result in
delays and costs in enforcing the lessor's
rights.
Repayment of the related mortgage loans
will also be affected by the expiration of
space leases and the ability of the
respective borrowers to renew or relet the
space on comparable terms. Even if vacated
space is successfully relet, the costs
associated with reletting, including
tenant improvements, leasing commissions
and free rent, could be substantial and
could reduce cash flow from the retail
properties. The correlation between the
success of tenant businesses and property
value is increased when the property is a
single tenant property.
Whether a shopping center is "anchored" or
"unanchored" is also an important
distinction. Anchor tenants in shopping
centers traditionally have been a major
factor in the public's perception of a
shopping center. The anchor tenants at a
shopping center play an important part in
generating customer traffic and making
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a center a desirable location for other
tenants of the center. An anchor tenant's
failure to renew its lease, the
termination of its lease, its bankruptcy
or economic decline, or its cessation of
the business (notwithstanding any
continued payment of rent) can materially
reduce the economic performance of a
shopping center. In addition, some tenants
at retail properties may be entitled to
terminate their leases if an anchor tenant
ceases operations at the property.
Unlike other types of commercial
properties, retail properties also face
competition from sources outside a given
real estate market. Catalogue retailers,
home shopping networks, telemarketing,
selling through the Internet, and outlet
centers all compete with more traditional
retail properties for consumer dollars,
and reduce demand for retail space by
retail companies. Continued growth of
these alternative retail outlets (which
are often characterized by lower operating
costs) could adversely affect value of and
cash flow from related retail properties.
In addition to risks generally associated
with real estate, cash flows from mortgage
loans secured by retail properties are
also significantly affected by the
following factors:
(1) adverse changes in consumer spending
patterns;
(2) local competitive conditions,
including the supply of retail space
or the existence or construction of
new competitive shopping centers or
shopping malls;
(3) the quality and management philosophy
of the management;
(4) the attractiveness of the properties
and surrounding neighborhood to
tenants and their customers;
(5) the public perception of the safety
of customers (at shopping malls and
shopping centers, for example); and
(6) the necessity of major repairs or
improvements to satisfy the needs of
tenants.
HOTEL AND MOTEL PROPERTIES ARE 3 of the mortgaged properties,
SUBJECT TO UNIQUE RISKS WHICH representing approximately 3.6% of the
MAY REDUCE PAYMENTS ON YOUR cut-off date balance, are hotels or
CERTIFICATES motels. Mortgage loans that are secured by
liens on hotel and motel properties are
exposed to unique risks particular to
those types of properties.
Hotel and motel properties may include
full service hotels, resort hotels with
many amenities, limited service hotels,
hotels and motels associated with national
franchise chains, hotels and motels
associated with regional franchise chains
and hotels that are not affiliated with
any franchise chain but may have their own
brand identity.
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Some of the significant factors affecting
the value and successful operation of
hotel and motel properties include:
(1) location, quality and franchise
affiliation;
(2) adverse economic conditions, either
local, regional or national, may
limit the amount that can be charged
for a room and may result in a
reduction in occupancy levels;
(3) 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;
(4) because hotel and motel rooms
generally are rented for short
periods of time, hotels and motels
tend to respond more quickly to
adverse economic conditions and
competition than do other commercial
properties;
(5) the financial strength and
capabilities of the owner and
operator of a hotel or motel may have
an impact on quality of service and
economic performance;
(6) the lodging industry, in some
locations, is 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;
and
(7) 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 and motel properties may be operated
pursuant to franchise agreements. The
continuation of franchises is typically
subject to specified operating standards
and other terms and conditions. The
franchisor periodically inspects its
licensed properties to confirm adherence
to its operating standards. The failure of
the hotel or motel property to maintain
operating standards or adhere to other
terms and conditions could result in the
loss or cancellation of the franchise
agreement. The franchisor could possibly
condition the continuation of a franchise
agreement on the completion of capital
improvements or making specified capital
expenditures that the related borrower
determines are too expensive or are
otherwise unwarranted in light of general
economic conditions or the operating
results or prospects of the affected
hotels. In that event, the related
borrower may elect to allow the franchise
agreement to lapse. In any case, if the
franchise is terminated, the related
borrower may seek to obtain a suitable
replacement
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<PAGE>
franchise or to operate the hotel or
motel property independently of a
franchise license. The loss of a franchise
agreement could have a material adverse
effect upon the operations or the
underlying value of the hotel or motel
covered by the franchise because of the
loss of associated name recognition,
marketing support and centralized
reservation systems provided by the
franchisor.
The viability of any hotel or motel
property that is part of a national or
regional hotel or motel chain 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
agreement. The transferability of
franchise agreements may be restricted
and, in the event of a foreclosure on a
hotel or motel property, the consent of
the franchisor for the continued use of
the franchise by the hotel or motel
property would be required. 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 or motel
property, it is unlikely that the
purchaser of that hotel or motel property
would be entitled to the rights under any
associated liquor license, and the
purchaser would be required to apply in
its own right for a liquor license. There
can be no assurance that a new license
could be obtained or that it could be
obtained promptly.
Other operating risks common to the
lodging industry include the following:
(1) a high level of continuing capital
expenditures to keep necessary
furniture, fixtures and equipment
updated;
(2) competition from other hotels and
motels;
(3) increases in operating costs (which
increases may not necessarily in the
future be offset by increased room
rates);
(4) dependence on business and commercial
travelers and tourism;
(5) increases in energy costs and other
expenses of travel; and
(6) adverse effects of national, regional
and local economic conditions.
These factors could reduce the related
borrower's ability to make payments on the
related mortgage loans.
Because limited service hotels and motels
are relatively quick and inexpensive to
construct and may quickly achieve an
initially
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positive value, an over-building of
hotels and motels could occur in any given
region, which would likely reduce
occupancy and daily room rates.
A hotel or motel property may present
additional risks as compared to other
commercial property types in that:
(1) hotels and motels may be operated
pursuant to management and operating
agreements that may be terminable by
the manager or the operator;
(2) the transferability of any operating
agreement to the entity acquiring a
hotel or motel (either through
purchase or foreclosure) is subject
to local law requirements;
(3) it may be difficult to terminate an
ineffective operator of a hotel or
motel property subsequent to a
foreclosure of that property; and
(4) future occupancy rates may be
adversely affected by, among other
factors, any negative perception of a
hotel or motel based upon its
historical reputation.
INDUSTRIAL PROPERTIES ARE 20 of the mortgaged properties,
SUBJECT TO UNIQUE RISKS WHICH representing approximately 9.8% of the
MAY REDUCE PAYMENTS ON YOUR cut-off date balance, are industrial
CERTIFICATES. properties. Mortgage loans that are
secured by liens on industrial properties
are exposed to unique risks particular to
those types of properties. Some of the
significant factors that affect the value
and successful operation of an industrial
property include:
(1) the quality of tenants;
(2) building design; and
(3) adaptability and the location of the
property.
Industrial properties may be adversely
affected by reduced demand for industrial
space occasioned by a decline in a
particular industry segment or by a
general slow-down in the economy. In
addition, an industrial property that
suited the particular needs of its
original tenant may be difficult to relet
to another tenant or may become
functionally obsolete relative to newer
properties. Furthermore, industrial
properties may be adversely affected by
the availability of labor sources or a
change in the proximity of supply sources.
Because industrial properties frequently
have a single tenant, any industrial
property is heavily dependent on the
success of the tenant's business.
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<PAGE>
Aspects of building site, design and
adaptability affect the value of an
industrial property. Site characteristics
which are valuable to an industrial
property include the following:
(1) clear heights;
(2) column spacing;
(3) number of bays and bay depths;
(4) divisibility;
(5) floor loading capacities;
(6) truck turning radius; and
(7) overall functionality and
accessibility.
Nevertheless, site characteristics of an
industrial property suitable for one
tenant may not be appropriate for other
potential tenants, which may make it
difficult to relet the property.
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.
Further, industrial properties may be
adversely affected by economic declines in
the industry segment of their tenants.
MANUFACTURED HOUSING 30 of the mortgaged properties,
COMMUNITIES ARE SUBJECT TO representing approximately 5.6% of the
CERTAIN RISKS WHICH COULD cut-off date balance, are manufactured
ADVERSELY AFFECT THEIR VALUE housing communities. Mortgage loans
AND CASH FLOW. secured by liens on properties of this
type pose risks not associated with loans
secured by liens on other types of
income-producing real estate, including:
(1) the number of competing manufactured
housing communities and other
residential developments (such as
apartment buildings and single family
homes) in the local market;
(2) the age, appearance and reputation of
the community;
(3) the ability of management to provide
adequate maintenance and insurance;
and
(4) the types of services and amenities
it provides.
The manufactured housing communities are
"special purpose" properties that could
not be readily converted to general
residential, retail or office use. Some
manufactured housing communities may lease
sites to non-permanent recreational
vehicles, which occupancy is often very
seasonal in nature.
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<PAGE>
SELF-STORAGE FACILITIES ARE 4 of the mortgaged properties,
SUBJECT TO UNIQUE RISKS WHICH representing approximately 0.6% of the
MAY REDUCE PAYMENTS ON YOUR cut-off date balance, are warehouse,
CERTIFICATES. mini-warehouse and self-storage
facilities. Mortgage loans that are
secured by liens on warehouse,
mini-warehouse and self-storage facilities
are exposed to unique risks particular to
those types of properties.
Because of relatively low acquisition
costs and break-even occupancy rates,
warehouse, mini-warehouse and self-storage
properties are considered vulnerable to
competition. Despite their relatively low
acquisition costs, and because of their
particular building characteristics, these
types of properties require substantial
capital investments in order to adapt them
to alternative uses. Thus, if the
operation of any of the these types of
properties becomes unprofitable due to
decreased demand, competition, age of
improvements or other factors, and the
borrower becomes unable to meet its
obligation on the related mortgage loan,
the liquidation value of the property may
be substantially less, relative to the
amount owing on the mortgage loan, than
would be the case if the property were
readily adaptable to other uses. In
addition to competition, some of the
factors that affect the success of a these
types of properties include:
(1) the location, design and visibility
of the facility;
(2) the facility's proximity to apartment
complexes or commercial users;
(3) the trends of apartment tenants in
the area moving to single-family
homes;
(4) the services provided (such as
security and accessibility);
(5) the age of improvements;
(6) the appearance of the improvements;
and
(7) the quality of management.
The environmental assessments discussed
herein did not include an inspection of
the contents of the self-storage units of
the self-storage properties. Accordingly,
there is no assurance that all of the
units included in the self-storage
properties are free from hazardous
substances or will remain so in the
future.
Tenant privacy, anonymity and efficient
access are also important to the success
of these types of properties.
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<PAGE>
AGING, DETERIORATION AND POOR The age, construction quality and design
CONSTRUCTION QUALITY MAY of a particular mortgaged property may
ADVERSELY AFFECT THE VALUE AND affect the occupancy level and the
CASH FLOW OF THE MORTGAGED occupancy fees that may be charged. Poorly
PROPERTIES. constructed mortgaged properties are
likely to require more expenditures for
maintenance, repairs and improvements.
Even mortgaged properties that were well
constructed and have been well maintained
will require improvements in order to
maintain their value and retain tenants
and other occupants.
LIMITED ADAPTABILITY FOR OTHER Some of the mortgaged properties would
USES MAY SUBSTANTIALLY LOWER require substantial capital expenditures
THE LIQUIDATION VALUE OF A to convert to an alternative use. If the
MORTGAGED PROPERTY IN CERTAIN operation of any of these mortgaged
CIRCUMSTANCES. properties becomes unprofitable due to,
among other factors, (1) competition, (2)
age of the improvements, (3) decreased
demand, and (4) zoning restrictions, and
as a result the borrower becomes unable to
meet its obligations, the liquidation
value of any these mortgaged properties
may be substantially less than would be
the case if these properties were more
readily adaptable to other uses.
RENEWAL, TERMINATION, We cannot assure you that (1) leases that
EXPIRATION AND RELETTING OF expire can be renewed, (2) the space
LEASES ENTAIL RISKS WHICH MAY covered by leases that expire or are
ADVERSELY AFFECT YOUR terminated can be leased in a timely
INVESTMENT. manner at comparable rents or on
comparable terms or (3) the borrower will
have the cash or be able to obtain the
financing to fund any required tenant
improvements. Income from and the market
value of the mortgaged properties would be
adversely affected if vacant space in the
mortgaged properties could not be leased
for a significant period of time, if
tenants were unable to meet their lease
obligations or if, for any other reason,
rental payments could not be collected.
Upon the occurrence of an event of default
by a tenant, delays and costs in enforcing
the lessor's rights could occur. In
addition, certain tenants at the mortgaged
properties may be entitled to terminate
their leases or reduce their rents based
upon negotiated lease provisions (for
example, if an anchor tenant ceases
operations at the related mortgaged
property). In these cases, we cannot
assure you that the operation of these
provisions will not allow a termination or
rent reduction. A tenant's lease may also
be terminated or otherwise affected if a
tenant becomes the subject of a bankruptcy
proceeding.
If a significant portion of a mortgaged
property is leased to a single tenant, the
failure of the borrower to relet that
portion of the mortgaged property in the
event this tenant vacates or fails
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<PAGE>
to perform its obligations will have a
greater adverse effect on your investment
than if the mortgaged property were leased
to a greater number of tenants.
FACTORS AFFECTING THE The mortgaged properties face competition
COMPETITIVE POSITION OF THE from various sources, which could
MORTGAGED PROPERTIES MAY adversely affect the properties' net
ADVERSELY AFFECT THEIR VALUE operating income and market values and,
AND CASH FLOW. therefore, your investment. Factors
affecting the competitive position of a
mortgaged property include:
(1) the existence of similar properties
located in the same area, which
attract similar types of occupants on
the basis of more favorable rental
rates, location, condition and
features;
(2) the existence of any oversupply of
available space in a particular
market, either as a result of new
construction or a decrease in the
number of occupants, which adversely
affects the rental rates for the
mortgaged property; and
(3) the possibility of other properties
being converted to competitive uses
as a result of trends in the use of
property by occupants (for example,
the establishment of more home based
offices and businesses or the
conversion of warehouse space for
multifamily use).
POOR QUALITY OF MANAGEMENT MAY The successful operation of the mortgaged
ADVERSELY AFFECT THE OPERATION properties is also dependent on the
OF THE MORTGAGED PROPERTIES. performance of the respective property
managers of the mortgaged properties.
Property managers may be responsible for:
(1) responding to changes in local market
factors such as competition and
patterns of demand;
(2) managing leasing activities such as
planning and implementing the rental
rate structure, including
establishing levels of rent payments;
and
(3) ensuring that maintenance and capital
improvements can be carried out in a
timely fashion.
MORTGAGE LOANS ARE NOT No mortgage loan is insured or guaranteed
GUARANTEED. by the United States of America, any
governmental agency or instrumentality,
any private mortgage insurer or by the
depositor, the Transferor, the mortgage
loan sellers, the master servicer, the
special servicer, the trustee or any of
their respective affiliates.
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<PAGE>
NON-RECOURSE LOANS LIMIT The mortgage loans are generally
REMEDIES FOLLOWING BORROWER non-recourse loans. Therefore, recourse
DEFAULT. generally may be had only against the
specific mortgaged property securing the
mortgage loan and any other assets that
may have been pledged to secure the
mortgage loan. Consequently, the payment
of each non-recourse mortgage loan is
primarily dependent upon the sufficiency
of the net operating income from the
related mortgaged property and, at
maturity, upon the market value of the
mortgaged property.
When recourse against the borrower is
permitted by the loan documents, the
ability to collect from the borrower is
dependent upon the creditworthiness,
solvency and other factors specific to the
borrower and generally is not within the
control of any of the mortgage loan
sellers, the Transferor, the depositor,
the master sevicer, the special servicer
or any of their respective affiliates.
Even if the mortgage loan documents
provide for recourse against the borrower
or another entity, we cannot assure you
that significant amounts will be realized
in respect of that recourse in the event
of a default with respect to any mortgage
loan.
CONCENTRATION OF MORTGAGE LOANS In general, a mortgage pool composed of
AND BORROWERS DECREASES loans having larger average balances and a
DIVERSIFICATION AND MAY smaller number of loans may be subject to
INCREASE THE RISK OF YOUR losses that are more severe than other
INVESTMENT. pools having smaller average balances, but
with the same or a similar aggregate
principal balance. You should carefully
consider all aspects of any mortgage loan
representing a significant percentage of
the cut-off date balance to ensure that
the loan is not subject to risks
unacceptable to you. Additionally, a
mortgage pool with a high concentration of
mortgage loans to the same borrower or
related borrowers is subject to the
potential risk that a borrower undergoing
financial difficulties might divert its
resources or undertake remedial actions
(such as a bankruptcy) in order to
alleviate these difficulties, to the
detriment of the mortgaged properties and
therefore your investment. See
"Description of the Mortgage Pool--Certain
Characteristics of the Mortgage
Pool--Concentration of Mortgage Loans and
Borrowers" herein.
FORECLOSURE MAY SUBJECT THE
TRUST FUND TO CERTAIN TAXES. If the trust fund acquires a mortgaged
property pursuant to a foreclosure or
deed-in-lieu of foreclosure, one of the
REMICs might become subject to federal
(and possibly state or local) tax, at the
highest marginal corporate rate on certain
of its net income from the operation and
management of that mortgaged property. As
a consequence, the net proceeds available
for distribution to certificateholders
would be reduced.
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<PAGE>
CHANGES IN THE COMPOSITION OF As principal payments or prepayments are
THE MORTGAGE POOL DUE TO made on various mortgage loans, you may be
PAYMENT PATTERNS MAY DECREASE subject to more concentrated risk due to
DIVERSIFICATION AND INCREASE the reduction in both the diversity of
THE RISK OF YOUR INVESTMENT. types of mortgaged properties and the
number of borrowers. Because principal on
the certificates is payable in sequential
order, and no class receives principal
until the certificate balance of the
preceding sequential class or classes has
been reduced to zero, classes that have a
later sequential designation are more
likely to be exposed to the risk of
concentration than classes with an earlier
sequential priority.
IF A BORROWER USES THE In general, other than disclosed in this
MORTGAGED PROPERTY AS SECURITY prospectus supplement including Annex A,
FOR ANOTHER LOAN, THE VALUE OF the borrower is prohibited from taking
THE MORTGAGED PROPERTY MAY BE another loan secured by the mortgaged
ADVERSELY AFFECTED. property without the mortgagee's consent.
The Pooling and Servicing Agreement will
permit the master servicer and the special
servicer to give its consent if certain
conditions exist, including a confirmation
from the Rating Agencies indicating that
forbearance from enforcing that provision
will not result in a downgrade, withdrawal
or qualification of the respective ratings
of any outstanding classes of
certificates. The absence of these
conditions may not become evident,
however, until the related mortgage loan
otherwise defaults. If one or more
subordinate liens are imposed on a
mortgaged property or the borrower incurs
other indebtedness, the trust fund is
subject to additional risks. Some of those
risks are:
(1) the borrower may defer necessary
maintenance of the mortgaged property
in order to pay the required debt
service on the subordinate financing,
and the value of the mortgaged
property may decline as a result;
(2) the borrower may have an incentive to
repay the subordinate or unsecured
indebtedness before the mortgage
loan;
(3) it may be more difficult for the
borrower to refinance the mortgage
loan or to sell the mortgaged
property for the purpose of making
any Balloon Payment upon the maturity
of the mortgage loan or for the
purpose of making a prepayment in
full on or about the Anticipated
Repayment Date in the case of any ARD
Loan; and
(4) additional debt increases the risk
that the borrower could become
insolvent or subject to bankruptcy or
similar proceedings or might
complicate bankruptcy proceedings
delaying foreclosure on the mortgaged
property. In addition, if the holder
of additional debt becomes bankrupt
or insolvent, the trustee's ability
to foreclose on the related mortgage
loan could be delayed.
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In general, borrowers may incur trade
payables in the ordinary course of
business, and in certain circumstances,
borrowers are permitted to incur
additional unsecured indebtedness.
In addition, many of the underlying
borrowers may not be prohibited by their
organizational documents or the related
loan documents from incurring unsecured
debt or, alternatively, may be prohibited
only to a limited degree. Additional debt,
in any form, may cause a diversion of
funds from property maintenance and
increase the likelihood that the borrower
will become the subject of a bankruptcy
proceeding.
Except as disclosed under "Description of
the Mortgage Pool--Material
Characteristics of the Mortgage
Pool--Unsecured Debt" and "--Subordinate
Financing" subsections, we have not been
able to confirm whether the respective
borrowers under the mortgage loans that we
intend to include in the trust fund have
any other debt outstanding.
See "Certain Legal Aspects of the Mortgage
Loans--Secondary Financing;
Due-on-Encumbrance Provisions" in the
prospectus.
EQUITY COURTS MAY REFUSE TO The mortgage loans generally contain
ENFORCE DUE-ON-SALE, "due-on-sale" and "due-on-encumbrance"
DUE-ON-ENCUMBRANCE AND clauses that permit the mortgagee to
DEBT-ACCELERATION CLAUSES, accelerate the maturity of the mortgage
ADVERSELY AFFECTING THE loan if the related borrower sells or
EXERCISE OF REMEDIES UPON otherwise transfers or encumbers the
DEFAULTED MORTGAGE LOANS. related mortgaged property or its interest
in the mortgaged property in violation of
the mortgage. All of the mortgage loans
also include a debt-acceleration clause. A
debt-acceleration clause permits the
lender to accelerate the debt upon
specified monetary or non-monetary
defaults of the borrower. The equity
courts of any state, however, may refuse
the foreclosure or other sale of a
mortgaged property or refuse to permit the
acceleration of the indebtedness if the
default is immaterial, or if enforcement
of the clause would be inequitable,
unjust, or unconscionable.
THE BANKRUPTCY OF BORROWERS MAY Borrowers may be either individuals or
ADVERSELY AFFECT PAYMENT OF legal entities. Most of the borrowers that
MORTGAGE LOANS. are legal entities are not bankruptcy
remote entities. Borrowers that are not
bankruptcy remote entities may be more
likely to become insolvent or the subject
of a voluntary or involuntary bankruptcy
proceeding because these borrowers may be
(a) operating entities with businesses
distinct from the operation of the
property, with the associated liabilities
and risks of operating an ongoing business
or (b) individuals who may have personal
liabilities unrelated to the mortgaged
property. In addition, any borrower, as an
owner of real estate, will be subject to
certain potential liabilities and risks.
We cannot assure you that a borrower will
not file for bankruptcy protection or
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<PAGE>
that creditors of a borrower, or a
corporate or individual general partner or
member of a borrower, will not initiate a
bankruptcy or similar proceeding against a
borrower. See "Certain Legal Aspects of
the Mortgage
Loans--Foreclosure--Bankruptcy Laws" in
the prospectus.
ENVIRONMENTAL CONDITIONS OF THE Each of the mortgage loan sellers has
MORTGAGED PROPERTIES MAY represented that each of the related
SUBJECT THE TRUST FUND TO mortgaged properties was subject to an
LIABILITY UNDER FEDERAL AND "environmental site assessment" or an
STATE LAWS, REDUCING THE VALUE update of a previously conducted
AND CASH FLOW OF THE MORTGAGED environmental site assessment, similar
PROPERTIES, WHICH MAY RESULT IN studies or an environmental screen
REDUCED PAYMENTS ON YOUR assessment conducted consistently with
CERTIFICATES. generally recognized industry standards.
Other than as described in the section
titled "Description of the Mortgage
Pool--Material Characteristics of the
Mortgage Pool--Environmental Risks" in
this prospectus supplement, the mortgage
loan sellers have informed the depositor
that those assessments, studies or updates
identified no material adverse
environmental conditions anticipated to
require any material expenditure for any
mortgaged property, except for:
(1) those cases where a qualified
environmental consultant investigated
those conditions and recommended no
further investigations or
remediation;
(2) a maintenance plan was obtained or an
escrow reserve was established to
cover the estimated costs of
obtaining that plan;
(3) those cases in which soil or
groundwater contamination was
suspected or identified and either
(a) those conditions were remediated
or abated prior to the closing date,
(b) a letter was obtained from the
applicable regulatory authority
stating that no further action was
required or (c) an environmental
insurance policy was obtained, a
letter of credit was provided, an
escrow reserve account was
established, or an indemnity from the
responsible party was obtained to
cover the estimated costs of any
required investigation, testing,
monitoring or remediation;
(4) those cases in which an offsite
property is the location of a leaking
underground storage tank or
groundwater contamination, a
responsible party has been identified
under applicable law, and either (a)
that condition is not known to have
affected the mortgaged property or
(b) the responsible party has either
received a letter from the applicable
regulatory agency stating nor further
action is
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<PAGE>
required, established a remediation
fund, or provided an indemnity or
guaranty to the borrower; and
(5) those cases involving small loans
(with an original principal balance
of less than $1,000,000), when the
borrower has acknowledged in the
related mortgage loan documents the
existence of that factor and
expressly agreed to comply with all
federal, state and local statutes or
regulations respecting the factor.
The above information regarding the
absence of material adverse environmental
conditions is based solely upon the
environmental assessments, similar studies
or updates. The mortgage loan sellers, the
depositor, the Transferor, and their
respective affiliates have not
independently verified this information.
The pooling and servicing agreement
requires that the special servicer obtain
an environmental site assessment of each
mortgaged property prior to either
acquiring title on behalf of the trust
fund or assuming the property's
operations. This requirement may
effectively delay foreclosure until a
satisfactory environmental site assessment
is obtained or until any required remedial
action is taken. However, this requirement
will also decrease the likelihood that the
trust fund will become liable under any
environmental law. Any environmental site
assessment could potentially fail to
reveal the factors that could result in
the trust fund becoming liable under any
environmental law. In addition, the
pooling and servicing agreement's
requirements may not effectively insulate
the trust fund from potential liability
under environmental laws.
For more information on environmental site
assessments, you should refer to the
section in the prospectus titled "Material
Legal Aspects of the Mortgage
Loans--Environmental Risks" and the
section titled "The Pooling and Servicing
Agreement--Realization Upon Mortgage
Loans--General Standards for Conduct in
Foreclosing or the Selling Defaulted
Loans" in this prospectus supplement.
All but 11 of these assessments, studies
or updates were conducted within 12 months
prior to the cut-off date.
You should understand that none of the
depositor, the mortgage loan sellers, the
master servicer, the special servicer, the
trustee, any affiliate of any of the
foregoing, any environmental consultants
or any other person guarantees the absence
of or extent of any environmental
condition on the mortgaged properties that
could result in environmental liability.
The ESAs, similar studies, screen
assessments and updates are limited in
scope. An environmental condition may not
be discovered or
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have its severity revealed. Further, none
of the aforementioned persons or entities
can give any assurance that future changes
in applicable environmental laws, the
development or discovery of presently
unknown environmental conditions at the
mortgaged properties or the deterioration
of existing conditions will not require
material additional study costs or
material remediation expenses, or generate
material liabilities, or otherwise put
stress on the borrower's cash flow.
FEDERAL OR STATE ENVIRONMENTAL Various environmental laws may make a
LAWS MAY AFFECT THE VALUE OF A current or previous owner or operator of
MORTGAGED PROPERTY OR THE real property liable for the costs of
ABILITY OF A BORROWER TO MAKE removal or remediation of hazardous or
REQUIRED LOAN PAYMENTS AND MAY toxic substances on, under, adjacent to,
REDUCE PAYMENTS ON YOUR or in the property. Those laws often
CERTIFICATES. impose liability whether or not the owner
or operator knew of, or was responsible
for, the presence of the hazardous or
toxic substances. For example, certain
laws impose liability for release of
asbestos-containing materials into the air
or require the removal or containment of
these materials. In some states,
contamination of a property may give rise
to a lien on the property to assure
payment of the costs of cleanup. In some
states, this lien has priority over the
lien of a pre-existing mortgage.
Additionally, third parties may seek
recovery from owners or operators of real
properties for personal injury associated
with exposure to asbestos, lead-based
paint or other hazardous substances.
The owner's liability for any required
remediation generally is not limited by
law and could exceed the value of the
property and/or the aggregate assets of
the owner. The presence of hazardous or
toxic substances also may adversely affect
the owner's ability to refinance the
property or to sell the property to a
third party. The presence of, or strong
potential for contamination by, hazardous
substances consequently can materially
adversely affect the value of the property
and a borrower's ability to repay its
loan.
In addition, under certain circumstances,
a lender (such as the trust fund) could be
liable for the costs of responding to an
environmental hazard. See "Certain Legal
Aspects of Mortgage Loans" in the
prospectus.
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SOME MORTGAGED PROPERTIES DO 15 of the mortgaged properties,
NOT HAVE OPERATING HISTORIES representing approximately 13.5% of the
WHICH MAKES IT DIFFICULT TO cut-off date balance, were constructed on
PREDICT FUTURE EVENTS WHICH MAY or after January 1, 1999 ("Newly
ADVERSELY AFFECT THE CASH FLOW Constructed Properties"), and consequently
OF THESE PROPERTIES AND WHICH do not have significant operating
MAY REDUCE PAYMENTS ON YOUR histories. There can be no assurance that
CERTIFICATES. the businesses operated at these mortgaged
properties will be successful. There can
be no assurances that current occupancy
levels of these mortgaged properties will
be maintained or that full occupancy will
be achieved or maintained or that as yet
undiscovered physical or design problems
with the recently constructed mortgaged
properties will not adversely affect
occupancy levels of any of the mortgaged
properties.
CONCENTRATION OF MORTGAGE LOANS A concentration of mortgaged properties in
IN ONE OR MORE GEOGRAPHIC AREAS a particular state, region or locale
REDUCES DIVERSIFICATION AND MAY increases the exposure of the mortgage
INCREASE THE RISK THAT YOUR pool to adverse conditions in that state,
CERTIFICATES MAY NOT BE PAID IN region or locale, which may reduce the
FULL. mortgaged property's income and its
foreclosure value. Possible adverse
conditions may result from:
(1) general economic or demographic
conditions in the state, region or
locale or adverse developments
affecting an industry that is
concentrated in the state or region;
(2) real estate market conditions in the
state or region;
(3) state or local government regulations
or fiscal policies;
(4) natural disasters, such as
earthquakes, floods, tornadoes and
hurricanes, which may not be fully
covered by insurance; and
(5) other factors that are beyond the
control of the related borrower.
Some states or geographic regions may be
more severely affected by these factors,
or factors affecting a particular
industry, than other states or regions,
and to the extent that there is a
concentration of mortgaged properties or
borrowers in that state or region, the
impact on the trust fund may be more
significant than would be the case if the
properties were more geographically
diversified.
For more detailed information regarding
these risks, you should refer to sections
in this prospectus supplement titled
"Description of the Mortgage
Pool--Material Characteristics of the
Mortgage Pool--Geographic Concentration."
APPRAISALS AND ENGINEERING In making your investment decision, you
REPORTS ARE OF LIMITED VALUE IN should not rely on appraisals and
HELPING YOU MAKE YOUR engineering reports on mortgaged
INVESTMENT DECISION. properties as your only indicator of the
actual value or physical characteristics
of the mortgaged properties. In general,
appraisals represent the
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analysis and opinion of qualified experts
and are not guarantees of present or
future value. Moreover, appraisals seek to
establish the amount a willing buyer would
pay a willing seller. This amount could be
significantly higher than the amount
obtained from the sale of a mortgaged
property under a distressed or liquidation
sale. Information regarding the values of
the mortgaged properties as of the cut-off
date is presented under "Description of
the Mortgage Pool--Certain Characteristics
of the Mortgage Pool" in this prospectus
supplement for illustrative purposes only.
The architectural and engineering reports
represent the analysis of the individual
engineers or site inspectors at or before
the origination of the respective mortgage
loans. The reports may not have been
updated since they were originally
conducted and may not have revealed all
necessary or desirable repairs,
maintenance or capital improvement items.
CHANGES IN ZONING LAWS MAY The mortgaged properties are typically
ADVERSELY AFFECT THE VALUE AND subject to applicable building and zoning
INCOME OF A MORTGAGED ordinances and codes affecting the
PROPERTY. construction and use of real property.
Because the zoning laws applicable to a
mortgaged property (including density,
use, parking and set-back requirements)
are generally subject to change at any
time, certain of the improvements upon the
mortgaged properties may not comply fully
with all applicable current and future
zoning laws. Changes in zoning laws may
limit the ability of the related borrower
to renovate or operate the premises and,
in the event of a substantial casualty
loss, to rebuild or utilize the premises.
THE COSTS OF COMPLIANCE WITH A borrower may be required to incur costs
APPLICABLE LAWS AND REGULATIONS to comply with various existing and future
MAY ADVERSELY AFFECT A federal, state or local laws and
BORROWER'S ABILITY TO REPAY ITS regulations applicable to the related
MORTGAGE LOAN. mortgaged property. These costs, or the
imposition of injunctive relief, penalties
or fines in connection with the borrower's
noncompliance, could negatively impact the
borrower's cash flow and, consequently,
its ability to pay its mortgage loan. See
"Certain Legal Aspects of the Mortgage
Loans--Americans With Disabilities Act" in
the prospectus.
LIMITATIONS ON THE Arrangements whereby certain of the
ENFORCEABILITY OF mortgage loans are cross-collateralized
CROSS-COLLATERALIZATION and cross-defaulted with one or more
ARRANGEMENTS MAY HAVE AN related mortgage loans could be challenged
ADVERSE EFFECT ON RECOURSE IN as fraudulent conveyances by the creditors
THE EVENT OF A DEFAULT ON A or the bankruptcy estate of any of the
CROSS-COLLATERALIZED MORTGAGE related borrowers. Under federal and most
LOAN. state fraudulent conveyance statutes, the
incurring of an obligation or the transfer
of property, including the granting of a
mortgage lien, by a person may be voided
under certain circumstances if:
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(1) the person did not receive fair
consideration or reasonably
equivalent value in exchange for the
obligation or transfer; and
(2) the person (a) was insolvent at the
time of the incurrence of the
obligation or transfer; or (b) was
engaged in a business or a
transaction or was about to engage in
a business or a transaction, for
which properties remaining with the
person constitute an unreasonably
small capital; or (c) intended to
incur, or believed that it would
incur, debts that would be beyond the
person's ability to pay as those
debts matured.
Accordingly, a lien granted by a borrower
could be avoided if a court were to
determine that (1) the borrower did not
receive fair consideration or reasonably
equivalent value when pledging the
mortgaged property for the equal benefit
of the other related borrowers, and (2)
the borrower was insolvent at the time of
granting the lien, was rendered insolvent
by the granting of the lien, was left with
inadequate capital or was not able to pay
its debts as they matured.
We cannot assure you that a lien granted by
a borrower on a cross-collateralized
mortgage loan to secure the mortgage loan of
an affiliated borrower, or any payment
thereon, would not be avoided as a
fraudulent conveyance. In addition, when
multiple real properties secure a mortgage
loan or group of cross-collateralized
mortgage loans, the amount of the mortgage
encumbering any particular one of those
properties may be less than the full amount
of the related mortgage loan or group of
cross-collateralized mortgage loans, to
avoid recording tax. This mortgage amount
may equal the appraised value or allocated
loan amount for the mortgaged real property
and will limit the extent to which proceeds
from the property will be available to
offset declines in value of the other
properties securing the same mortgage loan
or group of cross-collateralized mortgage
loans. See "Description of the Mortgage
Pool--Certain Characteristics of the
Mortgage Pool" herein for more information
regarding any cross-collateralized mortgage
loans.
THE CASH FLOW AND VALUE OF A 77 of the mortgaged properties,
SINGLE-TENANT PROPERTY COULD BE representing approximately 47.6% of the
ADVERSELY AFFECTED BY A cut-off date balance, have a single tenant
TENANT'S DEFAULT ON ITS LEASE. which constitutes more than 20% of the
rentable square footage at the related
mortgaged property. Any default by one of
these tenants could adversely affect the
related borrower's ability to make
payments on the related mortgage loan. We
cannot assure you that any of these
tenants will continue to perform its
obligations under its lease (or, in the
case of an owner-occupied mortgaged
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<PAGE>
property, under the related mortgage loan
documents). See "Description of the
Mortgage Pool--Certain Characteristics of
the Mortgage Pool--Tenant Matters" and
"Annex A" herein.
LITIGATION AGAINST A BORROWER From time to time, there may be legal
MAY ADVERSELY AFFECT THE proceedings pending or threatened against
BORROWER'S ABILITY TO MEET ITS the borrowers and their affiliates
MORTGAGE LOAN OBLIGATIONS. relating to their business. We cannot
assure you that any of this litigation
will not have a material adverse effect on
any borrower's ability to meet its
obligations under the related mortgage
loan and, thus, on the distributions to
certificateholders. We are aware that, in
the case of 2 of the mortgage loans,
representing 2.6% of the cut-off date
balance, that suits have been filed or
pending against the related borrower. We
do not believe, however, that these suits
will materially and adversely affect the
related underlying property.
BORROWERS' FAILURE TO MAKE Most of the mortgage loans are Balloon
BALLOON PAYMENTS MAY ADVERSELY Loans. Balloon Loans involve a greater
AFFECT YOUR INVESTMENT. risk of default than fully-amortizing
loans. The ability of a borrower to make a
Balloon Payment typically will depend upon
its ability either to refinance the
related mortgaged property or to sell the
mortgaged property at a price sufficient
to permit the borrower to make the Balloon
Payment. The ability of a borrower to
accomplish either of these goals will be
affected by a number of factors at the
time of attempted sale or refinancing,
including:
(1) the level of available mortgage
rates;
(2) the fair market value of the related
mortgaged property;
(3) the borrower's equity in the related
mortgaged property;
(4) the financial condition of the
borrower;
(5) the operating history of the related
mortgaged property;
(6) tax laws;
(7) prevailing economic conditions; and
(8) the availability of credit for
multifamily or commercial properties.
See "Yield and Maturity Considerations--
Yield Considerations--Balloon Payments/ARD
Loan Payments" herein.
THE INEFFECTIVENESS OF Restrictions on voluntary prepayments
RESTRICTIONS ON VOLUNTARY contained in a promissory note (for
PREPAYMENTS MAY ADVERSELY example, Lockout Periods, Yield
AFFECT THE YIELD OF YOUR Maintenance Charges and Prepayment
INVESTMENT. Premiums) affect the rate and timing of
principal payments made on the related
mortgage loan. Most of the mortgage loans
provide that, for a specified amount of
time during which a prepayment of the
mortgage loan is permitted, it
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<PAGE>
must be accompanied by a Yield
Maintenance Charge or other Prepayment
Premium. The existence of Yield
Maintenance Charges or other Prepayment
Premiums generally will result in the
mortgage loans prepaying at a lower rate.
However, the requirement that a prepayment
be accompanied by a Yield Maintenance
Charge or other Prepayment Premium may not
provide a sufficient economic disincentive
to a borrower seeking to refinance at a
more favorable interest rate. Furthermore,
we cannot assure you that the obligation
to pay a Yield Maintenance Charge or other
Prepayment Premium will be enforceable
under applicable state or federal law
(including federal bankruptcy law) or, if
enforceable, that the foreclosure proceeds
received with respect to a defaulted
mortgage loan will be sufficient to make
this payment. If these provisions were
unenforceable, borrowers would have an
incentive to default in order to prepay
their loans. See "Description of the
Mortgage Pool--Certain Terms and
Conditions of the Mortgage
Loans--Prepayment Provisions" herein.
The yield and total return on your offered
certificates may differ significantly from
your expectations due to prepayments on
the mortgage loans being higher or lower
than you anticipated. Even if the actual
yield is equal to your anticipated yield,
you may not realize your expected total
return on investment or the expected
weighted average life of your Certificate.
For a discussion of certain factors
affecting prepayment of the mortgage
loans. See "Yield and Maturity
Considerations" herein.
The structure of the offered certificates
causes the yield of certain classes to be
sensitive to changes in the rates of
prepayment of the mortgage loans and other
factors. If you are purchasing any class
of Offered Certificates other than the
Class A-1 or Class A-2 Certificates, you
will not receive any principal
distributions until the certificate
principal balance of each class that is
senior to your class is reduced to zero.
THE ABSENCE OF OR INADEQUACY OF The mortgaged properties may suffer
INSURANCE COVERAGE ON THE casualty losses due to risks that
MORTGAGED PROPERTIES MAY REDUCE insurance does not cover or for which
PAYMENTS ON YOUR CERTIFICATES. insurance coverage is inadequate. There is
no assurance borrowers will be able to
maintain adequate insurance. Moreover,
changes in laws may materially affect the
borrower's ability to reconstruct the
property or make major repairs or may
materially increase the cost of the
reconstruction or repairs.
Certain of the mortgaged properties are
located in California, Texas and along the
southeastern coastal areas of the United
States. These areas have historically been
at greater risk regarding acts of nature
(such as hurricanes, floods and
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earthquakes) than other areas. The loans
generally do not specifically require the
borrowers to maintain earthquake or
hurricane insurance.
As a result of any of the foregoing, the
amount available to make distributions on
the certificates could be reduced.
LOANS SECURED BY MORTGAGES ON A 5 of the mortgage loans, representing
LEASEHOLD INTEREST WILL SUBJECT approximately 1.89% of the cut-off date
YOUR INVESTMENT TO A RISK OF balance, are secured by mortgages
LOSS UPON A LEASE DEFAULT encumbering a borrower's leasehold
interest in the property under a ground
lease. 3 of the mortgage loans,
representing approximately 1.76% of the
cut-off date balance, are secured by a
mortgage encumbering both a borrower's
leasehold interest in the related
mortgaged property under a ground lease
and the fee interest of the owner of all
or a part of the property.
Leasehold loans are subject to risks not
associated with loans secured by a lien on
the fee estate of the borrower. The most
significant of these risks is that if the
landlord terminates the borrower's
leasehold interest upon a lease default,
the leasehold mortgagee would lose its
security. The ground lease loans may
require the master servicer to give
notices or to take actions in addition to
those required for a fee loan in order for
the trust to avail itself of its rights
under the related loan. Generally, the
related ground lease:
(1) requires the landlord to give the
leasehold mortgagee notice of tenant
defaults and an opportunity to cure
them prior to enforcing its remedies;
(2) prohibits any amendment of the ground
lease without the lender's prior
consent;
(3) permits the leasehold estate to be
assigned to the leasehold mortgagee
or the purchaser at a foreclosure
sale; and
(4) contains certain other protective
provisions typically included in a
"mortgageable" ground lease.
Upon the bankruptcy of a landlord or
tenant under a ground lease, the debtor
entity has the right to assume or reject
the lease. If a debtor landlord rejects
the lease, the tenant has the right to
remain in possession of its leased
premises for the term of the lease
including renewals, at the same rent. If a
debtor tenant/borrower rejects any or all
of its leases, the leasehold lender could
succeed to the tenant/ borrower's position
under the lease only if the landlord
specifically grants the lender that right.
As a result, the lender may lose its
security. If both the landlord and the
tenant/borrower are involved in bankruptcy
proceedings,
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the trustee may be unable to enforce the
bankrupt tenant/borrower's obligation to
not terminate a ground lease rejected by a
bankrupt landlord. In those circumstances,
a ground lease could be terminated
notwithstanding lender protection
agreements.
Ground leases securing the mortgaged
properties may provide that the ground
rent payable under the lease increases
during the lease term. These increases may
adversely affect the cash flow and net
income of the borrower from the mortgaged
property.
The execution of a mortgage over its fee
interest by an owner/landlord to secure
the debt of a borrower/tenant may be
subject to challenge as a fraudulent
conveyance. Among other things, a legal
challenge to the granting of the liens may
focus on the benefits realized by the
owner/landlord from the loan. If a court
concluded that the granting of the
mortgage was an avoidable fraudulent
conveyance, it might take actions
detrimental to the holders of the
certificates, including, under certain
circumstances, invalidating the mortgage
over the fee interest of the
owner/landlord.
MOST DECISIONS RELATING TO THE Generally, you have only very limited
TRUST FUND ARE MADE BY THE rights to participate in decisions with
MASTER SERVICER, THE TRUSTEE OR respect to the administration of the trust
THE SPECIAL SERVICER. THEIR fund, and your certificates generally do
DECISIONS MAY NOT BE not entitle you to vote, except with
REPRESENTATIVE OF THOSE OF THE respect to specified actions set forth in
CERTIFICATEHOLDERS AND MAY the pooling and servicing agreement.
ADVERSELY AFFECT THE INTERESTS Decisions relating to the administration
OF THE CERTIFICATEHOLDERS. of the trust fund are generally made,
subject to the express terms of the
pooling and servicing agreement, by the
master servicer, the trustee or the
special servicer, as applicable. Any
decision made by one of those parties with
respect to the trust fund, even if made in
the best interests of the
certificateholders (as determined by that
party in its good faith and reasonable
judgment), may be contrary to the decision
that would have been made by the holders
of any particular class or classes of
offered certificates and may negatively
affect the interests of those holders.
RAPID RATES OF PRINCIPAL The yield to maturity on Class X
PAYMENTS AND/OR PRINCIPAL Certificates will be extremely sensitive
LOSSES ON THE MORTGAGE LOANS to the rate and timing of principal
MAY ADVERSELY AFFECT THE YIELD payments (including prepayments) and
ON THE CLASS X CERTIFICATES. principal losses with respect to the
mortgage loans. Investors should fully
consider the associated risks, including
the risk that a rapid rate of principal
payments and/or principal losses on the
mortgage pool could result in the failure
by investors in the Class X Certificates
to fully recoup their initial investments.
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For more detailed information regarding
these risks, you should refer to the
section in this prospectus supplement
titled "Yield and Maturity
Considerations."
BECAUSE THE SECURITIES ARE IN One or more classes of the certificates
BOOK-ENTRY FORM, YOUR RIGHTS initially will be represented by
CAN ONLY BE EXERCISED certificates registered in the name of the
INDIRECTLY. nominee for the DTC, and will not be
registered in the names of the
certificateholders or their nominees.
Unless and until definitive certificates
are issued, beneficial owners of the
certificates will be able to exercise the
rights of certificateholders only
indirectly through the DTC and its
participating organizations.
For more detailed information regarding
theses risks, you should refer to the
section in this prospectus supplement
titled "Description of the
Certificates--Delivery, Form and
Denomination--Book-Entry Certificates."
A HIGH RATE AND EARLY The rate and the timing of delinquencies
OCCURRENCE OF BORROWER and defaults on the mortgage loans will
DELINQUENCIES AND DEFAULTS MAY affect:
ADVERSELY AFFECT YOUR
INVESTMENT. (1) the amount of distributions on your
certificates;
(2) the yield to maturity of your
certificates;
(3) the rate of principal payments on
your certificates; and
(4) the weighted average lives of your
certificates.
If you calculate the anticipated yield of
your certificates based on a rate of
default or amount of losses lower than
that actually experienced by the mortgage
loans and those additional losses are
allocable to your class of certificates or
those losses result in a reduction of the
certificate balance of your certificates,
your actual yield to maturity will be
lower than expected and could be negative
under certain extreme scenarios. The
timing of any loss on a liquidated
mortgage loan will also affect the actual
yield to maturity of your certificates if
a portion of the loss is allocable to
those certificates, even if the rate of
defaults and severity of losses are
consistent with your expectations. In
general, the earlier a loss borne by you
occurs, the greater the effect on your
yield to maturity.
THE MASTER SERVICER OR SPECIAL The master servicer and special servicer
SERVICER MAY HAVE INTERESTS may purchase and own certificates,
DIFFERENT FROM THOSE OF THE including the Subordinate Certificates.
TRUST FUND DUE TO THE MASTER Under those circumstances, it is possible
SERVICER'S OR SPECIAL that the interests of the master servicer
SERVICER'S PURCHASE OF or special servicer, as a holder of the
CERTIFICATES AND SERVICING OF certificates of any class, may differ from
NON-TRUST FUND LOANS. those of the certificateholders of any
other class. The master servicer and
special servicer have advised the
depositor that they intend to continue to
service existing mortgage loans and new
mortgage loans for third parties,
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including portfolios of mortgage loans
similar to the mortgage loans included in
the trust fund. These mortgage loans and
the related mortgaged properties may be in
the same markets as, or have owners,
obligors or property managers in common
with, certain of the mortgage loans in the
trust fund and the related mortgaged
properties. To the extent that overlap
exists, the interests of the master
servicer, the special servicer and their
respective affiliates and their other
clients may differ from, and compete with,
the interests of the trust fund. The
master servicer and special servicer are
required, however, to service the mortgage
loans in accordance with the servicing
standard contained in the Pooling and
Servicing Agreement.
INCORRECT ASSUMPTIONS REGARDING In deciding whether to purchase any
PRINCIPAL PAYMENTS AND offered certificates, you should make an
PREPAYMENTS MAY LEAD TO A LOWER independent decision as to the appropriate
THAN EXPECTED YIELD ON YOUR prepayment assumptions to be used. The
INVESTMENT. yield on the offered certificates of any
class will depend on, among other things,
the Pass-Through Rate for those
certificates and the extent to which
principal payments are applied to reduce
the related certificate's principal
balance. The yield on any offered
certificate that is purchased at a
discount or premium will also be affected
by the rate and timing of principal
payments and principal losses on the
mortgage loans.
If you purchase an offered certificate at
a discount, you should consider the risk
that a slower than anticipated rate of
principal payments on the mortgage loans
will result in an actual yield that is
lower than you expect. If you purchase an
offered certificate at a premium, you
should consider the risk that a faster
than anticipated rate of principal
payments on the mortgage loans will result
in an actual yield that is lower than you
expect. Insofar as the principal in your
offered certificate is repaid, you may not
be able to reinvest the amounts that you
receive in an alternative investment with
a yield comparable to the yield on your
offered certificates.
INTEREST ON ADVANCES, SPECIAL The master servicer or the trustee will be
SERVICING FEES, OTHER SERVICING entitled to receive interest on
EXPENSES AND ADDITIONAL TRUST unreimbursed Advances at the Advance Rate.
FUND EXPENSES MAY REDUCE THE Reimbursements will be made no later than
AMOUNT OF DISTRIBUTIONS ON YOUR the Distribution Date following the date
CERTIFICATES. on which funds are available to reimburse
that Advance. The master servicer's or the
trustee's right to receive these payments
of interest precedes your right to receive
distributions on the offered certificates.
Consequently, this circumstance may result
in decreased distributions to you than
would otherwise have resulted. See "The
Pooling and Servicing Agreement--Advances"
herein.
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In addition, certain circumstances,
including delinquent payments of principal
and interest, will result in a mortgage
loan being specially serviced. The special
servicer is entitled to additional
compensation for special servicing
activities, including Special Servicing
Fees, Disposition Fees and Workout Fees,
which may result in decreased
distributions on the offered certificates
than would otherwise have resulted. See
"The Pooling and Servicing
Agreement--Special Servicing" herein.
Under the Pooling and Servicing Agreement,
certain unanticipated or extraordinary
expenses are deemed to be expenses of the
trust fund, and no reimbursement for these
expenses from any other party is provided
for under the Pooling and Servicing
Agreement. Shortfalls in Available Funds
will result from these expenses of the
trust fund and other similar items, and
these shortfalls will generally be borne
as described under "Description of the
Certificates."
SUBORDINATION OF SUBORDINATE As described in this prospectus
CERTIFICATES WILL AFFECT THE supplement, unless your certificates are
TIMING OF PAYMENTS AND THE Class A-1, Class A-2 or Class X
APPLICATION OF LOSSES ON YOUR certificates, your rights to receive
CERTIFICATES distributions of amounts collected or
advanced on or in respect of the loans
will be subordinated to those of the
holders of the principal balance
certificates with an earlier alphabetical
designation and the interest only
certificates.
VARIOUS CONFLICTS OF INTEREST Conflicts Between Various Classes of
MAY HAVE AN ADVERSE EFFECT ON Certificateholders. The special servicer
YOUR CERTIFICATES is given considerable latitude in
determining when and how to liquidate or
modify defaulted loans. The directing
certificateholder has the right to replace
the special servicer. At any given time,
the holders of the most subordinate class
of principal balance certificates that has
at least 25% of its initial principal
balance still outstanding will control the
directing certificateholder. If no class
has at least 25% of its initial principal
balance still outstanding, the most
subordinate class of principal balance
certificates still outstanding will be the
controlling class. These holders may have
interests in conflict with those of the
holders of the other certificates. For
instance, these holders might desire to
mitigate the potential for loss to their
certificates from a troubled loan by
deferring enforcement in the hope of
maximizing future proceeds. However, the
interests of the trust may be better
served by prompt action, since delay
followed by a market downturn could result
in less proceeds to the trust than would
have been realized if earlier action had
been taken.
The special servicer or an affiliate may
acquire certain of the most subordinated
certificates, including those that have
the right to appoint the initial directing
certificateholder. Under these
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circumstances, the special servicer may
have interests that conflict with the
interests of the other holders of the
certificates.
Conflicts Between the Trust and Affiliates
of the Mortgage Loan Sellers. Conflicts of
interest may arise between the trust and
affiliates of each of the mortgage loan
sellers that engage in the acquisition,
development, operation, financing and
disposition of real estate.
Those conflicts may arise because
affiliates of each of the mortgage loan
sellers intend to continue to actively
acquire, develop, operate, finance and
dispose of real estate-related assets in
the ordinary course of their business.
During the course of their business
activities, those affiliates may acquire
or sell properties, or finance loans
secured by properties which may include
the mortgaged properties or properties
that are in the same markets as the
mortgaged properties. In that case, the
interests of those affiliates may differ
from, and compete with, the interests of
the trust. Decisions made with respect to
those assets may adversely affect the
amount and timing of distributions on the
certificates.
Conflicts Between Managers and the
Borrowers. Substantially all of the
property managers for the mortgaged
properties or their affiliates manage
additional properties, including
properties that may compete with the
mortgaged properties. Affiliates of the
managers, and certain of the managers
themselves, also may own other properties,
including competing properties. The
managers of the mortgaged properties may
accordingly experience conflicts of
interest in the management of the
mortgaged properties.
RISK OF PASS-THROUGH RATE The interest rates of the Class , Class
VARIABILITY , Class , Class , Class and Class
certificates are based on a weighted
average of certain net mortgage rates of
the mortgage loans. Mortgage loans with
relatively high interest rates are more
likely to prepay than mortgage loans with
relatively low interest rates. Higher
rates of principal payments on mortgage
loans having mortgage interest rates above
the weighted average interest rate of the
mortgage loans will have the effect of
reducing the interest rate of those
certificates. In addition, the
pass-through rates on the Class A-1 and
Class A-2 Certificates may not exceed the
weighted average of the net mortgage rates
of the mortgage loans.
THE ABSENCE OF A SECONDARY There is currently no secondary market for
MARKET FOR YOUR CERTIFICATES the offered certificates. The Underwriters
MAY ADVERSELY AFFECT THE have told us that they currently intend to
LIQUIDITY OF YOUR INVESTMENT. buy and sell (that is, "make a market" in)
the offered certificates, but they are
under no obligation to do so.
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<PAGE>
Accordingly, we cannot assure you that a
secondary market for the offered
certificates will develop. Moreover, if a
secondary market does develop, we cannot
assure you that it will allow you to
resell your offered certificates or that
it will continue for the life of the
offered certificates. We do not intend to
apply for listing of the offered
certificates on any securities exchange.
OTHER RISKS See "Risk Factors" in the prospectus for a
description of certain other risks and
special considerations that may be
applicable to your certificates.
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<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The mortgage pool will consist of 167 mortgage loans. The mortgage loans
have a cut-off date balance of approximately $818,406,907, plus or minus 5%.
The following is a generalized description of the terms and provisions of the
mortgage loans in the aggregate. Many of the individual mortgage loans have
special terms and provisions that deviate from this generalized description.
Specific information regarding the terms and provisions of the mortgage loans
is set forth in Annex A, and a description of the 10 largest mortgage loans is
set forth in Annex F. Annex A and Annex F are important parts of this
prospectus supplement.
Generally, each mortgage loan is evidenced by a separate promissory note.
Each mortgage loan is secured by one or more mortgages that create a first lien
on one or more related mortgaged properties or a borrower's leasehold interest.
The percentage of the cut-off date balance represented by each type of
mortgaged property is as follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
MORTGAGED CUT-OFF DATE
PROPERTY TYPE PROPERTIES BALANCE
-------------------------------- ------------ -------------
<S> <C> <C>
Multifamily .................... 46 27.8%
Retail-Anchored ................ 18 21.7%
Office ......................... 31 19.9%
Industrial ..................... 20 9.8%
Retail-Unanchored .............. 14 5.7%
Manufactured Housing ........... 30 5.6%
Hotel and Motel ................ 3 3.6%
Mixed Use ...................... 6 2.8%
Retail-Single Tenant ........... 6 2.3%
Self-Storage ................... 4 0.6%
Retail-Shadow Anchored ......... 1 0.2%
-- -----
Total .......................... 179 100.00%
=== ======
</TABLE>
No mortgage loan is insured or guaranteed by the United States of America,
any governmental agency or instrumentality, any private mortgage insurer, the
depositor, the Transferor, the mortgage loan sellers, the master servicer, the
special servicer, the trustee or any of their respective affiliates.
The depositor intends to purchase the mortgage loans on or before the
closing date on or about June , 2000. The depositor will assign the mortgage
loans and representations and warranties regarding the mortgage loans to the
trustee pursuant to the Pooling and Servicing Agreement. The master servicer
and the special servicer will each service the mortgage loans pursuant to the
Pooling and Servicing Agreement. For more detailed information, you should
refer to the section in this prospectus supplement titled "The Pooling and
Servicing Agreement--Servicing of the Mortgage Loans; Collection of Payments."
SECURITY FOR THE MORTGAGE LOANS
Each mortgage loan is secured by one or more mortgages encumbering one or
more related mortgaged properties. 9 of the mortgage loans, representing
approximately 3.0% of the cut-off date
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<PAGE>
balance, provide for full or limited recourse against the related borrower or a
guarantor or guarantors. The remainder of the mortgage loans are non-recourse
loans, meaning that if a borrower defaults under that loan, recourse generally
may be had only against the specific mortgaged property securing that mortgage
loan and any other assets specifically pledged by the borrower to secure that
mortgage loan. For example, 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. Also, the mortgage loans generally provide for
the indemnification of the mortgagees by the related borrowers for the presence
of any hazardous substances affecting the mortgaged properties. In some
instances, additional collateral may exist. However, borrowers generally have
limited assets, and there can be no assurance that any borrower will have
sufficient assets to support any of the obligations that may arise.
Each mortgage constitutes a first lien on one or more mortgaged properties
or leasehold interests. Generally that lien is subject only to the following:
(1) liens for real estate and other taxes and special assessments;
(2) covenants, conditions, restrictions, rights of way, easements and
other encumbrances in effect as of the date of recording of that
mortgage; and
(3) exceptions and encumbrances on the mortgaged property reflected in
the related title insurance policy.
Ground Leases; Estates for Years
5 of the mortgage loans, representing approximately 1.9% of the cut-off
date balance, are secured by a first lien encumbering the related borrower's
leasehold interest in the related mortgaged property. 159 of the mortgage
loans, representing approximately 96.3% of the cut-off date balance, are
secured by a mortgage, deed of trust or similar security instrument that
creates a first mortgage lien on a fee simple estate in an income producing
property. 3 of the mortgage loans, representing approximately 1.8% of the
cut-off date balance, are secured by first liens encumbering the related
borrower's (1) fee interest in a portion of the mortgaged property and (2)
leasehold interest in the remainder of the mortgaged property. Except for 2
mortgage loans, representing approximately 0.7% of the cut-off date balance,
the mortgage loan sellers have represented that each ground lease expires not
less than 20 years after the maturity date of the related mortgage loan
(including extension options). For more detailed information, you should refer
to the section in the prospectus titled "Material Legal Aspects of the Mortgage
Loans--Foreclosure--Leasehold Risks."
CERTAIN CHARACTERISTICS OF THE MORTGAGE POOL
Due Dates
The mortgage loans provide for monthly payments to be due on the due date.
The due date for all of the mortgage loans is the first day of the month. All
of the mortgage loans provide for a grace period of 10 days or less from the
related due date before a scheduled payment is deemed to be contractually
delinquent for purposes of imposing a late charge.
Mortgage Rates; Calculations of Interest
Each mortgage loan accrues interest at an annualized rate that is fixed
for the entire term of that mortgage loan and does not permit any negative
amortization or the deferral of interest except
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that 1 of the mortgage loans, representing approximately 2.2% of the cut-off
date balance, provides that for a period of up to 2 years from origination the
borrower is obligated only to pay interest accrued each month. This mortgage
loan has not yet reached the end of that period. This mortgage loan, together
with a summary of the relevant provisions, is identified in Annexes A and B,
each of which constitutes an important part of this prospectus supplement.
ARD Loans; Excess Interest
10 of the mortgage loans representing approximately 10.9% of the cut-off
date balance, are ARD Loans. ARD Loans bear interest at their respective
Mortgage Rates until the Anticipated Repayment Date specified in that loan.
Commencing on the Anticipated Repayment Date, each of these mortgage loans will
bear interest at the Revised Rate. The master servicer and the special servicer
will undertake in the Pooling and Servicing Agreement to deem the Revised Rate
to accrue at the Mortgage Rate plus 2.00% per annum, and have agreed not to
take any enforcement action with respect to the accrual or collection of Excess
Interest, including any request for payments of those amounts, in excess of
that rate, in each case unless each Rating Agency has been notified of the
intention to do so and each Rating Agency has indicated that this action will
not, by itself, result in the downgrade, qualification or withdrawal of any
rating then assigned by it to any class of certificates. Until the principal
balance of the mortgage loan has been reduced to zero, the borrower will only
be required to pay interest at the Mortgage Rate, and the Excess Interest
accrued at the Revised Rate over the portion of interest accrued at the related
Mortgage Rate will be deferred. The deferred interest will not be added to the
principal balance of the related mortgage loan, but will itself accrue interest
at the Revised Rate to the extent lawful.
Borrowers under ARD Loans generally are required to enter into lockbox
agreements in which revenue from the related mortgaged property will be
deposited into a lockbox account controlled by the master servicer, if
conditions specified in those ARD Loans are met, rather than paid directly to
the borrower. From and after the Anticipated Repayment Date, the related
borrower generally will be required to apply all monthly cash flow from the
related mortgaged property as specified in the related mortgage loan documents.
As described below, each ARD Loan generally provides that the related
borrower is prohibited from prepaying the mortgage loan until one to six months
prior to the Anticipated Repayment Date. However, upon the commencement of that
period, the borrower may prepay the loan, in whole or in part, without payment
of a Prepayment Premium or Yield Maintenance Charge. The Anticipated Repayment
Date for each ARD Loan is listed in Annex A.
The Class O Certificates will be entitled to all distributions of Excess
Interest, subject to the limitations set forth in the Pooling and Servicing
Agreement, including distributions on or after the date on which the Class O
certificate balance is reduced to zero.
Amortization of Principal
162 of the mortgage loans, representing approximately 99.0% of the cut-off
date balance, are Balloon Loans. The remaining mortgage loans are fully
amortizing and have amortization terms that match their respective terms to
maturity. The weighted average Balloon/ARD LTV applicable to the mortgage pool
is approximately 62.3%.
Prepayment Provisions
Generally, the mortgage loans provide that there are no restrictions on
voluntary prepayments during a specified period (generally two to twelve
months) prior to the maturity date or Anticipated
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Repayment Date, as applicable. Prior to that period, if any, each mortgage loan
restricts voluntary prepayments in one or more of the following ways:
(1) Imposing a "Lockout Period" by prohibiting any prepayments for a
specified period of time after the date of origination of that
mortgage loan;
(2) Imposing a "Yield Maintenance Charge" (as described in Annex A) in
connection with any principal prepayment made during a yield
maintenance period; or
(3) Imposing Prepayment Premiums in connection with any Principal
Prepayment made during a prepayment premium period.
6 of the mortgage loans, representing approximately 0.7% of the cut-off
date balance, contain provisions that allow prepayment accompanied by payment
of an amount equal to the greater of a Yield Maintenance Charge and a
Prepayment Premium.
2 of the mortgage loans, representing approximately 1.3% of the cut-off
date balance, contain provisions that allow a prepayment accompanied by payment
of an amount equal to the greater of a Yield Maintenance Charge and a
Prepayment Premium that declines over time.
55 of the mortgage loans, representing approximately 16.7% of the cut-off
date balance, contain provisions that prohibit a prepayment during a Lockout
Period, and thereafter allow a prepayment accompanied by payment of an amount
equal to the greater of a Yield Maintenance Charge and a Prepayment Premium.
2 of the mortgage loans, representing approximately 0.9% of the cut-off
date balance, contain provisions that prohibit a prepayment during a Lockout
Period, and thereafter allow a prepayment accompanied by payment of an amount
equal to the greater of a Yield Maintenance Charge and a Prepayment Premium
that declines over time.
4 of the mortgage loans, representing approximately 2.0% of the cut-off
date balance, contain provisions that allow a prepayment accompanied by payment
of an amount equal to the greater of a Yield Maintenance Charge and a
Prepayment Premium for a specified period, followed by a period during which a
prepayment is allowed if accompanied by payment of a Prepayment Premium.
1 of the mortgage loans, representing approximately 1.4% of the cut-off
date balance, contains provisions that allow a prepayment accompanied by
payment of an amount equal to the greater of a Yield Maintenance Charge and a
Prepayment Premium that declines over time for a specified period, followed by
a period during which a prepayment is allowed if accompanied by payment of a
Prepayment Premium.
96 of the mortgage loans, representing approximately 76.8% of the cut-off
date balance, provide that after the Defeasance Lockout Period, a borrower may
obtain a release of the lien on the related mortgaged property by substituting
for the mortgaged property, as collateral for the related promissory note, U.S.
government obligations that provide for payments in amounts equal to or greater
than the amounts payable under the related promissory note on each due date or
maturity date (or, in the case of the ARD Loans, through the related
Anticipated Repayment Dates, including prepayment in full on their related
Anticipated Repayment Dates) and upon satisfaction of certain other conditions.
1 of the mortgage loans, representing approximately 0.1% of the cut-off
date balance, contains provisions that prohibit a prepayment during a Lockout
Period, and thereafter allow a prepayment accompanied by payment of an amount
equal to the greater of a Yield Maintenance Charge and a
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Prepayment Premium for a specified period, followed by a period during which a
prepayment is allowed if accompanied by payment of a Prepayment Premium that
declines over time.
The table in "Summary--Overview of the Certificates--Prepayment
Lockout/Premium Analysis" sets forth for the distribution date in each
indicated month the percentage of the aggregate Scheduled Principal Balance of
all mortgage loans expected to be outstanding (after giving effect to scheduled
principal payments for the due date relating to that distribution date) with
respect to which:
(1) a Lockout Period is in effect;
(2) a prepayment must be accompanied by (a) a Yield Maintenance Charge,
(b) the greater of a Yield Maintenance Charge or a Prepayment Premium
(the percentage used in calculating the Prepayment Premium is also set
forth in the table) or (c) a Prepayment Premium (the percentage used
in calculating the Prepayment Premium is also set forth in the table);
or
(3) no Lockout Period, Yield Maintenance Period or Prepayment Premium
Period is applicable (designated "Open" on the table).
Annex A attached to this prospectus supplement contains information
regarding the calculation of Yield Maintenance Charges and Prepayment Premiums
applicable to each of the mortgage loans.
Prepayment Premiums and Yield Maintenance Charges are generally not
imposed in connection with involuntary prepayments resulting from a casualty or
condemnation with respect to a mortgaged property, so long as no event of
default then exists. The Prepayment Premiums and Yield Maintenance Charges are
payable in connection with prepayments after an event of default but prior to
the sale of the mortgaged property. Some mortgage loans permit the related
borrower to transfer the related mortgaged property to a third party without
prepaying the related mortgage loan if conditions specified in those mortgage
loans are satisfied, including an assumption by the transferee of all of the
borrower's obligations with respect to the mortgage loan. For more detailed
information, you should refer to the section in this prospectus supplement
titled "--`Due-on-Encumbrance' and `Due-on-Sale' Provisions."
You should note that the enforceability of provisions requiring payment of
Prepayment Premiums and Yield Maintenance Charges has been challenged in some
states, and the collectibility of any Prepayment Premium depends on the
creditworthiness of the borrower.
Defeasance
As described above, 96 of the mortgage loans, representing approximately
76.8% of the cut-off date balance, grant the related borrower the right, after
a specified period, to obtain the release of the lien on the related mortgaged
property by substituting U.S. government obligations for that mortgaged
property. Those securities must, in the aggregate, provide for payments on or
prior to each due date and on the maturity date of the mortgage loan in amounts
equal to or greater than the amounts payable under the related promissory note
on each of those dates (or, in the case of the ARD Loans, through the related
Anticipated Repayment Dates, including prepayment in full on the related
Anticipated Repayment Dates).
Conditions to the related borrower's right to a defeasance include
delivery of the following documents:
(1) an opinion of counsel stating that the REMICs will not fail to
maintain their respective statuses as REMICs as a result of the
defeasance; and
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<PAGE>
(2) in some cases, written confirmation from the Rating Agencies that the
defeasance will not result in a downgrading, withdrawal or
qualification of the respective ratings of any outstanding classes of
Certificates.
"Due-on-Encumbrance" and "Due-on-Sale" Provisions
Except for 10 of the mortgage loans, representing approximately 3.6% of
the cut-off date balance, the mortgages contain "due-on-encumbrance" clauses
that permit the holder of the mortgage to accelerate the maturity of the
related mortgage loan if the borrower encumbers the related mortgaged property
without its consent. Some borrowers are allowed, under circumstances described
in the related mortgage loans, to further encumber the related mortgaged
property with additional liens. The master servicer or the special servicer, as
applicable, will determine, in a manner consistent with the Servicing Standard
described in the section in this prospectus supplement titled "The Pooling and
Servicing Agreement--Servicing of the Mortgage Loans; Collection of Payments,"
whether to accelerate payment of a mortgage loan upon, or to consent to, any
additional encumbrance of the related mortgaged property. Acceleration may not
be waived except upon confirmation from each Rating Agency that the waiver will
not result in the downgrade, withdrawal or qualification of its then current
rating of any class of certificates.
The mortgages generally prohibit the borrower from transferring the
mortgaged property, or allowing a change of ownership of the borrower, without
the mortgagee's prior consent. For this purpose, a change in ownership of the
borrower is generally defined to include:
(1) a change in the ownership of the borrower, a guarantor of the
mortgage loan, or the general partner or managing member of the
borrower over a specified percentage (generally from 10% to 49%);
(2) the removal, resignation or change in ownership of, or the transfer
or pledge of the partnership or membership interest of, any general
partner or managing member of a borrower or a guarantor of the
mortgage loan;
(3) with respect to some of the mortgage loans, the removal, resignation
or change in ownership of the managing agent of the related mortgaged
property; or
(4) the voluntary or involuntary transfer or dilution of the controlling
interest in the related borrower held by a specified person.
With respect to some of the mortgage loans, the borrower may be entitled
to transfer the mortgaged property or allow a change in ownership if the
conditions specified in the related mortgage loan are satisfied, typically
including one or more of the following:
(1) no event of default has occurred;
(2) the proposed transferee meets the mortgagee's customary underwriting
criteria;
(3) the mortgaged property continues to meet the mortgagee's customary
underwriting criteria;
(4) an acceptable assumption agreement is executed; and
(5) a specified assumption fee (generally between 0.5% and 1.0% of the
then outstanding principal balance of the related mortgage loan) has
been received by the mortgagee.
Some mortgages also allow the following:
(1) changes in ownership between existing partners and members of the
borrower;
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(2) transfers to family members (or trusts for the benefit of family
members), affiliated companies and specified individuals and entities;
(3) issuance by the borrower of new partnership or membership interests;
(4) other changes in ownership for estate planning purposes described in
those mortgages;
(5) involuntary transfers caused by the death of any owner, general
partner or manager of the borrower; or
(6) other transfers similar in nature to the foregoing.
Upon any transfer or change in ownership of the mortgaged property which
is in direct violation of provisions contained in the mortgage loan, the holder
of the mortgage loan is generally permitted to accelerate the loan's maturity.
For more detailed information, you should refer to the section in the
prospectus titled "Material Legal Aspects of the Mortgage Loans--Enforceability
of Material Provisions--Due-on-Sale Provisions." You should note that the
enforceability of due-on-sale and due-on-encumbrance provisions has been
challenged in several states.
Default Provisions
The mortgage loans generally provide that an event of default will exist
if:
(1) the borrower fails to pay any regular installment of principal or
interest (a) upon the date the same is due, (b) within a specified
period (generally five days to 10 days) after the date upon which the
same was due, or (c) within a specified period (generally five days to
10 days) following written notice from the mortgagee of the failure to
make those payments;
(2) the borrower violates prepayment, defeasance, due-on-encumbrance or
due-on-sale provisions;
(3) the borrower fails to pay taxes or other charges when due;
(4) the borrower fails to keep all required insurance policies in full
force and effect;
(5) the borrower fails to cure any material violations of laws or
ordinances affecting the mortgaged property or to operate the related
mortgaged property according to specified standards;
(6) a mechanic's, materialman's or other lien is imposed against the
mortgaged property; or
(7) an involuntary bankruptcy, receivership or similar action is
instituted against the borrower or the mortgaged property and not
fully dismissed after the passage of 45 days or the borrower files for
bankruptcy or takes similar action.
Additionally, the mortgage loans may contain other specified events of
default, including one or more of the following:
(1) for multifamily rental properties, the unapproved conversion of the
related mortgaged property to a condominium or cooperative;
(2) defaults under other agreements specified in the related mortgage
loans;
(3) defaults under or unapproved modifications to any related franchise
agreement;
(4) material changes to or defaults under any related management
agreement; and
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<PAGE>
(5) for health care related properties, the failure to correct any
deficiency that would justify termination of a Medicare or Medicaid
contract or a ban on new patients otherwise qualifying for Medicaid or
Medicare coverage or the assessment of fines or penalties by any state
or any Medicare, Medicaid, health, reimbursement or licensing agency
specified in the related mortgage loan document.
Upon an event of default, the master servicer or the special servicer may
take any action as it deems advisable to protect and enforce the rights of the
trustee on behalf of the certificateholders against the related borrower and
against the related mortgaged property, subject to the terms of the related
mortgage loan. Actions may include acceleration of maturity of the mortgage
loan or complete or partial foreclosure of the mortgage loan.
Default Interest
All of the mortgage loans provide for imposition of Default Interest. You
should note that the enforceability of Default Interest provisions has been
challenged in several states. Also, the collectibility of Default Interest is
dependent on the creditworthiness of the borrower. For more detailed
information, you should refer to the section in the prospectus titled "Material
Legal Aspects of the Mortgage Loans--Enforceability of Material Provisions."
The master servicer, pursuant to the Pooling and Servicing Agreement, is
entitled to retain Default Interest (subject to offset for the payment of
interest on Advances) as additional compensation.
Hazard, Liability and other Insurance
Each mortgage loan requires that the related mortgaged property be insured
against loss or damage by fire or other risks and hazards covered by a standard
extended coverage insurance policy. Standard extended coverage insurance
generally includes:
(1) commercial general liability insurance for bodily injury or death and
property damage;
(2) an "All Risk of Physical Loss" policy or standard extended coverage
policy;
(3) other coverage as the related mortgage loan seller may require based
on the specific characteristics of the mortgaged property (including
in each case other than where a major tenant is self-insured or has
independently procured similar insurance, rental loss insurance and
business interruption insurance); and
(4) where appropriate, boiler and machinery coverage and flood insurance.
Generally, the insurance must be for an amount equal to (1) the full
replacement cost of the mortgaged property or (2) the outstanding principal
balance of the related mortgage loan, whichever is less, but in any event in an
amount sufficient to ensure that the insurer would not deem the borrower a
co-insurer. With respect to some of the mortgage loans, the related borrower
has satisfied the applicable insurance requirements by obtaining blanket
insurance policies.
Generally, the borrower is required to maintain an insurance policy
providing business interruption or rental continuation coverage in an amount
not less than the income anticipated from 12 months of operations of the
mortgaged property. 2 of the mortgaged properties, representing approximately
0.8% of the cut-off date balance, however, do not specifically require the
related borrowers to maintain business interruption or rental continuation
coverage, but generally do require the related borrowers to obtain and maintain
any insurance that the mortgagee may reasonably require. 3 of the mortgage
loans, representing approximately 0.5% of the cut-off date balance, have
business interruption insurance for six months or less.
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The related mortgage loans typically provide that upon a casualty to the
mortgaged property, insurance proceeds in excess of a specified amount will be
paid to the mortgagee rather than the borrower. The mortgagee may elect to
apply the insurance proceeds it receives to the outstanding indebtedness rather
then to restoration of the related mortgaged property. However, the mortgagee
may be required to apply those proceeds to restoration of the related mortgaged
property if conditions specified in the related mortgage loan are met. These
conditions typically include one or more of the following:
(1) the insurance proceeds payable are less than a specified amount;
(2) less than a specified percentage of the related mortgaged property is
destroyed;
(3) the value of the related mortgaged property following the casualty
remains greater than either a specified amount or a specified
percentage of the value of the related mortgaged property before the
casualty;
(4) the casualty affects less than a specified percentage of the net
rentable area of the mortgaged property or interrupts less than a
specified percentage of the rentals from the mortgaged property;
(5) restoration will cost less than a specified amount and the proceeds
are sufficient to complete the restoration;
(6) restoration can be accomplished within a specified time period;
(7) the restored mortgaged property will adequately secure the related
mortgage loan;
(8) income (including rents and insurance proceeds) will be adequate to
service the debt during the restoration period; and
(9) no event of default then exists.
Some leases require the borrower or the tenant to rebuild the buildings
located upon the related mortgaged property if a casualty has occurred, and the
mortgagee may be required to apply insurance proceeds to satisfy that
requirement.
Condemnation
Generally the mortgage loans provide that all awards payable to the
borrower in connection with any condemnation with respect to the related
mortgaged property will be paid directly to the mortgagee. The mortgagee may
elect to apply those proceeds to the outstanding indebtedness rather than to
the restoration of the related mortgaged property. However, the mortgagee may
be required to apply those awards to restoration of the related mortgaged
property if conditions specified in the related mortgage loans are met. These
conditions typically include one or more of the following:
(1) the award is less than a specified amount;
(2) the condemnation affects less than a specified percentage of the net
rentable area of the mortgaged property or interrupts less than a
specified percentage of the rentals from the mortgaged property;
(3) restoration will cost less than a specified amount and sufficient
funds are available to complete the restoration;
(4) restoration can be accomplished within a specified time period;
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(5) income (including the condemnation award, rentals and insurance
proceeds) will be adequate to service the debt during the restoration
period;
(6) no event of default then exists; and
(7) restoration is feasible and the mortgaged property will be
commercially viable after the restoration.
Some leases require the borrower or the tenant to restore the related
mortgaged property in the event of a condemnation, and the mortgagee may be
required to apply condemnation proceeds to satisfy that requirement.
Delinquencies and Modifications.
As of the cut-off date, no mortgage loan was more than 30 days delinquent
with respect to any Monthly Payment, and no mortgage loan has been modified in
any material manner since its origination in connection with any default or
threatened default on the part of the related borrower.
MATERIAL CHARACTERISTICS OF THE MORTGAGE POOL
Concentration of Mortgage Loans and Borrowers.
Several of the mortgage loans have cut-off date principal balances that
are substantially higher than the average cut-off date principal balance. The
largest single mortgage loan has a cut-off date principal balance of
$30,410,327, which represents approximately 3.7% of the cut-off date balance.
The ten largest individual mortgage loans, which includes cross-collateratized
mortgage loans, have cut-off date principal balances that represent in the
aggregate approximately 24.4% of the cut-off date balance.
Descriptions of the Ten Largest Individual Mortgage Loans.
For a description of the ten largest mortgage loans, see Annex F which
constitutes an important part of this prospectus supplement.
Affiliated Borrowers.
34 mortgage loans, collectively representing approximately 14.9% of the
cut-off date balance, were made to affiliated entities. No set of mortgage
loans made to a single borrower or to a single group of affiliated borrowers
constitutes more than approximately 2.5% of the cut-off date
balance. 10 mortgage loans, representing approximately 4.7% of the cut-off date
balance, are cross-collateralized and cross-defaulted with other mortgage loans
made to the same borrower or its affiliate. 2 mortgage loans, representing
approximately 0.3% of the cut-off date balance, are cross-defaulted with other
mortgage loans made to the same borrower or to its affiliate but are not
cross-collateralized. Subject to any limits imposed by their terms,
"cross-collateralized mortgage loans" and "cross-defaulted mortgage loans"
reduce the risk that the inability of an individual mortgaged property to
generate net operating income sufficient to pay debt service on that property
will result in defaults (and ultimately losses) by making the collateral
available to support debt service on, and principal repayment of, the aggregate
indebtedness evidenced by the related cross-collateralized mortgage loans and
by making it easier for a lender to foreclose on performing collateral should
the need arise. Annex C, which constitutes an important part of this prospectus
supplement, contains the Affiliated Borrower Loan Table which sets forth more
detailed information regarding mortgage loans made to a single borrower or to a
single group of affiliated borrowers.
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Geographic Concentration
The mortgaged properties are located in 34 states and the District of
Columbia. The states with the greatest concentration of mortgage loans are
indicated in the table below. No more than 4.9% of the mortgage loans by
cut-off date balance are secured by mortgaged properties located in any state
not indicated below.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGE CUT-OFF DATE
STATE LOANS BALANCE
-------------------------- ----------- --------------
<S> <C> <C>
California ............. 34 22.8%
Texas .................. 20 12.2%
Maryland ............... 3 5.7%
</TABLE>
Environmental Risks
A Phase I environmental site assessment, a similar study, an update of a
previously conducted Phase I ESA, an update based on information contained in
an established database, or for (i) mortgage loans with an original principal
balance of less than $1,000,000 (or $1,500,000 in the case of all mortgage
loans originated or purchased by Bridger Commercial Funding LLC), (ii) 2 of the
mortgage loans, representing approximately 0.5% of the cut-off date balance,
originated by KeyBank National Association under its "small balance loan"
program and (iii) 1 mortgage loan, representing approximately 0.1% of the
cut-off date balance, that was also originated by KeyBank National Association,
an environmental transaction screen assessment was obtained by the related
mortgage loan seller with respect to each of the mortgaged properties within 12
months of the respective dates as of which the mortgage loans were originated
or purchased. Other than as described below, an ESA or other similar study or
update has been prepared within the 12 months preceding the cut-off date.
Other than as described below, the mortgage loan sellers have informed the
depositor that the ESAs, studies, updates or screen assessments did not
identify any material adverse environmental conditions or circumstances, except
for:
(1) cases where those conditions or circumstances were investigated
further, and based upon additional investigation, a qualified
environmental consultant recommended no further investigation or
remediation;
(2) cases where a qualified environmental consultant recommended an
operations and maintenance plan and the maintenance plan was obtained
or an escrow reserve was established to cover the estimated costs of
obtaining the maintenance plan;
(3) cases where soil or groundwater contamination was suspected or
identified and either (a) that condition was remediated or abated
prior to the closing date; (b) a No Further Action letter was obtained
from the applicable regulatory authority, or (c) either an
environmental insurance policy was obtained, a letter of credit
provided, an escrow reserve account established, or an indemnity from
the responsible party was obtained, to cover the estimated costs of
any further required investigation, testing, monitoring or
remediation;
(4) cases in which an offsite property is the location of a leaking
underground storage tank or groundwater contamination, a responsible
party has been identified under applicable law, and either (a) that
condition is not known to have affected the mortgaged property or (b)
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the responsible party has either received a No Further Action letter
from the applicable regulatory agency, established a remediation fund,
or provided an indemnity or guaranty to the borrower; or
(5) cases in which, for small loans with an original principal balance of
less than $1,000,000, the borrower has acknowledged in the mortgage
loan documents the existence of that condition and expressly agreed to
comply with all federal, state and local statutes or regulations
respecting that condition.
The foregoing information is based solely upon ESAs, similar studies,
screen assessments or updates and has not been independently verified by the
mortgage loan sellers, the depositor, the Transferor, or any of their
respective affiliates.
The ESAs, similar studies, screen assessments or updates with respect to
some mortgaged properties identified adverse environmental conditions which
could be important and require material expenditure. For the 7 mortgage loans
identified below, which represent 4.2% of the cut-off date balance, either a
borrower's or a lender's environmental insurance policy was obtained to insure
either the borrower or the lender from known or suspected environmental
conditions identified in the environmental report obtained for the respective
mortgaged property. The insurer, general policy terms, term of coverage,
conditions or coverage, policy limits, deductibles and other aspects of the
policies vary from policy to policy. The mortgage loans with environmental
insurance policies are as follows: Loan No. 6392 (Inman Grove Shopping Center),
Loan No. 6568 (220 I Street NE), Loan No. 6569 (300 I Street NE), Loan No. 7237
(Bellwood Terrace Apartments), Loan No. 8355 (Doubletree Hotel), Loan No. 8714
(Warrington Shopping Center), and Loan No. 6603463 (Walnut Street Portfolio).
No assurances can be provided, however, that the environmental insurance
policies will be adequate to cover any environmental claims arising with
respect to the related mortgaged properties or as to the financial condition of
the borrower.
Unsecured Debt
In the case of 4 mortgage loans, representing approximately 1.9% of the
cut-off date balance, that are loans to borrowers that are partnerships, the
mortgage loans are not secured by either the related mortgaged properties or
the ownership interests in the borrowers. These unsecured loans were made to
the borrowers by affiliates of the borrowers.
Subordinate Financing
3 of the mortgage loans, representing approximately 0.9% of the cut-off
date balance, have current subordinate financing secured by the related
mortgaged properties and the related borrowers have executed and delivered
subordination and standstill agreements. 5 of the mortgage loans, representing
approximately 4.3% of the cut-off date balance, allow the borrowers to grant
subordinate financing in the future that would be secured by the related
mortgaged properties; however, the mortgage loan documents relating to these 5
mortgage loans do not explicitly require the execution and delivery of
subordination and standstill agreements in connection with the subordinate
financing.
The terms of certain loans permit or require the borrowers to post letters
of credit for the benefit of the mortgage loan, which may constitute a
contingent reimbursement obligation of the related borrower or an affiliate.
The issuing bank will not typically agree to subordination and standstill
protection benefitting the lender.
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Performance Holdbacks
3 mortgage loans, representing approximately 5.1% of the cut-off date
balance, provide for material performance holdbacks under which a portion of
the original loan amount disbursed by the originating lender was placed into an
escrow account at closing, to be released upon the satisfaction of certain
conditions by the borrower. While there is no specific date by which the
borrower is required to satisfy the necessary specified conditions, in the
event of any default by the borrower, the lender has the right to use the
escrowed holdback to pay down the principal balance of the loan in addition to
its other default remedies. In such event, the borrower would be obligated to
pay additional consideration to the lender. In the case of Loan No. 6603515
(Gateway Village Shopping Center), such consideration is based on the greater
of (i) the amount necessary to purchase defeasance collateral assuming
defeasance would have been permitted, or (ii) 1% of the principal amount of the
mortgage note after acceleration. In the case of Loan Nos. 6604092 (Gatehouse
Plaza) and 6603490 (Stephens Business Park), such consideration is based on a
yield maintenance calculation.
The achievement of the specified conditions necessary to release an
escrowed holdback is typically contingent upon the performance of the
underlying mortgaged property and an increase in the mortgaged property's Net
Cash Flow. If such specified conditions are not achieved, irregardless of
whether or not the escrowed holdback is used to pay down the principal balance
of the loan, as described above, the borrower will still be required to service
a monthly debt service amount that is based upon the entire original loan
amount.
Loans Containing Performance Holdback Provisions
<TABLE>
<CAPTION>
ANNEX A
MORTGAGE CUT-OFF AMOUNT OF OUTSIDE
LOAN DATE ESCROWED RELEASE
NUMBER PROPERTY NAME BALANCE HOLDBACK DATE RELEASE CONDITIONS
---------- --------------------------------- ------------ ----------- -------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
6603515 Gateway Village Shopping Center 25,848,385 1,827,490 none Minimum 1.25x DSCR based on a new
cash flow verification by Lender and
Borrower must construct an expansion
area of at least 10,000 s.f.
6604092 Gatehouse Plaza 8,679,168 700,000 none Completion of construction of tenant
space and commencement of occupancy
and payment of rent by Chic-Fil-A.
6603490 Stephens Business Park 7,466,965 1,372,000 none Minimum 1.25x DSCR based on a new
cash flow verification by Lender and a
new appraisal indicating a maximum loan
to value ratio of 75%. The new cash flow
verification will calculate effective
annualized rental income based on the
immediate proceeding six (6) months.
</TABLE>
<TABLE>
<CAPTION>
ANNEX A CUT-OFF
MORTGAGE DATE CURRENT LTV BALLOON/ARD BALLOON/ARD
LOAN BALANCE NET RATIO NET BALANCE NET LTV RATIO NET
NUMBER PROPERTY NAME OF HOLDBACK OF HOLDBACK OF HOLDBACK OF HOLDBACK
---------- --------------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
6603515 Gateway Village Shopping Center 24,020,895 71.70% 21,475,850 64.11%
6604092 Gatehouse Plaza 7,979,168 73.20% 7,120,574 65.33%
6603490 Stephens Business Park 6,094,965 74.60% 5,371,158 65.74%
</TABLE>
Zoning Compliance
The related mortgage loan seller received assurances that all of the
improvements located upon each respective mortgaged property complied in all
material respects with applicable zoning laws, or
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that those improvements qualified as permitted nonconforming uses. In some
cases, the assurances were limited to a representation or warranty from the
related borrower, for breach of which recourse may be had to that borrower.
Tenant Matters
In connection with 77 of the mortgaged properties, representing
approximately 47.6% of the cut-off date balance, a major tenant occupies more
than 20% of the net leasable area of the related mortgaged property. Many of
these major tenants occupy their respective leased premises pursuant to leases
that require them to pay all applicable real property taxes, maintain insurance
over the improvements on the premises and maintain the physical condition of
those improvements. With respect to mortgage loans secured by a retail, office
or industrial property, the related mortgage loan seller generally obtained an
estoppel certificate from each major tenant in which that tenant indicated its
intention to continue in the relevant lease and that the tenant was not
presently aware of any condition or event that would allow it to terminate the
lease prior to the end of the lease term. Generally, major tenants do not have
investment-grade credit ratings. Additional information regarding major tenants
is set forth in Annex A of this prospectus supplement.
Other Information
Annex A sets forth certain material information with respect to the
mortgage loans and the mortgaged properties. The information was primarily
derived from financial statements supplied by the borrowers which, in most
cases, are unaudited and were not prepared in accordance with generally
accepted accounting principles. Net Operating Income and Cash Flow do not
represent the net operating income and cash flow reflected on the borrowers'
financial statements. The differences between "Net Operating Income" and "Cash
Flow" determined by the mortgage loan sellers and net operating income and cash
flow reflected on the borrowers' financial statements represent the adjustments
made by the related mortgage loan seller as described below, to increase the
level of consistency between the financial statements provided by the
borrowers. However, these adjustments were subjective in nature and were not
made in a uniform manner nor in accordance with generally accepted accounting
principles. "Underwritten NOI" and "Underwritten Cash Flow" are pro forma
numbers prepared by the related mortgage loan seller to reflect their
assessment of the market based performance of the related mortgaged property.
None of the depositor, the Transferor or the Underwriters has made any attempt
to verify the accuracy of the financial statements supplied by the borrowers or
the accuracy or appropriateness of the adjustments discussed below to determine
"Net Operating Income," "Cash Flow," "Underwritten NOI," and "Underwritten Cash
Flow."
"Net Operating Income," "Cash Flow," "Underwritten NOI" and "Underwritten
Cash Flow" are not substitutes for, or improvements upon, net income as
determined in accordance with generally accepted accounting principles as a
measure of the results of a mortgaged property's operations or for cash flows
from operating activities determined in accordance with generally accepted
accounting principles as a measure of liquidity. No representation is made as
to the future net income or net cash flow of the mortgaged properties, and the
"Net Operating Income," "Cash Flow," "Underwritten NOI" and "Underwritten Cash
Flow" as set forth in this prospectus supplement are not intended to represent
the future net income or net cash flow.
The Loan-to-Value Ratios set forth below are based upon Appraised Values.
The mortgage loan sellers had appraisals of the mortgaged properties conducted
in compliance with the Code of Professional Ethics and Standards of
Professional Conduct of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice as adopted by the Appraisal Standards Board
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of the Appraisal Foundation and accepted and incorporated into FIRREA. No other
person has prepared or obtained a separate appraisal or reappraisal. Another
appraiser might arrive at a different opinion of value. Any Appraised Value
might differ from the value that would be determined in a current appraisal or
the amount that would be realized upon a sale or liquidation of the mortgaged
property. Accordingly, you should not rely on the Loan-to-Value Ratios set
forth in this prospectus supplement as necessarily indicative of the true
Loan-to-Value Ratios.
Debt Service Coverage Ratios are used by lenders of loans secured by
income producing property to measure the ratio of (1) cash currently generated
by a property annually that is available for debt service (that is, cash that
remains after payment of operating expenses) to (2) required annual debt
service payments. Debt service coverage ratios, however, only measure the
current, or recent, ability of a property to service mortgage debt. If a
property is not expected to have a stable operating cash flow (because, for
instance, it is subject to leases with above-market rents that expire during
the loan term and are difficult to replace at similar rent levels), a debt
service coverage ratio may not be a reliable indicator of a property's ability
to service the mortgage debt over the entire remaining loan term. In addition,
a debt service coverage ratio may not adequately reflect the significant
amounts of cash that a property owner may be required to expend to pay for
capital improvements, tenant improvements and leasing commissions when expiring
leases are replaced. Accordingly, we can give no assurance and make no
representation that the Debt Service Coverage Ratios accurately reflect the
future ability of a mortgaged property to generate sufficient cash flow to
repay the related mortgage loan.
Due to rounding, percentages may not add to 100% and amounts may not add
to the indicated total. For purposes of this prospectus supplement and Annex A
to this prospectus supplement all calculations of any applicable Lockout
Period, Defeasance Lockout Period, Yield Maintenance Period, Prepayment Premium
or Yield Maintenance Charge for a mortgage loan are based upon the mortgage
loan's first scheduled payment date. For each mortgage loan secured by more
than one mortgaged property, the "Number of Units," "Units/SF," "Appraised
Value," "Current Occupancy," "Underwritten NOI" and "Underwritten Cash Flow" is
the sum of the respective values of each mortgaged property securing that
mortgage loan.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The foregoing description of the mortgage pool and the mortgaged
properties is based upon scheduled principal payments due on the mortgage loans
on or before the cut-off date. Before we issue the certificates, one or more
mortgage loans may be removed from the mortgage pool if the depositor deems the
removal necessary or appropriate or if those mortgage loans are prepaid. A
limited number of other mortgage loans may be included in the mortgage pool
before we issue the certificates, unless including those mortgage loans would
materially alter the characteristics of the mortgage pool, as described in this
prospectus supplement. Accordingly, the characteristics of the mortgage loans
constituting the mortgage pool at the time we issue the certificates may vary
from those described in this prospectus supplement.
A Current Report on Form 8-K will be filed, together with the Pooling and
Servicing Agreement, with the SEC within 15 days after the initial issuance of
the certificates. The Form 8-K will be available to the certificateholders
promptly after its filing. If mortgage loans are removed from or added to the
mortgage pool as set forth in the preceding paragraph, the removal or addition
will be reflected in the Form 8-K.
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REPRESENTATIONS AND WARRANTIES; REPURCHASE
Each of KeyBank National Association, Bridger Commercial Realty Finance
LLC and Salomon Brothers Realty Corp. will make representations and warranties
relating to the mortgage loans, either directly to the depositor pursuant to a
Mortgage Loan Purchase Agreement, or indirectly through the Transferor pursuant
to the Underlying Mortgage Purchase Agreement. The Transferor will make
substantially similar representations to the depositor in a Mortgage Loan
Purchase Agreement with respect to the mortgage loans it purchases from
Bridger. The sole remedy available to the trustee or certificateholders for a
mortgage loan seller's failure to cure any breach of those representations and
warranties that materially and adversely affect the interest of the
certificateholders in that mortgage loan is for the applicable mortgage loan
seller to cure or repurchase the affected mortgage loan within 85 days of
receiving notice of the breach or as otherwise provided in the Pooling and
Servicing Agreement (which period may be extended to 180 days under certain
circumstances). The depositor will assign its rights under each Mortgage Loan
Purchase Agreement (and, as a result, the rights of the Transferor under the
Underlying Mortgage Loan Purchase Agreement) to the trustee for the benefit of
the certificateholders. Any repurchase of a mortgage loan because of a breach
of a representation and warranty will be made at the Repurchase Price.
All references in these representations and warranties are to related
documents, mortgaged properties and entities unless otherwise indicated. The
representations and warranties are made for each mortgage loan as of the date
specified in the applicable Mortgage Loan Purchase and Sale Agreement, and
include the following (subject to the exceptions set forth in that Mortgage
Loan Purchase Agreement):
(1) Mortgage Loan Characteristics. The information set forth in the
mortgage loan schedule is true, correct and complete in all material
respects; provided, however, that with respect to information set
forth with respect to each mortgage loan under the captions "Physical
Occupancy Percentage," "Occupancy As of Date," "1998 NOI" and "1999
NOI," "Underwritten NOI," "Underwritten Net Cash Flow" and
"Underwritten NOI DSCR", the mortgage loan seller represents only that
the information is a correct and accurate reproduction or derivation,
as adjusted by the mortgage loan seller in accordance with its
customary underwriting practices and procedures, of the information
provided to it by the borrower (or an affiliate or principal thereof)
and takes no responsibility for the accuracy or completeness of the
information provided to it by the borrower (or that affiliate or
principal); provided further, the mortgage loan seller has no actual
knowledge that the information is incorrect, inaccurate or incomplete
following the reasonable and customary due diligence performed by the
mortgage loan seller in connection with its origination or purchase of
the mortgage loans.
(2) Domestic Borrower. The borrower is an individual who is a citizen of,
or an entity organized under the laws of, a state of the United States
of America.
(3) Single-Purpose Bankruptcy Remote Entity. Each borrower of a mortgage
loan in excess of $25,000,000 is an entity which has represented in
connection with the origination of the mortgage loan, and whose
organizational documents as of the date of origination of the mortgage
loan provide that so long as the mortgage loan is outstanding, it will
be a single-purpose entity whose activities and ability to incur debt
are restricted by the applicable mortgage or the organizational
documents in a manner intended to make the
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likelihood of bankruptcy proceedings being commenced by or against that
borrower remote, and as to which the borrower has delivered an opinion
of counsel concerning substantive non-consolidation, and as to which
the borrower has at least one independent director. For this purpose,
"single-purpose entity" shall mean a person, other than an individual,
which does not engage in any business unrelated to the mortgaged
property and its financing, does not have any assets other than those
related to its interest in the mortgaged property or its financing, or
any indebtedness other than as permitted by the mortgage or the other
mortgage loan documents, has its own books and records separate and
apart from any other person and holds itself out as being a legal
entity, separate and apart from any other person.
(4) Delivery of Mortgage Loan Documents. The mortgage loan seller has
caused or will cause to be delivered to the Transferor or its
designee, or the depositor or its designee, within the prescribed time
period, each of the documents comprising the mortgage file for each
mortgage loan that is required to be delivered to the trustee.
(5) Payment Current. All payments required to be made with respect to the
mortgage loan under the terms of the promissory note or mortgage
(inclusive of any applicable grace or cure period) up to the closing
date have been made. Within the twelve months preceding the Closing
Date, there has not been any delinquency in excess of 30 days with
respect to the mortgage loan.
(6) Equity Participation or Participation Interest. The mortgage loan
contains no equity participation by the mortgage loan seller and is a
whole loan and not a participation interest. Neither the promissory
note nor the mortgage provides for negative amortization or any
contingent or additional interest in the form of participation in the
cash flow of the mortgaged property. The mortgage loan seller has no
ownership interest in the mortgaged property or in the borrower other
than in the mortgage loan being assigned and sold. Neither the
mortgage loan seller nor any affiliate of the mortgage loan seller has
any obligation to make any capital contributions to the borrower under
the mortgage or any other mortgage loan document.
(7) Compliance with Applicable Laws. As of its date of origination, the
mortgage loan either complied with or was exempt from, applicable
state or federal laws, regulations and other requirements pertaining
to usury. To the best of the mortgage loan seller's knowledge, as of
the date of origination of the mortgage loan, the originator complied
in all material respects with the requirements of any and all other
federal, state or local laws applicable to the origination, servicing
and collection of the mortgage loan. No governmental or regulatory
approval or consent is required for the sale of the mortgage loan by
the mortgage loan seller, and the mortgage loan seller has full right,
power and authority to sell the mortgage loan. To the extent necessary
to ensure the enforceability of the mortgage loan and the effective
sale, transfer and assignment thereof and of the promissory note, the
originator and/or the mortgage loan seller each was qualified and
appropriately licensed to transact business in the jurisdiction in
which the mortgaged property is located at the time that entity had
possession of the promissory note.
(8) Proceeds Fully Disbursed. The proceeds of the mortgage loan have been
fully disbursed (although certain reserve accounts controlled by the
mortgage loan seller may have been established as described in Annex
A), and there is no requirement for future advances thereunder.
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(9) Origination Expenses Paid. All costs, fees and expenses incurred in
connection with the origination and closing of the mortgage loan,
including, without limitation, recording costs and fees, have been
paid to the appropriate person or arrangements have been made for
their payment to the appropriate person on a timely basis by the
borrower.
(10) Documents Valid. Each of the promissory note, the mortgage and any
other mortgage loan document is the legal, valid and binding
obligation of the borrower, the guarantor or other party executing
that document (subject to any non-recourse or partial recourse
provisions contained therein) and is enforceable in accordance with
its terms subject to customary exceptions. There is no valid offset,
defense, counterclaim or right of rescission with respect to the
promissory note, mortgage or any other mortgage loan document, nor
will the operation of any of the terms of the promissory note or the
mortgage, or the exercise of any right thereunder, render either the
promissory note or the mortgage, unenforceable or subject to any valid
offset, defense, counterclaim or right of rescission, including,
without limitation, the defense of usury, and the mortgage loan seller
has no knowledge that any offset, defense, counterclaim or right of
rescission has been asserted or is available with respect thereto.
Except as described in the immediately following sentence, neither the
mortgage nor the promissory note requires the mortgagee to release any
portion of the mortgaged property except upon payment in full of the
mortgage loan or the exercise of a defeasance feature. In the case of
certain mortgaged properties securing cross-collateralized mortgage
loans, certain mortgage loans secured by multiple mortgaged
properties, and certain mortgage loans secured by one or more parcels
constituting a single mortgaged property, the mortgagee may be
required to release a mortgaged property or a portion thereof upon
payment of a portion of the mortgage loan, as specified in the
mortgage loan documents.
(11) Assignment of Mortgage; Note Endorsement. The assignment of mortgage
(but for the insertion of the name of the assignee and any related
recording information that is not yet available to the mortgage loan
seller) is or will be in recordable form and constitutes or will
constitute the mortgage loan seller's legal, valid and binding
assignment to the Transferor or the depositor of the mortgage and any
assignment of leases, rents and profits or assignment of assignment of
leases, rents and profits. The mortgage loan seller's endorsement and
delivery of the promissory note to the Transferor or the depositor, as
applicable, in accordance with the terms of the Underlying Mortgage
Loan Purchase Agreement or related Mortgage Loan Purchase Agreement
constitutes or will constitute the mortgage loan seller's legal, valid
and binding assignment to the Transferor or the depositor of that
promissory note, and, together with the mortgage loan seller's
execution and delivery of the assignment of mortgage to the Transferor
or the depositor legally and validly conveys or will convey all right,
title and interest of the mortgage loan seller in that mortgage loan
to the Transferor or the depositor.
(12) First Lien. Based on the related policy of title insurance (or pro
forma or specimen policy or "marked-up" commitment for title
insurance), the mortgage is a legal, valid and enforceable first lien
on the mortgaged property (including all buildings and improvements on
the mortgaged property and all installations and mechanical,
electrical, plumbing, heating and air conditioning systems located in
or annexed to those buildings, and all additions, alterations and
replacements made at any time prior to the closing date of the
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mortgage loan with respect to the foregoing, but excluding any related
personal property), which mortgaged property is free and clear of all
liens and encumbrances having priority over or equal to the first lien
of the mortgage, except for:
(a) the lien of current real estate taxes and special
assessments not yet delinquent or accruing interest or
penalties;
(b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date
of recording of the Mortgage which do not materially and
adversely (A) affect the value of the mortgaged property as
security for the mortgage loan or (B) interfere with the
related borrower's ability to make required principal and
interest payments or to make use of that mortgaged property
for the intended purposes therefor;
(c) leases and subleases for the mortgaged property which the
mortgage loan seller did not require to be subordinated to
the lien of the mortgage; provided that those leases and
subleases, if any, are with entities which are not
affiliated with the mortgage loan seller; and
(d) other matters which do not individually or in the aggregate,
materially and adversely (A)affect the value of the
mortgaged property as security for the mortgage loan, or (B)
interfere with the borrower's ability to make required
principal and interest payments or to make use of the
mortgaged property for the intended purposes therefor.
(13) No Modification, Release or Satisfaction. Except by a written
instrument which has been delivered as part of the mortgage file:
(a) neither the promissory note nor the mortgage (including any
amendments or supplements thereto included in the related
mortgage file) has been impaired, waived, modified, altered,
satisfied, canceled or subordinated or rescinded;
(b) the mortgaged property has not been released from the lien
of the mortgage; and
(c) the borrower has not been released from its obligations
under the mortgage, in whole or in any part, in a manner
which would materially interfere with the benefits of the
security intended to be provided by the mortgage.
(14) Defeasance. A mortgage loan that permits defeasance provides that,
after the applicable Defeasance Lockout Period, the borrower may
obtain the release of all or a portion of the related mortgaged
property from the lien of the mortgage upon the pledge to the trustee
of non-callable U.S. Treasury or other noncallable U.S. government
obligations that provide payments on or prior to all successive
payment dates to maturity (or, in the case of an ARD Loan, through the
Anticipated Repayment Date) in the amounts due on those dates and upon
the satisfaction of certain other conditions. A mortgage loan that
permits defeasance provides that the borrower is responsible for the
payment of all costs and expenses of the lender incurred in connection
with the defeasance of such mortgage loan and the release of the
related mortgaged property. A mortgage loan containing a defeasance
provision has a Defeasance Lockout Period of not less than two years
after the closing date or includes other conditions precedent the
satisfaction of which will ensure that the exercise of that feature
will not cause any REMIC to fail to be a REMIC. The
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mortgage loans that permit defeasance require that a first priority
perfected security interest opinion be provided, and certain mortgage
loans also require that a REMIC opinion be provided, as a condition to
exercise of any defeasance option. In addition, the mortgage or other
mortgage loan documents generally require the satisfaction of one or
more of the following conditions prior to the defeasance of the
mortgaged property:
(a) the borrower must provide the mortgagee with a prior written
notice of not less than 30 days;
(b) the borrower must either (i) deliver to the mortgagee or the
servicer of the mortgage loan, as the case may be, the
government obligations described in this clause (14) or (ii)
pay to the mortgagee or the servicer of the mortgage loan,
as the case may be, an amount sufficient to purchase the
government obligations described above in this clause (14);
(c) the borrower must provide a written confirmation from the
Rating Agencies indicating that the defeasance will not
result in a reduction, withdrawal or qualification of the
respective ratings of any outstanding classes of
Certificates;
(d) the borrower must deliver an officer's certificate to the
effect that all of its obligations with respect to the
mortgage loan have been satisfied and that the mortgage loan
is not in default; and
(e) the borrower must undertake to provide any other documents
or information that the mortgagee may reasonably request in
connection with the defeasance.
(15) No Delinquent Taxes or Assessments. All tax or governmental
assessments or installments thereof, that were due and owing on or
prior to the date of origination had been paid as of that date and the
mortgage loan seller knows of no tax or governmental assessment, or if
payable in installments, any installment thereof, which became due and
owing thereafter and prior to the closing date with respect to the
mortgaged property which, if left unpaid, would be, or might become, a
lien on the mortgaged property having priority over the mortgage which
has become delinquent so that (A) the tax, assessment or installment
has commenced to accrue interest or penalties, or (B) the applicable
taxing authority may commence proceedings to collect the tax,
assessment or installment, as applicable.
(16) Escrow or Reserve Deposits. As of the closing date: (a) the reserve
accounts, if any, contain all escrow deposits and other payments
required by the terms of the mortgage loan documents (inclusive of any
applicable grace or cure period) to be held by the mortgage loan
seller as of the closing date; and (b) the mortgage loan seller is
transferring all amounts on deposit in the reserve account(s) on the
closing date to the Transferor or the depositor or to the extent not
being transferred to the Transferor or the depositor all escrow
deposits and other payments required under the promissory note, the
mortgage and any other mortgage loan documents have been applied in
accordance with their intended purposes by the mortgage loan
originator, the mortgage loan seller or its agent.
(17) No Third Party Advances. The mortgage loan seller has not, directly
or indirectly, (a) advanced funds; (b) induced or solicited any
payment from a person other than the borrower; or (c) to the mortgage
loan seller's knowledge, received any payment other than from the
borrower, for the payment of any amount required under the promissory
note or
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the mortgage, except for interest accruing from the date of the
promissory note or the date of disbursement of the proceeds of the
mortgage loan, whichever is later, to the date which precedes by 30
days the first due date under the promissory note.
(18) No Condemnation or Damages. To the best of the mortgage loan seller's
knowledge, no proceedings for the total or partial condemnation of the
mortgaged property (a) have occurred since the date as of which the
appraisal relied upon in the origination of the mortgage loan was
prepared or (b) are pending or threatened other than, in each case,
proceedings as to a partial condemnation which do not materially and
adversely affect the value of the mortgaged property as security for
the mortgage loan. To the best of the mortgage loan seller's
knowledge, the mortgaged property is free of material damage. The
mortgage requires that any related condemnation award be applied
either to the restoration of the mortgaged property or the payment of
the outstanding principal balance of or accrued interest on the
mortgage loan.
(19) No Mechanics' Liens. To the mortgage loan seller's knowledge, the
mortgaged property (excluding any related personal property) (i) is
free and clear of any mechanics' and materialmen's liens or liens in
the nature thereof and (ii) no rights are outstanding that, under
applicable law, could give rise to any of these types of liens that
are or may be prior to, or equal with, the lien of the mortgage,
except, with respect to (i) or (ii) above, those which are insured
against by the lender's title insurance policy referred to in (23)
below.
(20) Title Survey: Improvements; Separate Tax Parcels. The mortgage loan
seller has delivered an as-built survey, a survey recertification, a
site plan, a recorded plat or the like with respect to the mortgaged
property which satisfied, or the mortgage loan seller otherwise
satisfied, the requirements of the related title insurance company for
deletion of the standard general exceptions for encroachments,
boundary and other survey matters and for easements not shown by the
public records from the related title insurance policy, except with
respect to any mortgaged property located in a jurisdiction (such as
the State of Texas where survey title insurance coverage is prohibited
by law) in which the exception for easements not shown by the public
records could not be deleted and the standard general exception is
customarily accepted by prudent commercial mortgage lenders in that
jurisdiction. Except for encroachments and similar matters which are
inconsequential, do not materially and adversely affect the value of
the mortgaged property as security for the mortgage loan, or are
insured against by the related lender's title insurance policy
described in (23) below, surveys and/or title insurance obtained at
the time of the origination of the mortgage loan indicated or insured
that (A) none of the improvements which were included for the purpose
of determining the appraised value of the mortgaged property in the
related appraisal at the time of the origination of the mortgage loan
lie outside the boundaries and building restriction lines of the
mortgaged property, and (B) no improvements on adjoining properties
encroach upon the mortgaged property. The mortgaged property
constitutes one or more complete separate tax lots or is subject to an
endorsement under the related lender's title insurance policy.
(21) Title. The mortgage loan seller has good title to and is the sole
owner and beneficial holder of the mortgage loan. The mortgage loan
seller has full power, authority and legal right to sell and assign
the mortgage loan, is the sole mortgagee or beneficiary of record
under the mortgage and is transferring the mortgage loan to the
Transferor or the depositor free and clear of any and all liens,
encumbrances, participation interests, pledges, charges or security
interests of any nature encumbering the mortgage loan.
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(22) Compliance with Laws. To the best of the mortgage loan seller's
knowledge, based upon a letter or letters from governmental
authorities, a legal opinion, an endorsement or endorsements to the
related title insurance policy, a representation of the borrower at
the time of origination of the mortgage loan or other information
reasonably acceptable to the mortgage loan seller at the time of
origination of that mortgage loan:
(a) no improvements located on or forming a part of the
mortgaged property are in violation of any applicable zoning
and building laws or ordinances;
(b) the mortgaged property complies with all other laws and
regulations pertaining to its use and occupancy thereof
(excluding environmental laws (see (34) and (35) below) and
all applicable insurance requirements;
(c) the borrower has obtained all inspections, licenses,
permits, authorizations, and certificates necessary for
compliance, including, but not limited to, certificates of
occupancy (if available); and
(d) the mortgage loan seller has not received notification from
any governmental authority that the mortgaged property
violates or does not comply with laws or regulations or is
being used, operated or occupied unlawfully or that the
borrower has failed to obtain any of the inspections,
licenses, permits, authorizations or certificates referred
to above, except for any violation or non-compliance (A)
which does not materially and adversely affect the value of
the mortgaged property as security for the mortgage loan or
the use for which that mortgaged property was intended at
the time of origination of the mortgage loan, (B) which was
specifically addressed by the appraiser in the determination
of the related appraised value, or (C) for which a reserve
account held for the related mortgage loan seller has been
established in an amount sufficient to pay for the estimated
costs to correct the violations or non-compliance.
(23) Title Insurance. The lien of the mortgage is insured by an ALTA
lender's title insurance policy or, if an ALTA lender's title
insurance policy is unavailable, another state-approved form of
lender's title insurance policy issued in an amount not less than the
stated principal amount of the mortgage loan (after all advances of
principal) insuring the mortgage loan seller and its successors and
assigns that the mortgage is a valid first lien on the mortgaged
property, subject only to exceptions described in (12) above (or, if
title insurance policy has not yet been issued with respect to the
mortgage loan, the policy will be issued and is currently evidenced by
a pro forma or specimen policy or by a "marked-up" commitment for
title insurance which was furnished by the related title insurance
company for purposes of closing the mortgage loan). The premium for
the title insurance policy has been paid in full and the title
insurance policy is (or, when issued, will be) in full force and
effect, and upon endorsement and delivery of the related promissory
note to the Transferor or the depositor and recording of the related
assignment of mortgage in favor of the Transferor or the depositor in
the applicable real estate records, the title insurance policy will
inure to the benefit of the Transferor or the depositor. The title
insurance policy (a) does not contain the standard general exceptions
for encroachments, boundary or other survey matters and for easements
not shown by the public records, other than matters which do not
materially and adversely (1) affect the value of the mortgaged
property as security for the mortgage loan, or (2) interfere with
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the borrower's ability to make required principal and interest payments
or to make use of the mortgaged property for the intended purposes, and
(b) only contains those exceptions for encroachments, boundary and
other survey matters as are customarily accepted by prudent commercial
mortgage lenders. The mortgage loan seller and its agents have not
taken, or failed to take, any action that would materially impair the
coverage benefits of that title insurance policy. The mortgage loan
seller has not made any claim under any title insurance policy.
(24) Insurance Related to Mortgaged Property. All improvements on the
mortgaged property are insured by (A) a fire and extended perils
insurance policy providing coverage on a full replacement cost basis
in an amount not less than the lesser of (1) the full replacement cost
of all improvements to the mortgaged property, and (2) the outstanding
principal balance of the mortgage loan, but in any event in an amount
sufficient to avoid the operation of any co-insurance provisions
contained in the insurance policy, which policy contains a standard
mortgagee clause naming the originator or the mortgage loan seller and
its successors as additional insureds; (B) an insurance policy
providing business interruption or rental continuation coverage in an
amount not less than the income anticipated from 12 months of
operations of the mortgaged property; (C) a comprehensive general
liability insurance policy in an amount not less than $1,000,000 per
occurrence; and (D) if any material improvement on the mortgaged
property is located in an area identified by the Federal Emergency
Management Agency as having special flood hazards under the National
Flood Insurance Act of 1968, as amended, a flood insurance policy
providing coverage in an amount not less than the lesser of (1) the
stated principal amount of the related promissory note, and (2) the
maximum amount of insurance available under the Flood Disaster
Protection Act of 1973, as amended. As of the closing date, the
insurance premium for each insurance policy shall have been paid or
escrowed. Each insurance policy contains a clause providing that it is
not terminable and may not be reduced without 30 days prior written
notice to the mortgagee (except that, in the event of nonpayment of
any insurance premium, each insurance policy provides for termination
upon not less than 10 days' prior written notice), and no notice has
been received by the mortgage loan seller. With respect to each
insurance policy, the mortgage loan seller has received a certificate
of insurance or similar document dated within the last 12 months to
the effect that the insurance policy is in full force and effect. The
mortgage loan seller has no knowledge of any action, omission,
misrepresentation, negligence or fraud which would result in the
failure of that insurance policy. The mortgage loan documents require
the borrower or a tenant of the borrower to maintain each insurance
policy at its expense, but authorizes the mortgagee to maintain any
insurance policy at the borrower's expense upon the borrower's or
tenant's failure to do so (subject to any applicable notice or cure
periods). The mortgage and insurance policy require that any related
insurance proceeds, in excess of a specified amount, will be applied
either to the repair or restoration of all or part of the mortgaged
property or to the payment of the outstanding principal balance of or
accrued interest on the mortgage loan.
(25) UCC Financing Statements. One or more Uniform Commercial Code
financing statements covering all furniture, fixtures, equipment and
other personal property (A) which are collateral under the mortgage or
under a security or similar agreement executed and delivered in
connection with the mortgage loan, and (B) in which a security
interest can be
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perfected by the filing of Uniform Commercial Code financing
statement(s) under applicable law have been filed or recorded (or have
been sent for filing or recording) wherever necessary to perfect under
applicable law a security interest in that furniture, fixtures,
equipment and other personal property (including rights under leases
and all agreements affecting the use, enjoyment or occupancy of all or
any part of the mortgaged property and hotel room revenues).
(26) Default, Breach and Acceleration. There is no material default,
breach, violation or event of acceleration existing under the related
loan agreement, promissory note, or mortgage. The mortgage loan seller
has no knowledge of any event (other than failure to make payments due
but not yet delinquent) which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration thereunder. The
mortgage loan seller has no knowledge that the borrower is a debtor in
any state or federal bankruptcy or insolvency proceeding.
(27) Customary Provisions. The promissory note and the mortgage, together
with applicable state law, contain customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the practical realization against the mortgaged property
of the benefits of the security, including, but not limited to,
judicial or, if applicable, nonjudicial foreclosure.
(28) Access Routes. (A) Surveys, title insurance reports, the title
insurance policy or other relevant documents contained in the mortgage
file indicate that at the time of origination of the mortgage loan,
the borrower had sufficient rights with respect to amenities, ingress
and egress and similar matters identified in the appraisal of the
mortgaged property as being critical to the appraised value thereof,
and (B) the mortgaged property was receiving services from public or
private water, sewer and other utilities that were adequate as of the
date that the mortgage loan was originated, and none of these services
is subject to revocation as a result of a foreclosure or change in
ownership of an adjacent property.
(29) Mortgage Loans Secured by Ground Lease but Not Fee Interest. With
respect to each mortgage loan that is secured in whole or in part by
the borrower's interest as lessee under a ground lease of all or a
portion of the mortgaged property, but the related fee interest in the
portion of the mortgaged property covered by that ground lease is not
subject or subordinate to the lien of the mortgage, the mortgage loan
seller hereby represents and warrants that:
(a) as of the date of the closing of the mortgage loan, the
ground lease is in full force and effect, and the ground
lease or a memorandum of the ground lease has been duly
recorded in the applicable real estate records and (1) that
ground lease (or the related estoppel letter or lender
protection agreement between the mortgage loan seller and
the lessor) does not prohibit the interest of the lessee
from being encumbered by the mortgage and does not restrict
the use of the mortgaged property of the lessee in a manner
that would interfere with the borrower's ability to make
required principal and interest payments or to make use of
the mortgaged property for the intended purposes, or a
separate written agreement permitting the encumbrance has
been obtained, and (2) there have been no material changes
in the terms of the ground lease that would be binding on
the mortgagee as successor to the lessee except as set forth
in written instruments which are part of the mortgage file;
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(b) based on the policy of title insurance, the lessee's
leasehold interest in the portion of the mortgaged property
covered by the ground lease is not subject to any liens or
encumbrances securing indebtedness which are superior to, or
of equal priority with, the mortgage, except for liens of
current real estate taxes and special assessments not yet
delinquent or accruing interest or penalties;
(c) the lessee's interest in the ground lease may be transferred
to the Transferor and its successors and assigns or the
depositor and its successors and assigns through a
foreclosure of the mortgage or conveyance in lieu of
foreclosure and, thereafter, may be transferred to another
person by the related mortgagee and its successors and
assigns upon notice to, but without the consent of, the
lessor (or, if any consent is required, either (1) it has
been obtained prior to the closing date, or (2) it may not
be unreasonably withheld), provided that the ground lease
has not been terminated and all amounts owed under that
ground lease have been paid;
(d) the lessor is required to give notice of any default under
the ground lease by the lessee to the mortgagee either under
the terms of the ground lease or under the terms of a
separate estoppel letter or written agreement;
(e) the mortgagee is entitled, under the terms of the ground
lease or a separate estoppel letter or written agreement, to
receive notice of any default by the lessee under the ground
lease, and after any default notice is entitled to not less
than the time provided to the lessee under the ground lease
to cure the default, which is curable during the period
before the lessor may terminate the ground lease; all rights
of the lessee under the ground lease may be exercised by or
on behalf of the mortgagee;
(f) the currently effective term of the ground lease (excluding
any extension or renewal which is not binding on the lessor
thereunder) extends not less than 20 years beyond the
maturity date of the mortgage loan;
(g) the ground lease does not impose any restrictions on
subletting which the mortgage loan seller considered to be
commercially unreasonable at the time of origination or
purchase of the mortgage loan or that a prudent commercial
mortgage lender would have considered unreasonable at that
date;
(h) to the mortgage loan seller's knowledge as of the closing
date, (1) no event of default has occurred under the ground
lease and (2) no event has occurred which, with the passage
of time, the giving of notice or both (other than rental or
other payments being due, but not yet delinquent), would
result in a default or an event of default under the terms
of the ground lease;
(i) the lessor has agreed in a writing included in the mortgage
file that the ground lease may not be amended, modified,
cancelled or terminated without the prior written consent of
the mortgage loan seller or the mortgagee and that any of
those actions taken without that consent is not binding upon
the mortgagee, its successors and assigns. Unless the
mortgagee fails to cure a default of the lessee under the
ground lease following notice thereof from the lessor as set
forth in (e) above, the lessor is required to enter into a
new ground lease upon termination of the ground lease for
any reason (including, without limitation, rejection of the
ground lease in a bankruptcy proceeding);
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(j) under the terms of the ground lease and the mortgage, taken
together, any related insurance proceeds or condemnation
award (other than with respect to a total or substantially
total loss or taking) will be applied either to (1) the
repair or restoration of all or part of the mortgaged
property covered by the ground lease, with the mortgagee or
a trustee appointed by it having the right to hold and
disburse those proceeds as the repair or restoration
progresses (except where the mortgage loan provides that the
related borrower or its agent may hold and disburse the
proceeds with respect to any loss or taking less than a
stipulated amount not greater than $50,000), or (2) the
payment of the outstanding principal balance of and accrued
interest on the mortgage loan; and
(k) there are no existing mortgages on the fee interest which
can be foreclosed upon that are not subject to the ground
lease, and the provisions of the ground lease and/or other
documents related thereto and included as part of the
mortgage file preclude the creation of any future mortgage
on the fee interest that can be foreclosed upon not subject
to the ground lease.
(30) Deed of Trust. With respect to any mortgage that is a deed of trust
or trust deed, a trustee, duly qualified under applicable law to serve
as trustee, has either been properly designated and currently so
serves or may be substituted in accordance with applicable law. Except
in connection with (A) a trustee's sale after default by the borrower,
or (B) the release of the mortgaged property following the payment of
the mortgage loan in full, no fees or expenses are payable by the
mortgage loan seller, the Transferor or the depositor to the trustee.
(31) Cross-Security. The mortgaged property is not collateral or security
for the payment or performance of (A) any other obligations owed to
the originator of the mortgage loan or mortgage loan seller other than
another mortgage loan being sold, transferred and assigned by the
mortgage loan seller under the Underlying Mortgage Loan Purchase
Agreement or the related Mortgage Loan Purchase Agreement, or (B) to
the mortgage loan seller's knowledge, any other obligations owed to
any person other than the mortgage loan seller. The related promissory
note is not secured by any property other than a mortgaged property.
(32) Assignment of Leases, Rents and Profits. Except with respect to the
mortgaged property or that portion of the mortgaged property that is
occupied by the borrower, the mortgage loan documents contain the
provisions of an assignment of leases, rents and profits or an
assignment of assignment of leases, rents and profits or include a
separate assignment of leases, rents and profits. Any assignment of
leases, rents and profits incorporated within the mortgage or set
forth in a separate mortgage loan document creates on recordation
(with the same priority as the related mortgage) a valid assignment
of, or security interest in, the right to receive all payments due
under the leases, if any.
(33) REMIC. (A) The mortgage loan is principally secured by an interest in
real property and either (1) the fair market value of that real
property was at least equal to 80% of the adjusted issue price of the
mortgage loan on the date of origination of the mortgage loan or, if
that mortgage loan has been "significantly modified" within the
meaning of Section 1001 of the Code, on the date of the modification
(unless the modification may be disregarded under Treas. Reg. Sec.
1.860G-2(b)(3)), or (2) substantially all of the proceeds
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of the mortgage loan were used to acquire or improve or protect an
interest in real property that, at origination of the mortgage loan,
was the only security for the mortgage loan; (B) the mortgage loan
contains no equity participation by the mortgage loan seller, and
neither the promissory note nor the mortgage provides for any
contingent or additional participation interest in the cash flow or
proceeds realized on disposition of the mortgaged property; and (C) the
mortgage loan is a "qualified mortgage" as defined in, and for purposes
of, Section 860G of the Tax Code and provides for the payments of
interest at a fixed rate or at a rate described in Treas. Reg. Sec.
1.806G-1(a)(3).
(34) Environmental Site Assessments (ESAs). Environmental site
assessments, transaction screen assessments, studies or updates
prepared or obtained in connection with the origination of the
mortgage loan identified no material adverse environmental conditions
or circumstances anticipated to require any material expenditure with
respect to any mortgaged property, except for: (A) those cases where
the conditions or circumstances were investigated further and based
upon that additional investigation, a qualified environmental
consultant recommended no further investigation or remediation; (B)
those cases in which an operations and maintenance plan was
recommended by the environmental consultant and the plan was obtained
or an escrow reserve established to cover the estimated costs of
obtaining the plan; (C) those cases in which soil or groundwater
contamination was suspected or identified and either (1) that
condition or circumstance was remediated or abated prior to the
origination date of the mortgage loan, (2) a "no further action"
letter was obtained from the applicable regulatory authority, or (3)
either an environmental insurance policy was obtained, a letter of
credit provided, an escrow reserve account established, or an
indemnity from the responsible party was obtained, to cover the
estimated costs of any required investigation, testing, monitoring or
remediation; or (D) those cases in which (1) a leaking underground
storage tank or groundwater contamination was identified to be located
on or to have originated from an offsite property, (2) a responsible
party has been identified under applicable law, and (3) either that
condition is not known to have affected the mortgaged property or the
responsible party has either received a "no further action" letter
from the applicable regulatory agency, established a remediation fund,
or provided a guaranty or indemnity to the borrower.
(35) Notice of Environmental Problem. Other than with respect to any
conditions identified in the ESAs, transaction screen assessments,
studies or updates referred to in (34) above, the mortgage loan
seller: (A) has not received actual notice from any federal, state or
other governmental authority of (1) any failure of the mortgaged
property to comply with any applicable environmental laws, or (2) any
known or threatened release of hazardous materials on or from the
mortgaged property in violation of any applicable environmental laws;
(B) has not received actual notice from the borrower that (1) the
borrower has received any of those notices from any relevant
governmental authority, (2) the mortgaged property fails to comply
with environmental laws, or (3) the borrower has received actual
notice that there is any known or threatened release of hazardous
materials on or from the mortgaged property in violation of any
applicable environmental laws; or (C) has no actual knowledge that (1)
the mortgaged property fails to materially comply with any applicable
environmental laws and (2) there has been any known or threatened
release of hazardous materials on or from the mortgaged property where
the release falls outside of exceptions stated in clause (34) above.
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(36) Recourse. The mortgage loan documents contain standard provisions
providing for recourse against the borrower or a principal of the
borrower for damages sustained in connection with the borrower's
fraud, material misrepresentation, misappropriation of any tenant
security deposits, rent, insurance proceeds or condemnation proceeds.
The mortgage loan documents contain provisions in which the borrower
or a principal of the borrower has agreed to indemnify the mortgagee
for damages resulting from violations of applicable environmental
laws.
(37) Environmental Compliance. Each mortgage loan contains either a
representation, warranty or covenant that the borrower will not use,
cause or permit to exist on the mortgaged property any hazardous
materials in violation of applicable environmental laws, or an
indemnity with respect to any violation in favor of the mortgage loan
seller.
(38) Inspection. The mortgage loan seller or originator has inspected the
mortgaged property or caused the mortgaged property to be inspected
within the 12 months preceding the closing date.
(39) Subordinate Debt. Except as has been disclosed in the exceptions
hereto, the mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the mortgage loan in the
event that the borrower encumbers the mortgaged property without prior
written consent of the mortgagee thereunder.
(40) Common Ownership. To the mortgage loan seller's knowledge, no two
properties securing mortgage loans are directly or indirectly under
common ownership except to the extent that this common ownership and
the ownership structure have been specifically disclosed in Annex A
and Annex C to this prospectus supplement.
(41) Operating or Financial Statement. The mortgage loan documents require
the borrower to furnish to the mortgagee at least annually an
operating statement with respect to the mortgaged property or, in the
case of a borrower-occupied mortgaged property, a financial statement
with respect to the borrower.
(42) Litigation. To the best of the mortgage loan seller's knowledge as of
the date of origination or purchase of the mortgage loan, and to the
mortgage loan seller's knowledge thereafter, there is no pending
action, suit, proceeding, arbitration or governmental investigation
with respect to the borrower or mortgaged property which if determined
adversely to the borrower would have a material adverse effect on the
value of the mortgaged property or the borrower's ability to continue
to perform its obligations under the mortgage loan.
(43) ARD Loans. With respect to each mortgage loan that is an ARD Loan, it
commenced amortizing on its initial scheduled due date (or, in the
case of certain interest-only mortgage loans, as otherwise set forth
in the related promissory notes) and provides that: (A) the spread
used in calculating its Mortgage Rate will increase by no more than
five percent (5%) in connection with the passage of its Anticipated
Repayment Date; (B) its Anticipated Repayment Date is of the term
specified in Annex A following the origination of the mortgage loan;
(C) no later than the related Anticipated Repayment Date, if it has
not previously done so, the borrower is required to enter into a
"lockbox agreement" whereby all revenue from the mortgaged property
shall be deposited directly into a designated account controlled by
the master servicer; and (D) any cash flow from the
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mortgaged property that is applied to amortize the mortgage loan
following its Anticipated Repayment Date shall, to the extent the net
flow is in excess of the Monthly Payment payable therefrom, be net of
budgeted and discretionary (master servicer approved) capital
expenditures.
(44) Due-on-Sale. The mortgage contains a "due-on-sale" clause that
provides for the acceleration of the payment of the unpaid principal
balance of the mortgage loan if, without the prior written consent of
the mortgagee, the mortgaged property subject to the mortgage is
directly or indirectly transferred or sold; provided that certain of
the mortgages permit (A) changes in ownership between existing
partners and members, (B) transfers to family members (or trusts for
the benefit of family members), affiliated companies and certain
specified individuals and entities; (C) issuance by the borrower of
new partnership or membership interests, (D) certain other changes in
ownership for estate planning purposes, or (E) certain other transfers
similar in nature to the foregoing.
(45) Loan Origination; Loan Underwriting. Each mortgage loan was
originated by the mortgage loan seller, an affiliate of the mortgage
loan seller or an originator approved by the mortgage loan seller, or
was purchased by the mortgage loan seller, and each mortgage loan
substantially complied with all of the terms, conditions and
requirements of the mortgage loan seller's underwriting standards in
effect at the time of its origination or purchase of the mortgage
loan, subject to any exceptions that the mortgage loan seller
approved.
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<PAGE>
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Prudential Securities Secured Financing Corporation, the depositor,
formerly known as P-B Secured Financing Corporation, was incorporated in the
State of Delaware on August 26, 1988 as a wholly-owned, limited purpose finance
subsidiary of Prudential Securities Group Inc. (a wholly-owned indirect
subsidiary of The Prudential Insurance Company of America). The depositor's
principal executive offices are located at One New York Plaza, New York, New
York 10292. Its telephone number is (212) 214-1000, Attention: David Rodgers.
The depositor does not have, nor is it expected in the future to have, any
significant assets.
MORTGAGE LOAN SELLERS
The mortgage loans will be purchased on or before the Closing Date from
the mortgage loan sellers pursuant to the related Mortgage Loan Purchase
Agreements.
Bridger Finance is a limited liability company organized under the laws of
the State of Missouri in 1998. It is a wholly owned, limited purpose finance
subsidiary of Bridger Commercial Funding LLC ("Bridger Funding") which is also
a limited liability company organized under the laws of the State of Missouri
in 1998. Bridger Funding is a real estate financial services company which
originates and acquires commercial and multifamily real estate loans and
provides loan servicing. Bridger Funding has offices in Mill Valley, California
(near San Francisco), Chicago, Illinois, Westfield, New Jersey, Westport,
Connecticut and Atlanta, Georgia. Bridger Finance was organized for the purpose
of acquiring loans originated or purchased by Bridger Funding and holding them
pending securitization or other disposition. The principal offices of both
Bridger Funding and Bridger Finance are located at 100 Shoreline Highway, Suite
100, Mill Valley, California 94941. Its telephone number is (415) 331-3220.
KeyBank National Association, a wholly owned subsidiary of KeyCorp, is a
national banking association. KeyBank provides financial services, including
commercial and multifamily real estate financing, throughout the United States.
As of March 31, 2000, KeyBank had total assets of approximately $75.3 billion,
total liabilities of approximately $69.3 billion and approximately $5.9 billion
in stockholder's equity. 62 of the mortgage loans, representing approximately
38.9% of the cut-off date balance, were acquired by KeyBank from National
Realty Finance L.C. in January 2000 when KeyBank acquired National Realty
Finance L.C. The principal executive offices of KeyBank are located at Key
Tower, 127 Public Square, Cleveland, Ohio 44114. Its telephone number is (216)
689-6300.
Salomon Brothers Realty Corp. is an affiliate of Salomon Smith Barney
Inc., Salomon Brothers Realty Corp. engages primarily in the business of
originating, purchasing and holding mortgage loans pending securitization,
repackaging or other disposition. Although Salomon Brothers Realty Corp.
originates, purchases and sells mortgage loans for its own account, it does not
act as a broker or dealer in connection with any such loans. The principal
offices of Salomon Brothers Realty Corp. are located at 388 Greenwich Street,
11th Floor, New York, New York 10013. Its telephone number is (212) 816-6000.
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UNDERWRITING GUIDELINES AND PROCESS FOR MORTGAGE LOAN SELLERS
Overview. The mortgage loan sellers generally underwrite commercial real
estate loans with principal amounts that range from $250,000 to $150 million.
Loans underwritten by the mortgage loan sellers are secured by mortgages on
commercial and multifamily real estate assets located throughout the United
States.
Mortgage Loan Underwriting Guide. Each mortgage loan seller adheres to
guidelines with respect to its policies and procedures for originating
commercial real estate loans. Certain of these procedures may be performed on
behalf of the mortgage loan seller by correspondents. While many aspects of
commercial real estate lending are subjective, and the guidelines expressly
provide for many exceptions, the guidelines establish baseline standards and a
generally uniform approach to originating commercial real estate loans.
Initial Steps for Loan Origination. Each mortgage loan seller's first step
in evaluating a prospective mortgage loan involves reviewing the property's
operating statements, rent roll (which indicates current lease terms), copies
of all leases, copies of actual real estate tax bills as well as property and
casualty bills, financial statements of the prospective borrower and/or its
principals and copies of utility bills. Each mortgage loan seller reviews and
evaluates information provided by the borrower, certified by the borrower as
correct, regarding any current or past loan defaults, bankruptcies or lawsuits,
and obtains applicable credit reports.
Market Analysis. Prior to property inspection, lease and sale comparables
are usually gathered from reliable sources such as appraisers, leasing agents
and real estate brokers that are active in the marketplace. Each mortgage loan
seller collects and evaluates data regarding the local market economics,
including overall market occupancy, rental rates and prices for similar
properties, submarket data and neighborhood specific data.
Financial Analysis. Each mortgage loan seller analyzes the financial
condition of a prospective borrower and its principals and conducts credit and
background inquiries which are intended to determine their credit history and
uncover any potential legal or ethical issues affecting or otherwise involving
the prospective borrower or its principals. Each mortgage loan seller also
contacts the respective credit references provided by the borrower.
Property Analysis. Each mortgage loan seller conducts an analysis of the
real estate collateral for each originated or purchased loan to reasonably
determine the property's stabilized cash flows and thereby calculate the
mortgage loan's DSCR. Each mortgage loan seller determines the LTV of the
mortgage loan as of the date of origination based on the value set forth in the
related appraisal conducted as described below under "--Appraisals."
Each mortgage loan seller's mortgage officers analyze property data
including, in most instances, building size, age, land area, number of units,
amenities, tenants, lease expiration, rental rates, creditworthiness of major
tenants, rollover exposure and expense reimbursements. Several years of
historical financial performance of the property are evaluated if that
information is available. Mortgage officers also evaluate any reasonably
identifiable irregular or non-recurring costs such as tenant improvements and
leasing commissions to measure the potential impact of these expenses on a
borrower's ability to service its debt.
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The following table highlights the mortgage loan sellers' underwriting
guidelines, subject to certain exceptions, for minimum DSCR and maximum LTV
ratios for various property types. These guidelines are as follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
PROPERTY TYPE DSCR(S) LTV
---------------------------------------- --------- --------
<S> <C> <C>
Multifamily .......................... 1.20 80%
Manufactured Housing ................. 1.20 80%
Retail--Anchored ..................... 1.20 80%
Retail--Unanchored ................... 1.25 75%
Industrial ........................... 1.25 75%
Office ............................... 1.25 75%
Self Storage ......................... 1.30 75%
Hospitality .......................... 1.40 75%
</TABLE>
In addition to guidelines for DSCR and LTV, there are guidelines relating
to the amortization of the loan with specific requirements based on property
type and property age.
Site Inspection. A mortgage officer or a representative of a mortgage loan
seller or the mortgage loan seller's correspondent inspects the property
securing a loan and often meets with the prospective borrower and its
principals. The mortgage officer or a representative of a mortgage loan seller
or the mortgage loan seller's correspondent tours the subject property,
inspects tenant spaces, evaluates the property's condition, and observes the
surrounding area and marketplace. By conducting or causing to be conducted an
inspection of the competing properties and confirming the accuracy of the
property related data, the mortgage loan seller or the mortgage loan seller's
correspondent intends to evaluate the property relative to competing
properties. This comparison analysis is an integral component in projecting the
ongoing physical and financial viability of the property.
Loan Summary. The mortgage officer develops a presentation concerning the
merits and weaknesses of the loan, including a consideration of any
corresponding mitigating factors. This loan presentation generally involves the
following:
(1) overview of the loan request with requirements and exceptions;
(2) strengths, risks and mitigating factors relating to the collateral;
(3) description of the market and neighborhood;
(4) photographs, description and comparative analysis of for-lease and
for-sale comparables;
(5) description of any major tenants in the property with pertinent
financial data;
(6) description of the borrowing entity, the principals and their
financial condition;
(7) photographs of the property which often include an aerial photograph;
(8) comparison of underwritten economics with historicals and an
explanation of the underwritten numbers; and
(9) summaries of the third-party reports described below, if they are
available.
The mortgage officer distributes the mortgage loan presentation to the
mortgage loan seller's credit officer or committee. Prior to the issuance of
any binding commitment, the mortgage loan seller's credit officer or committee
must approve and agree upon all substantive terms of the proposed loan.
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<PAGE>
Generally, each mortgage loan seller approves and issues loan commitments
after receipt and review of third-party reports or, if those reports are not
available at that time, subject to receipt and review. These reports consist of
an appraisal, a property condition report (and a seismic study where
appropriate) and a Phase I environmental report or similar environmental study
or assessment.
Appraisals. Appraisers must be state certified and each mortgage loan
seller's appraisals are generally prepared by Members of the Appraisal
Institute. Appraisals must be prepared in conformity with the requirements of
the Code of Professional Ethics, the Standards of Professional Appraisal
Practice as adopted by the Appraisal Standards Board of the Appraisal
Foundation and accepted and incorporated into FIRREA. A mortgage officer
reviews the final loan appraisal.
Property Condition Reports. Each mortgage loan seller orders property
condition reports from third-party agents. The engineer examines the entire
property and provides a report of property characteristics. The report outlines
immediate repairs necessary to remedy any deferred maintenance as well as a
schedule of anticipated capital repair expenditures over the life of the loan.
If any required repairs are not completed prior to the loan closing, the
mortgage loan seller establishes an escrow account and generally requires a
deposit of 125% of the estimated cost to be held until the repairs are
completed.
Environmental Reports. A qualified environmental engineer prepares all
environmental site assessments on behalf of each mortgage loan seller. All
firms that prepare site assessments must meet requirements as to experience,
knowledge of local or regional issues and insurance policy issues. For (i)
mortgage loans with an original principal balance of less than $1,000,000 (or
$1,500,000 in the case of all mortgage loans originated or purchased by Bridger
Commercial Funding LLC), (ii) 2 mortgage loans, representing approximately 0.5%
of the cut-off date balance, originated by KeyBank National Association under
its "small balance loan" program and (iii) 1 mortgage loan, representing
approximately 0.1% of the cut-off date balance, that was also originated by
KeyBank National Association, an environmental transaction screen assessment
may be performed in lieu of Phase I environmental assessment.
Should the Phase I report conclude that additional investigation is
necessary, a review of the test results is conducted in consultation with the
mortgage loan seller's chief underwriter to determine the extent of any
environmental risk. No mortgage loan is approved if the mortgage loan seller
believes that a substantial unmitigated environmental hazard exists.
Bridger Small Loans Program When originating mortgage loans under its
"small loan" program, Bridger follows its standard underwriting procedures,
except that (i) all third party reports made on the related mortgaged property
are abbreviated and contain less information than the third party reports on
which Bridger relies for its standard conduit loans, (ii) other than an
appraisal of the mortgaged property, no site inspection or independent market
study is conducted prior to origination, and (iii) review and analysis of
environmental conditions of the mortgaged property are based on transaction
screen assessments, rather than phase I environmental site assessments,
performed on the mortgaged property.
KeyBank Small Balance Loans. When originating mortgage loans under its
"small balance loan" program, KeyBank follows its standard underwriting
procedures, except that (i) all third party reports made on the related
mortgaged property are abbreviated and contain less information than the third
party reports on which KeyBank relies for its standard conduit loans, (ii)
other than an appraisal of the mortgaged property, no site inspection or
independent market study is conducted prior to origination, (iii) review and
analysis of environmental conditions of the mortgaged property
S-81
<PAGE>
are based on transaction screen assessments, rather than phase I environmental
site assessments, performed on the mortgaged property; and (iv) the loan
committee write-up for each mortgage loan is abbreviated and contains less
information than those for KeyBank's standard conduit loans.
S-82
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 19 classes to be designated as the Class A-1,
Class A-2, Class X, Class B, Class C, Class D, Class E, Class F, Class G, Class
H, Class J, Class K, Class L, Class M, Class N, Class O, Class R-I, Class R-II
and Class R-III Certificates. Only the Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F and Class G Certificates are offered pursuant to this
prospectus supplement. The initial certificate balance of each class of offered
certificates is expected to be the balance set forth on the cover of this
prospectus supplement, subject to a permitted variance of plus or minus 5%,
depending on the aggregate principal balance of the mortgage loans actually
transferred to the trust fund.
The Pooling and Servicing Agreement will be included as part of the Form
8-K to be filed with the SEC within 15 days after the closing date. For more
detailed information regarding the terms of the Pooling and Servicing Agreement
and the certificates, you should refer to the sections in this prospectus
supplement titled "The Pooling and Servicing Agreement" and to the section in
the prospectus titled "Description of the Certificates" and "Servicing of the
Mortgage Loans."
The certificates represent in the aggregate the entire beneficial
ownership interest in a trust fund consisting primarily of:
(1) the mortgage loans, all scheduled payments of interest and principal
due after the cut-off date;
(2) any REO Property and revenues arising from that property;
(3) funds or assets as from time to time are deposited in the Collection
Account, the Distribution Account and any REO Account;
(4) the rights of the mortgagee under all insurance policies with respect
to the mortgage loans;
(5) the depositor's rights and remedies under the Mortgage Loan Purchase
Agreements, including rights with respect to enforcement of repurchase
obligations of the mortgage loan sellers in connection with any
breaches of representations and warranties concerning the mortgage
loans; and
(6) all of the related mortgagee's right, title and interest in the
Reserve Accounts.
The certificate balance of any class of certificates outstanding at any
time represents the maximum amount that the holders of that class 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. The respective
certificate balance of each class of certificates will in each case be reduced
by amounts actually distributed on that class that are allocable to principal
and by any Realized Losses allocated to that class. The Class X Certificates
are interest only certificates, have no certificate balances and are not
entitled to distributions with respect to principal.
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<PAGE>
DISTRIBUTIONS
Method, Timing and Amount.
Distributions on the offered certificates will be made on each
distribution date, commencing on July 17, 2000. 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 Record Date. All distributions will be made in the following manner:
(1) by wire transfer of immediately available funds to the account
specified by the related certificateholder at a bank or other entity
having appropriate facilities for transfer of funds, if the
certificateholder (a) is DTC or its nominee or (b) provides the
trustee with wiring instructions no less than five business days prior
to the related Record Date and is the registered owner of certificates
with an aggregate certificate balance or notional balance of at least
$50,000; or
(2) by check mailed to the certificateholder. The final distribution on
any Certificate will be made in like manner, but only upon
presentation or surrender of the certificates at the location
specified in the notice to the holder of the certificates of the final
distribution. The aggregate distribution to be made on the
certificates on any distribution date will equal the Available Funds.
Allocations of Realized Losses on the distribution date occurring during
any Interest Accrual Period will be deemed to have been made as of the first
day of that Interest Accrual Period for purposes of determining any Class
Interest Distribution Amount.
Priorities
On each distribution date, holders of each class of certificates will
receive distributions, up to the amount of Available Funds, in the amounts and
in the order of priority set forth below:
(1) concurrently, to the Class A-1, Class A-2 and Class X Certificates,
pro rata based on their Class Interest Distribution Amounts, up to
their Class Interest Distribution Amounts plus any unpaid Class
Interest Shortfalls previously allocated to each of those classes,
(2) to the Class A-1 and Class A-2 Certificates, in reduction of their
certificate balances until reduced to zero, the remaining Pooled
Principal Distribution Amount for that distribution date in sequential
order based on their alphabetical class designations;
(3) to the Class A-1 and Class A-2 Certificates, pro rata, based on the
amount of unreimbursed Realized Losses previously allocated to those
classes, from remaining Available Funds;
(4) to the Class B Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that Class;
(5) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class B Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(6) to the Class B Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
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<PAGE>
(7) to the Class C Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(8) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class C Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(9) to the Class C Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(10) to the Class D Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(11) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class D Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(12) to the Class D Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(13) to the Class E Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(14) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class E Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(15) to the Class E Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(16) to the Class F Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(17) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class F Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(18) to the Class F Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(19) to the Class G Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(20) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class G Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(21) to the Class G Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(22) to the Class H Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(23) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class H Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
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<PAGE>
(24) to the Class H Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that Class;
(25) to the Class J Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(26) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class J Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(27) to the Class J Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(28) to the Class K Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(29) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class K Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(30) to the Class K Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(31) to the Class L Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(32) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class L Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(33) to the Class L Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(34) to the Class M Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(35) after the certificate balances of the classes with earlier
alphabetical class designations have been reduced to zero, to the
Class M Certificates, in reduction of its certificate balance until
reduced to zero, the remaining Pooled Principal Distribution Amount;
(36) to the Class M Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(37) to the Class N Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
(38) after the certificate balance of each class with an earlier
alphabetical class designation has been reduced to zero, to the Class
N Certificates, in reduction of its certificate balance until reduced
to zero, the remaining Pooled Principal Distribution Amount;
(39) to the Class N Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class;
(40) to the Class O Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated to
that class;
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(41) after the certificate balance of each class with an earlier
alphabetical class designation has been reduced to zero, to the Class
O Certificates, in reduction of its certificate balance until reduced
to zero, the remaining Pooled Principal Distribution Amount;
(42) to the Class O Certificates the remaining Available Funds up to the
amount of any unreimbursed Realized Losses previously allocated to
that class; and
(43) any remaining funds shall be distributed to the Class R-I
Certificates.
Additional master servicer or special servicer compensation, interest on
Advances, extraordinary expenses of the trust fund and other similar items will
create a shortfall in Available Funds, which generally will result in a Class
Interest Shortfall for the class then outstanding with the latest alphabetical
class designation.
Distributions of Principal After Senior Principal Distribution Cross-Over Date
Notwithstanding the foregoing, on each distribution date on and after the
Senior Principal Distribution Cross-Over Date, and on the final distribution
date in connection with the termination of the trust fund, all distributions of
principal to the Class A-1 and Class A-2 Certificates will be paid to holders
of those classes of certificates, pro rata, based on their outstanding
certificate balances immediately prior to the related distribution date, until
the certificate balance of each of those classes is reduced to zero.
Yield Maintenance Charges and Prepayment Premiums
Yield Maintenance Charges collected during any Collection Period will be
allocated as between the Class X Certificates and all other eligible classes
based on the Base Interest Fraction. The product of the Base Interest Fraction
and the aggregate amount of the Yield Maintenance Charges will be allocated for
distribution to classes entitled to receive principal distributions on the
related Distribution Date. The product of (a) the amount of principal
distributed to each class (other than the Class X Certificates) as a percentage
of the principal distributed to all those classes multiplied by (b) the Base
Interest Fraction and multiplied by (c) the amount of Yield Maintenance Charges
allocated to those classes will be distributed to each of those classes. The
remainder of the Yield Maintenance Charges will be distributed to the Class X
Certificates.
Twenty-five percent of the Prepayment Premiums collected during any
Collection Period will be allocated for distribution to classes entitled to
receive principal distributions on the related Distribution Date on a pro rata
basis, based on the amount of principal distributed to each of those classes as
a percentage of the amount of principal distributed to all those classes. The
remainder of the Prepayment Premiums will be allocated to the Class X
Certificates.
Notwithstanding the foregoing, no Prepayment Premiums or Yield Maintenance
Charges will be distributed to holders of the Class H, Class J, Class K, Class
L, Class M, Class N, Class O or Residual Certificates. Instead, after the
certificate balances of the Class A-1, Class A-2, Class B, Class C, Class D,
Class E, Class F and Class G Certificates have been reduced to zero, all
Prepayment Premiums and Yield Maintenance Charges will be distributed to
holders of the Class X Certificates. For a more detailed description of
Prepayment Premiums and Yield Maintenance Charges, you should refer to the
section in this prospectus supplement titled "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage Pool--Prepayment Provisions" and
to the section in the prospectus titled "Material Legal Aspects of the Mortgage
Loans--Enforceability of Material Provisions--Default Interest; Late Charges;
and Prepayment Fees."
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Prepayment Premiums will be distributed on any Distribution Date only to
the extent they are received with respect to the mortgage loans in the related
Collection Period.
Realized Losses
Realized Losses on mortgage loans included in the mortgage pool will be
allocated to the outstanding class of certificates with the latest alphabetical
class designation (other than the Residual Certificates and Class X
Certificates) in reverse sequential order, until its certificate balance is
reduced to zero. However, on and after the Senior Principal Distribution
Cross-Over Date, Realized Losses will be allocated among the Class A-1 and
Class A-2 Certificates on a pro rata basis.
Any amounts recovered with respect to any amounts previously written off
as Realized Losses will be distributed to the classes of certificates in
reverse order of allocation of Realized Losses thereto.
SCHEDULED FINAL DISTRIBUTION DATE
The Scheduled Final Distribution Date with respect to any class of
certificates is the distribution date on which the aggregate certificate
balance or aggregate notional balance, as the case may be, of that class of
certificates would be reduced to zero based on the assumptions set forth below.
The Scheduled Final Distribution Date shall in each case be as follows:
<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DISTRIBUTION DATE
-------------------------- -------------------
<S> <C>
Class A-1 .............. June 15, 2009
Class A-2 .............. February 15, 2010
Class B ................ March 15, 2010
Class C ................ April 15, 2010
Class D ................ April 15, 2010
Class E ................ May 15, 2010
Class F ................ September 15, 2010
Class G ................ December 15, 2010
</TABLE>
The Scheduled Final Distribution Dates set forth above were calculated
without regard to any delays in the collection of Balloon Payments and without
regard to a reasonable liquidation time with respect to any mortgage loans that
may become delinquent. Accordingly, upon defaults on the mortgage loans the
actual final Distribution Date for any class of Certificates may be later, and
could be substantially later, than the related Scheduled Final Distribution
Date.
In addition, the Scheduled Final Distribution Dates set forth above were
calculated assuming no prepayments (involuntary or voluntary), no exercise of
defeasance options, no early termination of the trust fund, no defaults, no
condemnations, no modifications, no extensions and payment in full of ARD Loans
on the related Anticipated Repayment Dates. Because the rate of payment
(including prepayments) of the mortgage loans can be expected to exceed the
scheduled rate of payments, and could exceed the scheduled rate by a
substantial amount, the actual final distribution date for any class of
Certificates may be earlier, and could be substantially earlier, than the
related Scheduled Final Distribution Date.
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ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATES
The Residual Certificates will remain outstanding for as long as the trust
fund exists. Holders of the Residual Certificates are not entitled to regular
or scheduled distributions with respect to principal, interest, Prepayment
Premiums, Yield Maintenance Charges or Excess Interest. Holders of the Residual
Certificates are not expected to receive any distributions until after the
certificate balances of all other classes of certificates have been reduced to
zero, and then will receive distributions only to the extent of any Available
Funds remaining on any distribution date and any remaining assets of the
REMICs.
EARLY TERMINATION
The holder of the Class R-III Certificates representing greater than a 50%
percentage interest of the Class R-III Certificates, and, if that holder does
not exercise this option, the special servicer and, if the special servicer
does not exercise this option, the master servicer and, if the master servicer
does not exercise this option, the depositor, will have the option to purchase
all of the mortgage loans and all property remaining in the trust fund on any
Distribution Date on which the aggregate Scheduled Principal Balance of the
mortgage loans remaining in the trust fund is less than 1% of the cut-off date
balance. Any purchase of the mortgage loans and other property in the trust
fund would effect an early termination of the trust fund and early retirement
of the outstanding Certificates. The purchase price payable upon the exercise
of the option on any Distribution Date will be an amount equal to the greater
of:
(1) the sum of the following amounts:
(a) 100% of the outstanding principal balance of each mortgage
loan included in the trust fund as of the last day of the
month preceding that distribution date (less any Advances
previously made on account of principal); plus
(b) the fair market value of all other property included in the
trust fund as of the last day of the preceding month, as
determined by an independent appraiser no more than 30 days
prior to the last day of that month; plus
(c) all unpaid interest accrued on the principal balance of each
of those mortgage loans (including any REO Mortgage Loan) at
the Mortgage Rate to the last day of that month (less any
Advances previously made on account of interest); plus
(d) unreimbursed Advances with interest at the Advance Rate,
unpaid servicing compensation and unpaid trust fund
expenses;
OR
(2) the aggregate fair market value of the mortgage loans and all other
property acquired with respect to any mortgage loan in the trust fund
on the last day of the month preceding that distribution date, as
determined by an independent appraiser no more than 30 days prior to
the last day of the month together with one month's interest at the
related Mortgage Rate and disposition expenses.
Under the circumstances described under "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage Pool--ARD Loans; Excess
Interest," the holders of 100% of the Class O Certificates or the special
servicer will have the option to purchase any ARD Loan that is in default on or
after its Anticipated Repayment Date at a price equal to the greater of (a) its
outstanding Scheduled Principal Balance plus accrued and unpaid interest (less
any Advances
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previously made) or (b) its fair market value, plus, in each case, unreimbursed
Advances made with respect thereto (with interest at the Advance Rate). As a
condition to a purchase, the holder wishing to make a purchase will be required
to deliver an opinion of counsel to the effect that the purchase would not
cause any REMIC to fail to qualify as a REMIC under the Code and either (1) an
opinion of counsel to the effect that the purchase would not result in a gain
taxable as net income from prohibited transactions (imposed by Code Section
860F(a)(1) or result in the imposition of any other tax on any REMIC or (2) an
accountant's certification to the effect that the purchase would not result in
the realization of any net income to any REMIC.
DELIVERY, FORM AND DENOMINATION
Book-Entry Certificates
No Person acquiring a Book-Entry Certificate will be entitled to receive a
physical certificate except under the limited circumstances described below.
Absent those circumstances, the Book-Entry Certificates will be registered in
the name of a nominee of DTC and beneficial interests in those certificates
will be held by the Beneficial Owners through the book-entry facilities of DTC,
as described in this prospectus supplement, in denominations of $25,000 initial
certificate balance or notional balance and integral multiples of $1.00 in
excess of $25,000 with respect to the Class A-1 and Class A-2 Certificates, in
denominations of $50,000 initial certificate balance or notional balance and
integral multiples of $1.00 in excess of $50,000 with respect to the Class B
Certificates, and in denominations of $100,000 initial certificate balance or
notional balance and integral multiples of $1.00 in excess of $100,000 with
respect to the Class C, Class D, Class E, Class F and Class G Certificates. One
certificate of each of those class may be issued that represents a different
initial certificate balance or notional balance to accommodate the remainder of
the initial certificate balance or notional balance of that class. The
depositor has been informed by DTC that its nominee will be Cede & Co.
Accordingly, Cede & Co. is expected to be the holder of record of the
Book-Entry Certificates.
No Beneficial Owner of a Book-Entry Certificate will be entitled to
receive a definitive certificate representing that person's interest in the
Book-Entry Certificates except as set forth below. Unless and until definitive
certificates are issued to Beneficial Owners with respect to the Book-Entry
Certificates under the limited circumstances described in this prospectus
supplement, all references to actions taken by certificateholders or holders
will, in the case of the Book-Entry Certificates, refer to actions taken by DTC
upon instructions from its participants, and all references in this prospectus
supplement to distributions, notices, reports and statements to
certificateholders or holders will, in the case of the Book-Entry Certificates,
refer to distributions, notices, reports and statements to DTC or Cede & Co.,
as the case may be, for distribution to Beneficial Owners in accordance with
DTC procedures. DTC may discontinue providing its services as securities
depository with respect to the Book-Entry Certificates at any time by giving
reasonable notice to the trustee. Under those circumstances, if a successor
securities depository is not obtained, certificates are required to be printed
and delivered. The trustee, the master servicer, the special servicer and the
certificate registrar may for all purposes, including the making of payments
due on the Book-Entry Certificates, deal with DTC as the authorized
representative of the Beneficial Owners with respect to those certificates.
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 New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the
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Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for Participants and to facilitate the clearance and settlement of securities
transactions among Participants through electronic computerized book-entry
charges in Participants' accounts, eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies and clearing corporations and other
organizations. The rules applicable to DTC and its Participants are on file
with the SEC. Indirect access to the DTC system also is available to banks,
brokers, dealers, trust companies and other institutions that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. DTC is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each Beneficial Owner
is in turn to be recorded on the Direct Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct Participant or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Book-Entry Certificates are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the certificates except when the use of the
book-entry system for the Book-Entry Certificates is discontinued. Neither the
certificate registrar nor the trustee will have any responsibility to monitor
or restrict the transfer of ownership interests in Book-Entry Certificates
through the book-entry facilities of DTC.
To facilitate subsequent transfers, all Book-Entry Certificates deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Book-Entry Certificates with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Book-Entry Certificates; DTC's
records reflect only the identity of the Direct Participants to whose accounts
those Book-Entry Certificates are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers. Beneficial Owners will not be
recognized as certificateholders, as that term is used in the Pooling and
Servicing Agreement, by the trustee or any paying agent appointed by the
trustee. Beneficial Owners will be permitted to exercise the rights of
certificateholders only indirectly through DTC and its Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners, will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and other banks, the ability of a Beneficial
Owner to pledge Book-Entry Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to those
Book-Entry Certificates, may be limited due to the lack of a definitive
certificate for those Book-Entry Certificates. In addition, under a book-entry
format, Beneficial Owners may experience delays in their receipt of payments,
since distributions will be made by the trustee or a paying agent on behalf of
the trustee to Cede & Co., as nominee for DTC.
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Neither DTC nor Cede & Co. will consent or vote with respect to the
Book-Entry Certificates. Under its usual procedures, DTC mails an Omnibus Proxy
to the trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the securities are credited on that record date (identified
in a listing attached to the Omnibus Proxy). DTC may take conflicting actions
to the extent that different Participants authorize divergent action.
Neither the depositor, the trustee, the master servicer, the special
servicer nor any paying agent will have any responsibility for any aspect of
the records relating to, or payments made on account of, beneficial ownership
interests of the Book-Entry Certificates registered in the name of Cede & Co.,
as nominee for DTC, or for maintaining, supervising or reviewing any records
relating to those beneficial ownership interests. If DTC or a Participant or an
Indirect Participant in whose name Book-Entry Certificates are registered
becomes insolvent, the ability of the Beneficial Owners of those Book-Entry
Certificates to obtain timely payment may be impaired. In addition, in that
event, if the limits of applicable insurance coverage by the Securities
Investor Protection Corporation are exceeded or if the applicable insurance
coverage is otherwise unavailable, ultimate payment of amounts distributable
with respect to those Book-Entry Certificates may be impaired.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the depositor believes to be reliable, but
the depositor takes no responsibility for the accuracy of the information.
Physical Certificates
Book-Entry Certificates will be converted to definitive certificates and
reissued to Beneficial Owners or their nominees, rather than to DTC or its
nominee, only if (1) (a) the depositor advises the certificate registrar in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to any class of the Book-Entry
Certificates and (b) the depositor is unable to locate a qualified successor or
(2) the depositor, at its option, advises the trustee and certificate registrar
that it elects to terminate the book-entry system through DTC with respect to
any class of the Book-Entry Certificates.
Upon the occurrence of any event described in the immediately preceding
paragraph, the certificate registrar will be required to notify all affected
Beneficial Owners through DTC of the availability of definitive certificates.
Upon surrender by DTC of the physical certificates representing the affected
Book-Entry Certificates and receipt of instructions for re-registration, the
certificate registrar will reissue the Book-Entry Certificates as definitive
certificates to the Beneficial Owners. Upon the issuance of definitive
certificates for purposes of representing ownership of the certificates
originally issued as Book-Entry Certificates, the registered holders of the
definitive certificates will be recognized as certificateholders under the
Pooling and Servicing Agreement and, accordingly, will be entitled directly to
receive payments on, and exercise Voting Rights with respect to, and to
transfer and exchange the definitive certificates.
Definitive certificates will be transferable and exchangeable at the
offices of the trustee or the certificate registrar in accordance with the
terms of the Pooling and Servicing Agreement.
REGISTRATION AND TRANSFER
The holder of any definitive certificate may transfer or exchange the same
in whole or part (subject to the minimum authorized denomination) at the
corporate trust office of the certificate registrar or at the office of any
transfer agent. In exchange for any definitive certificate properly
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presented for transfer or exchange with all necessary accompanying
documentation, the certificate registrar will, within five business days of the
request if made at the corporate trust office of the certificate registrar, or
within ten business days if made at the office of another transfer agent,
execute and deliver to the transferee or holder the transferred or exchange
definitive certificates.
No fee or service charge will be imposed by the certificate registrar for
any registration of transfer or exchange referred to above. The certificate
registrar may require payment by each transferor of a sum sufficient to pay any
tax, expense or other governmental charge payable in connection with the
transfer.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General
The yield on any offered certificate will depend on (1) the price at which
that certificate is purchased by an investor and (2) the rate, timing and
amount of distributions on that certificate. The rate, timing and amount of
distributions on any offered certificate will in turn depend on, among other
things:
(1) the rate and timing of principal payments (including voluntary and
involuntary prepayments) and the extent to which those amounts are to
be applied in reduction of the certificate balance (or notional
balance) of the class of certificates to which that certificate
belongs;
(2) the rate, timing and severity of Realized Losses on the mortgage
loans and the extent to which those losses are allocable in reduction
of the certificate balance (or notional balance) of any class of
certificates;
(3) with respect to the Class , , , , Class and Class X
Certificates, the Weighted Average Net Mortgage Rate as in effect from
time to time; and
(4) disproportionate principal payments (whether resulting from
differences in amortization schedules, prepayments or otherwise) on
mortgage loans having Net Mortgage Rates that are higher or lower than
the current Weighted Average Net Mortgage Rate will affect the yield
on to the Class , , , , Class , Class and Class X Certificates.
Rate and Timing of Principal Payments
The yield to holders of certificates purchased at a discount or premium
will be affected by the rate and timing of principal payments made in reduction
of the certificate balance of those certificates. The Pooled Principal
Distribution Amount for each distribution date generally will be distributable
in its entirety to each class of Principal Balance Certificates, sequentially
in order of class designation, in each case until the certificate balance of
each of those classes of certificates is reduced to zero. Consequently, the
rate and timing of principal payments made in reduction of the certificate
balance of the Principal Balance Certificates will be directly related to the
rate and timing of principal payments on or with respect to the mortgage loans.
Defaults on the mortgage loans, particularly at or near their stated
maturity dates, may result in significant delays in payments of principal on
the mortgage loans and, accordingly, on the certificates, while work-outs are
negotiated, foreclosures are completed or bankruptcy proceedings are resolved.
The yield to investors in the Subordinate Certificates will be very sensitive
to the timing and magnitude of losses on the mortgage loans due to liquidations
following a default, and will also be very sensitive to delinquencies in
payment. In addition, the special servicer has the option, subject to
limitations set forth in the related mortgage loans, to extend the maturity of
those mortgage loans following a default in the payment of a Balloon Payment.
For more information, you should refer to the sections in this prospectus
supplement titled "The Pooling and Servicing Agreement--Servicing of the
Mortgage Loans; Collection of Payments" and "--Realization Upon Mortgage Loans"
and to the section in the prospectus titled "Material Legal Aspects of the
Mortgage Loans--Foreclosure."
The rate and timing of principal payments and defaults and the severity of
losses on the mortgage loans may be affected by a number of factors, including,
without limitation, the terms of
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the mortgage loans (for example, the provisions requiring the payment of
Prepayment Premiums or Yield Maintenance Charges and amortization terms that
require Balloon Payments or include an Anticipated Repayment Date), prevailing
interest rates, the market value of the mortgaged properties, the demographics
and relative economic vitality of the areas in which the mortgaged properties
are located, the general supply and demand for those facilities (and their
uses) in those areas, the quality of management of mortgaged properties, the
servicing of the mortgage loans, federal and state tax laws (which are subject
to change) and other opportunities for investment.
The rate of prepayment on the mortgage pool is likely to be affected by
the amount of any required Yield Maintenance Charges and Prepayment Premiums
and the borrowers' ability to refinance their related mortgage loans. If
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level have decreased enough to offset any required Yield Maintenance
Charges and Prepayment Premium, a borrower may have an increased incentive to
refinance its mortgage loan. Under those circumstances a borrower may refinance
to "lock in" a fixed rate or a lower rate or to take advantage of an initial
"teaser rate" on an adjustable rate mortgage loan (that is, a mortgage interest
rate below that which would otherwise apply if the applicable index and gross
margin were applied). Also, a borrower may refinance its mortgage loan to "cash
out" (that is, to take advantage of an increase in the market value of the
mortgaged property).
Borrowers may sell mortgaged properties in order to realize their equity
in those mortgaged properties, to meet cash flow needs or to make other
investments. Changes in federal, state and local tax laws or deferral programs
may also impact the refinance opportunities. Also, although excess cash flow is
applied to reduce the principal of the ARD Loans after their respective
Anticipated Repayment Dates and the Mortgage Rates are reset at the Revised
Rates, there can be no assurance that any of those mortgage loans will be
prepaid on that date or any date prior to maturity. Under the circumstances
described under "Description of the Mortgage Pool--Certain Characteristics of
the Mortgage Pool--ARD Loans; Excess Interest," the holders of 100% of the
Class O Certificates or the special servicer will have the option to purchase
any ARD Loan on or after its Anticipated Repayment Date. The exercise of this
option may accelerate repayment of some certificates, but is not expected to
result in repayment of all classes on the same distribution date.
If the markets for commercial and multifamily real estate should
experience an overall decline in property values so that the outstanding
balances of the mortgage loans exceed the value of the respective mortgaged
properties, a borrower under a non-recourse loan may have a decreased incentive
to fund operating cash flow deficits. As a result, actual losses may be higher
than those originally anticipated by investors.
Neither the depositor, the Transferor nor the mortgage loan sellers, or
any affiliate of any of them, makes any representation as to the particular
factors that will affect the rate and timing of prepayments and defaults on
particular mortgage loans or as to the relative importance of those factors.
None of them makes any representation as to the percentage of the principal
balance of the mortgage loans that will be prepaid at all or at any time or as
to whether a default will occur as of any date.
The extent to which the yield to maturity of any class of offered
certificates may vary from the anticipated yield will depend upon the degree to
which they are purchased at a discount or premium and when, and to what degree,
payments of principal on the mortgage loans are in turn distributed in
reduction of the certificate balance of those certificates. An investor should
consider, in the case of
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any offered certificate 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 that investor that is lower than the anticipated yield. An
investor should consider, in the case of any certificate purchased at a premium
(or the Class X Certificates, which have no certificate balances), the risk
that a faster than anticipated rate of principal payments could result in an
actual yield to that investor that is lower than the anticipated yield. In
general, the earlier a payment of principal on the mortgage loans is
distributed in reduction of the certificate balance or notional balance of any
offered certificate purchased at a discount or premium the greater will be the
effect on an investor's yield to maturity. As a result, the effect on an
investor's yield of principal payments on the mortgage loans occurring at a
rate higher (or lower) than the rate anticipated by the investor during any
particular period would not be fully offset by a subsequent like reduction (or
increase) in the rate of those principal payments.
Balloon Payments/ARD Loan Payments
152 of the mortgage loans representing approximately 88.1% of the cut-off
date balance, are Balloon Loans that will have substantial payments (that is,
Balloon Payments) due at their stated maturities, unless previously prepaid. 10
of the mortgage loans, representing approximately 10.9% of the cut-off date
balance, are ARD Loans. The ability of the borrowers to pay the Balloon
Payments at the maturity of the Balloon Loans or to prepay an ARD Loan in full
on the related Anticipated Repayment Dates may depend on their ability to sell
or refinance the mortgaged properties which in turn, will depend on a number of
factors described above, many of which are beyond the control of the borrowers.
The certificates are subject to the risk of default by the borrowers in making
the required Balloon Payments or prepayments of ARD Loans on their Anticipated
Repayment Dates. If any borrower is unable to make the applicable Balloon
Payment when due or to prepay an ARD Loan on the Anticipated Repayment Date,
the weighted average lives of the Certificates are likely to be longer than
expected.
Losses and Shortfalls
The yield to holders of the offered certificates will also depend on the
extent to which those holders are required to bear the effects of any losses or
shortfalls on the mortgage loans. Shortfalls in Available Funds resulting from
shortfalls in collections of amounts payable on the mortgage loans (to the
extent not advanced) or additional master servicer or special servicer
compensation, interest on Advances, extraordinary trust fund expenses or other
similar items will generally be borne as described above under "Description of
the Certificates."
Pass-Through Rate
The Pass-Through Rates on the certificates other than the Class A-1 and
Class A-2 Certificates, are related to the Weighted Average Net Mortgage Rate.
Therefore, a decrease in the Net Mortgage Rate for any mortgage loan (for
example, as a result of a modification) will result in the certificates
accruing interest at a rate higher than the Net Mortgage Rate for the mortgage
pool and there will not be sufficient cash flow to make all interest payments
due on each of those classes. Any interest shortfall would affect those
Certificates in reverse sequential order commencing with the Class O
Certificates.
The Weighted Average Net Mortgage Rate will fluctuate over the lives of
the certificates as a result of scheduled amortization, voluntary prepayments,
Appraisal Reductions, liquidations and repurchases of mortgage loans. If
principal payments, including voluntary and involuntary Principal
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Prepayments, are made on a mortgage loan with a relatively high Net Mortgage
Rate at a rate faster than the rate of principal payments on the mortgage pool
as a whole, the Pass-Through Rates applicable to the Certificates (other than
the Class , Class , Class and Class Certificates) will be adversely
affected. Accordingly, the yield on each of those classes of Certificates will
be sensitive to changes in the outstanding principal balances of the mortgage
loans as a result of scheduled amortization, voluntary prepayments,
liquidations and repurchases of mortgage loans.
Delay in Payment of Distributions
Because monthly distributions will not be made to certificateholders
until, at the earliest, the 15th day of the month following the month in which
interest accrued on the certificates, the effective yield to the holders of the
Regular Certificates will be lower than the yield that would otherwise be
produced by the applicable Pass-Through Rate and purchase prices (assuming the
prices did not account for the delay).
WEIGHTED AVERAGE LIFE
Weighted average life of a certificate refers to the average amount of
time that will elapse from the closing date to the date of distribution to the
investor of each dollar distributed in reduction of principal balance or
notional balance of that security. The weighted average life of each class of
certificates will be influenced by, among other things, the rate at which
principal of the mortgage loans is paid.
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 rate of
prepayment each month, expressed as an annual rate, relative to the then
outstanding principal balance of a pool of mortgage loans for the life of those
mortgage loans. As used in each of the following tables, the column headed "0%"
assumes that none of the mortgage loans is prepaid before maturity. The columns
headed "10%," "15%" and "25%" assume that no prepayments are made on any
mortgage loan during that mortgage loan's Lockout Period, if any, or during
that mortgage loan's Yield Maintenance Period, if any, or during that mortgage
loan's Defeasance Lockout Period, if any, and are otherwise made on each of the
mortgage loans at the indicated CPRs. CPR does not purport to be either an
historical description of the prepayment experience of any pool of mortgage
loans or a prediction of the anticipated rate of prepayment of any mortgage
loans, including the mortgage loans to be included in the trust fund.
The tables set forth below have been prepared on the basis of those
assumptions described below regarding the characteristics of the mortgage loans
that are expected to be included in the mortgage pool as described under
"Description of the Mortgage Pool" in this prospectus supplement and the
performance of the mortgage loans. The tables assume, among other things, that:
(1) as of the closing date the mortgage loans (except as set forth in
this prospectus supplement) provide for a Monthly Payment of principal
and interest that would fully amortize the remaining principal balance
of those mortgage loans using the Monthly Payments set forth in Annex
A hereto, commencing on July 17, 2000 (including Balloon Payments on
the maturity dates set forth in Annex A);
(2) neither the depositor, the Transferor nor any mortgage loan seller
will repurchase any mortgage loan, and none of the master servicer,
the special servicer, the depositor or the holders of the Class R-III
Certificates will exercise its option to purchase mortgage loans and
cause a termination of the trust fund;
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(3) there are no delinquencies or Realized Losses;
(4) no Prepayment Premiums are paid;
(5) there are no Appraisal Reductions;
(6) payments on the Certificates will be made on the 15th day of each
month, commencing in July 2000 (notwithstanding that the 15th day of
the month may not be a business day or is fewer than four business
days after the related Determination Date);
(7) there are no ongoing trust fund expenses payable out of the trust
fund other than Servicing Fees;
(8) the certificates will be purchased on the closing date;
(9) no defaults occur with respect to any of the mortgage loans;
(10) 49 of the mortgage loans accrue interest based upon a 360-day year
composed of twelve 30-day months and 118 of the mortgage loans accrue
interest based upon the actual number of days elapsed in each calendar
month and a 360-day year;
(11) all mortgage loans have a maturity date on the first day of a month;
(12) each ARD Loan is paid in full on its Anticipated Repayment Date
notwithstanding the fact that prepayments could occur under the ARD
Loans prior to that Anticipated Repayment Date and that, in either
case, those prepayments would not be accompanied by payment of a Yield
Maintenance Charge or Prepayment Premium; and
(13) the closing date will occur on June , 2000.
The actual performance of the mortgage loans will differ from the
assumptions used in calculating the tables set forth below, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. Any
difference between those assumptions and the actual performance of the mortgage
loans, or actual prepayment or loss experience, will affect the percentages of
initial certificate balance outstanding over time and the weighted average
lives of the classes of certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each class of certificates, and set forth
the percentages of the initial certificate balance or notional balance of each
class of certificates that would be outstanding after each of the distribution
dates shown based on different prepayment speed assumptions. The weighted
average life of each class is determined as follows:
(1) multiplying the amount of each distribution in reduction of the
certificate balance or notional balance of that class by the number of
years from the date of purchase to the related distribution date,
(2) adding the results; and
(3) dividing the sum by the aggregate distributions in reduction of
certificate balance or notional balance referred to in first step
above.
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PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
PREPAYMENT SPEED (1) PREPAYMENT SPEED (1)
----------------------------------------- -----------------------------------------
PAYMENT DATE 0% 10% 15% 25% 0% 10% 15% 25%
----------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date .......... 100 100 100 100 100 100 100 100
June 15, 2001 ......... 94 94 94 94 100 100 100 100
June 15, 2002 ......... 88 88 88 88 100 100 100 100
June 15, 2003 ......... 82 82 82 82 100 100 100 100
June 15, 2004 ......... 75 75 75 75 100 100 100 100
June 15, 2005 ......... 57 57 57 57 100 100 100 100
June 15, 2006 ......... 49 49 49 49 100 100 100 100
June 15, 2007 ......... 37 37 37 37 100 100 100 100
June 15, 2008 ......... 28 27 27 27 100 100 100 100
June 15, 2009 ......... 0 0 0 0 99 98 97 97
June 15, 2010 ......... 0 0 0 0 0 0 0 0
Weighted Avg
Life (2) ............. 5.7 5.7 5.7 5.7 9.3 9.3 9.3 9.3
</TABLE>
--------
(1) Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. A common model (the "Constant Prepayment
Rate" or "CPR") represents an assumed constant rate of prepayment
relative to the then outstanding principal balance of a pool of new
mortgage loans for the life of the mortgage loans.
(2) The weighted average life of each class is determined by (i) multiplying
the amount of each distribution in reduction of the certificate balance
or notional balance of the class by the number of years from the date of
purchase to the related distribution date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
certificate balance or notional balance referred to in clause (i).
S-99
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS B CLASS C
PREPAYMENT SPEED (1) PREPAYMENT SPEED (1)
----------------------------------------- -----------------------------------------
PAYMENT DATE 0% 10% 15% 25% 0% 10% 15% 25%
----------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date .......... 100 100 100 100 100 100 100 100
June 15, 2001 ......... 100 100 100 100 100 100 100 100
June 15, 2002 ......... 100 100 100 100 100 100 100 100
June 15, 2003 ......... 100 100 100 100 100 100 100 100
June 15, 2004 ......... 100 100 100 100 100 100 100 100
June 15, 2005 ......... 100 100 100 100 100 100 100 100
June 15, 2006 ......... 100 100 100 100 100 100 100 100
June 15, 2007 ......... 100 100 100 100 100 100 100 100
June 15, 2008 ......... 100 100 100 100 100 100 100 100
June 15, 2009 ......... 100 100 100 100 100 100 100 100
June 15, 2010 ......... 0 0 0 0 0 0 0 0
Weighted Avg
Life (2) ............. 9.7 9.7 9.7 9.6 9.8 9.8 9.8 9.8
</TABLE>
--------
(1) Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. A common model (the "Constant Prepayment
Rate" or "CPR") represents an assumed constant rate of prepayment
relative to the then outstanding principal balance of a pool of new
mortgage loans for the life of the mortgage loans.
(2) The weighted average life of each class is determined by (i) multiplying
the amount of each distribution in reduction of the certificate balance
or notional balance of the class by the number of years from the date of
purchase to the related distribution date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
certificate balance or notional balance referred to in clause (i).
S-100
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS D CLASS E
PREPAYMENT SPEED (1) PREPAYMENT SPEED (1)
----------------------------------------- -----------------------------------------
PAYMENT DATE 0% 10% 15% 25% 0% 10% 15% 25%
----------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date .......... 100 100 100 100 100 100 100 100
June 15, 2001 ......... 100 100 100 100 100 100 100 100
June 15, 2002 ......... 100 100 100 100 100 100 100 100
June 15, 2003 ......... 100 100 100 100 100 100 100 100
June 15, 2004 ......... 100 100 100 100 100 100 100 100
June 15, 2005 ......... 100 100 100 100 100 100 100 100
June 15, 2006 ......... 100 100 100 100 100 100 100 100
June 15, 2007 ......... 100 100 100 100 100 100 100 100
June 15, 2008 ......... 100 100 100 100 100 100 100 100
June 15, 2009 ......... 100 100 100 100 100 100 100 100
June 15, 2010 ......... 0 0 0 0 0 0 0 0
Weighted Avg
Life (2) ............. 9.8 9.8 9.8 9.8 9.9 9.8 9.8 9.8
</TABLE>
--------
(1) Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. A common model (the "Constant Prepayment
Rate" or "CPR") represents an assumed constant rate of prepayment
relative to the then outstanding principal balance of a pool of new
mortgage loans for the life of the mortgage loans.
(2) The weighted average life of each class is determined by (i) multiplying
the amount of each distribution in reduction of the certificate balance
or notional balance of the class by the number of years from the date of
purchase to the related distribution date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
certificate balance or notional balance referred to in clause (i).
S-101
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING FOR EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS F CLASS G
PREPAYMENT SPEED (1) PREPAYMENT SPEED (1)
-------------------------------------------- ---------------------------------------------
DISTRIBUTION DATE 0% 10% 15% 25% 0% 10% 15% 25%
----------------------- --------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date .......... 100 100 100 100 100 100 100 100
June 15, 2001 ......... 100 100 100 100 100 100 100 100
June 15, 2002 ......... 100 100 100 100 100 100 100 100
June 15, 2003 ......... 100 100 100 100 100 100 100 100
June 15, 2004 ......... 100 100 100 100 100 100 100 100
June 15, 2005 ......... 100 100 100 100 100 100 100 100
June 15, 2006 ......... 100 100 100 100 100 100 100 100
June 15, 2007 ......... 100 100 100 100 100 100 100 100
June 15, 2008 ......... 100 100 100 100 100 100 100 100
June 15, 2009 ......... 100 100 100 100 100 100 100 100
June 15, 2010 ......... 49 37 32 21 100 100 100 100
June 15, 2011 ......... 0 0 0 0 0 0 0 0
Weighted Avg
Life (2) ............. 10.0 10.0 10.0 9.9 10.3 10.2 10.2 10.2
</TABLE>
--------
(1) Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. A common model (the "Constant Prepayment
Rate" or "CPR") represents an assumed constant rate of prepayment
relative to the then outstanding principal balance of a pool of new
mortgage loans for the life of the mortgage loans.
(2) The weighted average life of each class is determined by (i) multiplying
the amount of each distribution in reduction of the certificate balance
or notional balance of the class by the number of years from the date of
purchase to the related distribution date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
certificate balance or notional balance referred to in clause (i).
S-102
<PAGE>
MASTER SERVICER AND SPECIAL SERVICER
THE MASTER SERVICER
Key Corporate Capital Inc. d/b/a Key Commercial Mortgage, a Michigan
corporation ("KCCI"), will be the master servicer of the mortgage loans. KCCI
is a wholly owned subsidiary of KeyBank National Association, which is a wholly
owned subsidiary of KeyCorp. On January 31, 2000, KCCI acquired a substantial
portion of the assets of National Realty Funding L.C., including its entire
mortgage loan servicing operation. KCCI's primary servicing location is 911
Main Street, Kansas City, Missouri 64105.
As of June 1, 2000, KCCI was responsible for the servicing of
approximately 926 commercial and multifamily loans with an aggregate principal
balance of approximately $3.6 billion, the collateral for which is located
throughout the United States, the District of Columbia, and the Virgin Islands.
S&P and Moody's have approved KCCI as a master servicer for investment
grade-rated commercial and multifamily mortgage-backed securities.
The foregoing information concerning KCCI has been provided by it.
Accordingly, neither the depositor nor the Underwriters make any representation
or warranty as to the accuracy or completeness of the information.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation and a subsidiary of LNR
Property Corporation ("LNR"), will initially be appointed as special servicer
of the mortgage loans. The principal executive offices of the special servicer
are located at 760 NW 107th Avenue, Miami, Florida, 33172, and its telephone
number is (305) 485-2000. LNR, its subsidiaries and affiliates are involved in
the real estate investment and management business and engage principally in
(i) acquiring, developing, managing and repositioning commercial and
multi-family residential real estate properties, (ii) acquiring (often in
partnership with financial institutions or real estate funds) and managing
portfolios of mortgage loans and other real estate related assets, (iii)
investing in unrated and non-investment grade rated commercial mortgage-backed
securities as to which LNR has the right to be special servicer, and (iv)
making high yielding real estate related loans and equity investments. The
special servicer has regional offices located across the country in Florida,
Georgia, Oregon and California. As of April 1, 2000, the special servicer and
its affiliates were managing a portfolio including over 9,000 assets in most
states with an original face value of over $50 billion, most of which are
commercial real estate assets. Included in this managed portfolio are $44
billion of commercial real estate assets representing 59 securitization
transactions, for which the special servicer is servicer or special servicer.
The special servicer and its affiliates own and are in the business of
acquiring assets similar in type to the assets of the trust fund. Accordingly,
the assets of the special servicer and its affiliates may, depending upon the
particular circumstances including the nature and location of the assets,
compete with the mortgaged properties for tenants, purchasers, financing and so
forth.
The information set forth herein concerning the special servicer has been
provided by it, and neither the depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of the
information.
S-103
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The certificates will be issued pursuant to the Pooling and Servicing
Agreement. Upon written request, the depositor will provide to a prospective or
actual holder of a certificate a copy (without exhibits) of the Pooling and
Servicing Agreement without charge. Requests should be addressed to Prudential
Securities Secured Financing Corporation, One New York Plaza, New York, New
York 10292, attention: David Rodgers, at telephone number (212) 214-1000.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the closing date, the depositor will assign or cause the
assignment of the mortgage loans, without recourse, to the trustee for the
benefit of the holders of certificates. On or before the closing date, the
depositor will deliver to the trustee the mortgage file (with a copy to the
master servicer) for each mortgage loan, which includes the following:
(1) the original promissory note, endorsed by the applicable mortgage
loan seller in blank in the following form: "Pay to the order of The
Chase Manhattan Bank, as Trustee, for the registered holders of
Prudential Securities Secured Financing Corporation Commercial
Mortgage Pass-Through Certificates, Series 2000-KEY1, without
recourse," which the master servicer or its designee is authorized to
complete and which promissory note and all endorsements of the
promissory note shall show a complete chain of endorsement from the
originator of the mortgage loan to the applicable mortgage loan
seller;
(2) (a) the original recorded mortgage or a copy of the mortgage
certified by the related title insurance company, public recording
office or closing agent to be in the form in which it was executed or
was submitted for recording, (b) the related original recorded
assignment of mortgage from the originator to the applicable mortgage
loan seller or a copy of the assignment of mortgage certified by the
related title insurance company, public recording office or closing
agent to be in the form in which it was executed or was submitted for
recording, and (c) the related original assignment of mortgage
executed by the applicable mortgage loan seller in blank, which the
master servicer or its designee is authorized to complete and which,
except for the insertion of the name of the assignee and any related
recording information which is not yet available to the applicable
mortgage loan seller, is in suitable form for recordation in the
jurisdiction in which the related mortgaged property is located;
(3) (a) if the security agreement for the mortgage loan is separate from
the related mortgage, the original security agreement or a counterpart
of it, (b) if the security agreement is not assigned under the
Assignments of Mortgage described in clause (2) above, the related
original assignment of the security agreement from the originator to
the applicable mortgage loan seller or a counterpart of it and (c) the
original assignment of the security agreement executed by the
applicable mortgage loan seller in blank which the master servicer or
its designee is authorized to complete;
(4) a copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property and fixtures constituting a part of the
mortgaged property, together with a copy of each Form UCC-2 or UCC-3
assignment, if any, of the financing statement to the applicable
mortgage loan seller from the originator, and a copy of each Form
UCC-2 or
S-104
<PAGE>
UCC-3 assignment, if any, of the financing statement executed by the
applicable mortgage loan seller in blank, which the master servicer or
its designee is authorized to complete and which, except for the
insertion of the name of the assignee and any related filing
information which is not yet available to the applicable mortgage loan
seller, is in suitable form for filing in the filing office in which
the financing statement was filed;
(5) the original loan agreement, if any, or a counterpart of it;
(6) the original lender's title insurance policy (or the original pro
forma title insurance policy), together with any endorsements to the
lender's title insurance policy;
(7) if any assignment of leases, rents and profits for the mortgage loan
is separate from the related mortgage, (a) the original recorded
Assignment of Leases, Rents and Profits or a copy of it certified by
the related title insurance company, public recording office or
closing agent to be in the form in which it was executed or was
submitted for recording, (b) the related original recorded
reassignment of any instrument, if any, from the originator to the
applicable mortgage loan seller or a copy of it certified by the
related title insurance company, public recording office or closing
agent in the form in which it was executed or was submitted for
recording, and (c) the related original reassignment of any
instrument, if any, executed by the applicable mortgage loan seller in
blank, which the master servicer or its designee is authorized to
complete and which, except for the insertion of the name of the
assignee and any related recording information which is not yet
available to the applicable mortgage loan seller, is in suitable form
for recordation in the jurisdiction in which the related mortgaged
property is located. Any reassignments may also be included in a
related assignment of mortgage and need not be a separate instrument;
(8) if any assignment of contracts is separate from the mortgage, the
original assignment of contracts or a counterpart of it, and if the
assignment of contracts is not assigned under the Assignments of
Mortgage described in clause (2) above, the related original
reassignment of any instrument from the originator to the applicable
mortgage loan seller or a counterpart of the reassignment and the
related original reassignment of any instrument from the originator
executed by the applicable mortgage loan seller in blank, which the
master servicer or its designee is authorized to complete;
(9) with respect to any Reserve Accounts, a copy of any separate
agreement relating to the Reserve Accounts between the borrower and
the originator;
(10) the original of any other written agreement, instrument or document
securing the mortgage loan, including original guarantees for the
mortgage loan or the original letter of credit, if any, for the
mortgage loan, together with any and all amendments to the documents,
including any amendment which entitles the master servicer to draw
upon the letter of credit on behalf of the trustee for the benefit of
the certificateholders, and the original of each instrument or other
item of personal property given as security for the mortgage loan for
which possession by a secured party is necessary to the secured
party's valid, perfected, first priority security interest in that
mortgage loan, together with all assignments or endorsements necessary
to entitle the master servicer to enforce a valid, perfected, first
priority security interest in that mortgage loan on behalf of the
trustee for the benefit of the certificateholders;
S-105
<PAGE>
(11) with respect to any Reserve Accounts, (a) a copy of the UCC-1
financing statements, if any, submitted for filing relating to the
applicable mortgage loan seller's security interest in the Reserve
Accounts and all funds contained in those accounts, (b) a copy of each
Form UCC-2 or UCC-3 assignment, if any, of the financing statement
from the originator to the applicable mortgage loan seller and (c) a
copy of each Form UCC-2 or UCC-3 assignment, if any, of the financing
statement executed by the applicable mortgage loan seller in blank,
which the master servicer or its designee is authorized to complete
and which, except for the insertion of the name of the assignee and
any related filing information which is not yet available to the
applicable mortgage loan seller, is in suitable form for filing in the
filing office in which the financing statement was filed; and
(12) copies of any and all amendments, modifications, supplements and
waivers related to any of the foregoing.
The trustee is obligated to review the mortgage file for each mortgage
loan within 90 days after the later of delivery of the file to the trustee or
the closing date and report any missing documents or defects in the mortgage
file that are required to be reported by the trustee. The sole remedy available
to the trustee or certificateholders for a defect in the delivery of the
mortgage file is for the applicable mortgage loan seller to cure or repurchase
the affected mortgage loan within 85 days of receiving notice of the breach or
as otherwise provided in the Pooling and Servicing Agreement (which period may
be extended to 180 days under certain circumstances). Any repurchase of a
mortgage loan because of the failure to deliver any of the documents required
to be delivered to the trustee will be made at the Repurchase Price.
The master servicer will hold all remaining mortgage loan documents and
all other documents related to each mortgage loan, including copies of any
management agreements, ground leases, appraisals, surveys, environmental
reports and similar documents and any other written agreements relating to each
mortgage loan in trust for the benefit of the trustee on behalf of
certificateholders. The legal ownership of all records and documents with
respect to each mortgage loan prepared by or that come into the possession of
the master servicer will immediately vest in the trustee, in trust for the
benefit of certificateholders.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the master servicer and the
special servicer (directly or through a sub-servicer) to service and administer
the mortgage loans (or in the case of the special servicer, the Specially
Serviced Mortgage Loans and REO Mortgage Loans) on behalf of the trust fund
solely in the best interests of and for the benefit of all of the
certificateholders and the trust fund, in accordance with the terms of the
Pooling and Servicing Agreement and the mortgage loans. To the extent
consistent with the foregoing and except to the extent that the Pooling and
Servicing Agreement provides for a contrary specific course of action, each of
the master servicer and the special servicer is required to service and
administer the mortgage loans (1) in the same manner in which, and with the
same care, skill, prudence and diligence with which it services and administers
similar mortgage loans for itself and other third-party portfolios, giving due
consideration to the customary and usual standards of practice used by prudent
institutional commercial mortgage loan servicers of loans comparable to the
mortgage loans, or (2) in the same manner in which, and with the same care,
skill, prudence and diligence with which it services and administers similar
mortgage loans that it owns, whichever standard of care is higher, and taking
into account its other obligations under the Pooling and Servicing Agreement
and with the purpose of maximizing the estimated net present value of each
mortgage loan, but without regard to the following:
S-106
<PAGE>
(1) any other relationship that the master servicer, the special
servicer, any sub-servicer, the depositor, the trustee, or any
affiliate of any of them may have with the borrowers or any affiliate
of the borrowers;
(2) the ownership of any Certificate by the master servicer, the special
servicer or any affiliate of either;
(3) the master servicer's or the trustee's obligations, as applicable, to
make Advances or to incur servicing expenses with respect to the
mortgage loans;
(4) the master servicer's, the special servicer's or any sub-servicer's
right to receive compensation for its services under the Pooling and
Servicing Agreement or for any particular transaction;
(5) the ownership, servicing or management for others by the master
servicer, the special servicer or any sub-servicer of any other
mortgage loans or property; or
(6) any obligation of the master servicer to pay any indemnity with
respect to any repurchase obligation.
The standard set forth above is often referred to as the "Servicing
Standards."
Each of the master servicer and the special servicer is permitted, at its
own expense, to employ sub-servicers, agents or attorneys in performing any of
its obligations under the Pooling and Servicing Agreement. In each of those
instances, neither the master servicer nor the special servicer will be
relieved of any of its obligations under the Pooling and Servicing Agreement
and each will be responsible for the acts and omissions of any of their
sub-servicers, agents or attorneys. The Pooling and Servicing Agreement
provides, however, that neither the master servicer nor the special servicer,
nor any of their directors, officers, employees or agents, will have any
liability to the trust fund or the certificateholders for taking any action or
refraining from taking any action in good faith or for errors in judgment. The
foregoing provision would not protect the master servicer, the special servicer
or any other person from:
(1) any liability resulting from a breach of any of the master servicer's
or the special servicer's respective representations or warranties in
the Pooling and Servicing Agreement;
(2) any specific liability imposed on the master servicer or the special
servicer or any other person for a breach of the Servicing Standards
set forth in the Pooling and Servicing Agreement; or
(3) any liability by reason of the master servicer's or the special
servicer's or any other person's willful misfeasance, bad faith, fraud
or negligence in the performance of its duties under the Pooling and
Servicing Agreement or its reckless disregard of its obligations and
duties under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the master servicer and the
special servicer to make reasonable efforts to collect all payments called for
under the terms of the mortgage loans and to follow collection procedures as
are consistent with the Servicing Standards under the Pooling and Servicing
Agreement. Consistent with the Servicing Standards, the master servicer or the
special servicer, as applicable, may, in its discretion, waive any late payment
charge or penalty fee in connection with any delinquent Monthly Payment or
Balloon Payment with respect to any mortgage loan. With respect to any ARD
Loan, the Pooling and Servicing Agreement prohibits the master servicer and the
special servicer from taking any enforcement action (other than requests for
S-107
<PAGE>
collections) for payment of Excess Interest or principal in excess of the
principal component of the constant Monthly Payment for that ARD Loan prior to
the earlier of (1) any acceleration of the maturity of that ARD Loan based on a
default other than the non-payment of Excess Interest or principal in excess of
the principal component of the related Monthly Payment for that ARD Loan or (2)
the final maturity date of that ARD Loan.
ADVANCES
Subject to the limitations described below, the master servicer will be
obligated to advance on the Remittance Date an amount equal to the total or any
portion of the Monthly Payment on any mortgage loan that was delinquent as of
the close of business on the business day preceding that Remittance Date or,
upon a default in the payment of a Balloon Payment, the Assumed Scheduled
Payment for the related Balloon Loan, unless the master servicer determines
that any of those advances would be a Nonrecoverable Advance and delivers to
the trustee an officer's certificate and accompanying documentation related to
a determination of nonrecoverability.
For any Distribution Date, the amount required to be advanced for a
mortgage loan that has been subject to an Appraisal Reduction Event will equal
the amount that would be required to be advanced by the master servicer without
giving effect to the Appraisal Reduction multiplied by a fraction, the
numerator of which is the outstanding principal balance of the mortgage loan
less the amount of the Appraisal Reduction and the denominator of which is the
outstanding principal balance of that mortgage loan.
In addition to P&I Advances, the master servicer will also be obligated
(subject to the limitations described in this prospectus supplement) to make
Property Advances (a) to pay costs and expenses incurred in connection with
defaulted mortgage loans, acquisition of title to, or management of, REO
Properties, or the sale of defaulted mortgage loans or REO Properties, in each
case as specified in the Pooling and Servicing Agreement, (b) to pay delinquent
real estate taxes, assessments and hazard insurance premiums and (c) to cover
other similar costs and expenses necessary to protect and preserve the security
of the related mortgage. None of the master servicer, the special servicer or
the trustee, as applicable, shall be obligated to advance from its own funds
any amounts required to cure any failure of any mortgaged property to comply
with any applicable environmental law or to contain, clean up or remedy any
environmental condition present at any mortgaged property, and those expenses
shall be borne by the trust fund.
If the trustee becomes the successor master servicer, the trustee, as
successor master servicer acting in accordance with the Servicing Standards set
forth in the Pooling and Servicing Agreement, will be required to make the
Advances subject to its determination of recoverability. The trustee will be
entitled to rely conclusively on any non-recoverability determination of the
master servicer.
The obligation of the master servicer or the trustee, as applicable, to
make Advances with respect to any mortgage loan continues through the
foreclosure of that mortgage loan and until the liquidation of the mortgage
loan or related mortgaged properties. Advances are intended to provide a
limited amount of liquidity and not to guarantee or insure against losses.
Neither the master servicer nor the trustee will be required to make any
Advance that it determines (based on, among other things, an updated appraisal
or an environmental assessment) will not be recoverable out of related late
payments, insurance proceeds, condemnation proceeds, liquidation proceeds and
other collections with respect to the mortgage loan as to which the Advance was
made. To the extent that any borrower is not obligated under its mortgage loan
documents to pay or reimburse any portion of any related outstanding Advances
as a result of a modification of the related mortgage loan by the
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<PAGE>
special servicer that forgives loan payments or other amounts that the master
servicer or the trustee previously advanced, and the master servicer or the
trustee determines that no other source of payment or reimbursement for those
Advances is available to it, those Advances will be deemed to be
nonrecoverable. In addition, if the master servicer or the trustee, as
applicable, determines that any Advance previously made will not be recoverable
from the foregoing sources, then the master servicer or the trustee, as
applicable, will be reimbursed for the Advance, plus interest, out of amounts
on deposit in the Collection Account before any distributions are made on the
Certificates. The determination by the master servicer or the trustee must be
evidenced by an officer's certificate delivered to the trustee (or, in the case
of the trustee, to the depositor) setting forth its determination of
nonrecoverability and the procedure and considerations of the master servicer
or the trustee, as applicable, forming the basis of its determination. This
officer's certificate must include a copy of the updated appraisal,
environmental assessment or any other information or reports obtained by the
master servicer or the trustee, as applicable, such as property operating
statements, rent rolls, property inspection reports, engineering reports and
other documentation which may support the determination as set forth in the
certificate.
The master servicer or the trustee, as applicable, will be reimbursed for
any Advance it has made from (1) any collections on or with respect to the
particular mortgage loan or REO Property with respect to which the Advance was
made or (2) any other amounts from time to time on deposit in the Collection
Account upon determining that the Advance is not recoverable in the manner
described in the preceding paragraph.
Except as set forth above with respect to Advances made during payment
grace periods, the master servicer or the trustee, as applicable, will be
entitled to receive interest at the Advance Rate on its outstanding Advances.
The master servicer or the trustee, as applicable, will be authorized to pay
itself interest on the Advances from general collections on all of the mortgage
loans before any payments are made to holders of certificates. If the interest
on Advances is not offset by the Default Interest, a shortfall will result
which generally will result in a Class Interest Shortfall for the most
Subordinate Class then outstanding.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred for a mortgage loan, an
Appraisal Reduction will be calculated for that mortgage loan.
If an appraisal is to be obtained or, with respect to any mortgage loan
with an outstanding principal balance of less than $2,000,000, an internal
valuation is to be performed, the special servicer must obtain the appraisal or
perform the internal valuation by the date of the related Appraisal Reduction
Event. Notwithstanding the foregoing, if an internal valuation of the mortgaged
property is performed, the Appraisal Reduction will equal the greater of (A)
the Appraisal Reduction and (B) 25% of the Scheduled Principal Balance of the
mortgage loan. Furthermore, if an appraisal is not obtained or an internal
valuation is not performed by the earliest of the dates described in the
definition of Appraisal Reduction Event, then until such appraisal is obtained
or such internal valuation performed the Appraisal Reduction will equal 25% of
the Scheduled Principal Balance of the mortgage loan. On the first
Determination Date occurring on or after the delivery of the appraisal or the
internal valuation, the special servicer will be required to calculate and
report to the master servicer, and the master servicer will report to the
trustee, the Appraisal Reduction to take into account the appraisal. The
Directing Certificateholder shall have the right, at any time within six months
of the date of its receipt of any appraisal or the internal valuation of any
mortgaged property
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<PAGE>
required to be obtained as set forth above, to require that the special
servicer obtain a new appraisal or perform a new internal valuation of the
mortgaged property meeting the criteria specified above. The cost of the
appraisal or the internal valuation shall be paid by the Controlling Class
Certificateholders without right of reimbursement. However the special servicer
shall not be required to obtain an appraisal or perform the internal valuation
unless the special servicer shall have received reasonable assurance of payment
of the costs of the appraisal or internal valuation and of any related
expenses. Upon receipt of the appraisal or internal valuation, the special
servicer shall redetermine and report to the servicer, the trustee and the
Directing Certificateholder the amount of the Appraisal Reduction on the basis
of both appraisals or both internal valuations with respect to the mortgage
loan, and the redetermined Appraisal Reduction shall replace the prior
Appraisal Reduction with respect to the mortgage loan.
As a result of calculating an Appraisal Reduction for a mortgage loan, the
P&I Advance for that mortgage loan for the related Remittance Date will be
reduced, which will have the effect of reducing the amount of interest
available for distribution to the certificateholders. The maximum amount of the
P&I Advance for any distribution date and any mortgage loan for which an
Appraisal Reduction has been calculated will equal the amount that would be
required to be advanced without giving effect to the Appraisal Reduction
multiplied by a fraction, the numerator or which is the outstanding principal
balance of the mortgage loan less the amount of the Appraisal Reduction and the
denominator of which is the outstanding principal balance of the mortgage loan.
The Appraisal Reduction will be allocated to the Subordinate Certificates in
reverse sequential order of the classes for purposes of determining Voting
Rights. See "--Realization Upon Mortgage Loans" and "--Voting Rights" herein.
With respect to each mortgage loan as to which an Appraisal Reduction has
occurred and which has remained current for 12 consecutive Monthly Payments and
no other Appraisal Reduction Event has occurred and is continuing, the special
servicer shall, within 30 days before the date of the twelfth Monthly Payment,
order an appraisal (which may be an update of a prior appraisal) or, with
respect to any mortgage loan with an outstanding principal balance less than
$2,000,000, perform an internal valuation or obtain an appraisal (which may be
an update of a prior appraisal), the cost of which will be paid by the master
servicer as a Property Advance recoverable from the trust fund. Based upon the
appraisal or internal valuation, the special servicer will redetermine and
report to the master servicer and the trustee the amount of the Appraisal
Reduction for the mortgage loan, and that redetermined Appraisal Reduction
shall replace the prior Appraisal Reduction. Notwithstanding the foregoing, the
special servicer will not be required to obtain an appraisal or perform an
internal valuation for a mortgage loan which is the subject of an Appraisal
Reduction Event if the special servicer has obtained an appraisal or internal
valuation for the related mortgaged property during the 12-month period before
the occurrence of the Appraisal Reduction Event, unless reliance thereon would
not be in accordance with the Servicing Standard. Instead, the special servicer
may use the prior appraisal or internal valuation in calculating any Appraisal
Reduction for that mortgage loan.
ACCOUNTS
Collection Account
The master servicer will establish and maintain a Collection Account into
which it will be required to deposit, within two business days of receipt, the
following payments and collections received or made by it on or with respect to
the mortgage loans:
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(1) all payments on account of principal on the mortgage loans, including
the principal component of Unscheduled Payments on the mortgage loans;
(2) all payments on account of interest on the mortgage loans and the
interest portion of all Unscheduled Payments and all Prepayment
Premiums and Yield Maintenance Charges;
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(3) any amounts required to be deposited by the master servicer in
connection with losses realized on Permitted Investments with respect
to funds held in the Collection Account and in connection with
Prepayment Interest Shortfalls;
(4) (a) all Net REO Proceeds transferred from an REO Account, (b) all
amounts transferred from lockbox accounts with respect to ARD Loans
and payable to the certificateholders and (c) all condemnation
proceeds, insurance proceeds and net liquidation proceeds not required
to be applied to the restoration or repair of the related mortgaged
property;
(5) any amounts received from borrowers that represent recoveries of
property protection expenses or Property Advances;
(6) with respect to any Distribution Date occurring in each February and
in any January occurring in each year that is not a leap year, the
Withheld Amounts to be deposited in the Interest Reserve Account and
held for future distribution; and
(7) any other amounts required by the provisions of the Pooling and
Servicing Agreement to be deposited into the Collection Account by the
master servicer or the special servicer.
The foregoing requirements for deposits in the Collection Account will be
exclusive, and any payments in the nature of late payment charges, late fees,
"insufficient funds" check charges, assumption fees, loan modification fees,
loan service transaction fees, extension fees, demand fees, beneficiary
statement charges and similar fees and Default Interest need not be deposited
in the Collection Account by the master servicer. To the extent permitted by
applicable law, the master servicer or the special servicer, as applicable,
will be entitled to retain any of these charges and fees received with respect
to the mortgage loans. If the master servicer deposits into the Collection
Account amounts not required to be deposited in the Collection Account, the
master servicer may at any time withdraw those amounts from the Collection
Account.
Distribution Account
The trustee will establish and maintain a Distribution Account in its name
in trust for the benefit of the holders of the certificates. For each
Distribution Date, the master servicer will deposit in the Distribution
Account, to the extent of funds on deposit in the Collection Account on or
before the Remittance Date, the aggregate amount of Available Funds as required
by the Pooling and Servicing Agreement, plus the following amounts:
(1) any Prepayment Premiums, Yield Maintenance Charges and Excess
Interest received by the master servicer during the related Collection
Period; and
(2) amounts payable to the trustee as compensation for its services
(including, but not limited to, the Trustee Fee).
To the extent not included in Available Funds, the master servicer will
remit to the trustee all P&I Advances for deposit into the Distribution Account
on the related Remittance Date. For more detailed information, you should refer
to the section in this prospectus supplement titled "Description of the
Certificates--Distributions."
The Collection Account and the Distribution Account will be held in the
name of the trustee (or, in the case of the Collection Account, the master
servicer on behalf of the trustee) on behalf of the holders of certificates,
and the trustee (and, in the case of the Collection Account, the master
servicer) will be authorized to make withdrawals from those accounts. Each of
the Collection Account and the Distribution Account will be either (1) a
segregated account or accounts
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maintained with either a federally or state-chartered depository institution or
trust company the short term unsecured debt obligations of which are rated at
least P-1 by Moody's and at least "A-1+" by S&P or, if deposits are to be held
in those accounts for 30 or more days, the long term unsecured debt obligations
of which are rated at least equal to the greater of (A) Aa2 by Moody's and at
least AA-- by S&P and (B) the rating on the highest rated class then
outstanding or (2) a segregated trust account or accounts maintained with an
Eligible Bank. Amounts on deposit in the Collection Account and other accounts
may be invested in Permitted Investments. For a listing of Permitted
Investments, you should refer to the Pooling and Servicing Agreement.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The master servicer may make withdrawals from the Collection Account for
the following purposes:
(1) to remit on or before each Remittance Date to the Distribution
Account an amount equal to Available Funds and any Prepayment
Premiums, Yield Maintenance Charges and Excess Interest for the
related Distribution Date;
(2) to pay or reimburse the master servicer or the trustee, as
applicable, for Advances made by it and interest on the Advances, but
the master servicer's right to reimburse itself will be limited as
described above in the section in this prospectus supplement titled
"--Advances";
(3) to (a) pay on or before each Remittance Date to the master servicer
and the special servicer the fee portion of the servicing compensation
for the related distribution date (provided that the servicing fees
must be paid from interest received on the related mortgage loan), (b)
pay from time to time to the master servicer any interest or
investment income earned on funds deposited in the Collection Account,
(c) pay to the master servicer as additional servicing compensation
any Prepayment Interest Surplus received in the preceding Collection
Period, and (d) pay to the master servicer or the special servicer, as
applicable, any other amounts constituting additional servicing
compensation;
(4) to pay on or before each distribution date to the depositor, the
Transferor, the related mortgage loan seller or other purchaser of
each mortgage loan or REO Property that has previously been purchased
or repurchased pursuant to the Pooling and Servicing Agreement, all
amounts received on that mortgage loan or REO Property during the
related Collection Period and after the date as of which the price of
the purchase or repurchase was determined;
(5) to the extent not reimbursed or paid pursuant to any of the above
clauses, to reimburse or pay to the master servicer, the special
servicer, the trustee and the depositor, as applicable, for other
specified unreimbursed expenses incurred by or on behalf of those
persons pursuant to and to the extent reimbursable under the Pooling
and Servicing Agreement and to satisfy any other payment or
reimbursement obligations of the trust fund under the Pooling and
Servicing Agreement;
(6) to pay to the trustee amounts payable as compensation, including, but
not limited to, the trustee fee, and amounts requested by the trustee
to pay taxes on the net income with respect to REO Properties
(provided the trustee will also have the right to withdraw funds from
the Collection Account to make those payments);
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(7) to withdraw any amount deposited into the Collection Account that was
not required to be deposited in the Collection Account; and
(8) to clear and terminate the Collection Account pursuant to a plan for
termination and liquidation of the trust fund.
INTEREST RESERVE ACCOUNT
The master servicer will establish and maintain an Interest Reserve
Account in the name of the master servicer on behalf of the Trustee. With
respect to each distribution date occurring in February and each distribution
date occurring in any January which occurs in a year that is not a leap year,
there will be deposited, with respect to each mortgage loan that accrues
interest on the basis of a 360-day year (an "Interest Reserve Loan"), an amount
equal to one day's interest at the related Mortgage Rate (net of any servicing
fee and trustee fee payable therefrom) on the respective Scheduled Principal
Balance as of the immediately preceding Due Date, from the Monthly Payment or
P&I Advance that is made in respect thereof (all amounts so deposited in any
consecutive January (if applicable) and February are referred to as "Withheld
Amounts"). With respect to each distribution date occurring in March, an amount
is required to be withdrawn from the Interest Reserve Account with respect to
each Interest Reserve Loan equal to the related Withheld Amounts from the
preceding January (if applicable) and February, if any, and deposited into the
Collection Account.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The master servicer or the special servicer, as applicable, will be
obligated to enforce the trustee's rights under the "due-on-sale" clause in the
related mortgage loan documents to accelerate the maturity of the related
mortgage loan, unless
(1) the "due-on-sale" provision would result in a loss of insurance
coverage under any insurance policy or is not enforceable under
applicable law;
(2) the enforcement of the "due-on-sale" provision would result in a loss
of insurance coverage under any insurance policy or is reasonably
likely to result in meritorious legal action by the related borrower;
or
(3) the master servicer or the special servicer, as applicable, acting in
accordance with the Servicing Standards described in this prospectus
supplement, determines that the enforcement of the "due-on-sale"
clause is not in the best interests of the trust fund.
However, if the Scheduled Principal Balance of any mortgage loan or group
of mortgage loans (1) made to a single borrower or affiliated borrowers or (2)
that is secured by any group of cross-collateralized mortgaged properties
equals or exceeds the greater of $20,000,000 and 2% of the aggregate
outstanding Scheduled Principal Balance of all mortgage loans, the master
servicer or the special servicer, as applicable, will not be permitted to
refrain from enforcing the trustee's rights under the "due-on-sale" clause in
that mortgage loan or a group of mortgage loans without obtaining a
confirmation from each Rating Agency that forbearance will not result in the
reduction, modification or withdrawal of its then current rating of any class
of certificates, provided that this requirement is consistent with the terms of
the related mortgage loan.
If the provisions set forth above allowing the master servicer or special
servicer to refrain from enforcing a "due-on-sale" provision are applicable,
then the mortgage loan in question may be assumed by a third person. As a
result of the assumption of the mortgage loan by a third person:
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(1) the original borrower may be released from liability for the unpaid
principal balance of the mortgage loan and interest on the principal
balance at the applicable Mortgage Rate during the remaining term of
the mortgage loan;
(2) the master servicer may accept payments with respect to the mortgage
loan from the new owner of the related mortgaged property; and
(3) the master servicer or the special servicer, as applicable, may enter
into an assumption agreement with a new purchaser in which the new
owner of the related mortgaged property will be substituted as the
borrower and the original borrower will be released, so long as (to
the extent permitted by law) the new owner satisfies the underwriting
requirements customarily imposed by the master servicer or the special
servicer, as applicable, as a condition to its approval of a borrower
on a new mortgage loan substantially similar to the mortgage loan.
If a mortgage loan is assumed as described above, the trustee, the master
servicer and the special servicer will not permit any modification of that
mortgage loan other than as described below in the section in this prospectus
supplement titled "--Amendments, Modifications and Waivers." The master
servicer or the special servicer, as applicable, will be entitled to retain as
additional servicing compensation any assumption fees (including assumption
application or processing fees) paid by the original borrower or the new owner
in connection with the assumption of the mortgage loan. For more information,
you should refer to the section in the prospectus titled "Material Legal
Aspects of the Mortgage Loans-Enforceability of Material Provisions-Due-on-Sale
Provisions." A new owner of the related mortgaged property may be substituted,
or a junior or senior lien may be allowed on the related mortgaged property,
without the consent of the master servicer, the special servicer or the trustee
in a bankruptcy proceeding involving the mortgaged property.
If any mortgage loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms (1) provides that the mortgage
loan will (or may at the related mortgagee's option) become due and payable
upon the creation of any lien or other encumbrance on the related mortgaged
property or (2) requires the consent of the related mortgagee to the creation
of any lien or other encumbrance on that mortgaged property, then, for so long
as that mortgage loan is included in the trust fund, and borrower creates any
lien or other encumbrance, the special servicer on behalf of the trust fund,
will enforce the "due-on-encumbrance" provision. As a result, the special
servicer will accelerate the payments due on that mortgage loan or withhold its
consent to the creation of those liens or other encumbrances, as applicable.
However, the special servicer will not enforce the "due-on-encumbrance"
provision if, acting in accordance with the applicable servicing standards, it
determines that the enforcement would not be in the best interests of the trust
fund and it is able to obtain the confirmation of each Rating Agency that it
will not downgrade, withdraw or qualify its then current rating of any class of
certificates as a result of forbearance from enforcement. As an exception to
the foregoing, the special servicer may elect to refrain from enforcing any
"due-on-encumbrance" provision relating to any junior or senior lien on a
mortgaged property imposed in any bankruptcy proceeding involving that
mortgaged property.
A "due-on-sale" or "due-on-encumbrance" clause may, under some
circumstances, be unenforceable against a borrower, including a borrower that
is a debtor in a case under the Bankruptcy Code.
INSPECTIONS; APPRAISALS
The master servicer (or the special servicer with respect to Specially
Serviced Mortgage Loans or REO Properties) is required, at its own expense, to
inspect each mortgaged property at the times
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and in the manner as are consistent with the Servicing Standards described in
this prospectus supplement, but will in any event: (1) inspect each mortgaged
property at least once every 12 months (or 24 months for any mortgage loan with
a principal balance of less then $2,000,000), with the first inspection to be
completed on or before July 31, 2001, unless each of the Rating Agencies has
confirmed in writing that a longer period between inspections (which may not
exceed 24 months) will not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by that Rating Agency
to any class of certificates; and (2) inspect the related mortgaged property as
soon as practicable after the master servicer or the special servicer, as
applicable, has received any Financial and Lease Reporting Fees for any
mortgage loan (unless that property has been inspected by the master servicer
or the special servicer during the preceding 120-day period). In addition, if
any Monthly Payment on any mortgage loan becomes more than 60 days delinquent
(without giving effect to any grace period permitted under the related
promissory note or mortgage), the special servicer will inspect each related
mortgaged property at its own expense as soon as practicable thereafter. The
special servicer will inspect each REO Property at least annually.
REALIZATION UPON MORTGAGE LOANS
If a mortgage loan has defaulted or, in the special servicer's judgment, a
payment default is imminent, the special servicer may at any time, consistent
with the Servicing Standard and the mortgage loan documents, institute
foreclosure proceedings, exercise any power of sale contained in the related
mortgage or otherwise acquire title to the related mortgaged property.
GENERAL STANDARDS FOR CONDUCT IN FORECLOSING OR SELLING DEFAULTED LOANS
Any costs and expenses incurred in any foreclosure or similar proceedings
will be advanced by the master servicer as a Property Advance, unless the
master servicer determines that the Advance would constitute a Nonrecoverable
Advance.
If the special servicer elects to proceed with a foreclosure in accordance
with the laws of the jurisdiction in which the subject mortgaged property is
located, the special servicer will not be required to pursue a deficiency
judgment against the related borrower or any other liable party if (1) the laws
of the jurisdiction do not permit a deficiency judgment after a foreclosure or
(2) the special servicer determines, in its best judgment, that the likely
recovery resulting from a deficiency judgment will not be sufficient to warrant
the cost, time, expense and/or exposure of pursuing the deficiency judgment and
that determination is evidenced by an officer's certificate delivered to the
trustee.
The special servicer, on behalf of the trust fund, is prohibited from
obtaining title to a mortgaged property as a result of or in lieu of
foreclosure or otherwise obtaining title to any direct or indirect partnership
interest or other equity interest in any borrower pledged pursuant to a pledge
agreement and becoming the beneficial owner of a mortgaged property, and
otherwise acquiring possession of, or taking any other action with respect to,
any mortgaged property if, as a result of any of those actions, the trustee,
for the trust fund or the certificateholders, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator" of
that mortgaged property within the meaning of CERCLA or any comparable law,
unless the special servicer has previously determined, in accordance with the
Servicing Standards set forth in the Pooling and Servicing Agreement and based
on an updated ESA prepared within the past twelve months by a person
independent of the special servicer who regularly conducts environmental
assessments, that:
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(1) the mortgaged property is in compliance with applicable environmental
laws in all material respects or, if that mortgaged property is found
not to be in compliance after consultation with an environmental
consultant, that it would be in the best economic interest of the
trust fund to take those actions as are necessary to bring that
mortgaged property in compliance with those laws; and
(2) there are no circumstances present at that mortgaged property
relating to the use, management or disposal of any hazardous materials
for which investigation, testing, monitoring, containment, clean-up or
remediation could reasonably be required under any currently effective
federal, state or local law or regulation, or that, if any hazardous
materials are present for which any of those actions could reasonably
be required, after consultation with an environmental consultant, it
would be in the best economic interest of the trust fund to take those
actions with respect to that mortgaged property.
If the environmental assessment last obtained by the special servicer with
respect to a mortgaged property indicates that the mortgaged property may not
be in compliance with applicable environmental laws in all material respects or
that hazardous materials may be present but does not definitively establish
that fact, the special servicer will cause further environmental tests as the
special servicer deems prudent to protect the interests of certificateholders
to be conducted by a person independent of the special servicer who regularly
conducts those tests. Any of those tests will be deemed part of the ESA
obtained by the special servicer for these purposes.
If title to any mortgaged property is acquired in foreclosure or by
deed-in-lieu of foreclosure, the deed or certificate of sale will be issued to
the trustee or to its nominee (which may not be the master servicer or the
special servicer) or a separate trustee or co-trustee on behalf of the trust
fund. Notwithstanding any acquisition of title and cancellation of the related
mortgage loan, that mortgage loan will be considered to be a mortgage loan held
in the trust fund until the time the related REO Property is sold by the trust
fund and will be reduced by Net REO Proceeds allocated to the principal.
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 special servicer must administer that
mortgaged property in a manner so that it qualifies at all times as
"foreclosure property" within the meaning of Tax Code Section 860G(a)(8). The
Pooling and Servicing Agreement also requires that within 90 days of the trust
fund's acquisition of the mortgaged property the special servicer contract with
an independent contractor (as defined in the Pooling and Servicing Agreement)
for the management and operation of that mortgaged property, unless the special
servicer provides the trustee, at the trust fund's expense, an opinion of
counsel that the operation and management of the mortgaged property other than
through an independent contractor will not cause the mortgaged property to fail
to qualify as "foreclosure property."
The special servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, if and when the special servicer
determines, consistent with the Servicing Standards set forth in the Pooling
and Servicing Agreement, that the sale of that loan or property would be in the
best economic interests of the trust fund. In any event, the special servicer
will offer to sell each REO Property so that the sale of the REO Property will
occur within the period specified in the Pooling and Servicing Agreement. For
any sale of a Specially Serviced Mortgage Loan or a REO Property described
above, the special servicer will give the trustee at least 10 business days'
prior written notice of its intention to sell. The special servicer will accept
an offer
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from any person that is determined by the special servicer to be a fair price
for that Specially Serviced Mortgage Loan or REO Property, if the highest
offeror is not an Interested Person, or is determined to be a fair price by the
trustee (which may be based upon updated independent appraisals received by the
trustee or the special servicer, as applicable), if the highest offeror is an
Interested Person; provided, however, that any offer by an Interested Person in
the amount of the Repurchase Price shall be deemed to be a fair price. Neither
the trustee, in its individual capacity, nor any of its affiliates may offer to
purchase any Specially Serviced Mortgage Loan or any REO Property and nothing
in this prospectus supplement is intended to allow it. In addition, the special
servicer may accept an offer that is not the highest offer if it determines, in
accordance with the Servicing Standards set forth in the Pooling and Servicing
Agreement, that acceptance of that 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 other terms offered by the
prospective buyer making the lower offer are more favorable).
The special servicer will prepare an Asset Status Report for each mortgage
loan which becomes a Specially Serviced Mortgage Loan within 30 days after the
servicing of that mortgage loan is transferred to the special servicer. The
special servicer will deliver each Asset Status Report to the master servicer,
the Directing Certificateholder and the Rating Agencies. The Directing
Certificateholder may object to any Asset Status Report within 10 business days
of receipt; provided, however, that the special servicer shall implement the
recommended action as outlined in the Asset Status Report if it makes an
affirmative determination that the objection is not in the best interest of all
the certificateholders. In connection with making that affirmative
determination, the special servicer will request a vote by all the
certificateholders. If the majority of certificateholders fail within five days
after the notice of the vote is sent to them to reject the Asset Status Report,
the special servicer shall implement the same. If the majority of
certificateholders reject the Asset Status Report, the special servicer shall
revise the Asset Status Report as set forth below. If the Directing
Certificateholder does not disapprove an Asset Status Report within 10 business
days, the special servicer shall implement the recommended action as outlined
in the Asset Status Report.
If the Directing Certificateholder disapproves the Asset Status Report and
the special servicer has not made the affirmative determination described
above, the special servicer will revise the Asset Status Report as soon as
practicable thereafter, but in no event later than 30 days after the
disapproval. The special servicer will revise the Asset Status Report until the
earlier of (a) the Directing Certificateholder's failure to disapprove the
revised Asset Status Report as described above; or (b) until the special
servicer makes a determination that the objection is not in the best interests
of the certificateholders; or (c) the passage of ninety (90) days from the date
of preparation of the first Asset Status Report. The special servicer shall
implement the recommended action as outlined in the Asset Status Report in a
commercially reasonable manner promptly, but no more than 30 days after the
event described in clause (a) of the preceding sentence, no more than 10 days
after the event described in clause (b) of the preceding sentence, and no more
than 5 days after the event described in clause (c) of the preceding sentence.
The special servicer will not, however, be required to take or refrain
from taking any action that would cause it to violate applicable law, the
Pooling and Servicing Agreement (including the Servicing Standards set forth in
the Pooling and Servicing Agreement) or the REMIC Provisions.
After a default in the payment of a Balloon Payment, the special servicer
may, acting in accordance with the Servicing Standards set forth in the Pooling
and Servicing Agreement, grant any number of successive extensions of up to 12
months (or the period from the beginning of the first of
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the extensions, if shorter) on the defaulted mortgage loan. However, the
special servicer may not grant any extension that (1) permits the related
borrower to make payments of only interest for a period of longer than 12
months in the aggregate, or (2) extends the maturity date of the related
mortgage loan beyond the date that is two years prior to the Rated Final
Distribution Date or (3) extends the maturity date of any mortgage loan beyond
the date that is 20 years before the expiration of any related ground lease
with respect to the mortgaged property securing that mortgage loan without the
written consent of each Rating Agency or (4) extends the maturity date of any
mortgage loan beyond the date that is 5 years after the original maturity date
based upon its original amortization schedule.
EVENTS OF DEFAULT
If there occurs an Event of Default, then so long as the Event of Default
has not been remedied, the trustee may, and at the written direction of the
certificateholders of at least 25% of the Voting Rights of all certificates,
the trustee shall, by notice in writing to the master servicer or the special
servicer, as the case may be, terminate all of its respective rights and
obligations under the Pooling and Servicing Agreement, other than any rights it
may have hereunder as a certificateholder and any rights or obligations that
accrued prior to the date of termination (including the right to receive all
amounts accrued or owing to it under the Pooling and Servicing Agreement, plus
interest at the Advance Rate on those amounts until received to the extent
those amounts bear interest, with respect to periods prior to the date of its
termination, and the right to indemnification in accordance with the terms of
that Agreement notwithstanding any termination); provided, however, that in the
event the master servicer and the special servicer is the same person, any
termination of the master servicer will constitute a termination of the special
servicer and vice versa.
AMENDMENTS, MODIFICATIONS AND WAIVERS
The special servicer shall perform all modifications and extensions of the
mortgage loans. The special servicer may not amend, modify, waive or otherwise
consent to the change of the stated maturity date of any mortgage loan, the
payment of principal of or interest (including Default Interest) on any
mortgage loan, or any other term of any mortgage loan, or any complete or
partial release of any real property securing a mortgage loan from the lien of
the mortgage, unless:
(1) that amendment, modification, waiver or consent is not a "significant
modification" under Section 1001 of the Tax Code; or
(2) the master servicer or the special servicer shall have received an
Opinion of Counsel (at the trust fund's expense) that that amendment,
modification or waiver would not cause an imposition of a tax under
the REMIC Provisions or cause a loss of the REMIC status.
provided that if that amendment, modification, waiver or consent would
constitute a "significant modification" under Section 1001 of the Tax Code, and
that modification is occasioned by a default or a reasonably foreseeable
default on that mortgage loan, then the special servicer may take that action.
THE TRUSTEE
The Chase Manhattan Bank, a New York banking corporation with its
principal offices in New York, New York will act as the trustee pursuant to the
Pooling and Servicing Agreement. The trustee's corporate trust office is
located at 450 West 33rd Street, 14th Floor, New York, New York 10001.
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The trustee may resign at any time by giving written notice to the
depositor, the master servicer, the special servicer and the Rating Agencies.
Upon notice of the trustee's resignation, the master servicer will appoint a
successor trustee. If no successor trustee is appointed within 30 days after
the giving of notice of resignation, the resigning trustee may petition any
court of competent jurisdiction for appointment of a successor trustee.
The depositor or the master servicer may remove the trustee if, among
other things, any of the following events occur:
(1) the trustee ceases to be eligible to continue as trustee under the
Pooling and Servicing Agreement;
(2) the trustee at any time becomes incapable of acting;
(3) the trustee is adjudged bankrupt or insolvent;
(4) a receiver of the trustee or its property is appointed; or
(5) any public officer takes charge or control of the trustee or its
property.
The holders of certificates representing a majority of the aggregate
Voting Rights may remove the trustee upon written notice to the master
servicer, the special servicer, the depositor and the trustee. No resignation
or removal of the trustee or appointment of a successor trustee will become
effective until the acceptance of the appointment by the successor trustee.
The trust fund will indemnify the trustee and its directors, officers,
employees, agents and affiliates against any and all losses, liabilities,
damages, claims or expenses (including reasonable attorneys' fees) arising with
respect to the Pooling and Servicing Agreement or the certificates (but only to
the extent that they are expressly reimbursable under the Pooling and Servicing
Agreement or are "unanticipated expenses incurred by the REMIC" under Treasury
Regulations Section 1.860G-1(b)(3)(ii)) other than those resulting from the
negligence, fraud, bad faith or willful misconduct of the trustee and those for
which those indemnified persons are indemnified by the master servicer or the
special servicer as described in the last sentence of this paragraph. The
trustee will not 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 opinion, the repayment of those funds or adequate indemnity
against that risk or liability is not reasonably assured to it. Each of the
master servicer and the special servicer will indemnify the trustee and its
directors, officers, employees, agents and affiliates against certain losses,
liabilities and expenses resulting from the willful misconduct, fraud, bad
faith or negligence in the performance of the master servicer's or the special
servicer's respective duties under the Pooling and Servicing Agreement or by
reason of reckless disregard of the master servicer's or the special servicer's
respective obligations and duties under the Pooling and Servicing Agreement.
DUTIES OF THE TRUSTEE
The trustee, the master servicer and the special servicer will make no
representation as to the validity or sufficiency of the Pooling and Servicing
Agreement, the certificates or this prospectus supplement or the validity,
enforceability or sufficiency of the mortgage loans or related documents. The
trustee will not be accountable for the use or application by the depositor of
any certificates or of the proceeds of those certificates, or for the use or
application of any funds paid to the depositor, the master servicer or the
special servicer with respect to the mortgage loans, or any funds deposited
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in or withdrawn from the Collection Account or the Distribution Account by the
depositor, the master servicer or the special servicer, other than with respect
to any funds held by the trustee.
If no Event of Default has occurred of which the trustee has actual
knowledge or, after the curing of all Events of Default 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 and other instruments required to be furnished to it, the
trustee is required to examine those documents and to determine only whether
they conform on their face to the requirements of the Pooling and Servicing
Agreement.
If the master servicer fails to make any required Advance, the trustee, as
successor master servicer, will be required to make the Advance to the extent
that the Advance is not deemed to be nonrecoverable. The trustee will be
entitled to rely conclusively on any determination by the master servicer that
an Advance, if made, would be a Nonrecoverable Advance. The trustee will be
entitled to reimbursement for each Advance made by it in the same manner and to
the same extent as the master servicer. For more detailed information, you
should refer to the section in this prospectus supplement titled "--Advances."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The master servicer will be entitled to receive a monthly Servicing Fee
with respect to each mortgage loan. The Servicing Fee relating to each mortgage
loan will be retained by the master servicer from interest payments and
collections on that mortgage loan. The master servicer will also be entitled to
retain as additional servicing compensation:
(1) investment income earned on amounts on deposit in the Collection
Account, the Reserve Accounts and the Interest Reserve Account (to the
extent consistent with applicable law and the related mortgage loan
documents);
(2) amounts collected on the mortgage loans that are not Specially
Serviced Mortgage Loans in the nature of late payment charges and
Default Interest (each net of any amount used to pay interest on
Advances), "insufficient funds" check charges, loan service
transaction fees, demand fees, beneficiary statement charges and
similar fees and charges (but excluding any Prepayment Premiums, Yield
Maintenance Charges, Excess Interest or other amounts required to be
deposited or retained in the Collection Account);
(3) Financial and Lease Reporting Fees relating to any mortgage loan that
is not a Specially Serviced Mortgage Loan and to the extent permitted
under the related mortgage loan; and
(4) Prepayment Interest Surplus (to the extent not offset against any
Prepayment Interest Shortfall in accordance with the Pooling and
Servicing Agreement).
The master servicer will reimburse the trustee for out-of-pocket expenses
incurred by the trustee in the performance of its duties in accordance with the
Pooling and Servicing Agreement.
The master 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).
The primary servicer will be entitled to receive, as additional
compensation, to the extent paid by the borrower, 50% of any assumption fees
with respect to a mortgage loan that is not a Specially
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Serviced Mortgage Loan or which arises from certain other specified mortgage
loans. The master servicer will not be entitled to receive any loan
modification fees or extension fees relating to mortgage loans for which the
work associated with that modification or extension was performed by the
special servicer.
SPECIAL SERVICING
With respect to any mortgage loan that is designated a Specially Serviced
Mortgage Loan, the master servicer will transfer its servicing responsibilities
to the special servicer, but will continue to perform the following functions:
(1) receive payments on the mortgage loan (including amounts collected by
the special servicer) and maintain payment records;
(2) make calculations relating to the mortgage loan as required by the
Pooling and Servicing Agreement; and
(3) make remittances and prepare reports to the trustee relating to the
mortgage loan.
If the related mortgaged property is acquired with respect to any mortgage
loan whether through foreclosure, deed-in-lieu of foreclosure or otherwise, the
special servicer will continue to be responsible for the operation and
management of the mortgaged property. The master servicer will have no
responsibility for the performance by the special servicer of its duties under
the Pooling and Servicing Agreement.
"Specially Serviced Mortgage Loan" has the meaning set forth in the
Glossary.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing mortgage loan (through workout by the special servicer or
otherwise) for three consecutive Monthly Payments (provided no additional event
of default is foreseeable in the reasonable judgment of the special servicer),
the special servicer will return the full servicing responsibilities of that
mortgage loan to the master servicer.
Lennar Partners, Inc. will be the initial special servicer. The special
servicer may be removed and a successor special servicer may be appointed by
the Directing Certificateholder.
If any removal of the special servicer is made without cause, then the
costs of transferring the servicing responsibilities to a successor special
servicer will be paid by the Controlling Class.
The removal of the special servicer and the appointment of a successor
special servicer will not be effective until (1) the successor special servicer
has assumed in writing all of the responsibilities, duties and liabilities of
the special servicer under the Pooling and Servicing Agreement pursuant to an
agreement satisfactory to the trustee, (2) each of the Rating Agencies confirms
to the trustee in writing that the appointment of and assumption by the
successor special servicer will not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by that Rating Agency
to any class of certificates and (3) if the special servicer is removed without
cause, the trustee's costs associated with the removal have been provided for.
The special servicer will be entitled to the Special Servicing Fee on each
Specially Serviced Mortgage Loan on a monthly basis. In addition to the Special
Servicing Fee, the special servicer may also receive a Disposition Fee or a
Workout Fee.
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If any Corrected Mortgage Loan again becomes a Specially Serviced Mortgage
Loan, any right to the Workout Fee relating to that mortgage loan earned from
the initial modification, restructuring or workout of that mortgage loan will
terminate, and the special servicer will be entitled to a new Workout Fee for
that Specially Serviced Mortgage Loan upon resolution or workout of the
subsequent event of default under that Specially Serviced Mortgage Loan. Each
of the foregoing fees, along with expenses related to special servicing of a
mortgage loan, will be payable out of funds otherwise available to pay
principal and interest on the certificates.
The special servicer will also be entitled to retain as additional
servicing compensation (1) all investment income earned on amounts on deposit
in any REO Account and (2) to the extent permitted under the related mortgage
loan, all amounts collected with respect to the Specially Serviced Mortgage
Loans in the nature of late payment charges, late fees, "insufficient funds"
check charges, financial and lease reporting fees (to the extent those fees are
not required to be remitted to the related borrower pursuant to the related
promissory note), loan service transaction fees, beneficiary statement charges
or similar items (but excluding any Default Interest, Yield Maintenance Charges
or other Prepayment Premiums or Excess Interest), in each case to the extent
received with respect to any Specially Serviced Mortgage Loan and not required
to be deposited or retained in the Collection Account pursuant to the Pooling
and Servicing Agreement. The special servicer will be entitled to receive, as
additional compensation, to the extent paid by the borrower, all assumption
fees, provided that it will only be entitled to receive 50% of any assumption
fees with respect to a mortgage loan that is not a Specially Serviced Mortgage
Loan and that was purchased by the depositor from KeyBank National Association
or which arises from certain other specified mortgage loans. The special
servicer will be entitled to receive any loan modification fees or extension
fees to the extent received with respect to any mortgage loan relating to
mortgage loans for which the work associated with the modification or extension
was performed by the special servicer.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Monthly Reports
On each Distribution Date, the trustee will prepare in CMSA format and
forward by mail to each certificateholder and Rating Agency, as set forth in
Annex E, with copies to the depositor, the paying agent, the Underwriters and
the master servicer, a statement on the distribution to be made on that date,
setting forth for each class:
(1) The Pooled Principal Distribution Amount and the amount allocable to
principal included in Available Funds;
(2) The Class Interest Distribution Amount distributable to that class
and the amount of Available Funds allocable thereto, together with any
Class Interest Shortfall allocable to that class;
(3) The amount of any P&I Advances by the master servicer or the trustee
included in the amounts distributed to the certificateholders;
(4) The certificate balance of each class of certificates after giving
effect to the distribution of amounts with respect to the Pooled
Principal Distribution Amount on that distribution date;
(5) Realized Losses and their allocation to the certificate balance of
any class of certificates;
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(6) The Scheduled Principal Balance of the mortgage loans as of the due
date preceding that distribution date;
(7) The number and aggregate principal balance of the mortgage loans (a)
delinquent one month, (b) delinquent two months, (c) delinquent three
or more months, (d) as to which foreclosure proceedings have been
commenced, and (e) that otherwise constitute Specially Serviced
Mortgage Loans, and, with respect to each Specially Serviced Mortgage
Loan, the amount of Property Advances made during the related
Collection Period, the amount of P&I Advances made on that
Distribution Date, the aggregate amount of Property Advances made that
remain unreimbursed and the aggregate amount of P&I Advances made that
remain unreimbursed;
(8) With respect to any mortgage loan that became an REO Mortgage Loan
during the preceding calendar month, the principal balance of that
mortgage loan as of the date it became an REO Mortgage Loan;
(9) As of the due date preceding that distribution date, as to any REO
Property sold during the related Collection Period, the date on which
the special servicer made a Final Recovery Determination and the
amount of the proceeds of the sale deposited into the Collection
Account, and the aggregate amount of REO Proceeds and Net REO Proceeds
(in each case other than liquidation proceeds) and other revenues
collected by the special servicer with respect to each REO Property
during the related Collection Period and credited to the Collection
Account, in each case identifying that REO Property by name;
(10) The outstanding principal balance of each REO Mortgage Loan as of the
close of business on the immediately preceding due date and the
appraised value of the related REO Property in the most recent
appraisal obtained;
(11) The amount of the servicing compensation paid to the master servicer
with respect to that distribution date, and the amount of the
additional servicing compensation that was paid to the master servicer
with respect to that distribution date;
(12) The amount of any Special Servicing Fee, Disposition Fee or Workout
Fee paid to the special servicer with respect to that distribution
date, and the amount of the additional servicing compensation that was
paid to the special servicer with respect to that distribution date;
(13) The amount of any Appraisal Reduction allocated in the related
Collection Period on a loan-by-loan basis and the total amount of
Appraisal Reductions made through that distribution date; and
(14) (a) The amount of Yield Maintenance Charges or Prepayment Premiums
collected and any Excess Interest received during the related
Collection Period, and (b) the amount of Default Interest received
during the related Collection Period.
In the case of information furnished pursuant to clauses (1), (2), (3) and
(14)(a) above, the amounts will be expressed as a dollar amount in the
aggregate for all certificates of each applicable class, and will be expressed
as a dollar amount for each class of certificates for a certificate having a
denomination of $1,000 initial certificate balance or notional balance.
Within a reasonable period of time after the end of each calendar year,
the trustee will furnish to each person who at any time during that calendar
year was a holder of a certificate (except for a
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Residual Certificate) and to each Rating Agency a statement containing the
information set forth in clauses (1) and (2) above, aggregated for that
calendar year or applicable portion of that year during which that person was a
certificateholder. The obligation of the trustee to furnish the above
information will be deemed to have been satisfied to the extent that it
provided substantially comparable information pursuant to any requirements of
the Tax Code as from time to time in effect.
On each Distribution Date, the trustee will mail to each holder of a
Residual Certificate a copy of the reports mailed to the other
certificateholders on that distribution date and a statement setting forth the
amounts, if any, actually distributed on the Residual Certificates on that
Distribution Date.
Within a reasonable period of time after the end of each calendar year,
the trustee will furnish to each person who at any time during that calendar
year was a holder of a Residual Certificate a statement setting forth the
amounts actually distributed on that Certificate aggregated for that calendar
year or applicable portion of that year during which that person was a
certificateholder. The obligation of the trustee to furnish the above
information will be deemed to have been satisfied to the extent that it
provided substantially comparable information pursuant to any requirements of
the Tax Code as from time to time in effect.
In addition, the trustee will provide each certificateholder with any
additional information, if any, regarding the mortgage loans that the master
servicer or the special servicer, in its sole discretion, delivers to the
trustee for distribution to the certificateholders. The information made
available in the Distribution Date Statements may be obtained by accessing a
World Wide Website maintained by the trustee at www.chase.com.
Other Available Information
The master servicer or the special servicer, if applicable, will promptly
give notice to the trustee, who will provide a copy to each certificateholder,
each Rating Agency, the depositor, the Underwriters, the related mortgage loan
sellers and the master servicer or the special servicer (if affecting a
Specially Serviced Mortgage Loan), of (1) any notice from a borrower or
insurance company regarding an upcoming voluntary or involuntary prepayment
(including that resulting from a casualty or condemnation) of all or part of
the related mortgage loan (provided that a request by a borrower or other party
for a quotation of the amount necessary to satisfy all obligations with respect
to a mortgage loan will not, in and of itself, be deemed to be notice under
this clause (1)); and (2) any other occurrence known to it with respect to a
mortgage loan or REO Property that the master servicer or the special servicer
determines in accordance with the Servicing Standards set forth in the Pooling
and Servicing Agreement would have a material effect on that mortgage loan or
REO Property. The notice referred to in (2) will include an explanation as to
the reason for the material effect on the mortgage loan or REO Property (with
the understanding that any extension of the term of any mortgage loan will in
any event be deemed to have a material effect).
In addition to the other reports and information made available and
distributed to the depositor, the Underwriters, the trustee or the
certificateholders pursuant to the provisions of the Pooling and Servicing
Agreement, the master servicer and the special servicer will, in accordance
with the reasonable rules and procedures as they may adopt, also make available
any information relating to the mortgage loans, the mortgaged properties or the
borrowers for review by the depositor, the Underwriters, the trustee, the
certificateholders and any other persons to whom the master servicer or the
special servicer, as the case may be, believes disclosure of the above
information is appropriate, unless prohibited by applicable law or by any
documents related to a mortgage loan. In
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providing additional information, the master servicer or the special servicer
may, to the extent it deems necessary or appropriate, require the recipient of
the information to execute an agreement governing the availability, use and
disclosure of the information. The agreement to be obtained by the master
servicer or the special servicer may also contain indemnification provisions
for the master servicer or the special servicer, as applicable, against any
liability or damage that may arise from disclosing the information.
Upon reasonable prior written request, the trustee will also make
available during normal business hours, for review by the depositor, the Rating
Agencies, any certificateholder, the Underwriters, any person identified to the
trustee by a certificateholder as a prospective transferee of a certificate and
any other persons to whom the trustee believes disclosure is appropriate, the
following items:
(1) the Pooling and Servicing Agreement;
(2) all monthly statements to certificateholders delivered since the
closing date;
(3) all annual statements as to compliance delivered to the trustee and
the depositor; and
(4) all annual independent accountants' reports delivered to the trustee
and the depositor.
The master servicer or the special servicer, as appropriate, will make
available at its offices during normal business hours, for review by the
depositor, the Underwriters, the trustee, the Rating Agencies, any
certificateholder, any person identified to the master servicer or the special
servicer, as applicable, by a certificateholder as a prospective transferee of
a Certificate, and any other persons to whom the master servicer or the special
servicer, as applicable, believes disclosure is appropriate, the following
items:
(1) the inspection reports prepared by or on behalf of the master
servicer or the special servicer in connection with property
inspections;
(2) any and all modifications, waivers and amendments of the terms of a
mortgage loan entered into by the master servicer or the special
servicer; and
(3) any and all officer's certificates and other evidence delivered to
the trustee and the depositor to support the master servicer's
determination that any Advance was, or if made, would be, a
Nonrecoverable Advance, in each case except to the extent doing so is
prohibited by applicable law or by any document relating to a mortgage
loan.
Each of the master servicer, the special servicer and the trustee will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses incurred by it in providing copies of or access to any of the
above information. However, any costs and expenses arising from any request of
this type by a Rating Agency will be paid by the master servicer.
The master servicer will, on behalf of the trust fund, prepare, sign and
file with the SEC any and all reports, statements and information relating to
the trust fund that the master servicer or the trustee determines are required
to be filed with the SEC pursuant to Sections 13(a) or 15(d) of the 1934 Act.
Each of those reports, statements and information must be filed on or before
the required filing date for that report, statement or information.
Notwithstanding the foregoing, the depositor will file with the SEC, within 15
days of the closing date, a Form 8-K together with the Pooling and Servicing
Agreement.
None of the trustee, the master servicer or the special servicer will be
responsible for the accuracy or completeness of any information supplied to it
by a borrower or other third party for
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inclusion in any notice or in any other report or information furnished or
provided by the trustee, master servicer or the special servicer under the
Pooling and Servicing Agreement. The trustee, the master servicer and the
special servicer will be indemnified and held harmless by the trust fund
against any loss, liability or expense incurred in connection with any legal
action relating to any statement or omission or alleged statement or omission
in or from any notice, report or information described above, including any
report filed with the SEC.
VOTING RIGHTS
Each class of certificates is assigned the Voting Rights set forth in the
Glossary. The Voting Rights of any class of certificates will be allocated
among holders of certificates of that class in proportion to their respective
percentage interests; however, any Certificate held or beneficially owned by
the depositor, the master servicer, the special servicer, the trustee, a
property manager or a borrower or any of their affiliates 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 consent, approval or waiver that specifically relates
to any of those persons has been obtained (unless the consent, approval or
waiver is to an action that would materially and adversely affect the interests
of the holders of any class of certificates while any of those persons is the
holder of certificates aggregating not less than 66 2/3% of the percentage
interest of that class). For purposes of determining Voting Rights, the
certificate balance of any class will be deemed to be reduced by the amount
allocated to the class of any Appraisal Reductions related to mortgage loans as
to which liquidation proceeds or other final payment has not yet been received.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans in California and Texas (approximately 22.8% and 12.2% of the
cut-off date balance, respectively). The summaries do not purport to be
complete and are qualified in their entirety by reference to the applicable
federal and state laws governing the mortgage loans.
California
California and various other states have imposed statutory prohibitions or
limitations that limit the remedies of a mortgagee under a mortgage or a
beneficiary under a deed of trust. Generally all of the mortgage loans are
nonrecourse loans as to which, in the event of default by a borrower, recourse
may be had only against the specific property pledged to secure the mortgage
loan and not against the borrower's other assets. Even if recourse is available
pursuant to the terms of the mortgage loan, certain states have adopted
statutes which impose prohibitions against or limitations on such recourse. The
limitations described below and similar or other restrictions in other
jurisdictions where mortgaged properties are located may restrict the ability
of the master servicer or the special servicer, as applicable, to realize on
the mortgage loans and may adversely affect the amount and timing of receipts
on the mortgage loans.
The following summary is not intended to be a comprehensive analysis of
California foreclosure procedures and requirements, and is therefore qualified
in its entirety by reference to applicable provisions of California law.
California statutes limit the right of the beneficiary to obtain a
deficiency judgment against the trustor (i.e., obligor) following a
non-judicial foreclosure sale under a deed of trust. A deficiency judgment is a
personal judgment against an obligor in most cases equal to the difference
between the amount due to the beneficiary and the fair market value of
collateral. No deficiency judgment is permitted under California law following
a nonjudicial sale under the power of sale in a deed of trust. Other California
statutes require the beneficiary 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 obligor for
recovery of the debt, except in certain cases liability may be asserted for the
amount by which the value of the real property was impaired as a result of
environmental problems. California case law has held that acts such as an
offset of an unpledged account or the application of rents from secured
property prior to foreclosure, under some circumstances, constitute violations
of such statutes. Violations of such statutes may result in the loss of some or
all of the security under the loan, as well as the right to obtain any judgment
on the loan. Finally, other statutory provisions in California limit any
deficiency judgment (if otherwise permitted) against the former trustor
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 or (ii) the amount of the winning bid in foreclosure, and give the
borrower a one-year period within which to redeem the property. California
statutes also provide priority to certain tax liens over the lien of previously
recorded deeds of trust. Additionally, in the absence of sufficient waivers,
the above limitations may apply to restrict proceedings against a guarantor of
the loan.
In some states, foreclosure may result in automatic termination of
subordinate leases in the absence of either (i) an agreement to the contrary
between the foreclosing lender and the tenant or (ii) circumstances in which it
would be equitable to permit such termination. In addition, in all states, real
property taxes have priority over the lien of previously recorded mortgages or
deeds of trust and in some states and under certain circumstances, mechanics'
liens and materialmen's liens may also take priority over the lien of
previously recorded mortgages or deeds of trust.
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Foreclosure under either a mortgage or a deed of trust or the sale by the
referee or other designated official or by trustee is often a public sale.
However, because of the difficulty a potential buyer at the sale might have in
determining the exact status of title to the property subject to the lien of
the mortgage or deed of trust and the redemption rights that may exist, and
because the physical condition and financial performance of the property may
have deteriorated during foreclosure proceedings and/or for a variety of other
reasons, a third party may be unwilling to purchase the property at foreclosure
sale. Some states require that the lender disclose to potential bidders at a
trustee's sale all known facts materially affecting the value of the property.
Such disclosure may have an adverse effect on the trustee's or mortgagee's
ability to sell the property or upon the sale price.
Texas
The following discussion contains a summary of certain statutory
procedures and requirements, that must be followed by a lender in connection
with exercising its rights and remedies to foreclose through a non-judicial
power of sale set forth in a deed of trust with respect to property securing an
obligation.
This summary is not intended to be a comprehensive analysis of Texas
foreclosure procedures and requirements, and is therefore qualified in its
entirety by reference to applicable provisions of the Texas Property Code
governing foreclosures in Texas, including, without limitations, Sections
51.002, 51.003, 51.004 and 51.005 of the Texas Property Code as amended.
In general, in the event a default occurs under a loan secured by a Texas
deed of trust, the lender may elect to foreclose either (i) judicially; or (ii)
non-judicially through the power of sale set forth in the deed of trust. Most
lenders prefer to pursue a non-judicial foreclosure sale against the property
securing the loan, rather than a judicial foreclosure sale, because of the
reduced cost and expeditious timing in the conduct of a non-judicial
foreclosure. In order to conduct a non-judicial foreclosure under the power of
sale contained in a deed of trust, the lender, as beneficiary and through the
trustee or substitute trustee appointed under the deed of trust, is required to
comply with the terms of the deed of trust and applicable Texas law governing
non-judicial foreclosure sales. Specifically, the lender may request the
trustee, or any successor or substitute trustee duly appointed by the lender,
to enforce the trust upon its request and sell the property to the highest
bidder for cash at a public auction at the county courthouse of any county in
which the property is situated. The non-judicial foreclosure sale must be
conducted on the first Tuesday of any month between the hours of 10:00 a.m. and
4:00 p.m., after giving notice of the time, place and terms of sale and
identifying the property to be sold. The notice of sale must be given at least
twenty one (21) days before the date of the sale by (i) posting at the
courthouse door of each county in which the property is located a written
notice designating the county in which the property will be sold; (ii) filing
in the office of the county clerk of each county in which the property is
located a copy of the notice described above; and (iii) serving written notice
of the sale by certified mail on each debtor who, according to the records of
the holder of the debt, is obligated to pay the debt. The affidavit of a person
who has knowledge of these facts to the effect that service was completed is
prima facie evidence of the fact of service. After such sale, the trustee may
make a conveyance with a general warranty of title to any purchaser or
purchasers and such warranties shall be binding upon the borrower and its
heirs, assigns, executors, administrators and legal representatives.
If provided for in the deed of trust, the trustee has the right to sell
the property in whole or in part and in such parcels and order as the trustee
may determine, and the right of sale will not be
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exhausted by one or more sales, but successive sales may be had until all of
the property has been legally sold. The proceeds from any non-judicial
foreclosure sale conducted by the trustee are required to be applied in
accordance with the terms set forth in the deed of trust. The lender may become
the purchaser at any non-judicial foreclosure sale if it is the highest bidder,
and shall have the right to credit the amount of its bid upon the amount of
indebtedness owing in lieu of cash payment. In the event of a foreclosure under
a power of sale set forth in the deed of trust, the borrower and all other
persons who remain in possession of any part of the property shall be deemed
tenants at will of the purchaser at such foreclosure sale, and shall be liable
for reasonable rental for the use of the property. In general, if any tenants
refuse to surrender possession of the property upon demand, the purchaser shall
be entitled to institute and maintain a statutory action for forcible entry and
detainer and procure a writ of possession thereunder. In addition, foreclosure
may result in the automatic termination of subordinate leases in the absence of
a specific agreement to the contrary between the foreclosing lender and the
tenant, such as a non-disturbance agreement. In Texas, real property taxes will
have priority over the lien of any previously recorded deed of trust and, under
certain circumstances, a mechanic's and materialman's lien may also take
priority over the lien of a previously recorded deed of trust.
Subject to any non-recourse provisions set forth in the deed of trust, any
action for a deficiency after the foreclosure sale must be brought within two
(2) years after the foreclosure sale. The person against whom a deficiency is
sought, may request a determination of the fair market value of the property at
the time of foreclosure sale. Competent evidence may be introduced by the
lender and borrower as to the fair market value at the time of the foreclosure
sale and, if the court determines that the fair market value is greater than
the bid at the foreclosure sale, such excess shall be offset against the debt.
If a judicial foreclosure sale is conducted, a person obligated on the debt may
seek a determination of the fair market value not later than ninety (90) days
after the date of the foreclosure sale, unless a guarantor did not receive
actual notice of the sale, in which event the suit must be brought by the
guarantor no later than ninety (90) days after the date on which the guarantor
received actual notice of the foreclosure sale.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, three separate REMIC elections will be
made with respect to the trust fund, creating three REMICs. Upon the issuance
of the offered certificates, Latham & Watkins will deliver its opinion,
generally to the effect that, assuming (i) compliance with all provisions of
the Pooling and Servicing Agreement, (ii) the proper making of an election,
(iii) the accuracy of all representations made with respect to the mortgage
loans and (iv) compliance with any changes in the laws, including any
amendments to the Tax Code or applicable Treasury Regulations thereunder, (1)
each pool of assets with respect to which a REMIC election is made will qualify
as a REMIC under the Tax Code, and (2) (a) the Class A-1, Class A-2, Class X,
Class B, Class C, Class D, Class E, Class F and Class G Certificates will be,
or will represent ownership of, REMIC "regular interests" and (b) each residual
interest will be the sole "residual interest" in the related REMIC.
Because they represent regular interests, the offered certificates
generally will be treated as newly originated debt instruments for federal
income tax purposes. Holders of those classes of certificates will be required
to include in income all interest on those certificates in accordance with the
accrual method of accounting, regardless of a certificateholder's usual method
of accounting. For purposes of determining the rate of accrual of market
discount, original issue discount and premium for federal income tax purposes,
it has been assumed that the mortgage loans will prepay at the rate of 0% CPR,
with all ARD Loans prepaying on their related Anticipated Repayment Dates. No
representation is made as to whether the mortgage loans will prepay at that
rate or any other rate.
Some classes of the offered certificates may be treated for federal income
tax purposes as having been issued at a premium. Whether any holder of any of
those classes of certificates will be treated as holding a certificate with
bond premium will depend on that certificateholder's purchase price. Holders of
those classes of certificates should consult their own tax advisors regarding
the possibility of making an election to amortize any bond premium. See
"Material Federal Income Tax Consequences" in the prospectus.
Offered certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Section 856(c)(4)(A) and
Section 856(c)(5)(B) of the Tax Code in the same proportion that the assets of
the trust fund underlying the certificates would be so treated, provided,
however, that if 95% or more of the REMIC's assets are real estate assets
during a calendar quarter, then the offered certificates will be considered
"real estate assets" in their entirety for that quarter. In addition, income
with respect to offered certificates will be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Tax Code to the
extent that the certificates are treated as "real estate assets" under Section
856(C)(4)(A) of the Tax Code. Offered certificates held by a domestic building
and loan association will generally constitute a "regular or residual interest
in a REMIC" within the meaning of Section 7701(a)(19)(C)(xi) of the Tax Code
only in the proportion that the mortgage loans are secured by multifamily
apartment buildings. See "Material Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates" in the prospectus.
For further information regarding the federal income tax consequences of
investing in the offered certificates, you should refer to the section in the
prospectus titled "Material Federal Income Tax Consequences--Taxation of REMIC
Income."
New Withholding Regulations
Recently, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules
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described in the prospectus supplement. The New Regulations attempt to unify
certification requirements and modify reliance standards. The New Regulations
will generally be effective for payments made after December 31, 2000, subject
to certain transition rules. It is suggested that prospective investors consult
their own tax advisors regarding the New Regulations.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE
MANNER OF THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX ADVISORS
REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE CERTIFICATES.
ERISA CONSIDERATIONS
SUMMARY
The Subordinate Certificates may not be purchased by or transferred to:
(1) an employee benefit plan or other retirement arrangement, including
an individual retirement account or a Keogh plan, which is subject to
the fiduciary responsibility provisions of ERISA or Section 4975 of
the Tax Code, or a governmental plan subject to any similar law;
(2) a collective investment fund in which those plans are invested;
(3) other persons acting on behalf of any plan or using the assets of any
plan or any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (within the meaning of
Department of Labor Regulations Section 2510.3-101); or
(4) an insurance company that is using assets of any insurance company
separate account or general account in which the assets of those Plans
are invested (or which are deemed pursuant to ERISA or any similar law
to include assets of those plans) other than an insurance company
using the assets of its general account under circumstances whereby
the assets of the trust fund will not be treated as "plan assets" for
purposes of applying the fiduciary responsibility and the prohibited
transactions provisions of ERISA, the Tax Code or any similar law.
Each prospective transferee of a Certificate will be required to deliver
to the depositor, the certificate registrar and the trustee either: (a) a
transferee representation letter stating that that prospective transferee is
not a person referred to in clause (1), (2), (3) or (4) above, or (b) an
opinion of counsel which establishes to the satisfaction of the depositor, the
trustee and the certificate registrar that the purchase and holding of that
certificate will not result in the assets of the trust fund being deemed to be
"plan assets" and subject to the fiduciary responsibility or prohibited
transaction provision of ERISA, the Tax Code or any similar law, and will not
constitute or result in a non-exempt prohibited transaction within the meaning
of Section 406 or 407 of ERISA, Section 4975 of the Tax Code or any similar
law, and will not subject the master servicer, the special servicer, the
depositor, the trustee or the certificate registrar to any obligation or
liability (including obligations or liabilities under ERISA or Section 4975 of
the Tax Code). If a prospective transferee elects to deliver the opinion of
counsel referred to in (b), then that opinion of counsel will be at the expense
of that prospective transferee and not the expense of the trustee, the trust
fund, the master servicer, the special servicer, the certificate registrar or
the depositor.
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TO THE EXTENT ANY OFFERED CERTIFICATE IS IN BOOK-ENTRY FORM, THE HOLDER OF
A BENEFICIAL INTEREST IN THAT CERTIFICATE AND ANY TRANSFEREE OF THE BENEFICIAL
INTEREST WILL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT A PERSON REFERRED TO
IN CLAUSES (1), (2), (3) OR (4) ABOVE.
None of the Residual Certificates may be purchased by or transferred to a
Plan. Accordingly, the following discussion does not purport to discuss the
considerations under ERISA or Tax Code Section 4975 with respect to the
purchase, holding or disposition of the Residual Certificates.
REQUIREMENTS UNDER ERISA
General
ERISA and the Tax Code impose duties and restrictions on Plans and some
persons who perform services for Plans. 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 borrowers and involuntary
liquidations) on the mortgage loans, as discussed in "Yield and Maturity
Considerations" in this prospectus supplement.
Parties in Interest/Disqualified Persons
Other provisions of ERISA (and corresponding provisions of the Tax Code)
prohibit one or more transactions involving the assets of a Plan and persons
who have specified relationships to the Plan (so-called "parties in interest"
within the meaning of ERISA or "disqualified persons" within the meaning of the
Tax Code). The depositor, the Underwriters, the master servicer, the special
servicer or the trustee or one or more of their affiliates 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
that Plan could be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and the Tax 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 those assets, the depositor, the Underwriters, the master
servicer, the special servicer or the trustee or an of their affiliates either:
(1) has discretionary authority or control with respect to the investment or
management of assets of that Plan, or (2) has authority or responsibility to
give, or regularly gives, investment advice with respect to those assets
pursuant to an agreement or understanding that the advice given will serve as a
primary basis for investment decisions with respect to those assets and the
advice will be based on the particular needs of the Plan.
Delegation of Fiduciary Duty
Further, if the assets included in the 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 some transactions involved in the operation of the trust fund might be
deemed to constitute prohibited transactions under ERISA and the Tax Code.
Neither ERISA nor the Tax Code define the term "plan assets."
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The United States Department of Labor has issued Plan Asset Regulations
concerning whether a Plan's assets will be considered to include an interest in
the underlying assets of an entity (such as the trust fund) for purposes of the
general fiduciary responsibility provisions of ERISA, as well as for the
prohibited transaction provisions of ERISA and the Tax Code, if the Plan
acquires an "equity interest" (such as a certificate) in an entity.
Exceptions are provided in the Plan Asset Regulations whereby an investing
Plan's assets would be considered merely to include its interest in the
certificates instead of being deemed to include an interest in the underlying
assets of a trust fund. However, the depositor cannot predict in advance, nor
can there be any continuing assurance whether those exceptions may be
applicable, because of the factual nature of the rules set forth in the Plan
Asset Regulations. For example, one of the exceptions in the Plan Asset
Regulations states that the underlying assets of an entity will not be
considered "plan assets" if less than 25% of the value of each class of equity
interests is held by "benefit plan investors," which are defined as Plans,
individual retirement accounts and employee benefit plans not subject to ERISA
(for example, governmental plans), but 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
Individual Administrative Exemptions
The Department has granted to Prudential Securities Incorporated an
individual administrative exemption (Prohibited Transaction Exemption 90-32, 55
Fed. Reg. 23147 (June 6, 1990, as amended by Prohibited Transaction Exemption
97-34, 62 Fed. Reg. 39021 (July 21, 1997)) referred to in this prospectus
supplement as the "Exemption," for some mortgage-backed and asset-backed
certificates underwritten in whole or in part by Prudential Securities
Incorporated. The Exemption may be applicable to the initial purchase, the
holding and the subsequent resale by a Plan of some certificates, such as the
Senior Certificates, underwritten by the Underwriters, representing interests
in pass-through trusts that consist of receivables, loans and other obligations
specified in the Exemption, provided that the conditions and requirements of
the Exemption are satisfied. The loans described in the Exemption include
mortgage loans such as the mortgage loans.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of 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 certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust fund;
(3) The certificates acquired by the Plan have received a rating at the
time of acquisition of the certificates that is one of the three
highest generic rating categories from either Moody's, Fitch IBCA,
Inc., S&P or Duff & Phelps Credit Rating Co.;
(4) The trustee must not be an affiliate of any member of the Restricted
Group;
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of certificates represents not more
than reasonable compensation for underwriting the certificates; the
sum of all payments made to and retained by the depositor pursuant to
the assignment of the mortgage loans to the Trust represents not more
than the fair market value of those mortgage loans; the sum of all
payments made to and retained by
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the master servicer and any other servicer represents not more than
reasonable compensation for that person's services under the pooling and
servicing agreement and reimbursement of that person's reasonable
expenses in connection therewith; and
(6) The plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the SEC under the 1933
Act.
In addition, the Trust must also meet the following requirements:
(1) The corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(2) Certificates in other investment pools must have been rated in one of
the three highest rating categories by Moody's, Fitch IBCA, Inc., S&P
or Duff & Phelps Credit Rating Co. for at least one year before the
plan's acquisition of the certificates pursuant to the Exemption; and
(3) Certificates evidencing interests in other investment pools must have
been purchased by investors other than plans for at least one year
before any plan's acquisition of the Certificates pursuant to the
Exemption.
If the conditions of the Exemption are met, the acquisition, holding and
resale of certificates by plans would be exempt from the prohibited transaction
provisions of ERISA and the Tax Code (regardless of whether a plan's assets
would be considered to include an ownership interest in the mortgage loans in
the mortgage pool).
Moreover, the Exemption provides relief from some
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:
(1) in the case of an acquisition in connection with the initial issuance
of certificates, at least 50% of each class of certificates in which
Plans have invested is acquired by persons independent of the
Restricted Group; and at least 50% of the aggregate interest in the
trust is acquired by persons independent of the Restricted Group;
(2) fiduciary (or its affiliate) is an obligor with respect to 5% or less
of the fair market value of the obligations contained in the trust;
(3) the Plan's investment in certificates of any class does not exceed
25% of all of the certificates of that class outstanding at the time
of the acquisition; and
(4) immediately after the acquisition no more than 25% of the assets of
the Plan with respect to which that 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 Exemption does not apply to the purchasing or holding of certificates
by Plans sponsored by any member of the Restricted Group.
THE CHARACTERISTICS OF THE SUBORDINATE CERTIFICATES AND THE RESIDUAL
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY, THE
SUBORDINATE CERTIFICATES AND RESIDUAL CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN OR PERSON ACTING ON BEHALF OF ANY PLAN OR USING THE
ASSETS OF ANY PLAN, OTHER THAN AN INSURANCE COMPANY USING ASSETS OF ITS GENERAL
ACCOUNT UNDER CIRCUMSTANCES IN WHICH THE PURCHASE OR TRANSFER OF THOSE
CERTIFICATES WOULD NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION.
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Before purchasing a Senior Certificate, a fiduciary of a Plan should make
its own determination as to the availability of the exemptive relief provided
by the Exemption or the availability of any other prohibited transaction
exemptions, and whether the conditions of any of those exemptions will be
applicable to the Senior Certificates. Any fiduciary of a Plan (including an
entity that is deemed to hold Plan assets for purposes of ERISA and the Tax
Code) considering whether to purchase a Senior Certificate should also
carefully review with its own legal advisors the applicability of the fiduciary
duty and prohibited transaction provisions of ERISA and the Tax Code to the
proposed investment and the availability of the Exemption.
THE SALE OF SENIOR CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION BY THE DEPOSITOR, THE UNDERWRITERS OR ANY OTHER MEMBER OF THE
RESTRICTED GROUP 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.
EXEMPT PLAN
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Tax Code Section 4975 but may be subject to a 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 any similar law.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Tax Code Section 401(a) and exempt from taxation under Tax Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Tax Code Sections 511-515
and 860E. Further, before the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to its transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a "Disqualified
Organization," which term as defined in the Glossary to the prospectus includes
some tax-exempt entities not subject to Tax Code Section 511, including some
governmental plans, as discussed in the section in the prospectus titled
"Material Federal Income Tax Consequences." Accordingly, Plans may not purchase
Residual Certificates.
LEGAL INVESTMENT
The certificates will not be mortgage-related securities for purposes of
SMMEA. The appropriate characterization of the certificates under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the certificates, may be subject to significant
interpretive uncertainties.
The depositor makes no representations 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 the certificates under applicable legal investment
restrictions. These uncertainties may adversely affect the liquidity of the
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 certificates
constitute a legal investment or are subject to investment, capital or other
restrictions.
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PLAN OF DISTRIBUTION
Prudential Securities Incorporated, Salomon Smith Barney Inc. and McDonald
Investments Inc., as Underwriters, have agreed, severally and not jointly,
pursuant to the Underwriting Agreement, to purchase from the depositor the
principal balances of certificates set forth below.
<TABLE>
<CAPTION>
PRUDENTIAL
SECURITIES SALOMON SMITH MCDONALD
CLASS INCORPORATED BARNEY INC. INVESTMENTS INC.
--------------------- -------------- --------------- -----------------
<S> <C> <C> <C>
Class A-1 ......... $
Class A-2 ......... $
Class B ........... $
Class C ........... $
Class D ........... $
Class E ........... $
Class F ........... $
Class G ........... $
</TABLE>
The Underwriters have informed the depositor that they propose to offer
the offered certificates for sale from time to time in one or more negotiated
transactions, or otherwise, at varying prices to be determined, in each case,
at the time of sale. The Underwriters may effect those transactions by selling
those certificates to or through dealers, and those dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters or purchasers of the certificates for whom they may act
as agent. The Underwriters and any dealers that participate with the
Underwriters in the distribution of the certificates purchased by the
Underwriters may be deemed to be underwriters, and any discounts or commissions
received by them and any profit on the resale of certificates by them or the
Underwriters may be deemed to be underwriting discounts or commissions under
the 1933 Act.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to conditions precedent set forth in the Underwriting
Agreement and the Underwriters will be obligated to purchase all of the
certificates if any are purchased.
The depositor has agreed to indemnify the Underwriters against specific
liabilities, including liabilities under the 1933 Act, or contribute to
payments that the Underwriters may be required to make with respect to those
liabilities.
The Underwriters have advised the depositor that they currently expect to
make a market in the certificates, although they have no obligation to do so.
Any market making may be discontinued at any time, and there can be no
assurance that an active public market for the certificates will develop. For
further information regarding any offer or sale of the certificates pursuant to
this prospectus supplement and the prospectus, you should refer to the section
in the prospectus titled "Plan of Distribution"
USE OF PROCEEDS
The depositor will apply the net proceeds from the sale of certificates to
pay the purchase price of the mortgage loans, to repay indebtedness that has
been incurred to obtain funds to acquire the mortgage loans and to pay costs of
structuring, issuing and underwriting the certificates.
LEGAL MATTERS
Legal matters will be passed upon for the depositor and for the
Underwriters by Latham & Watkins, New York, New York.
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RATINGS
It is a condition to the issuance of the offered certificates that each
class of offered certificates be assigned the ratings indicated on the cover
hereof by Moody's and S&P.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders of payments of interest and principal
to which they are entitled by the Rated Final Distribution Date. The Rating
Agencies' ratings take into consideration the credit quality of the mortgage
pool, structural and legal aspects associated with the certificates, and the
extent to which the payment stream in the mortgage pool is adequate to make
payments required under the certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of the likelihood, timing
or frequency of principal prepayments by borrowers or the degree to which those
prepayments (both voluntary and involuntary) might differ from those originally
anticipated. The security ratings do not address the possibility that
certificateholders might suffer a lower than anticipated yield. In addition,
ratings on mortgage pass-through certificates do not address the likelihood of
receipt of Prepayment Premiums or Yield Maintenance Charges or the timing of
the receipt of Prepayment Premiums or Yield Maintenance Charges or the
likelihood of collection by the master servicer of Default Interest. In
general, the ratings thus address credit risk and not prepayment risk.
There can be no assurance as to whether any rating agency not requested to
rate the certificates will nonetheless issue a rating and, if so, what that
rating would be. A rating assigned to the 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 rating of the 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 revision
or withdrawal at any time by the assigning rating agency.
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GLOSSARY
"ADVANCES" means P&I Advances and Property Advances.
"ADVANCE RATE" means the interest rate on outstanding Advances which the
master servicer or trustee is entitled to receive, which, except with respect
to Advances made during payment grace periods, and will be equal to the prime
rate published in The Wall Street Journal, or if The Wall Street Journal is no
longer published, The New York Times.
"ANNUAL DEBT SERVICE" means, for any mortgage loan, the current annual
amounts (including interest allocable to the payment of the related Servicing
Fee, trustee fee and principal) payable with respect to the mortgage loan
during the 12-month period commencing on the cut-off date (assuming no
prepayments occur).
"ANTICIPATED REPAYMENT DATE" shall have the meaning set forth in the
definition of ARD Loans.
"APPRAISAL REDUCTION" means, for any distribution date and for any
mortgage loan as to which any Appraisal Reduction Event has occurred, an amount
equal to the excess, if any, of
(1) the outstanding Scheduled Principal Balance of the mortgage loan over
(2) the excess of
(a) 90% of the appraised value of the related mortgaged property
plus the amount of any escrows and/or letters of credit held
by or on behalf of the trustee as security for the payment of
principal of the mortgage loan (less the estimated amount of
the obligations anticipated to be payable in the next twelve
months to which the escrows relate) as determined
(A) by one or more appraisals, if the mortgage loan has an
outstanding Scheduled Principal Balance equal to or in
excess of $2,000,000, conducted in compliance with the
Code of Professional Ethics and Standards of Professional
Conduct of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice as adopted by
the Appraisal Standards Board of the Appraisal Foundation
and accepted and incorporated into FIRREA (the costs of
which will be paid by the master servicer as a Property
Advance) or
(B) by either an appraisal conducted as described in the
preceding clause (A) or an internal valuation performed by
the special servicer, if the mortgage loan has an
outstanding Scheduled Principal Balance less than
$2,000,000 over
(b) the sum of
(A) to the extent not previously advanced by the master
servicer or the trustee, all unpaid interest on the
mortgage loan at a per annum rate equal to its Mortgage
Rate,
(B) all unreimbursed Advances (and interest thereon) with
respect to the mortgage loan and
(C) all currently due and unpaid real estate taxes and
assessments, insurance premiums, ground rents and all
other amounts due and unpaid with respect to the mortgage
loan, net of any amounts currently escrowed for those
amounts (which taxes, assessments, premiums, ground rents
and other amounts have not been subject to an Advance by
the master servicer or the trustee).
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"APPRAISAL REDUCTION EVENT" for a mortgage loan will occur at the earliest
of:
(1) the third anniversary of the date on which the first extension of the
maturity date of the mortgage loan became effective as a result of a
modification of the mortgage loan by the special servicer, which
extension did not decrease the aggregate amount of Monthly Payments on
the mortgage loan;
(2) 120 days after an uncured delinquency (without regard to any grace
period) occurs for the mortgage loan;
(3) the date on which a reduction in the amount of Monthly Payments on
the mortgage loan, or a change in any other material economic term of
the mortgage loan (other than an extension of its maturity) becomes
effective as a result of a modification of the mortgage loan by the
special servicer;
(4) 60 days after the date on which the special servicer receives notice
that a receiver has been appointed;
(5) 60 days after the date on which the special servicer receives notice
that the related borrower under the mortgage loan declares bankruptcy
or is the subject of an involuntary bankruptcy proceeding; or
(6) immediately after the mortgage loan becomes an REO Mortgage Loan;
provided, however, that an Appraisal Reduction Event will not occur at any time
when the aggregate certificate balances of all classes of certificates other
than the Senior Certificates have been reduced to zero.
"APPRAISED VALUE" means the appraised value of a mortgaged property as
determined by an appraisal made not more than nine months prior to the
origination date of the related mortgage loan and reviewed by the related
mortgage loan seller.
"ARD AMOUNT" or "ARD BALANCE" for any ARD Loan is equal to the Scheduled
Principal Balance as of the related Anticipated Repayment Date before giving
effect to the principal component of the scheduled monthly payment for such
date.
"ARD LOANS" means mortgage loans that bear interest at their respective
Mortgage Rates until a specified date (the "ANTICIPATED REPAYMENT DATE"), after
which time the interest rate changes to a fixed annual rate equal to the
Mortgage Rate plus a specified percentage (generally, no more than 2%, so long
as the mortgage loan is included in the trust fund) (the "REVISED RATE"). Until
the principal balance of the mortgage loan has been reduced to zero, the
mortgage loan will only be required to pay interest at the Mortgage Rate, and
the interest accrued at the Revised Rate over the interest that would have
accrued at the related Mortgage Rate will be deferred. The deferred interest
will not be added to the principal balance of the related mortgage loan, but
will itself accrue interest at the Revised Rate to the extent the accrual is
lawful. This accrued and deferred interest, and any interest accrued thereon,
is referred to herein as "EXCESS INTEREST". ARD Loans have the other
characteristics described in "Description of the Mortgage Pool"--"Certain
Annualization of the Mortgage Pool."
"ASSET STATUS REPORT" means a report prepared by the special servicer
pursuant to the Pooling and Servicing Agreement for each mortgage loan that
becomes a Specially Serviced Mortgage Loan within 30 days after the servicing
of the mortgage loan is transferred to the special servicer.
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"ASSUMED SCHEDULED PAYMENTS" with respect to any mortgage loan for which
the Balloon Payment is delinquent (including any REO Mortgage Loan as to which
the Balloon Payment would have been due), an amount equal to the sum of (a) the
principal portion of the Monthly Payment that would have been due on that
mortgage loan on a due date that falls on or after the date on which the
Balloon Payment was due, based on the original amortization schedule thereof,
assuming the Balloon Payment had not become due, after giving effect to any
modification, and (b) interest at the applicable Net Mortgage Rate on the
principal balance that would have remained on the mortgage loan after giving
effect to deemed principal payments pursuant to clause (a) hereof on prior due
dates.
"AVAILABLE FUNDS" for a Distribution Date will be the sum of all
previously undistributed Monthly Payments or other receipts on account of
principal of and interest on or with respect to the mortgage loans (including
Unscheduled Payments and Net REO Proceeds, if any) received by the master
servicer during the related Collection Period, all P&I Advances made with
respect to that Distribution Date, and all other amounts required to be placed
in the Collection Account by the master servicer. "Available Funds" does not
include the following:
(1) amounts used to reimburse the master servicer or the trustee, as
applicable, for previously unreimbursed Advances and interest thereon;
(2) the Servicing Fee, Special Servicing Fee, Disposition Fee, Workout
Fee and other compensation due to the master servicer and special
servicer with respect to each mortgage loan;
(3) all late fees, late payment charges and similar fees, "insufficient
funds" check charges, loan modification fees, extension fees, loan
service transaction fees, demand fees, beneficiary statement charges,
assumption fees, financial lease and reporting fees and similar fees;
(4) all amounts representing scheduled Monthly Payments due after the due
date in the related Collection Period (these amounts are to be treated
as received on the due date when due);
(5) other amounts payable to the master servicer or special servicer out
of liquidation proceeds, condemnation proceeds or insurance proceeds;
(6) all amounts representing certain reimbursable expenses of the master
servicer, the special servicer or the trustee and amounts permitted to
be retained by the master servicer or the special servicer or
withdrawn by the master servicer from the Collection Account to cover
these expenses;
(7) Prepayment Premiums, Yield Maintenance Charges and Excess Interest
received in the related Collection Period, which are to be distributed
separately as described herein;
(8) interest or investment income with respect to funds on deposit in the
collection account; or
(9) Default Interest received in the related Collection Period.
"BALLOON/ARD LTV" means the Balloon Amount or ARD Amount for a Balloon or
ARD Loan as of the cut-off date divided by the Appraised Value of the related
mortgaged property.
"BALLOON AMOUNT" or "BALLOON BALANCE" means the principal amount, if any,
due at maturity, taking into account scheduled amortization, up to, but not
including the maturity date, assuming no prepayments or defaults.
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"BALLOON LOANS" are mortgage loans which provide for monthly payments of
principal based on amortization schedules that are longer than their original
loan terms, thereby leaving substantial principal amounts due and payable on
their respective maturity dates.
"BALLOON PAYMENT" is the final payment on a Balloon Loan, together with
interest for the one-month period preceding the Balloon Loan's maturity date.
"BASE INTEREST FRACTION" with respect to any principal prepayment on any
mortgage loan and with respect to any class of certificates, a fraction (a)
whose numerator is the amount, if any, by which (1) the Pass-Through Rate on
the class of certificates exceeds (2) the Yield Rate used in calculating the
Yield Maintenance Charge with respect to the principal prepayment and (b) whose
denominator is the amount, if any, by which the (1) Mortgage Rate on the
mortgage loan exceeds (2) the Yield Rate used in calculating the Yield
Maintenance Charge with respect to the principal prepayment; provided, however,
that under no circumstances shall the Base Interest Fraction be greater than
one. If the Yield Rate is greater than or equal to the lesser of (a) the
Mortgage Rate on the mortgage loan and (b) the related Pass-Through Rate, then
the Base Interest Fraction shall equal zero.
"BENEFICIAL OWNERS" means an investor holding beneficial interests in the
Book-Entry Certificates through the book-entry facilities of DTC or another
securities depository.
"BOOK-ENTRY CERTIFICATE" any certificate registered in the name of DTC,
its nominee, or any other securities depository.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which banking institutions in the States of New York, Texas or Missouri are
authorized or obligated by law, executive order or governmental decree to
close.
"CASH FLOW" means the NOI for the related mortgaged property less tenant
improvements, leasing commissions, capital expenditures and other non-recurring
expenditures, as appropriate.
"CLASS X NOTIONAL BALANCE" as of any date is equal to the sum of the
certificate balances of all other classes of certificates.
"CLASS INTEREST DISTRIBUTION AMOUNT" with respect to any Distribution Date
and each class of certificates other than the Residual Certificates, the amount
of interest accrued on the certificate balance or notional balance of that
class during the related Interest Accrual Period at the applicable Pass-Through
Rate. Notwithstanding the foregoing, the Class Interest Distribution Amount for
each class of Certificates will be reduced by that class' pro rata share of any
Prepayment Interest Shortfall not offset by Prepayment Interest Surplus or the
servicing fees available for offset (determined pro rata according to each
Class Interest Distribution Amount without regard to this sentence).
"CLASS INTEREST SHORTFALL" for any class of certificates on any
distribution date means the excess, if any, of the amount of interest required
to be distributed to the holders of that class of certificates on that
distribution date over the amount of interest actually distributed to those
holders. No interest will accrue on unpaid Class Interest Shortfalls.
"COLLECTION PERIOD" with respect to a distribution date, is the period
beginning on the day following the Determination Date in the preceding month
(or, in the case of the distribution date occurring in July, 2000, on the day
after the cut-off date) and ending on the Determination Date in the month in
which that distribution date occurs.
"COMMISSION" or "SEC" means the Securities and Exchange Commission.
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"CONSTANT PREPAYMENT RATE" or "CPR" means assumed constant rate of
prepayment relative to the then outstanding principal balance of a pool of new
mortgage loans for the life of the mortgage loans.
"CORRECTED MORTGAGE LOAN" any Specially Serviced Mortgage Loan that has
become current and remained current (through workout by the special servicer or
otherwise) for three consecutive Monthly Payments, taking into account any
modification or amendment (provided no additional event of default is
foreseeable in the reasonable judgment of the special servicer).
"CUT-OFF DATE PRINCIPAL BALANCE" of each mortgage loan is the unpaid
principal balance thereof as of the cut-off date, after application of all
payments of principal due on or before that date, whether or not received.
"DEBT SERVICE COVERAGE RATIO," "UNDERWRITTEN DSCR" or "DSCR" means, for a
mortgage loan, (a) the Underwritten Cash Flow for the related mortgaged
property divided by (b) the Annual Debt Service for the related mortgage loan.
"DEFAULT INTEREST" means a rate of interest with respect to a mortgage
loan higher than the stated interest rate that is payable upon the occurrence
of an event of default. In some cases Default Interest may be calculated as a
specified rate above a specified base rate (typically a prime rate reported in
the Wall Street Journal or published at major money center banks.
"DEFEASANCE LOCKOUT PERIOD" means a period of not less than two years
after the closing date of the certificates.
"DETERMINATION DATE" means the 11th day of any month, or if the 11th day
is not a business day, the next succeeding business day. The first
Determination Date will be July 11, 2000
"DISPOSITION FEE" with respect to any Specially Serviced Mortgage Loan or
REO Property that is sold or transferred or otherwise liquidated (except in
connection with the repurchase of a mortgage loan as described under
"Description of the Mortgage Pool--Representations and Warranties;
Repurchase"), equal to the product of (1) the excess, if any, of (a) the
proceeds of the sale or liquidation of the Specially Serviced Mortgage Loan or
REO Property over (b) any broker's commission and related brokerage referral
fees and (2) 1.0%.
"DISTRIBUTION ACCOUNT" means a segregated account or accounts established
and maintained by the trustee in its name in trust for the benefit of the
holders of certificates.
"DISTRIBUTION DATE" means the date on which distributions on the Regular
Certificates will be made, which is the 15th day of each month or, if that day
is not a Business Day, then on the next succeeding Business Day, commencing on
July 17, 2000, provided that no distribution date shall be fewer than four
Business Days after the related Determination Date.
"DUE DATE" means the date on which Monthly Payments on a particular
mortgage loan is due (disregarding any applicable grace period).
"ELIGIBLE BANK" means a federally or state chartered depository
institution or trust company acting in its fiduciary capacity, having, in
either case, a combined capital and surplus of at least $50,000,000 and subject
to supervision or examination by federal or state authority and subject to
regulations regarding fiduciary funds on deposit substantially similar to 12
CFR 9.10(b), or as to which the trustee has been informed in writing by each
Rating Agency that the maintenance of that account will not, in and of itself,
result in a downgrading, withdrawal or qualification of the rating then
assigned by that Rating Agency to any class of certificates.
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"EVENT OF DEFAULT" means any one of the following events:
o any failure by the master servicer to remit to the Collection Account
or any failure by the master servicer to remit to the trustee for
deposit into the Distribution Account, any amount required to be so
remitted by the master servicer pursuant to and in accordance with the
terms of the Pooling and Servicing Agreement; or any failure by the
special servicer to remit to the REO Account or any failure by the
special servicer to remit to the master servicer any amount to be so
remitted by the special servicer pursuant to and in accordance with the
terms of that Agreement; or
o any failure on the part of the master servicer or special servicer duly
to observe or perform in any material respect any other of the covenants
or agreements, or the breach of any representations or warranties
provided in the Agreement on the part of the master servicer or special
servicer which materially and adversely affects the interests of the
certificateholders, the master servicer, the special servicer or the
trustee with respect to any mortgage loan and which, in either event,
continues unremedied for a period of 30 days after the date on which
written notice of the failure or breach, requiring the same to be
remedied, shall have been given to the master servicer or special
servicer by the depositor or the trustee, or to the master servicer or
special servicer, the depositor and the trustee by the
certificateholders entitled to at least 25% of the aggregate Voting
Rights of any class affected thereby; or
o confirmation in writing by Moody's that the then-current rating
assigned to any class of certificates will be withdrawn, downgraded or
qualified if the master servicer or special servicer is not removed as
master servicer or special servicer; or
o a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law for the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the master servicer or special
servicer and the decree or order shall have remained in force,
undischarged or unstayed, for a period of 60 days; or
o the master servicer or special servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the master servicer or special
servicer, or of or relating to all or substantially all of the property
of the master servicer or special servicer; or
o the master servicer or special servicer shall admit in writing its
inability to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; or
o the master servicer shall fail to make any Advance required to be made
by the master servicer hereunder (whether or not the trustee makes the
Advance); or
o the master servicer or the special servicer, as the case may be, is no
longer on S&P's list of "approved" commercial mortgage loan servicers,
and the master servicer or special servicer, as applicable, shall not
have again become "approved" within ninety (90) days thereafter.
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"EXCESS INTEREST" shall have the meaning set forth in the definition of
ARD Loans.
"FINAL RECOVERY DETERMINATION" shall have the meaning set forth in the
definition of Scheduled Principal Balance.
"INDIRECT PARTICIPANTS" are banks, brokers, dealers, trust companies and
other institutions that have indirect access to the DTC system by clearing
through or maintaining a custodial relationship with a Participant, either
directly or indirectly.
"INTEREST ACCRUAL PERIOD" with respect to any distribution date is the
calendar month preceding the month in which that distribution date occurs.
Interest for each Interest Accrual Period is calculated based on a 360-day year
consisting of twelve 30-day months.
"INTERESTED PERSON" means the depositor, the master servicer, the special
servicer, the trustee, any borrower or property manager of a mortgaged
property, any independent contractor engaged by the special servicer to manage
or operate an REO Property or any known affiliate of any of the foregoing.
"LOAN-TO-VALUE RATIO" "APPRAISED LTV" or "LTV" means the principal balance
of a mortgage loan as of the cut-off date after giving effect to the principal
component of the Monthly Payment made on such date, divided by the Appraised
Value of the related mortgaged property.
"LOCKOUT PERIOD" means a specified period of time after the date of
origination of the mortgage loan during which prepayments are prohibited.
"MONTHLY PAYMENT" with respect to a mortgage loan (other than an REO
Mortgage Loan), the scheduled monthly payment of principal and interest,
excluding any Balloon Payment, on that mortgage loan that is payable by the
related borrower on the related due date. The Monthly Payment with respect to
an REO Mortgage Loan is the monthly payment that would otherwise have been
payable on the related due date had the mortgage loan not been discharged
(after giving effect to any extension or other modification), determined as set
forth in the Pooling and Servicing Agreement.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means one or more mortgages, deeds of trust, deeds to secure
debt or other similar security instruments securing each mortgage loan.
"MORTGAGE LOAN PURCHASE AGREEMENT" means an agreement pursuant to which
the depositor will purchase the mortgage loans on or before the Closing Date
from the Transferor, KeyBank National Association or Salomon Brothers Realty
Corp.
"MORTGAGE LOAN SELLERS" means KeyBank National Association, Bridger
Commercial Realty Finance LLC and Salomon Brothers Realty Corp.
"MORTGAGE RATE" with respect to each mortgage loan, the annual rate at
which interest accrues (in the absence of a default or, with respect to any ARD
Loan, in the absence of a failure to prepay the ARD Loan on or before its
Anticipated Repayment Date); provided, however, that if any mortgage loan does
not accrue interest on the basis of a 360-day year consisting of twelve 30-day
months, then the Mortgage Rate of that mortgage loan for any one-month period
preceding a related Due Date will be the annualized rate at which interest
would have to accrue on that mortgage loan on the basis of a 360-day year
consisting of twelve 30-day months in order to produce the aggregate amount of
interest actually accrued (exclusive of Default Interest or Excess Interest) in
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respect of that mortgage loan during that one-month period at the related
Mortgage Rate; and provided further that with respect to each Interest Reserve
Loan, (i) the Mortgage Rate for the one month period preceding the Due Dates in
both January and February in any year that is not a leap year and in February
in any year that is a leap year, shall be determined net of any Withheld
Amounts and (ii) the Mortgage Rate for the one month period preceding the Due
Date in March of each year shall be determined taking into account the addition
of the Withheld Amounts. The "Mortgage Rate" for purposes of calculating the
Weighted Average Net Mortgage Rate shall be the Mortgage Rate of the 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 in interest or principal due to a modification
of the mortgage loan.
"NET MORTGAGE RATE" for each mortgage loan is the Mortgage Rate for the
mortgage loan in the absence of a default and exclusive of Excess Interest,
minus the related Servicing Fee Rate and the trustee fee rate.
"NET OPERATING INCOME" or "NOI" means revenue derived from the use and
operation of the mortgaged property (primarily rental income) less operating
expenses (such as utilities, general administrative expenses, management fees,
advertising, repairs and maintenance) and less fixed expenses (such as
insurance and real estate taxes). NOI generally does not reflect capital
expenditures, replacement reserves, interest expense, income taxes and non-cash
items such as depreciation or amortization. The mortgage loan sellers have
informed the depositor that they have adjusted items of revenue and expense
shown on the borrower's financial statements in order to reflect the historical
operating results for a mortgaged property on a normalized basis (e.g.,
adjusting for the payment of two years of real estate taxes in a single year).
Revenue was generally adjusted to eliminate security deposits and to eliminate
non-recurring items and items not related to the operation of the mortgaged
property. Expenses were generally adjusted to eliminate distributions to
owners, items of expense not related to the operation of the mortgaged
property, non-recurring items, such as capital expenditures, and refunds of
security deposits. The mortgage loan sellers have informed the depositor that
they have made the adjustments based upon their review of borrower financial
statements, their own experience in originating loans and, in some cases,
conversations with borrowers. The adjustments were subjective in nature and
were not uniform for each mortgaged property. "98 NOI" and "99 NOI", reflect
calendar year operations for 1998 and 1999, respectively.
"NET REO PROCEEDS" with respect to an REO Property and any related
mortgage loan, all revenues received by the master servicer or special servicer
with respect to the REO Property or REO Mortgage Loan that are not Liquidation
Proceeds, net of any insurance premiums, taxes, assessments and other costs and
expenses permitted to be paid from the related REO Account pursuant to the
Pooling and Servicing Agreement.
"NONRECOVERABLE ADVANCE" means an Advance which the Master Servicer
determines to be nonrecoverable.
"OCCUPANCY RATE" or "PHYSICAL OCCUPANCY RATE" means the percentage of
gross leasable area, rooms, units, beds, pads or sites of a mortgaged property
that are leased or occupied. Occupancy rates are calculated based upon the most
recent rent information received by the related mortgage loan seller except in
the case of hotel properties, for which the occupancy rate is based upon the
average monthly occupancy reported for the twelve months preceding the
specified date. The "OCCUPANCY PERCENTAGE" and "OCCUPANCY DATE" for each
mortgage loan are based upon rent information received by the related mortgage
loan seller from the related borrower or mortgage loan originator (if other
than the related mortgage loan seller).
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"P&I ADVANCE" means an amount the master servicer will be obligated to
advance on the Business Day preceding each Distribution Date (the "REMITTANCE
DATE"), equal to the total of any portion of the Monthly Payment on any
mortgage loan that was delinquent as of the close of business on the Business
Day preceding the Remittance Date or, in the event of a default in the payment
of a Balloon Payment, the Assumed Scheduled Payment for the related Balloon
Loan, unless the master servicer determines that this advance would be a
Nonrecoverable Advance and delivers to the trustee an officer's certificate and
accompanying documentation related to a determination of nonrecoverability.
"PARTICIPANTS" means the participating organizations in DTC.
"PASS-THROUGH RATE" for any class of offered certificates is the per annum
rate at which interest accrues on the certificates of that class during any
Interest Accrual Period, and is set forth under "SUMMARY" herein.
"PERMITTED INVESTMENTS" means the United States government securities and
other investments specified in the Pooling and Servicing Agreement.
"PHYSICAL OCCUPANCY PERCENTAGE" mean the percentage of net rentable area,
rooms, units, beds, pads or sites of a mortgaged property that are leased or
occupied. Occupancy rates are calculated based upon the most recent rent
information received by the related mortgage loan seller. The "OCCUPANCY AS OF
DATE" for each mortgage loan are based upon rent rolls received by the related
mortgage loan seller from the related borrower or mortgage loan originator (if
other than the related mortgage loan seller).
"PLAN ASSET REGULATIONS" means regulations issued by The United States
Department of Labor concerning whether a Plan's assets will be considered to
include an interest in the underlying assets of an entity (such as the trust
fund) if the Plan acquires an "equity interest" (such as a certificate) in an
entity.
"POOL BALANCE" as of any date will be the aggregate of the outstanding
principal balances of the mortgage loans in the mortgage pool as of that date.
"POOLED PRINCIPAL DISTRIBUTION AMOUNT" for any Distribution Date will be
equal to the sum (without duplication) of:
(1) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) that become due on the mortgage loans during the
related Collection Period, regardless of whether received;
(2) the principal component of all Assumed Scheduled Payments, as
applicable, deemed to become due during the related Collection Period
with respect to any Balloon Loan that is delinquent with respect to
its Balloon Payment, regardless of whether received;
(3) the Scheduled 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 an
early termination of the trust fund;
(4) the portion of Unscheduled Payments allocable to principal of any
mortgage loan that was liquidated during the related Collection
Period;
(5) the principal component of any Balloon Payment received during the
related Collection Period;
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(6) all Principal Prepayments received in the related Collection Period;
and
(7) all full or partial recoveries with respect to principal, including
insurance proceeds, liquidation proceeds, condemnation proceeds and
Net REO Proceeds.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement, to be dated June 1, 2000 by and between the depositor, the master
servicer, the special servicer and the trustee.
"PREPAYMENT INTEREST SHORTFALL" means the amount of interest a borrower is
not required to pay or does not pay because of a Principal Prepayment thereby
made during any Collection Period relative to the amount of interest that would
have accrued on the mortgage loan during the Collection Period in the absence
of the Principal Prepayment. Any Prepayment Interest Shortfall with respect to
a distribution date will be offset first by the amount of any Prepayment
Interest Surplus and then up to an amount equal to the aggregate Servicing Fees
to which the master servicer would otherwise be entitled on that distribution
date. If the master servicer and the special servicer are the same person, any
remaining Prepayment Interest Shortfall after the application of the prior
sentence will be offset by the aggregate Special Servicing Fees, Workout Fees
and Disposition Fees to which the special servicer would otherwise be entitled
on such distribution date.
"PREPAYMENT INTEREST SURPLUS" with respect to any Principal Prepayment
means the amount by which (a) interest received from the related borrower with
respect to a mortgage loan during a Collection Period exceeds interest at the
related Net Mortgage Rate on the Scheduled Principal Balance of that mortgage
loan that would have been due in the absence of the Principal Prepayment. The
master servicer will be entitled to retain any Prepayment Interest Surplus as
additional servicing compensation to the extent not required to offset
Prepayment Interest Shortfalls.
"PREPAYMENT PREMIUMS" are payments received on a mortgage loan in
connection with a Principal Prepayment thereon, calculated as a fixed
percentage of the amount of principal to be prepaid.
"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 those
payments and that 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.
"PROPERTY ADVANCES" means cash advances that the master servicer is
obligated to make (a) to pay certain costs and expenses incurred in connection
with defaulted mortgage loans, acquisition of title to, or management of, REO
Properties, or the sale of defaulted mortgage loans or REO Properties, (b) to
pay delinquent real estate taxes, assessments and hazard insurance premiums and
(c) to cover other similar costs and expenses necessary to protect and preserve
the security of the related mortgage.
"REO ACCOUNT" means any account established in connection with an REO
Property.
"REO PROPERTY" means a mortgaged property title to which has been acquired
by the master servicer on behalf of the trust fund through foreclosure,
deed-in-lieu of foreclosure or otherwise.
"REO MORTGAGE LOAN" is any mortgage loan as to which the related mortgaged
property has become an REO Property.
"REALIZED LOSS" with respect to any distribution date will mean the
amount, if any, by which (1) the aggregate certificate balance after giving
effect to distributions made on that distribution date, exceeds (2) the
aggregate Scheduled Principal Balance of the mortgage loans as of the due date
in the month in which that distribution date occurs.
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"RECORD DATE" means the close of business on the last business day of each
month. The record date always relates to the distribution date for the
following calendar month.
"REMAINING TERM TO MATURITY" means the number of Due Dates remaining from
the cut-off date until the maturity of a mortgage loan (or, for ARD Loans,
through the related Anticipated Repayment Dates).
"REMAINING AMORTIZATION TERM" for any mortgage loan is calculated as the
original amortization term of the related mortgage loan (based upon the
mortgage loan's original balance, interest rate and monthly payment, in the
case of the ARD Loans, assuming prepayment in full on the related Anticipated
Repayment Date) less the number of Due Dates through and including the cut-off
date.
"REMIC" means real estate mortgage investment conduit.
"REMITTANCE DATE" shall have the meaning set forth in the definition of
P&I Advance.
"REPURCHASE PRICE" means an amount equal to:
(i) the unpaid principal balance of the mortgage loan, specially
serviced mortgage loan or REO Mortgage Loan as of the Due Date as
to which a payment was last made by the related borrower or was
advanced by the master servicer (less any Advances previously
made on account of principal); plus
(ii) unpaid accrued interest from the Due Date as to which interest
was last paid by the borrower or was advanced by the master
servicer up to the Due Date in the month following the month in
which the purchase or repurchase occurred at a rate equal to the
related Mortgage Rate on the unpaid principal balance of the
mortgage loan, specially serviced mortgage loan or REO Mortgage
Loan (less any Advances previously made on account of interest);
plus
(iii) all unreimbursed Advances, together with interest thereon at the
Advance Rate, and unpaid servicing compensation allocable to the
mortgage loan; and plus
(iv) in the event that the mortgage loan is required to be
repurchased because of a breach of a representation and warranty
or a failure to deliver a portion of the mortgage file that is
required to be delivered to the trustee, expenses reasonably
incurred or to be incurred by the master 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.
"RESTRICTED GROUP" means any of the depositor, the Underwriters, the
master servicer, the special servicer, any obligor with respect to the mortgage
loans included in the trust fund constituting more than 5% of the aggregate
unamortized balance of the assets in the trust fund, or any affiliate of those
parties.
"REVISED RATE" shall have the meaning set forth in the definition of ARD
Loans.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984.
"SCHEDULED PRINCIPAL BALANCE" of any mortgage loan as of any due date will
be the principal balance of the mortgage loan as of the due date, after giving
effect to (1) any Principal Prepayments,
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prepayments that do not include prepayment premiums or other unscheduled
recoveries of principal and any Balloon Payments received during the related
Collection Period and (2) any payment with respect to principal due on or
before that due date (excluding Balloon Payments, but including the principal
portion of any Assumed Scheduled Payment), irrespective of any delinquency in
payment by the borrower. The Scheduled Principal Balance of any REO Mortgage
Loan as of any due date is equal to the principal balance thereof outstanding
on the date that the related mortgaged property became an REO Property minus
any Net REO Proceeds allocated to principal and minus the principal component
of Monthly Payments due thereon on or before that due date. With respect to any
mortgage loan, from and after the date on which the special servicer makes a
determination that it has recovered all amounts that it reasonably expects to
be finally recoverable (a "Final Recovery Determination"), the Scheduled
Principal Balance thereof will be zero.
"SCHEDULED FINAL DISTRIBUTION DATE" with respect to any class of
certificates is the distribution date on which the aggregate certificate
balance of that class of certificates would be reduced to zero based on the
assumptions set forth herein.
"SENIOR PRINCIPAL DISTRIBUTION CROSS-OVER DATE" will be the first
distribution date on which the aggregate certificate balance of the Class A-1
and A-2 Certificates (before any distributions are made) exceeds the sum of (a)
the aggregate Scheduled Principal Balance of all mortgage loans on that
distribution date and (b) the portion of the Available Funds that will remain
after the required distributions of interest to be made to those classes on
that distribution date.
"SERVICING FEE" means the monthly servicing fee which the master servicer
is entitled to with respect to each mortgage loan and for each distribution
date equal to one-twelfth (1/12) of a per annum rate (the related "SERVICING
FEE RATE" ranging from 0.05% to 2.25%) multiplied by the Scheduled Principal
Balance of that mortgage loan as of the Due Date in the month preceding the
month in which that distribution date occurs.
"SERVICING FEE RATE" shall have the meaning specified in the definition of
Servicing Fee.
"SERVICING STANDARDS" shall have the meaning set forth in this prospectus
supplement under "The Pooling and Servicing Agreement--Servicing of the
Mortgage Loans; Collection of Payments."
"SPECIAL SERVICING FEE" means fees to which the special servicer is
entitled including a special servicing fee equal to one-twelfth of 0.25% of the
outstanding Scheduled Principal Balance of each Specially Serviced Mortgage
Loan on a monthly basis.
"SPECIALLY SERVICED MORTGAGE LOAN" means any mortgage loan with respect to
which:
(1) the related borrower is 60 or more days delinquent (without giving
effect to any grace period) in the payment of principal and interest
(regardless of whether P&I Advances have been reimbursed in respect
thereof);
(2) the related borrower has expressed to the master servicer its
inability to pay or a hardship in paying the mortgage loan in
accordance with its terms;
(3) the master servicer has received notice that the related borrower has
(a) become the subject of any bankruptcy, insolvency or similar
proceeding, (b) admitted in writing its inability to pay its debts as
they come due, or (c) made an assignment for the benefit of creditors;
(4) the master servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the mortgaged property;
S-150
<PAGE>
(5) a default of which the master servicer has notice (other than a
failure by the related borrower to pay principal or interest) and
which materially and adversely affects the interests of the
certificateholders has occurred and remains unremedied for the
applicable grace period specified in the mortgage loan (or, if no
grace period is specified, 60 days); provided, that in any case a
default requiring a Property Advance will be deemed to materially and
adversely affect the interests of the certificateholders;
(6) the related borrower has failed to make a Balloon Payment when due
(unless the master servicer and the special servicer agree in writing
that the mortgage loan is likely to be paid in full within 30 days
after that default);
(7) the master servicer proposes to commence foreclosure or other workout
arrangements; or
(8) the master servicer otherwise determines that there is a material
risk of default by the related borrower,
provided that a mortgage loan will cease to be a Specially Serviced Mortgage
Loan:
(1) with respect to the circumstances described in clauses (1) and (6)
above, when the related borrower has brought the mortgage loan current
and thereafter has made three consecutive full and timely Monthly
Payments on that mortgage loan; with the understanding that, with
respect to the circumstances described in clause (6), the related
borrower may satisfy the requirements above pursuant to any workout
implemented by the special servicer;
(2) with respect to the circumstances described in clauses (2) and (4)
above, when those circumstances cease to exist in the good faith
judgment of the special servicer and with respect to the circumstances
described in clauses (3) and (7), when those circumstances cease to
exist;
(3) ith respect to the circumstances described in clause (5) above, when
the default is cured; or
(4) with respect to the circumstances described in clause (8) above, when
the master servicer determines that there is no longer a material risk
of default by the related borrower,
provided that, in any case, no circumstance exists (as described above) at the
time that would cause that mortgage loan to be otherwise characterized as a
Specially Serviced Mortgage Loan.
"TAX CODE" means the Internal Revenue Code of 1986.
"TRANSFEROR" means Prudential Securities Credit Corp., LLC, a Delaware
limited liability company.
"UNDERLYING MORTGAGE LOAN PURCHASE AGREEMENT" refers to the agreement
pursuant to which the Transferor will purchase mortgage loans from Bridger
Commercial Realty Finance LLC, on or before the Closing Date.
"UNDERWRITERS" means Prudential Securities Incorporated, Salomon Smith
Barney Inc. and McDonald Investments Inc.
"UNDERWRITING AGREEMENT" means the agreement, dated June , 2000 pursuant
to which the Underwriters have agreed, severally and not jointly, to purchase
from the depositor specified principal or notional balances of certificates.
"UNDERWRITTEN NET CASH FLOW" for the related mortgage loan seller means
(i) with respect to KeyBank National Association and Bridger Commercial Realty
Finance LLC, the Underwritten NOI
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<PAGE>
for a mortgage loan decreased by an amount that the related mortgage loan
seller has determined to be an appropriate allowance, based upon its
underwriting guidelines, for average annual tenant improvements and leasing
commissions and (ii) with respect to Salomon Brothers Realty Corp., the
Underwritten NOI for a mortgage loan decreased by an amount that the related
mortgage loan seller has determined to be an appropriate allowance, based up on
its underwriting guidelines, for average annual replacement reserves or, in the
case of hotels, furniture, fixtures and equipment reserves, tenant improvements
and leasing commissions.
"UNDERWRITTEN NOI" means, (i) with respect to KeyBank National Association
and Bridger Commercial Realty Finance LLC, the NOI for the related mortgaged
property on an annual basis as determined by the related mortgage loan seller
in accordance with its underwriting guidelines for similar properties. Although
there are differences in the underwriting guidelines of the mortgage loan
sellers, the nature and types of adjustments made by each of them were
generally the same. Revenue generally is calculated as follows. Rental revenue
is calculated using the lower of actual or market rental rate, with a vacancy
rate equal to the higher of the mortgaged property's historical rate, the
market rate or an assumed vacancy rate. Other revenues, such as parking fees,
percentage rents and vending income are included only if sustainable. Revenues,
such as application fees and lease termination fees, are not included.
Operating and fixed expenses generally are adjusted to reflect the higher of
the mortgaged property's average expenses or a mid-range industry norm for
expenses on similar properties in similar locations plus the greater of actual
management fees or an assumed market rate management fee and a reserve for
replacement of capital items and (ii) with respect to Salomon Brothers Realty
Corp., the NOI for the related mortgaged property on an annual basis as
determined by the related mortgage loan seller in accordance with its
underwriting guidelines for similar properties. Although there are differences
in the underwriting guidelines of the mortgage loan sellers, the nature and
types of adjustments made by each of them were generally the same. Revenue
generally is calculated as follows. Rental revenue is calculated using the
lower of actual or market rental rate, with a vacancy rate equal to the higher
of the mortgaged property's historical rate, the market rate or an assumed
vacancy rate. Other revenues, such as parking fees, percentage rents and
vending income are included only if sustainable. Revenues, such as application
fees and lease termination fees, are generally not included. Operating and
fixed expenses are generally based upon a mortgaged property's average expenses
observed during recent historical operating periods, the appraiser's estimate
of such expenses, mid-range industry norm for expenses on similar properties in
similar locations or, in the case of certain expenses such as management fees,
the greater of the actual contractual rate for such fees or an assumed market
rate.
"UNSCHEDULED PAYMENTS" are all liquidation proceeds, condemnation proceeds
and insurance proceeds payable under the mortgage loans, the Repurchase Prices
of any mortgage loans that are repurchased or purchased pursuant to the Pooling
and Servicing Agreement and any other payments under or with respect to the
mortgage loans not scheduled to be made, including Principal Prepayments, but
excluding Prepayment Premiums, Yield Maintenance Charges and Excess Interest.
"VOTING RIGHTS" assigned to each class will be:
(1) 0% in the case of the Residual Certificates;
(2) in the case of any other class of Principal Balance Certificates, a
percentage equal to the product of (a) 99% and (b) a fraction, the
numerator of which is equal to the aggregate outstanding certificate
balance of that class and the denominator of which is equal to the
aggregate outstanding certificate balances of all classes of
certificates;
S-152
<PAGE>
(3) in the case of the Class X Certificates, 1%.
"WEIGHTED AVERAGE MATURITY" means the weighted average of the Remaining
Terms to Maturity of the mortgage loans weighted on the basis of the Scheduled
Principal Balance thereof as of the first day of such interest accrual period.
"WEIGHTED AVERAGE NET MORTGAGE RATE" for any Interest Accrual Period, a
per annum rate equal to the weighted average of the amount of interest accrued
on the mortgage loans at the related Net Mortgage Rates during the related
Interest Accrual Period, weighted on the basis of the Scheduled Principal
Balances thereof as of the first day of that Interest Accrual Period.
"WORKOUT FEE" with respect to any Corrected Mortgage Loan, an amount equal
to the product of 1.0% and the amount of all payments on account of principal
and interest on that mortgage loan and all Prepayment Premiums, Yield
Maintenance Charges and Excess Interest that are received by the master
servicer or the special servicer with respect to each Corrected Mortgage Loan
so long as the Corrected Mortgage Loan has not again become a Specially
Serviced Mortgage Loan.
"YEAR BUILT" (i) with respect to KeyBank National Association and Bridger
Commercial Realty Finance LLC, is based on information contained in deed
records, appraisals, engineering surveys, architectural papers, title
insurance, and/or other insurance policies and (ii) with respect to Salomon
Brothers Realty Corp., with respect to any mortgaged real property, the year
during which construction of the mortgaged real property was completed. In the
event of multiple years of construction, only the most recent of those years is
shown.
"YEAR RENOVATED" (i) with respect to KeyBank National Association and
Bridger Commercial Realty Finance LLC, is based upon information contained in
the appraisal of the related mortgaged property and (ii) with respect to
Salomon Brothers Realty Corp., with respect to any mortgaged real property, the
year during which the most recent renovation, if any, of the mortgaged real
property was completed. That renovation would generally include significant
capital improvements to both the interior and exterior of the mortgaged
property. In the event of multiple years of renovation, only the most recent of
those years is shown.
"YIELD MAINTENANCE CHARGE" will be the present value, as of the date of
prepayment, of the remaining scheduled payments of principal and interest on
the portion of the mortgage loan being prepaid (including any Balloon Payment
or principal balance due on the Anticipated Repayment Date for an ARD Loan)
determined by discounting those payments at the Yield Rate, less the amount
prepaid.
"YIELD RATE" generally is a per annum rate calculated by the linear
interpolation of the yields of U.S. Treasury constant maturities with maturity
dates (one longer, one shorter) most nearly approximating the maturity date
(or, with respect to ARD Loans, the Anticipated Repayment Date) of the mortgage
loan being prepaid, as reported in Federal Reserve Statistical Release
H.15--Selected Interest Rates under the heading U.S. Government
Securities/Treasury constant maturities, for the week ending prior to the date
of the prepayment, or the monthly equivalent of that rate. If Federal Reserve
Statistical Release H.15--Selected Interest Rates is no longer published, the
master servicer shall select a comparable publication to determine the relevant
Yield Rate.
S-153
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX A
Crossed loans (i.e., cross-collateralized or cross-defaulted mortgage
loans) include a summation of certain loan parameters (for example, (cut-off
date balance) on the top line of the loan group as designated in bold type and,
therefore, some loan totals are duplicated and must be adjusted to attain
portfolio totals.
Certain ratios including cut-off date balance/Unit or SF, DSCR, LTV and
Balloon LTV are calculated on a combined basis for mortgage loans that are
secured by multiple mortgaged properties or are cross-collateralized and
cross-defaulted.
The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related Note. For those
mortgage loans utilizing an actual/360 interest calculation methodology, the
actual amortization to a zero balance may require more monthly payments than
indicated.
"Largest Tenant Name" refers to the tenant that represents the greatest
percentage of the total square footage at the related mortgaged property.
YM represents yield maintenance. "YM1", "YM2", "YM3", "YM4" and "YM5",
represent the greater of yield maintenance or one percent, two percent, three
percent, four percent and five percent of the outstanding principal balance at
such time, respectively. The "1%", "2%", "3%", "4%" and "5%" represent
specified Prepayment Premiums. "Open" represents a period during which
principal prepayments are permitted without payment of a Prepayment Premium.
For each mortgage loan, the sum of the numbers set forth under the Prepayment
Description category represents the number of months in the original term to
maturity.
"LO" denotes that a mortgage loan is locked out for a period during which
prepayment is not permitted.
"DEF" denotes defeasance and indicates that a mortgage loan may be
defeased only during the indicated period.
"Yield Maintenance Description" indicates whether the Yield Maintenance
Charge is calculated using a flat Treasury Rate or a specified spread in basis
points.
"Yield Maintenance Calculation Method" indicates the various mathematical
formulas used to calculate the applicable Yield Maintenance Charges.
"Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment to the cut-off date.
Missing NOI data points occur because the data was not available or
because they apply to a time period that is not comparable to other mortgage
loans in the mortgage loan pool.
"Due-on-Sale" provides a confirmation that exercise is at the related
lender's option with a fee payable for such option.
"Fixed" Loan Type identifies that interest will accrue on the balance of
the related mortgage loan at the indicated fixed coupon during the term of the
loan.
"NAP" denotes data is not applicable.
"Current LTV Ratio" is calculated using the original appraised value and
the cut-off date balance.
A-1
<PAGE>
All current reserve escrow balances, monthly reserves and monthly escrows
were obtained from the related Mortgage Loan Seller.
Generally, 1998 NOI and 1999 NOI indicates a January through December
calendar of fiscal year.
"Current or Future Subordinate Financing" indicates whether the related
borrower may enter into further financing secured by the mortgaged property,
without the lender's consent.
Generally, any "Yield Maintenance Charge" will be calculated in accordance
with one of the following formulae:
TYPE 1:
The Yield Maintenance Charge will be an amount equal to the greater of (i)
a specified prepayment premium or (ii) the present value, as of the date of
such prepayment, of the remaining scheduled payments of principal and interest
on the portion of the Mortgage Loan being prepaid (including any Balloon
Payment or principal balance due on the Anticipated Repayment Date for an ARD
Loan) determined by discounting such payments at the Discount Rate, less the
amount being prepaid. The term "Discount Rate" shall mean the rate that, when
compounded monthly, is equivalent to the Treasury Rate (hereinafter defined)
when compounded semi-annually. The term "Treasury Rate" shall mean the yield
calculated by the linear interpolation of the yields, as reported in Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the prepayment date, of U.S. Treasury constant maturities with maturity dates
(one longer and one shorter) most nearly approximating the maturity date. In
the event that Release H.15 is no longer published, the lender shall select a
comparable publication to determine the Treasury Rate.
TYPE 2:
The Yield Maintenance Charge will be an amount equal to the greater of:
(i) a specified prepayment premium which is a percentage of the principal
balance of the Mortgage Loan being prepaid; or (ii) the product of (A) the
ratio of the amount of the principal balance of the Mortgage Loan being prepaid
over the outstanding principal balance of the Mortgage Loan on the date of such
prepayment (after subtracting the scheduled principal payment on such
prepayment date), multiplied by (B) the present value as of the prepayment date
of the remaining scheduled payments of principal and interest from the
prepayment date through the maturity date (including any balloon payment)
determined by discounting such payments at the Discount Rate less the amount of
the outstanding principal balance of the Mortgage Loan on the prepayment date
(after subtracting the scheduled principal payment on such prepayment date).
The term "Treasury Rate" shall mean the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15-Selected Interest Rates under the heading U.S. Government
Securities/Treasury Constant Maturities for the week ending prior to the
prepayment date, of U.S. Treasury constant maturities with maturity dates (one
longer and one shorter) most nearly approximating the maturity date. In the
event that Release H.15 is no longer published, the lender shall select a
comparable publication to determine the Treasury Rate.
TYPE 3:
The Yield Maintenance Charge will be an amount equal to the greater of (i)
1% of the outstanding principal balance of the Mortgage Loan as of the date of
prepayment, or (ii) an amount
A-2
<PAGE>
equal to (x) the sum of the present values as of the date of prepayment of all
unpaid principal and interest payments required under the Mortgage Loan,
calculated by discounting such payments from their respective scheduled payment
dates back to the date of prepayment at a discount rate equal to the Periodic
Treasury Yield (as hereinafter defined), minus (y) the outstanding balance of
the Mortgage Loan as of the date of prepayment. The "Periodic Treasury Yield"
means (i) the annual yield to maturity of an actively traded non-callable U.S.
Treasury fixed interest rate security (other than any such security which can
be surrendered at the option of the holder at face value in payment of federal
estate tax or which was issued at a substantial discount) that has a maturity
closest to (whether before, on or after) the maturity date of the Mortgage Loan
(or if two or more such securities have maturity dates equally close to the
maturity date of the Mortgage Loan, the average annual yield to maturity of all
such securities), as reported in The Wall Street Journal or other authoritative
publication or news retrieval service on the fifth business day preceding the
date of prepayment, divided by (ii) twelve, if scheduled payments are monthly,
or four, if scheduled payment dates are quarterly.
TYPE 4:
The Yield Maintenance Charge will be an amount equal to the greater of (i)
1% of the principal balance of the Mortgage Loan being prepaid, or (ii) the
product obtained by multiplying (A) the prepaid principal balance of the
Mortgage Loan at the time of prepayment, multiplied by (B) the difference
obtained by subtracting from the interest rate of the Mortgage Loan the yield
rate (the "Yield Rate") on the direct U.S. Treasury Security obligation having
a maturity closest to the maturity date of the Mortgage Loan (the "Specified
U.S. Treasury Security"), as the Yield Rate is reported in the Wall Street
Journal on the fifth business day preceding (x) the date notice of prepayment
is given to the holder of the Mortgage Loan ("Holder") where prepayment is
voluntary, or (y) the date the Holder accelerated the Mortgage Loan, times (C)
the present value factor calculated using the following formula:
1- (l - r)-n
r
where r = Yield Rate for the Specified U.S. Treasury Security, and n = the
number of years, and any fraction thereof, remaining between the prepayment
date and the maturity date of the Mortgage Loan; if the publication of such
Yield Rates in the Wall Street Journal is discontinued, the Holder shall
determine such Yield Rates from another source selected by the Holder.
Notwithstanding the foregoing, (i) as to the Twelve Month Period
commencing November 1, 1999, and continuing through and including October 31,
2000, Borrower may prepay the Mortgage Loan in an aggregate amount not to
exceed the sum of $240,000, plus any Accumulated Unused Annual Prepayments,
provided any such prepayment shall be made with the simultaneous payment by
Borrower to Holder of all accrued and unpaid interest, and any other sums due
under the Mortgage Loan, and a prepayment premium equal to 1% o the prepaid
principal balance of the Mortgage Loan, and (ii) the prepayment premium payable
by Borrower for any prepayments of principal occurring during any 12 Month
Period of the first (1st) five (5) years after October 31, 2000, which do not
exceed the sum of $240,000, plus any Accumulated Unused Annual Prepayments,
shall be limited to 1% of such prepaid amount.
For the purposes hereof,
"12 Month Period" shall mean the twelve (12) month period commencing
November 1, 1996, and continuing through and including October 31, 1997, and
every succeeding twelve (12) month period thereafter,
A-3
<PAGE>
"Unused Annual Prepayment" shall mean, as to any 12 Month Period, the
amount, if any, by which $240,000 exceeds any prepayments of principal made
during such 12 Month Period,
"Used Annual Prepayment" shall mean, as to any 12 Month Period, the
amount, if any, by which the aggregate amount of prepayments of principal made
during such 12 Month Period exceeds $240,000, and
"Accumulated Unused Annual Prepayment" shall mean at any time, and from
time to time, the aggregate amount of Unused Annual Prepayments for all prior
12 Month Periods, less the aggregate amount of Used Annual Prepayments for all
prior 12 Month Periods.
TYPE 5:
The Yield Maintenance Charge will be an amount equal to the greater of (i)
one percent (1%) of the amount prepaid, or (ii) the present value of a series
of payments each equal to the Payment Differential (hereinafter defined) and
payable on the first day of each month "Monthly Payment Date" from the date of
prepayment through and including the maturity date discounted at the
Reinvestment Yield (hereinafter defined) (monthly compounding) for the number
of months remaining from the date of prepayment to each such Monthly Payment
Date. The "Reinvestment Yield" shall be equal to the yield on the U.S. Treasury
issue (primary issue) with a maturity date closest to, but not earlier than,
the maturity date with such yield being based on the bid price for such issue
as published in The Wall Street Journal in New York City, New York on a date
fourteen (14) days prior to the date of prepayment set forth in the prepayment
notice (or, if such bid price is not published on that date, the next preceding
date on which such bid price is so published) and converted to a monthly
compounded nominal yield. In the event The Wall Street Journal ceases
publication or ceases to publish the bid price for such U.S. Treasury issues,
the borrower shall select a comparable publication to determine such bid price.
Absent manifest error, the determination of the Reinvestment Yield and the
calculation of the Yield Maintenance Charge by the borrower shall be binding on
lender. The "Payment Differential" shall be equal to the product of (x) a
fraction, the numerator of which is the excess, if any, of a per annum interest
rate equal to the then applicable interest rate on the related Mortgage over
the Reinvestment Yield (expressed as a decimal percentage), and the denominator
of which is 12, and (y) the principal balance of related Mortgage Note.
A-4
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
RANGE OF CUT-OFF DATE MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
PRINCIPAL BALANCES LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
351,672 - 499,999 ........ 2 0.09% 9.510% 109.0 74.04% 1.36x $ 703,345
500,000 - 999,999 ........ 15 1.53 8.778 118.3 63.76 1.36 12,491,845
1,000,000 - 1,999,999 .... 38 7.10 8.477 116.8 67.22 1.32 58,125,862
2,000,000 - 2,999,999 .... 24 7.06 8.316 126.1 67.63 1.32 57,803,883
3,000,000 - 3,999,999 .... 17 7.42 8.357 112.8 70.49 1.31 60,746,781
4,000,000 - 4,999,999 .... 13 7.24 8.101 112.9 72.96 1.31 59,243,863
5,000,000 - 5,999,999 .... 14 9.44 8.200 114.8 68.67 1.35 77,242,170
6,000,000 - 6,999,999 .... 9 7.29 8.233 115.1 70.12 1.32 59,638,854
7,000,000 - 7,999,999 .... 7 6.50 8.191 112.9 75.06 1.26 53,177,532
8,000,000 - 8,999,999 .... 4 4.32 8.216 120.7 77.56 1.23 35,353,940
9,000,000 - 9,999,999 .... 6 6.85 8.510 113.6 70.30 1.35 56,063,026
10,000,000 - 11,999,999 .. 5 6.73 8.135 119.2 72.20 1.34 55,069,660
12,000,000 - 14,999,999 .. 6 10.13 7.766 115.1 71.84 1.30 82,917,700
15,000,000 - 19,999,999 .. 3 6.44 8.112 119.7 73.96 1.33 52,670,756
20,000,000 - 39,999,999 .. 4 11.87 8.060 112.1 74.84 1.24 97,157,689
--- ------ ----- ----- ----- ---- ------------
Total .................... 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
PROPERTY TYPE DISTRIBUTION BY CUT-OFF DATE PRINCIPAL
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGED CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
PROPERTY TYPE PROPERTIES POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- ---------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily ........ 46 27.84% 8.053% 114.6 75.09% 1.28x $227,870,837
Retail-Anchored .... 18 21.70 8.065 113.9 73.37 1.27 177,594,097
Office ............. 31 19.86 8.187 118.0 67.29 1.35 162,513,189
Industrial ......... 20 9.80 8.267 114.4 72.06 1.29 80,230,218
Retail-Unanchored .. 14 5.74 8.207 123.9 72.47 1.25 46,983,262
Manufactured Housing 30 5.56 8.433 117.5 67.55 1.36 45,511,849
Hotel .............. 3 3.64 9.124 112.4 65.75 1.52 29,755,349
Mixed Use .......... 6 2.83 8.557 115.3 69.75 1.31 23,139,145
Retail-Single Tenant 6 2.26 8.330 120.0 67.81 1.35 18,526,355
Self-Storage ....... 4 0.60 8.840 123.0 56.88 1.37 4,881,581
Retail-Shadow Anchor 1 0.17 6.940 99.0 63.68 1.52 1,401,025
--- ------ ----- ----- ----- ---- ------------
Total .............. 179 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-5
<PAGE>
MATURITY YEARS
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
MATURITY DATE YEARS LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
2005 ............... 1 1.68% 7.530% 55.0 73.12% 1.27x $ 13,710,244
2006 ............... 1 0.48 8.170 77.0 77.27 1.26 3,894,599
2008 ............... 1 0.17 6.940 99.0 63.68 1.52 1,401,025
2009 ............... 94 49.10 8.168 110.8 71.49 1.32 401,875,407
2010 ............... 52 38.42 8.306 117.4 72.66 1.29 314,431,241
2011 ............... 8 4.08 8.183 133.7 61.09 1.41 33,404,045
2012 ............... 3 3.07 8.216 140.4 75.82 1.25 25,141,867
2013 ............... 1 1.63 7.500 151.0 61.55 1.26 13,380,764
2014 ............... 2 0.44 7.566 174.5 68.33 1.24 3,572,059
2015 ............... 2 0.42 8.435 182.1 74.56 1.25 3,427,204
2018 ............... 1 0.33 6.880 220.0 74.72 1.27 2,689,754
2019 ............... 1 0.18 9.000 230.0 59.63 1.32 1,478,700
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
ORIGINATION YEARS
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
LOAN ORIGINATION YEARS LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
---------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 ............... 1 0.25% 10.300% 137.0 31.53% 1.72x $ 2,080,978
1997 ............... 3 3.59 7.583 108.8 68.18 1.26 29,409,106
1998 ............... 4 2.27 6.996 142.8 74.12 1.28 18,594,704
1999 ............... 127 74.10 8.158 114.4 71.36 1.31 606,446,042
2000 ............... 32 19.78 8.557 119.2 72.93 1.28 161,876,078
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
COLLATERAL CONTRIBUTORS
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
COLLATERAL CONTRIBUTORS LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Key Bank ........... 92 59.03% 8.149% 116.6 71.03% 1.30x $483,065,357
Bridger ............ 55 21.59 8.481 115.4 68.02 1.38 176,718,506
Salomon Smith Barney 20 19.38 8.018 114.3 76.91 1.25 158,623,044
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-6
<PAGE>
GEOGRAPHIC DISTRIBUTION BY CUT-OFF DATE PRINCIPAL
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGED CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
STATE PROPERTIES POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- ---------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
California ......... 34 22.82% 8.252% 115.5 69.30% 1.33x $186,745,147
Texas .............. 20 12.16 7.802 120.9 73.05 1.27 99,484,348
Maryland ........... 3 5.65 8.551 110.8 73.51 1.36 46,239,958
Nevada ............. 7 4.86 8.118 124.3 73.06 1.26 39,781,780
New York ........... 12 4.80 8.452 112.8 72.01 1.25 39,266,731
Washington ......... 6 4.60 8.141 92.9 70.53 1.27 37,635,167
Pennsylvania ....... 10 3.79 8.321 113.5 72.51 1.26 31,037,407
Nebraska ........... 1 3.72 8.380 115.0 72.41 1.25 30,410,327
Virginia ........... 4 3.61 7.834 116.7 77.64 1.29 29,548,534
New Jersey ......... 7 3.50 8.078 120.8 63.49 1.47 28,612,319
Illinois ........... 7 3.08 8.257 111.7 73.72 1.29 25,170,000
Indiana ............ 3 2.82 8.240 127.4 77.14 1.24 23,077,791
Tennessee .......... 2 2.35 8.115 114.0 77.19 1.24 19,222,742
Florida ............ 7 2.22 8.317 115.1 74.14 1.27 18,190,292
Ohio ............... 5 1.75 8.229 113.4 71.09 1.28 14,311,452
Michigan ........... 4 1.62 8.201 114.7 64.01 1.46 13,265,117
Colorado ........... 4 1.59 8.218 109.5 58.45 1.51 13,004,495
Minnesota .......... 5 1.57 8.681 131.1 72.45 1.28 12,876,079
Georgia ............ 3 1.57 8.246 125.3 85.65 1.19 12,824,770
Massachusetts ...... 2 1.47 8.325 135.3 62.42 1.49 12,053,531
Kentucky ........... 2 1.37 8.020 113.9 75.53 1.29 11,211,303
Arizona ............ 3 1.02 8.555 115.4 68.96 1.22 8,328,450
Oregon ............. 3 1.00 8.005 110.4 66.37 1.33 8,153,835
Missouri ........... 3 0.98 8.464 113.7 76.69 1.22 8,060,266
Delaware ........... 4 0.90 8.052 111.2 75.39 1.27 7,393,340
Alaska ............. 3 0.89 8.389 114.3 73.78 1.32 7,322,635
Louisiana .......... 2 0.83 8.567 114.9 63.32 1.44 6,818,009
Idaho .............. 2 0.82 7.911 109.0 76.14 1.35 6,670,589
District of Columbia 3 0.72 8.400 109.0 55.85 1.30 5,908,937
New Mexico ......... 1 0.59 7.570 109.0 79.50 1.45 4,865,678
Kansas ............. 2 0.42 8.435 113.0 71.62 1.28 3,476,644
Utah ............... 2 0.36 7.930 108.0 77.41 1.23 2,978,693
Wisconsin .......... 1 0.33 7.079 175.0 70.72 1.28 2,722,580
Rhode Island ....... 1 0.12 8.550 115.0 52.13 1.83 995,605
Oklahoma ........... 1 0.09 9.380 127.0 44.99 1.50 742,358
--- ------ ----- ----- ----- ---- ------------
Total .............. 179 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-7
BALLOON/ARD LTV RANGE
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
RANGE OF BALLOON/ARD MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
LOAN-TO-VALUES LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Zero - 5.0 ......... 5 1.00% 8.587% 190.2 58.81% 1.37x $ 8,208,016
15.01 - 35.00 ...... 2 0.33 8.865 133.5 47.46 1.35 2,697,683
35.01 - 40.00 ...... 2 1.07 8.025 123.5 43.28 1.68 8,762,810
40.01 - 45.00 ...... 10 4.01 8.297 117.1 54.29 1.54 32,783,173
45.01 - 50.00 ...... .6 3.06 7.926 132.9 59.38 1.35 25,020,711
50.01 - 55.00 ...... 15 4.83 8.291 112.0 62.66 1.36 39,559,374
55.01 - 60.00 ...... 25 12.35 8.448 119.1 67.54 1.37 101,052,036
60.01 - 65.00 ...... 49 27.32 8.151 117.8 71.86 1.30 223,604,539
65.01 - 70.00 ...... 35 30.68 8.166 109.6 74.94 1.26 251,051,861
70.01 - 75.00 ...... 17 14.44 8.106 114.4 79.58 1.24 118,199,739
80.01 - 85.00 ...... 1 0.91 8.150 112.0 91.39 1.14 7,466,965
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.309x $818,406,907
=== ====== ===== ===== ===== ===== ============
</TABLE>
DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
DSCR(x) LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.01 - 1.15 ........ 2 1.02% 8.250% 118.2 88.25% 1.14x $ 8,316,443
1.16 - 1.20 ........ 6 5.85 8.289 114.9 76.39 1.20 47,913,653
1.21 - 1.25 ........ 50 33.27 8.156 116.3 74.69 1.24 272,255,157
1.26 - 1.30 ........ 53 31.98 8.110 114.9 71.85 1.28 261,688,367
1.31 - 1.35 ........ 20 9.70 8.185 120.2 70.65 1.33 79,358,025
1.36 - 1.40 ........ 8 2.91 8.261 112.2 68.73 1.38 23,805,224
1.41 - 1.45 ........ 8 4.07 8.133 111.7 69.61 1.43 33,316,241
1.46 - 1.50 ........ 7 4.17 8.516 119.6 64.30 1.50 34,142,178
1.51 - 1.55 ........ 4 3.37 8.765 111.2 62.93 1.52 27,568,174
1.56 - 1.60 ........ 3 1.15 8.065 113.7 61.25 1.58 9,423,820
1.66 - 1.70 ........ 1 0.49 8.200 114.0 45.83 1.70 3,987,052
1.71 - 1.75 ........ 3 1.18 8.560 128.0 41.65 1.72 9,656,388
1.76 - 1.80 ........ 1 0.73 8.200 114.0 49.02 1.78 5,980,579
1.81 - 1.85 ........ 1 0.12 8.550 115.0 52.13 1.83 995,605
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-8
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
MORTGAGE RATES LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.751 - 7.000 ...... 2 0.50% 6.901% 178.6 70.94% 1.36x $ 4,090,779
7.001 - 7.250 ...... 2 1.77 7.023 132.8 75.02 1.26 14,503,925
7.251 - 7.500 ...... 2 2.16 7.481 140.6 65.76 1.26 17,645,989
7.501 - 7.750 ...... 10 10.16 7.645 103.5 75.92 1.29 83,128,191
7.751 - 8.000 ...... 21 18.36 7.931 115.8 71.34 1.32 150,295,109
8.001 - 8.250 ...... 36 28.10 8.121 114.3 72.56 1.31 229,950,340
8.251 - 8.500 ...... 42 20.60 8.383 116.1 70.63 1.28 168,628,507
8.501 - 8.750 ...... 23 7.97 8.635 119.5 69.59 1.32 65,186,891
8.751 - 9.000 ...... 16 4.95 8.892 119.7 71.08 1.30 40,508,738
9.001 - 9.250 ...... 4 2.13 9.118 119.0 67.94 1.26 17,421,036
9.251 - 9.500 ...... 5 2.85 9.319 113.8 68.16 1.49 23,334,822
9.501 - 9.750 ...... 3 0.20 9.595 113.6 64.92 1.31 1,631,602
10.251 - 10.500 .... 1 0.25 10.300 137.0 31.53 1.72 2,080,978
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
RANGE OF CURRENT LOAN-TO-VALUE
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
LOAN-TO-VALUES LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.01 - 35.00 ...... 1 0.25% 10.300% 137.0 31.53% 1.72x $ 2,080,978
40.01 - 45.00 ...... 3 1.16 8.131 123.8 43.41 1.67 9,505,167
45.01 - 50.00 ...... 4 1.65 8.305 116.6 48.08 1.63 13,516,193
50.01 - 55.00 ...... 7 1.48 8.333 111.6 52.69 1.42 12,125,707
55.01 - 60.00 ...... 6 2.50 8.649 120.2 58.63 1.48 20,420,923
60.01 - 65.00 ...... 18 9.22 8.089 123.3 62.51 1.38 75,419,295
65.01 - 70.00 ...... 28 14.30 8.469 114.6 68.14 1.35 117,049,915
70.01 - 75.00 ...... 56 35.40 8.273 115.6 72.70 1.27 289,693,992
75.01 - 80.00 ...... 40 30.94 7.937 113.5 77.67 1.26 253,174,302
80.01 - 85.00 ...... 3 2.19 8.363 124.7 81.78 1.26 17,953,471
85.01 - 95.00 ...... 1 0.91 8.150 112.0 91.39 1.14 7,466,965
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-9
<PAGE>
DISTRIBUTION OF PAYMENT TYPES
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
WEIGHTED AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
MORTGAGE CUT-OFF DATE INTEREST TERM CUT-OFF DATE AVERAGE THE CUT-OFF
PAYMENT TYPES LOANS POOL BALANCE RATE (MONTHS) LTV DSCR DATE
--------------------- --------- ------------ -------- --------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Amortizing Balloon . 152 88.07% 8.211% 115.9 71.57% 1.31x $720,739,965
Hyper Amortizing ... 10 10.93 8.032 109.0 72.25 1.27 89,458,926
Fully Amortizing ... 5 1.00 8.587 190.2 58.81 1.37 8,208,016
--- ------ ----- ----- ----- ---- ------------
Total .............. 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
=== ====== ===== ===== ===== ==== ============
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOAN POOL
------------------------------------------------------------------------------------------------------------------------------------
CONTROL LOAN
NUMBER NUMBER LOAN CONTRIBUTOR PROPERTY NAME PROPERTY ADDRESS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 10312 Key SouthPointe Pavilions 2940 Pine Lake Road
2 6603515 Salomon Gateway Village Shopping Center 150 Defense Highway
3 5557 NRF The Bristol Apartments 1221 Redford Road
4 BRIDGER VARIOUS VARIOUS
4.1 260990081 Bridger Quality Inn - Boardwalk 1601 North Baltimore Avenue
4.2 260990082 Bridger Quality Inn - Oceanfront 5400 Coastal Highway
5 6603656 Salomon 4000 Alameda 4000 W. Alameda
6 10756 Key Sterling University Village 117 Holleman Drive West
7 10761 Key Red Rock Villas Apartments 451 Crestdale Lane
8 7816 NRF The Aerospace Corporation 180 - 200 N. Aviation Boulevard
9 415990039 Bridger Highlander Apartments 620 Iris Avenue
10 6603700 Salomon Lenoxgate Apartments 100 Lenoxplace
11 9569 NRF Meadowood Plaza Shopping Center 5505-5575 South Virginia Street
12 2806 Key Pickering Square Shopping Center 1802-1810 12th Avenue Northwest
13 1906 NRF ABERFELDY PORTFOLIO VARIOUS
13.1 1906A NRF Shiloh Office Park 921 Shiloh Road
13.2 1906B NRF LAM Research Building 1524 South IH 35
13.3 1906C NRF 2550 Downing Road Building 2550 Downing Drive
13.4 1906D NRF Ranch Plaza 820 East Bruton Road
13.5 1906E NRF Richland Business Center 445 East Walnut Street
13.6 1906F NRF Richland Commons Shopping Center 8251 Bedford-Euless Road
14 7598 NRF NEC Building 14040 Park Center Road
15 1889 NRF Northcrest Village Shopping Center 3044 Old Denton Road
16 6603028 Salomon 9201 Belmont Ave. 9201 Belmont Avenue
17 6392 NRF Inman Grove Shopping Center 1125 Inman Avenue
18 9776 NRF Market Pointe I Center 15104-15310 East Indiana Avenue
19 10315 Key Hawk Pacific Distribution Warehouse Facility 175 Tower Road
20 SALOMON VARIOUS 2 South End Avenue
20.1 6603086 Salomon Cove Club Residential 2 South End Avenue
20.2 6603085 Salomon Cove Club Commercial 2 South End Avenue
21 810000132 Bridger Bridge Point Business Park 4120 & 4142 Point Eden Way
22 8355 NRF Doubletree Riverfront Hotel 50 Warren Street
23 8987 NRF Greenwood Square Shopping Center 2945 Scottsville Road
24 9519 Key 599 Broadway 599 Broadway
25 7529 NRF Bixby Knolls Shopping Center 4500-4558 North Atlantic Avenue
26 410990101 Bridger Bensalem Crossing 2200 - 2290 Neshaminy Boulevard
27 9272 Key Garden Quarter Apartments 1200 Elmwood Drive
28 6604092 Salomon Gatehouse Plaza 3040-3071 Gatehouse Plaza
29 9069 NRF 11th & Main Properties 1100-1132 & 1123-1137 South Main,
106-112 11th Street
30 6603157 Salomon Wilshire Office Building 8447 Wilshire Boulevard
31 240990070 Bridger Citrus Village 700 E. Redlands Blvd.
32 10487 Key The Hornbrook Estates Apartments 5001 East Riverside Drive
33 6603490 Salomon Stephens Business Park 1860-1999 Parker Court
34 7000 NRF Havenwood Apartments 6501 Boca Raton Boulevard
35 10382 Key General Motors Building 5350 Biloxi Avenue and 5353 Clybourn
36 6603234 Salomon Harbor Tower One Harbor Court
37 8770 NRF Champlin Marketplace 8600 114th Avenue North
38 10489 Key The Martin Estates Apartments 2301 Raleigh Boulevard
39 6603048 Salomon Chowder Bay Apartments 4700 South Rio Grande Ave
40 9462 NRF Kennedy Center 10200 East Girard Avenue
41 6603050 Salomon Airport Plaza Office Complex - Airport II 1762 Technology Drive
42 7198 NRF 32-36 West 39th Street 32-36 West 39th Street
43 9155 Key Homebase 725 Grand Avenue
44 400990084 Bridger 769 Northfield Avenue 769 Northfield Avenue
45 8489 NRF Fox Hunt Apartments 2095 Valley Green Drive
46 400990109 Bridger Southwood Village Mobile Home Park 440 60th Street S.E.
47 6603029 SALOMON BALDUCCI'S VARIOUS
47.1 6603029A Salomon Balducci's- 424 6th Avenue 69-73 West 9th Street, a/k/a 424 Sixth Avenue
47.2 6603029B Salomon Balducci-11-02 Queens Plaza South 11-02 Queens Plaza South
48 240990106 Bridger ABI Distribution Center 1701 Exchange Parkway
49 8512 NRF Huntington Beach Medical Center 17742 Beach Boulevard
50 410990052 Bridger East Gate Office 125-139 Gaither Drive
51 7723 NRF San Bruno Square 881-883, 901-903 Sneath Lane
52 7361 NRF Weber Distribution Building 13530 Rosecrans Avenue
53 6603961 Salomon ABCO Desert Market 13940 W. Meeker Blvd.
54 NRF VARIOUS VARIOUS
55 6643 NRF Mobile Home Rollup Various
55.1 6643A NRF Smith Mobile Home Park 14115 South Western Avenue
55.2 6643B NRF American Mobile Home Park 14149 South Western Avenue
56 9198 NRF Sycamore Mobile Home Park 1750 West Broadway
57 7001 NRF Copper Creek Apartments 6011 Oakland Hills
58 400000134 BRIDGER TROPICANA BLVD. MHP VARIOUS
58.1 400000134A Bridger Golden Mobile Manor 252 East Tropicana Avenue
58.2 400000134B Bridger Bond Trailer Lodge 284 East Tropicana Avenue
58.3 400000134C Bridger Tropicana Mobile Home Park 300 East Tropicana Avenue
59 250990091 Bridger Executive Ridge (Cardiff) 3220 Executive Ridge Drive
60 10319 Key Underwood Gartland 216 8329 and 8415-216th Street SE
61 6913 NRF Redwood Park Apartments 4103 West 18th Avenue
62 10320 Key AHFC Office Building 4300 Boniface Parkway
63 6603463 Salomon Walnut Street Portfolio 5406-5408, 5411, 5509-5511, 5520 and
5524 Walnut Street
64 6603498 Salomon The Towers Apartments 5400 & 5404 Montgomery Blvd. NE
65 7488 NRF Baldwin Building 201 Baldwin Avenue
66 7815 NRF Birch Plaza 236 South 1st West
67 800990098 Bridger Evergreen Business Center 8625 Evergreen Way
68 7371 NRF Random House Distribution Warehouse 193 Edwards Drive
69 6603237 Salomon Evergreen Apartments 6085 Pegasus Drive
70 6988 NRF San Marcos Freeway Center 960-680 Los Vallecitos Boulevard
71 7805 NRF Salem Woods Apartments 5291 Wood Creek Road
72 7827 NRF Colonial Gardens Apartments 334 East Main Street
73 258990114 Bridger Essen Crossing 5703-5745 Essen Lane
74 8714 NRF Warrington Shopping Center Route 611 and Bristol Roads
75 400990085 Bridger 349 E. Northfield Road 349 E. Northfield Road
76 400990071 Bridger Philadelphia Design Center 2300-2320 Chestnut Street &
2306-2312 Ionic Street
77 245990073 Bridger Country Meadows Estates 701 Ridgeview Drive
78 9082 Key River Valley Mobile Home Park 10910 Turner Boulevard
79 10314 Key Milford Corporate Office Park 1050 & 1150 Corporate Office Drive
80 9179 NRF Summit Ridge Apartments 9500 Summit Drive
81 7261 NRF Best Buy Store 5550 SW Loop 820
82 240000136 Bridger Corinthian Plaza 4341 & 4343 MacArthur Blvd.
83 240990103 Bridger Linens N' Things 2240 Bradley Road
84 410990083 Bridger 1035 Mill Road 1035 Mill Road
85 6251 NRF VARIOUS VARIOUS
85.1 6251A NRF Homestead Mobile Home Park County Route 442 & 431
85.2 6251B NRF Pine Acres/Ulrich Mobile Home Park Route 60 Cassadaga
85.3 6251C NRF Pine Ridge Mobile Home Park North Street
85.4 6251D NRF Sunset Mobile Home Park 637 Route 17C
86 9704 NRF Colonial Corners Shopping Center 5600 Colonial Drive
87 6909 NRF Charleston Apartments 1429 Seventh Street, 1202 Lincoln Avenue,
1434, 1617, 1801 Ninth Street
88 10308 Key Oceanside Village Apartments 207 Chandler Street
89 7184 NRF Battlefield Place Shopping Center Highway 27 at Highway 27 Bypass
90 6885 NRF North Village Apartments 1602 Jacaman Road
91 255990080 Bridger Owens Corning Whse 2710 Laude Road
92 6000070 Salomon K-Mart Store 103 Oak Avenue
93 6601140 Salomon Cochituate Village Shopping Center 25 - 35 Main Street
94 7015 NRF The Misty Bayou Apartments #1 Stonesthrow Drive
95 10311 Key Festival Shopping Center 185 North Kennedy Drive
96 7404 NRF Mission Valley Office 2525 Camino Del Rio South
97 10318 Key River Falls Shopping Center SWC of Blankenship Road and 10th Street
98 10391 Key 56 Court Street 56 Court Street
99 6569 NRF 300 I Street, N.E. 300 I Street N.E.
100 10313 Key Vinyl Source Plant 427 Thatcher Lane
101 400980023 Bridger Escondido Terrace MHP 1380 Oak Hill Drive
102 KEY VARIOUS VARIOUS
102.1 10405 Key Churchill Mobile Home Park 5905 Churchill Way
102.2 10335 Key Waterside Mobile Home Park 5010 North Douglas Highway
103 5151 NRF Mira Mesa Commercial Center 9175 & 9225 Mira Mesa Boulevard
104 7552 NRF Burnsville Heights Business Center 11975 Portland Avenue South
105 10306 Key Eagles Run Apartments, Phase II 2000 Bouldercrest Road
106 9391 Key Coral Way Gardens Apartments 2150 South West 16th Avenue
107 10309 Key MAC Equipment 7901 NW 107th Terrace
108 800990076 Bridger 13000 Bel-Red Road 13000 Bel-Red Road
109 8399 NRF K-Mart 1290 North Monroe Street
110 400990108 Bridger Hacienda Square 4460-4480 W. Hacienda Avenue
111 7747 NRF Madison Court Apartments One Madison Avenue
112 10400 Key Renaissance Village 5035 South Catherine Street
113 300980019 Bridger Kimberly Gardens MHP 24922 Muirlands Blvd.
114 240990104 Bridger Lazy Boy Furniture 2104 Bradley Road
115 400990086 Bridger 120 Littleton Road 120 Littleton Road
116 10336 Key The Alderview Apartments 300 11th Avenue
117 6602981 Salomon Scoop Office Bldg. 416 W. Muhammad Ali Blvd.
118 405990030 Bridger Aspen Village Apts. 545 South 2nd East
119 8698 NRF Palm Desert Apartments 8429 North 27th Avenue
120 7766 NRF Stor More I & II 1506 Industrial Boulevard and 1315 Muller Road
121 8335 NRF Oakwood Manor and Monterey Apartments 808 Washburn Avenue/ 1015 SW Garfield Avenue
122 6568 NRF 220 I Street, N.E. 220 I Street, N.E.
123 245990072 Bridger Nancene Apartments 805 S. Mill Street
124 220990034 Bridger 1344-1350 University Ave. 1344-1350 University Avenue
125 7237 NRF Bellwood Terrace Apartments 2554 Noel Street
126 415990117 Bridger Casa de Barcelona 2800 South 25th Street
127 400990065 Bridger 3701 Birch Street 3701 Birch Street
128 6567 NRF 1413 K Street, N.W. 1413 K Street, N.W.
129 245990074 Bridger University Properties 1533 Merchant Street, 1610 & 1622 Center Street
130 400990047 Bridger Parkway MHP 9355 South 500 West
131 420990049 Bridger 1128-1142 Valencia Street Apts. 1128-1142 Valencia Street and
27-41 San Jose Avenue
132 10323 Key Kissing Camels Office Building 2950 Professional Place
133 400990051 Bridger 2823-35 S. Bristol St. Office 2823 & 2835 S. Bristol Street
134 400990029 Bridger Oak Grove MHP 307 1/2 Mehigan Street Northwest
135 BRIDGER VARIOUS VARIOUS
135.1 410990077 Bridger 14001 Townsend 14001 Townsend Road
135.2 410990090 Bridger 203 Lincoln Highway 203 Lincoln Highway
136 3314 NRF Camp Wisdom Village Shopping Center 222 Camp Wisdom Road
137 415000131 Bridger Desert Dorado Villas 850 E. Vista Chino Drive
138 400990048 Bridger Northcrest MHP 3980 South 1950 West
139 400990041 Bridger Woischke's MHP Route 4 box 36C
140 10310 Key Gallatin Manor Apartments 332 East William Street
141 410990045 Bridger Green St. Manor Apts. 1806-1814 Green Street
142 245990116 Bridger Noah's Ark Self Storage 30435 Highway 281 North
143 8669 Key Monterey Shore Plaza Shopping Center 72-750 Dinah Shore Drive
144 410990061 Bridger 1841 South 4th Street 1841 South 4th Street
145 400990119 Bridger Country Village MHP 801 E Rittenhouse Street
146 400990095 Bridger North Bonita Self Storage 26300 Old 41 Road
147 7748 NRF 728 Dawson Drive 728 Dawson Drive
148 10407 Key The Franklin Building 1524-1536 Franklin Street
149 6010 NRF Montgomery Center Building 3615 Kearny Villa Road
150 400990107 Bridger Townhouse MHP 3811 North 27th Avenue
151 415990102 Bridger La Villa Vegas MHP 1190 S. Mojave Road
152 400990089 Bridger Leisure Village MHC 1620 Nooseneck Hill Road
153 400980012 Bridger Bamboo MHP 2430 Charles Rd.
154 400990064 Bridger El Rancho MHP 12955 Yorba Avenue
155 10399 Key Woodside Estates Mobile Home Park 1322 Paddock Drive
156 410990066 Bridger Fairwinds Plaza 703-707 Pulaski Highway
157 400990097 Bridger Harbor Mobile Home Park 22503 Meyler Street
158 5847 NRF Summerfield Apartments 1650 7th Street SE
159 400990060 Bridger Chesapeake Point Mobile Home Park 800 Chesapeake Drive
160 8526 NRF AJAX Corporate Building 605 East Houston Street
161 10337 Key Twin Oaks & Beaver Creek Mobile Home Parks 9230 State Route 45
162 NRF VARIOUS VARIOUS
162.1 6667 NRF 410 Third Avenue 410 Third Avenue
162.2 6668 NRF 407 Third Avenue 407 Third Avenue
163 10338 Key North Valley Mini Storage 222 Brookside Boulevard
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
CONTROL LOAN PROPERTY PROPERTY
NUMBER NUMBER CITY STATE PROPERTY ZIP CODE PROPERTY TYPE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 10312 Lincoln NE 68516 Retail-Anchored
2 6603515 Annapolis MD 21401 Retail-Anchored
3 5557 Houston TX 77034 Multifamily
4 VARIOUS MD 21842 HOTEL-FULL SERVICE
4.1 260990081 Ocean City MD 21842 Hotel-Full Service
4.2 260990082 Ocean City MD 21842 Hotel-Full Service
5 6603656 Burbank CA 91505 Office
6 10756 College Station TX 77840 Multifamily
7 10761 Las Vegas NV 89134 Multifamily
8 7816 El Segundo CA 90245 Office
9 415990039 Sunnyvale CA 94086 Multifamily
10 6603700 Goodlettsville TN 37072 Multifamily
11 9569 Reno NV 89509 Retail-Anchored
12 2806 Issaquah WA 98027 Retail-Anchored
13 1906 VARIOUS VARIOUS VARIOUS VARIOUS
13.1 1906A Tyler TX 75703 Office
13.2 1906B Austin TX 78704 Office
13.3 1906C Fort Worth TX 76106 Warehouse
13.4 1906D Mesquite TX 75149 Retail-Unanchored
13.5 1906E Richardson TX 75801 Retail-Unanchored
13.6 1906F North Richland Hills TX 76180 Retail-Unanchored
14 7598 Herndon VA 20171 Office
15 1889 Carrollton TX 75007 Retail-Anchored
16 6603028 Franklin Park IL 60131 Industrial
17 6392 Edison NJ 08820 Retail-Anchored
18 9776 Spokane WA 99216 Retail-Anchored
19 10315 Napa CA 94588 Industrial
20 New York NY 10280 VARIOUS
20.1 6603086 New York NY 10280 Multifamily
20.2 6603085 New York NY 10280 Mixed Use
21 810000132 Hayward CA 94545 Mixed Use
22 8355 Lowell MA 01852 Hotel-Full Service
23 8987 Bowling Green KY 42103 Retail-Anchored
24 9519 New York NY 10012 Office
25 7529 Long Beach CA 90807 Retail-Anchored
26 410990101 Bensalem Township PA 19020 Retail-Anchored
27 9272 Terre Haute IN 47802 Multifamily
28 6604092 Falls Church VA 22042 Retail-Unanchored
29 9069 Los Angeles CA 90015 Retail-Unanchored
30 6603157 Beverly Hills CA 90211 Office
31 240990070 Redlands CA 92374 Retail-Anchored
32 10487 Evansville IN 47715 Multifamily
33 6603490 Stone Mountain GA 30087 Industrial
34 7000 Fort Worth TX 76112 Multifamily
35 10382 North Hollywood CA 91601 Industrial
36 6603234 Portsmouth VA 23704 Multifamily
37 8770 Champlin MN 55316 Retail-Anchored
38 10489 Shelbyville IN 46176 Multifamily
39 6603048 Orlando FL 32839 Multifamily
40 9462 Denver CO 80231 Office
41 6603050 San Jose CA 95110 Office
42 7198 New York NY 10018 Office
43 9155 Glendora CA 91740 Retail-Single Tenant
44 400990084 West Orange NJ 07052 Office
45 8489 Kettering OH 45429 Multifamily
46 400990109 Gaines Township MI 49548 Manufactured Housing
47 6603029 VARIOUS NY VARIOUS VARIOUS
47.1 6603029A New York NY 10003 Retail-Unanchored
47.2 6603029B Long Island City NY 11101 Industrial
48 240990106 Waco TX 76712 Industrial
49 8512 Huntington Beach CA 92647 Office
50 410990052 Mt. Laurel NJ 08054 Office
51 7723 San Bruno CA 94066 Office
52 7361 Santa Fe Springs CA 90670 Industrial
53 6603961 Sun City West AZ 85375 Retail-Anchored
54 VARIOUS IL 60406 MANUFACTURED HOUSING
55 6643 Dixmoor IL 60406 Manufactured Housing
55.1 6643A Dixmoor IL 60406 Manufactured Housing
55.2 6643B Dixmoor IL 60406 Manufactured Housing
56 9198 Blue Island IL 60406 Manufactured Housing
57 7001 Fort Worth TX 75231 Multifamily
58 400000134 LAS VEGAS NV 89109 MANUFACTURED HOUSING
58.1 400000134A Las Vegas NV 89109 Manufactured Housing
58.2 400000134B Las Vegas NV 89109 Manufactured Housing
58.3 400000134C Las Vegas NV 89109 Manufactured Housing
59 250990091 Vista CA 92083 Office
60 10319 Maltby WA 98072 Industrial
61 6913 Eugene OR 97402 Multifamily
62 10320 Anchorage AK 99504 Office
63 6603463 Pittsburgh PA 15232 Retail-Unanchored
64 6603498 Albuquerque NM 87109 Multifamily
65 7488 San Mateo CA 94401 Office
66 7815 Rexburg ID 83440 Multifamily
67 800990098 Everett WA 98208 Office
68 7371 Jackson TN 38301 Industrial
69 6603237 Riverside CA 92503 Multifamily
70 6988 San Marcos CA 92069 Mixed Use
71 7805 Trotwood OH 45426 Multifamily
72 7827 Newark DE 19711 Multifamily
73 258990114 Baton Rouge LA 70810 Mixed Use
74 8714 Warrington PA 18976 Retail-Anchored
75 400990085 Livingston NJ 07051 Office
76 400990071 Philadelphia PA 19103 Office
77 245990073 Lee's Summit MO 64086 Multifamily
78 9082 Longmont CO 80504 Manufactured Housing
79 10314 Milford MI 48381 Office
80 9179 Benbrook TX 76126 Multifamily
81 7261 Fort Worth TX 76132 Retail-Single Tenant
82 240000136 Newport Beach CA 92660 Retail-Anchored
83 240990103 Santa Maria CA 93455 Retail-Single Tenant
84 410990083 Allentown PA 18017 Industrial
85 6251 VARIOUS VARIOUS VARIOUS VARIOUS
85.1 6251A Dagsboro DE 19947 Manufactured Housing
85.2 6251B Charlotte NY 14718 Manufactured Housing
85.3 6251C Adams NY 13606 Manufactured Housing
85.4 6251D Barton NY 14892 Manufactured Housing
86 9704 Orlando FL 32808 Retail-Unanchored
87 6909 Charleston IL 61920 Multifamily
88 10308 Cape Canaveral FL 32920 Multifamily
89 7184 Chickamauga GA 30707 Retail-Anchored
90 6885 Laredo TX 78041 Multifamily
91 255990080 Rockford IL 61109 Industrial
92 6000070 Menomonie WI 54751 Retail-Anchored
93 6601140 Wayland MA 01778 Retail-Unanchored
94 7015 Houma LA 70364 Multifamily
95 10311 Bradley IL 60915 Retail-Unanchored
96 7404 San Diego CA 92108 Office
97 10318 West Linn OR 97068 Retail-Unanchored
98 10391 Brooklyn NY 11201 Multifamily
99 6569 Washington DC 20002 Office
100 10313 Austintown OH 44515 Industrial
101 400980023 Escondido CA 92027 Manufactured Housing
102 JUNEAU AK 99801 MANUFACTURED HOUSING
102.1 10405 Juneau AK 99801 Manufactured Housing
102.2 10335 Juneau AK 99801 Manufactured Housing
103 5151 San Diego CA 92126 Retail-Unanchored
104 7552 Burnsville MN 55337 Industrial
105 10306 Atlanta GA 30316 Multifamily
106 9391 Miami FL 33145 Multifamily
107 10309 Kansas City MO 64153-1272 Industrial
108 800990076 Bellevue WA 98005 Mixed Use
109 8399 Frenchtown MI 48162 Retail-Single Tenant
110 400990108 Las Vegas NV 89118 Industrial
111 7747 Warminster PA 19040 Multifamily
112 10400 Plattsburgh NY 12901 Multifamily
113 300980019 Lake Forest CA 92630 Manufactured Housing
114 240990104 Santa Maria CA 93455 Retail-Single Tenant
115 400990086 Parsippany NJ 07054 Office
116 10336 Seattle WA 98122 Multifamily
117 6602981 Louisville KY 40202 Office
118 405990030 Rexburg ID 83440 Multifamily
119 8698 Phoenix AZ 85051 Multifamily
120 7766 Laredo TX 78041 Self-Storage
121 8335 Topeka KS 66606 Multifamily
122 6568 Washington DC 20002 Office
123 245990072 Lee's Summit MO 64063 Multifamily
124 220990034 Rochester NY 14607 Industrial
125 7237 Richmond VA 23237 Multifamily
126 415990117 Abilene TX 79605 Multifamily
127 400990065 Newport Beach CA 92660 Office
128 6567 Washington DC 20037 Office
129 245990074 Emporia KS 66801 Multifamily
130 400990047 Sandy UT 84070 Manufactured Housing
131 420990049 San Francisco CA 94110 Multifamily
132 10323 Colorado Springs CO 80904 Office
133 400990051 Santa Ana CA 92706 Office
134 400990029 New Brighton MN 55112 Manufactured Housing
135 VARIOUS PA VARIOUS VARIOUS
135.1 410990077 Philadelphia PA 19154 Industrial
135.2 410990090 Falls Township PA 19030 Retail-Unanchored
136 3314 Duncanville TX 75116 Retail-Shadow Anchored
137 415000131 Palm Springs CA 92262 Multifamily
138 400990048 Roy UT 84067 Manufactured Housing
139 400990041 Pine City MN 55063 Manufactured Housing
140 10310 Ann Arbor MI 48104 Multifamily
141 410990045 Philadelphia PA 19123 Multifamily
142 245990116 Bulverde TX 78163 Self-Storage
143 8669 Palm Desert CA 92260 Retail-Unanchored
144 410990061 Allentown PA 18103 Retail-Anchored
145 400990119 Houston TX 77076 Manufactured Housing
146 400990095 Bonita Springs FL 34135 Self-Storage
147 7748 Newark DE 19713 Industrial
148 10407 Denver CO 80204 Retail-Single Tenant
149 6010 San Diego CA 92123 Office
150 400990107 Phoenix AZ 85017 Manufactured Housing
151 415990102 Las Vegas NV 89104 Manufactured Housing
152 400990089 Coventry RI 02816 Manufactured Housing
153 400980012 Pembroke Park FL 33009 Manufactured Housing
154 400990064 Chino CA 91710 Manufactured Housing
155 10399 Mansfield OH 44096 Manufactured Housing
156 410990066 New Castle Hundred DE 19701 Mixed Use
157 400990097 Torrance CA 90746 Manufactured Housing
158 5847 St. Cloud MN 56304 Multifamily
159 400990060 Tarpon Springs FL 34689 Manufactured Housing
160 8526 Broken Arrow OK 74012 Industrial
161 10337 Center Township OH 44453 Manufactured Housing
162 ASBURY PARK NJ 07712 MULTIFAMILY
162.1 6667 Asbury Park NJ 07712 Multifamily
162.2 6668 Asbury Park NJ 07712 Multifamily
163 10338 Grants Pass OR 97526 Self-Storage
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
CONTROL LOAN
NUMBER NUMBER BORROWER NAME
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 10312 R.E.D. Capital Management, L.L.C.
2 6603515 Cordish Gateway Village, LLC
3 5557 Brigadoon Associates Limited Partnership
4 VARIOUS
4.1 260990081 Harrison QI 17 Funding LLC
4.2 260990082 Harrison QI 54 Funding LLC
5 6603656 Alameda Enterprise, Inc.
6 10756 College Station Student Housing I, LTD
7 10761 ORRC Holding II Corporation
8 7816 Aviation Business Park
9 415990039 Northwest Investments and Central Investments
10 6603700 J.P. Realty II Inc.
11 9569 Shankar Nevada LLC
12 2806 Pickering Square LLC
13 1906 ABERFELDY II LIMITED PARTNERSHIP
13.1 1906A Aberfeldy II Limited Partnership
13.2 1906B Aberfeldy II Limited Partnership
13.3 1906C Aberfeldy II Limited Partnership
13.4 1906D Aberfeldy II Limited Partnership
13.5 1906E Aberfeldy II Limited Partnership
13.6 1906F Aberfeldy II Limited Partnership
14 7598 Lexington Herndon L.L.C.
15 1889 David E. Claassen
16 6603028 Coolidge-Chicago Equities, L.L.C..
17 6392 Oak Grove Associates
18 9776 Market Pointe I, LLC
19 10315 Skihawk Development Company
20 VARIOUS
20.1 6603086 Y&O Cove Club LLC
20.2 6603085 Cove Commercial LLC
21 810000132 Luba Properties, LLC
22 8355 LHG, LLC
23 8987 Greenwood Square Holdings, L.L.C.
24 9519 599 Broadway LLC
25 7529 GGF, LLC
26 410990101 Bensalem Crossing Associated, L.P.
27 9272 Southern Indiana Investments Company One, LLC
28 6604092 Terrabrook Merrifield Gatehouse, L.L.C.
29 9069 11th & Main Partners, LLC
30 6603157 KOAR 8447 Associates II, LLC
31 240990070 Redlands Palm Associates, Ltd.,
32 10487 Evansville Place Apartments Limited Partnership
33 6603490 Matana Realty, L.P.
34 7000 Havenwood Associates Limited Partnership
35 10382 Bill & Bill Property Management, LLC
36 6603234 Goodeed LLC
37 8770 Champlin Marketplace, LLC
38 10489 Shelbyville Place Apartments Limited Partnership
39 6603048 Holgrand Limited Partnership
40 9462 Kennedy Center Partnership LLP
41 6603050 Airport II, a California general partnership
42 7198 32 West 39th Street Associates L.L.C.
43 9155 Peer Properties-VI
44 400990084 769 Associates, LLC
45 8489 Realmark/Fox Hunt Limited Partnership
46 400990109 Southwood Village Mobile Home Park,II
47 6603029 SPGNY, LLC
47.1 6603029A SPGNY, LLC
47.2 6603029B SPGNY, LLC
48 240990106 Matsushita International Corporation
49 8512 Greenglass Associates, LLC
50 410990052 East Gate Business Center, LLC
51 7723 San Bruno Office Associates, LLC
52 7361 Nicholas N. Weber and Patricia D. Weber
53 6603961 Abart Properties I LLC, an Arizona limited liability company
54 SMITH MOBILE HOME PARK, INC.
55 6643 Smith Mobile Home Park, Inc.
55.1 6643A Smith Mobile Home Park, Inc.
55.2 6643B Smith Mobile Home Park, Inc.
56 9198 Smith Mobile Homes, Inc.
57 7001 Price Copper Creek, Ltd.
58 400000134 WEST PARK, INC.; TIEN FU HSU AND LISA SU, CO-TRUSTEE OF THE LISA SU FAMILY TRUST OF 1992,
U/D/T DATED JUNE 26, 1992
58.1 400000134A WEST PARK, INC.; TIEN FU HSU AND LISA SU, CO-TRUSTEE OF THE LISA SU FAMILY TRUST OF 1992,
U/D/T DATED JUNE 26, 1992
58.2 400000134B WEST PARK, INC.; TIEN FU HSU AND LISA SU, CO-TRUSTEE OF THE LISA SU FAMILY TRUST OF 1992,
U/D/T DATED JUNE 26, 1993
58.3 400000134C WEST PARK, INC.; TIEN FU HSU AND LISA SU, CO-TRUSTEE OF THE LISA SU FAMILY TRUST OF 1992,
U/D/T DATED JUNE 26, 1994
59 250990091 Moxie Pacific Palomar #9, LLC
60 10319 Underwood Gartland 216, L.L.C.
61 6913 Redwood Park Associates
62 10320 4300 Boniface Corporation
63 6603463 Walnut Capital Partners - Shadyside Retail, L.P.
64 6603498 Triad Towers LLC, a Washington limited liability company
65 7488 201 Baldwin Avenue Associates, LLC
66 7815 ProTrust Birch Plaza, LLC
67 800990098 Evergreen Business Center Investments LLC
68 7371 Client Distribution Services, LLC
69 6603237 Tomanek & Associates, LLC, a California limited liability company
70 6988 San Marcos Freeway Center Ltd
71 7805 New Salem Woods L.P.
72 7827 New Colonial Garden, L.P.
73 258990114 Animate Corp.
74 8714 Juniper-Warrington Associates
75 400990085 349 Associates, LLC
76 400990071 2300 Chestnut Associates Limited
77 245990073 Woodcliff Associates
78 9082 River Valley Village Mobile Home Park
79 10314 Milford Investment LLC
80 9179 Smallwood Summit Partners, LP
81 7261 E.H. Fort Worth, LLC, Palisades F.W. Investors, LP, C.C.H. Fort Worth, LLC
82 240000136 Sanderson J. Ray-Macarthur
83 240990103 SM 101 Five, LLC
84 410990083 1035 Mill Road Associates L.P.
85 6251 PINE RIDGE MHP, LLC
85.1 6251A Pine Ridge MHP, LLC
85.2 6251B Pine Ridge MHP, LLC
85.3 6251C Pine Ridge MHP, LLC
85.4 6251D Pine Ridge MHP, LLC
86 9704 FF Colonial LLC
87 6909 Unique Homes Properties, Inc.
88 10308 Oceanside Village Apartments, LLC
89 7184 Battlefield Partners, LLC
90 6885 N.W. Laredo Development, Ltd.
91 255990080 The Cornerstone Group X, L.L.C.
92 6000070 KM of Menomonie, Wisconsin, L.P.
93 6601140 Main Street Property, Inc.
94 7015 B&T Leasing, Inc.
95 10311 EIG Bradley, LLC
96 7404 Samuel Markarian
97 10318 West Linn Associates, L.L.C.
98 10391 BIL I, LLC
99 6569 300 I Street N.E., LLC
100 10313 S.L. Austintown, L.L.C.
101 400980023 Escondido Terrace Ownership Corporation
102 MYRON W. KLEIN
102.1 10405 Myron W. Klein
102.2 10335 Myron W. Klein
103 5151 Gitinem Enterprises, Ltd.
104 7552 Portland Avenue, LLC
105 10306 Eagles Run Housing Partners II, Ltd.
106 9391 Frank W Guilford, Jr.
107 10309 PNEU Real Estate, Inc.
108 800990076 Bel-Red, LLC
109 8399 DW Properties, LLC
110 400990108 Hacienda Square, LLC
111 7747 Madison Management Associates
112 10400 Mary J. Johnson
113 300980019 Kimberly Gardens Owners Association
114 240990104 SM 101 Four, LLC
115 400990086 Groton Associates, LLC
116 10336 Alderview Apartments LLC
117 6602981 T. J. Associates, Inc.
118 405990030 MKH Properties Co., Ltd.
119 8698 Phoenix P.H.C., Inc.
120 7766 Stor-More Ltd
121 8335 Oakwood/Monterey, LP
122 6568 220 I Street N.E., LLC
123 245990072 Strother Investment Properties, L.L.C.
124 220990034 1344-1350 University Avenue LLC
125 7237 Keck & Smith
126 415990117 Otay Lakes Associates, LLC
127 400990065 Ruth L. Ko
128 6567 1413 K Street N.W., LLC
129 245990074 University Properties
130 400990047 Parkway Manufactured Housing Community, LLC
131 420990049 1128 Valencia Associates, LLC
132 10323 Sullivan Communities Kissing Camels Office Park I, LLC
133 400990051 Bristol South Coast Properties, LLC
134 400990029 Oak Grove Park Properties, LLP
135 VARIOUS
135.1 410990077 Sant Properties
135.2 410990090 Sant Properties
136 3314 222 Camp Wisdom Village L.P.
137 415000131 Carl Bruno, Stefan T. Kulesza and Zaina Kulesza
138 400990048 Northcrest Manufactured Housing Community, LLC
139 400990041 William P. Woischke and Shirley M. Woischke
140 10310 Gallatin Manor, L.L.C.
141 410990045 1804-1814 Green Street Associates Limited Partnership
142 245990116 Noah's Ark Self Storage I, L.P.
143 8669 J. M. Madera, L.L.C.
144 410990061 Joseph T. Posh, Joseph Posh, John C. Posh, and Jody Lynn Posh-Wendt
145 400990119 Country Village Park, LP
146 400990095 Newman & Newman
147 7748 728 Dawson Associates
148 10407 The Franklin Company LLC
149 6010 BOS Properties
150 400990107 MHP #9 LLC
151 415990102 DRC Investments, Inc.
152 400990089 Leisure Village, Inc.
153 400980012 William Corrigan, Sr. and Clara H. Corrigan
154 400990064 Dale E. McNeely and Janet M. McNeely
155 10399 Fairhaven Limited Partnership
156 410990066 Fairwinds Associates, L.L.C.
157 400990097 Dzikowski Family Trust
158 5847 Tapestry/Summerfield Real Estate Limited Partnership
159 400990060 Chesapeake Investments, Inc.
160 8526 Arch Property Company, LLC
161 10337 Lisbon Associates Limited Partnership
162 UNLIMITED ADDRESS, L.L.C.
162.1 6667 Unlimited Address, L.L.C.
162.2 6668 Unlimited Address, L.L.C.
163 10338 North Valley Mini Storage, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
1ST INT. &
ORIGINAL GROSS NET PRIN.
CONTROL LOAN PRINCIPAL CUT-OFF DATE MORTGAGE MORTGAGE PAYMENT
NUMBER NUMBER BALANCE BALANCE LOAN TYPE RATE RATE NOTE DATE DATE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 30,492,000 30,410,327 Fixed 8.380% 8.328% 12/31/99 2/1/00
2 6603515 26,000,000 25,848,385 Fixed 7.960% 7.888% 7/2/99 9/1/99
3 5557 21,000,000 20,856,683 Fixed 7.670% 7.618% 6/30/99 8/1/99
4 20,500,000 20,391,572 FIXED 9.300% 9.248% 10/20/99 12/1/99
4.1 260990081 11,415,000 11,354,624 Fixed 9.300% 9.248% 10/20/99 12/1/99
4.2 260990082 9,085,000 9,036,948 Fixed 9.300% 9.248% 10/20/99 12/1/99
5 6603656 20,100,000 20,042,294 Fixed 8.110% 8.038% 12/2/99 2/1/00
6 10756 17,780,000 17,780,000 Fixed 8.180% 8.128% 3/23/00 5/1/02
7 10761 17,500,000 17,449,427 Fixed 8.084% 8.032% 12/23/99 2/1/00
8 7816 17,500,000 17,441,330 Fixed 8.070% 8.018% 11/9/99 1/1/00
9 415990039 14,850,000 14,754,516 Fixed 7.895% 7.842% 6/4/99 8/1/99
10 6603700 14,800,000 14,750,115 Fixed 8.050% 7.953% 11/23/99 1/1/00
11 9569 14,100,000 14,064,555 Fixed 7.960% 7.908% 12/28/99 3/1/00
12 2806 14,000,000 13,710,244 Fixed 7.530% 7.478% 12/31/97 2/1/98
13 1906 13,703,000 13,380,764 FIXED 7.500% 7.448% 12/15/97 2/1/98
13.1 1906A 674,435 658,575 Fixed 7.500% 7.448% 12/15/97 2/1/98
13.2 1906B 4,286,127 4,185,335 Fixed 7.500% 7.448% 12/15/97 2/1/98
13.3 1906C 3,088,533 3,015,903 Fixed 7.500% 7.448% 12/15/97 2/1/98
13.4 1906D 1,210,201 1,181,742 Fixed 7.500% 7.448% 12/15/97 2/1/98
13.5 1906E 913,954 892,461 Fixed 7.500% 7.448% 12/15/97 2/1/98
13.6 1906F 3,529,752 3,446,747 Fixed 7.500% 7.448% 12/15/97 2/1/98
14 7598 12,375,000 12,257,507 Fixed 7.600% 7.548% 8/13/99 10/1/99
15 1889 12,000,000 11,781,344 Fixed 7.010% 6.958% 8/18/98 10/1/98
16 6603028 11,500,000 11,438,621 Fixed 8.290% 8.218% 7/30/99 9/1/99
17 6392 10,500,000 10,433,641 Fixed 7.810% 7.758% 8/30/99 10/1/99
18 9776 10,100,000 10,061,429 Fixed 8.300% 8.198% 1/28/00 3/1/00
19 10315 9,800,000 9,684,327 Fixed 7.960% 7.908% 5/27/99 7/1/99
20 9,657,000 9,609,256 FIXED VARIOUS VARIOUS 9/1/99 11/1/99
20.1 6603086 7,657,000 7,622,908 Fixed 8.110% 8.038% 9/1/99 11/1/99
20.2 6603085 2,000,000 1,986,348 Fixed 8.610% 8.538% 9/1/99 11/1/99
21 810000132 9,600,000 9,590,593 Fixed 8.500% 8.448% 3/29/00 5/1/00
22 8355 9,500,000 9,363,777 Fixed 8.740% 8.688% 8/30/99 10/1/99
23 8987 9,250,000 9,222,075 Fixed 7.910% 7.858% 12/22/99 2/1/00
24 9519 9,177,000 9,165,307 Fixed 8.690% 8.638% 2/28/00 4/1/00
25 7529 9,012,000 8,956,438 Fixed 8.030% 7.928% 8/24/99 10/1/99
26 410990101 8,960,000 8,934,211 Fixed 8.100% 8.048% 12/16/99 2/1/00
27 9272 8,800,000 8,784,123 Fixed 8.570% 8.518% 2/25/00 4/1/00
28 6604092 8,700,000 8,679,168 Fixed 8.170% 8.048% 1/5/00 3/1/00
29 9069 8,000,000 7,984,458 Fixed 9.040% 8.988% 1/27/00 3/1/00
30 6603157 7,875,000 7,829,800 Fixed 8.020% 7.908% 7/9/99 9/1/99
31 240990070 7,650,000 7,629,730 Fixed 8.200% 8.147% 8/20/99 10/1/99
32 10487 7,500,000 7,496,720 Fixed 8.070% 8.018% 4/14/00 6/1/00
33 6603490 7,500,000 7,466,965 Fixed 8.150% 8.038% 9/21/99 11/1/99
34 7000 7,200,000 7,146,952 Fixed 7.680% 7.628% 7/27/99 9/1/99
35 10382 7,000,000 6,993,102 Fixed 8.480% 8.428% 3/14/00 5/1/00
36 6603234 7,000,000 6,947,375 Fixed 7.710% 7.638% 5/15/99 7/1/99
37 8770 6,850,000 6,836,559 Fixed 9.000% 8.898% 1/18/00 3/1/00
38 10489 6,800,000 6,796,948 Fixed 8.000% 7.948% 4/14/00 6/1/00
39 6603048 6,800,000 6,756,803 Fixed 7.940% 7.868% 6/24/99 8/1/99
40 9462 6,600,000 6,577,561 Fixed 8.000% 7.948% 12/15/99 2/1/00
41 6603050 6,600,000 6,561,513 Fixed 7.960% 7.848% 7/15/99 9/1/99
42 7198 6,139,000 6,104,144 Fixed 8.440% 8.388% 8/30/99 10/1/99
43 9155 6,075,000 6,064,849 Fixed 8.610% 8.508% 3/27/00 5/1/00
44 400990084 6,000,000 5,980,579 Fixed 8.200% 8.107% 11/19/99 1/1/00
45 8489 6,000,000 5,975,684 Fixed 8.050% 7.948% 11/15/99 1/1/00
46 400990109 6,000,000 5,970,498 Fixed 7.960% 7.858% 12/29/99 2/1/00
47 6603029 6,000,000 5,964,505 FIXED 8.200% 8.128% 6/22/99 8/1/99
47.1 6603029A 4,675,862 4,648,200 Fixed 8.200% 8.128% 6/22/99 8/1/99
47.2 6603029B 1,324,138 1,316,305 Fixed 8.200% 8.128% 6/22/99 8/1/99
48 240990106 5,700,000 5,681,044 Fixed 8.100% 8.048% 11/24/99 1/1/00
49 8512 5,550,000 5,532,520 Fixed 8.300% 8.198% 11/9/99 1/1/00
50 410990052 5,545,000 5,514,177 Fixed 8.140% 8.088% 7/14/99 9/1/99
51 7723 5,500,000 5,460,805 Fixed 7.880% 7.828% 8/25/99 10/1/99
52 7361 5,500,000 5,448,748 Fixed 8.160% 8.058% 8/11/99 10/1/99
53 6603961 5,330,000 5,318,962 Fixed 8.780% 8.708% 1/13/00 3/1/00
54 5,258,000 5,231,482 FIXED 8.340% 8.288% 12/9/99 2/1/00
55 6643 3,818,000 3,798,745 Fixed 8.340% 8.288% 12/9/99 2/1/00
55.1 6643A 3,169,660 3,153,675 Fixed 8.340% 8.288% 12/9/99 2/1/00
55.2 6643B 648,340 645,070 Fixed 8.340% 8.288% 12/9/99 2/1/00
56 9198 1,440,000 1,432,738 Fixed 8.340% 8.288% 12/9/99 2/1/00
57 7001 5,200,000 5,161,687 Fixed 7.680% 7.628% 7/27/99 9/1/99
58 400000134 5,150,000 5,136,953 FIXED 8.350% 8.248% 2/29/00 4/1/00
58.1 400000134A 1,940,756 1,935,839 Fixed 8.350% 8.248% 2/29/00 4/1/00
58.2 400000134B 1,174,188 1,171,213 Fixed 8.350% 8.248% 2/29/00 4/1/00
58.3 400000134C 2,035,056 2,029,901 Fixed 8.350% 8.248% 2/29/00 4/1/00
59 250990091 5,068,000 5,057,581 Fixed 8.810% 8.758% 1/3/00 3/1/00
60 10319 5,060,000 5,038,427 Fixed 8.270% 8.218% 9/13/99 11/1/99
61 6913 5,000,000 4,964,941 Fixed 7.930% 7.828% 7/15/99 9/1/99
62 10320 4,941,000 4,927,627 Fixed 8.340% 8.288% 12/23/99 2/1/00
63 6603463 4,903,850 4,876,816 Fixed 7.840% 7.768% 8/3/99 10/1/99
64 6603498 4,900,000 4,865,678 Fixed 7.570% 7.448% 6/18/99 8/1/99
65 7488 4,750,000 4,734,625 Fixed 8.200% 8.148% 11/29/99 1/1/00
66 7815 4,720,000 4,682,669 Fixed 7.820% 7.718% 6/29/99 8/1/99
67 800990098 4,600,000 4,591,391 Fixed 9.190% 9.137% 1/6/00 3/1/00
68 7371 4,500,000 4,472,627 Fixed 8.330% 8.278% 11/15/99 1/1/00
69 6603237 4,300,000 4,265,225 Fixed 7.420% 7.328% 5/14/99 7/1/99
70 6988 4,300,000 4,256,635 Fixed 8.450% 8.398% 7/1/99 9/1/99
71 7805 4,300,000 4,256,445 Fixed 7.740% 7.638% 8/31/99 10/1/99
72 7827 4,246,000 4,202,924 Fixed 7.730% 7.628% 8/31/99 10/1/99
73 258990114 4,150,000 4,146,259 Fixed 8.790% 8.737% 3/23/00 5/1/00
74 8714 4,000,000 3,995,709 Fixed 9.190% 9.138% 1/29/00 4/1/00
75 400990085 4,000,000 3,987,052 Fixed 8.200% 8.097% 11/19/99 1/1/00
76 400990071 4,000,000 3,978,827 Fixed 8.000% 7.908% 8/30/99 10/1/99
77 245990073 3,950,000 3,937,815 Fixed 8.375% 8.323% 11/19/99 1/1/00
78 9082 3,910,000 3,894,599 Fixed 8.170% 8.118% 10/29/99 12/1/99
79 10314 3,825,000 3,815,228 Fixed 8.560% 8.508% 12/29/99 2/1/00
80 9179 3,750,000 3,733,887 Fixed 8.540% 8.488% 10/27/99 12/1/99
81 7261 3,750,000 3,722,696 Fixed 7.740% 7.638% 7/6/99 9/1/99
82 240000136 3,500,000 3,498,663 Fixed 8.420% 8.368% 4/3/00 6/1/00
83 240990103 3,435,000 3,428,397 Fixed 8.260% 8.208% 2/25/00 4/1/00
84 410990083 3,300,000 3,288,083 Fixed 8.500% 8.448% 10/14/99 12/1/99
85 6251 3,229,000 3,204,843 FIXED 8.100% 8.048% 6/2/99 8/1/99
85.1 6251A 1,189,207 1,180,310 Fixed 8.100% 8.048% 6/2/99 8/1/99
85.2 6251B 846,554 840,221 Fixed 8.100% 8.048% 6/2/99 8/1/99
85.3 6251C 612,744 608,160 Fixed 8.100% 8.048% 6/2/99 8/1/99
85.4 6251D 580,494 576,151 Fixed 8.100% 8.048% 6/2/99 8/1/99
86 9704 3,200,000 3,192,722 Fixed 8.860% 8.808% 1/4/00 3/1/00
87 6909 3,180,000 3,143,390 Fixed 8.240% 8.188% 6/29/99 8/1/99
88 10308 3,100,000 3,086,419 Fixed 8.170% 8.118% 9/15/99 11/1/99
89 7184 3,056,000 3,039,707 Fixed 8.380% 8.328% 10/11/99 12/1/99
90 6885 2,914,000 2,901,300 Fixed 8.470% 8.343% 10/1/99 12/1/99
91 255990080 2,750,000 2,728,819 Fixed 8.000% 7.948% 9/10/99 11/1/99
92 6000070 2,800,000 2,722,580 Fixed 7.079% 7.007% 6/30/98 8/1/98
93 6601140 2,800,000 2,689,754 Fixed 6.880% 6.808% 9/4/98 11/1/98
94 7015 2,700,000 2,671,750 Fixed 8.220% 8.168% 7/13/99 9/1/99
95 10311 2,640,000 2,627,688 Fixed 8.240% 8.188% 12/10/99 2/1/00
96 7404 2,600,000 2,573,483 Fixed 8.380% 8.278% 6/29/99 9/1/99
97 10318 2,597,000 2,571,387 Fixed 7.910% 7.858% 7/23/99 9/1/99
98 10391 2,468,000 2,464,762 Fixed 8.600% 8.548% 2/29/00 4/1/00
99 6569 2,471,000 2,443,092 Fixed 8.360% 8.308% 6/21/99 8/1/99
100 10313 2,453,000 2,442,794 Fixed 8.830% 8.778% 12/23/99 2/1/00
101 400980023 2,450,000 2,423,974 Fixed 8.500% 8.378% 5/27/99 7/1/99
102 2,410,000 2,395,007 FIXED 8.490% 8.438% 10/4/99 12/1/99
102.1 10405 1,660,000 1,649,673 Fixed 8.490% 8.438% 10/4/99 12/1/99
102.2 10335 750,000 745,334 Fixed 8.490% 8.438% 10/4/99 12/1/99
103 5151 2,400,000 2,360,883 Fixed 8.090% 8.038% 2/2/99 4/1/99
104 7552 2,375,000 2,358,966 Fixed 8.120% 8.068% 7/9/99 9/1/99
105 10306 2,362,000 2,318,098 Fixed 8.380% 8.328% 9/11/97 11/1/97
106 9391 2,300,000 2,293,189 Fixed 8.430% 8.348% 2/4/00 4/1/00
107 10309 2,286,000 2,278,158 Fixed 8.690% 8.638% 10/1/99 12/1/99
108 800990076 2,250,000 2,241,765 Fixed 8.450% 8.397% 10/26/99 12/1/99
109 8399 2,200,000 2,185,249 Fixed 8.100% 8.048% 10/15/99 12/1/99
110 400990108 2,135,000 2,132,996 Fixed 8.650% 8.527% 3/15/00 5/1/00
111 7747 2,136,000 2,120,959 Fixed 8.400% 8.348% 10/26/99 12/1/99
112 10400 2,100,000 2,092,876 Fixed 8.950% 8.898% 1/7/00 3/1/00
113 300980019 2,400,000 2,080,978 Fixed 10.300% 8.128% 9/10/96 12/1/96
114 240990104 2,085,000 2,078,382 Fixed 8.340% 8.288% 12/8/99 2/1/00
115 400990086 2,000,000 1,993,526 Fixed 8.200% 8.087% 11/19/99 1/1/00
116 10336 2,000,000 1,991,910 Fixed 8.460% 8.408% 9/16/99 11/1/99
117 6602981 2,000,000 1,989,228 Fixed 8.530% 8.428% 6/30/99 8/1/99
118 405990030 2,000,000 1,987,920 Fixed 8.125% 8.073% 5/28/99 8/1/99
119 8698 2,000,000 1,987,190 Fixed 8.010% 7.958% 11/18/99 1/1/00
120 7766 2,000,000 1,955,326 Fixed 8.670% 8.618% 9/29/99 11/1/99
121 8335 1,900,000 1,886,578 Fixed 8.380% 8.328% 11/9/99 12/1/99
122 6568 1,894,000 1,872,609 Fixed 8.360% 8.308% 6/21/99 8/1/99
123 245990072 1,850,000 1,844,293 Fixed 8.375% 8.323% 11/22/99 1/1/00
124 220990034 1,850,000 1,841,349 Fixed 9.000% 8.948% 6/17/99 8/1/99
125 7237 1,680,000 1,664,485 Fixed 8.320% 8.268% 8/3/99 10/1/99
126 415990117 1,660,000 1,657,442 Fixed 9.000% 8.948% 3/10/00 5/1/00
127 400990065 1,650,000 1,637,111 Fixed 8.625% 8.503% 8/31/99 10/1/99
128 6567 1,611,000 1,593,237 Fixed 8.510% 8.458% 6/17/99 8/1/99
129 245990074 1,600,000 1,590,066 Fixed 8.500% 8.448% 11/1/99 12/1/99
130 400990047 1,595,000 1,583,672 Fixed 7.930% 7.807% 5/18/99 7/1/99
131 420990049 1,500,000 1,493,787 Fixed 8.375% 8.323% 9/7/99 11/1/99
132 10323 1,495,000 1,485,554 Fixed 8.410% 8.358% 10/13/99 12/1/99
133 400990051 1,500,000 1,483,260 Fixed 8.250% 8.128% 5/27/99 7/1/99
134 400990029 1,500,000 1,478,700 Fixed 9.000% 8.878% 7/23/99 9/1/99
135 1,450,000 1,445,192 FIXED VARIOUS VARIOUS VARIOUS 2/1/00
135.1 410990077 770,000 768,066 Fixed 8.625% 8.573% 12/17/99 2/1/00
135.2 410990090 680,000 677,126 Fixed 8.750% 8.698% 12/17/99 2/1/00
136 3314 1,441,000 1,401,025 Fixed 6.940% 6.888% 8/28/98 10/1/98
137 415000131 1,400,000 1,398,815 Fixed 9.000% 8.948% 2/28/00 5/1/00
138 400990048 1,405,000 1,395,021 Fixed 7.930% 7.807% 5/18/99 7/1/99
139 400990041 1,400,000 1,381,330 Fixed 8.000% 7.878% 5/4/99 6/1/99
140 10310 1,300,000 1,294,141 Fixed 8.420% 8.368% 12/6/99 2/1/00
141 410990045 1,275,000 1,268,073 Fixed 8.500% 8.448% 6/17/99 8/1/99
142 245990116 1,220,000 1,215,092 Fixed 9.000% 8.948% 12/16/99 2/1/00
143 8669 1,157,000 1,154,111 Fixed 9.460% 9.408% 2/21/00 4/1/00
144 410990061 1,135,000 1,129,537 Fixed 8.875% 8.823% 10/19/99 1/1/00
145 400990119 1,115,000 1,109,106 Fixed 8.550% 8.428% 3/14/00 5/1/00
146 400990095 1,100,000 1,093,657 Fixed 8.875% 8.753% 10/6/99 12/1/99
147 7748 1,100,000 1,092,562 Fixed 8.650% 8.598% 10/26/99 12/1/99
148 10407 1,050,000 1,046,781 Fixed 9.490% 9.438% 1/21/00 3/1/00
149 6010 1,050,000 1,038,311 Fixed 8.450% 8.398% 6/1/99 8/1/99
150 400990107 1,025,000 1,022,297 Fixed 8.440% 8.317% 12/22/99 2/1/00
151 415990102 1,000,000 997,850 Fixed 8.625% 8.573% 1/5/00 3/1/00
152 400990089 1,000,000 995,605 Fixed 8.550% 8.428% 12/28/99 2/1/00
153 400980012 1,000,000 988,886 Fixed 8.875% 8.653% 4/30/99 6/1/99
154 400990064 960,000 956,425 Fixed 8.750% 8.628% 9/8/99 11/1/99
155 10399 930,000 928,257 Fixed 9.660% 9.608% 2/1/00 4/1/00
156 410990066 923,000 917,544 Fixed 8.750% 8.698% 10/20/99 12/1/99
157 400990097 865,000 849,478 Fixed 9.125% 9.003% 10/28/99 12/1/99
158 5847 826,000 820,523 Fixed 8.210% 8.158% 7/14/99 9/1/99
159 400990060 783,000 778,616 Fixed 8.125% 8.003% 11/18/99 1/1/00
160 8526 750,000 742,358 Fixed 9.380% 9.328% 12/28/99 2/1/00
161 10337 712,500 708,271 Fixed 8.730% 8.678% 10/15/99 12/1/99
<PAGE>
162 710,000 703,345 FIXED 9.510% 9.458% 5/28/99 8/1/99
162.1 6667 355,000 351,672 Fixed 9.510% 9.458% 5/28/99 8/1/99
162.2 6668 355,000 351,672 Fixed 9.510% 9.458% 5/28/99 8/1/99
163 10338 620,000 617,506 Fixed 9.000% 8.948% 12/8/99 2/1/00
818,406,907
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
INTEREST
CONTROL LOAN ACCRUAL PAYMENT MONTHLY DEBT
NUMBER NUMBER METHOD RESOURCE DUE DATE GRACE PERIOD (DAYS) FREQUENCY SERVICE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10312 Actual/360 No 1 5 12 231,868.85
2 6603515 Actual/360 No 1 10 12 190,054.28
3 5557 Actual/360 No 1 5 12 149,287.30
4 Actual/360 NO 1 5 12 176,266.09
4.1 260990081 Actual/360 No 1 5 12 98,150.12
4.2 260990082 Actual/360 No 1 5 12 78,115.97
5 6603656 Actual/360 No 1 5 12 149,030.91
6 10756 Actual/360 No 1 7 12 132,701.25
7 10761 Actual/360 No 1 7 12 129,435.04
8 7816 Actual/360 No 1 5 12 129,263.80
9 415990039 Actual/360 No 1 5 12 107,879.03
10 6603700 Actual/360 No 1 10 12 109,113.47
11 9569 Actual/360 No 1 5 12 103,067.90
12 2806 Actual/360 No 1 7 12 98,177.79
13 1906 30/360 NO 1 10 12 95,813.36
13.1 1906A 30/360 No 1 10 12 4,715.74
13.2 1906B 30/360 No 1 10 12 29,969.22
13.3 1906C 30/360 No 1 10 12 21,595.47
13.4 1906D 30/360 No 1 10 12 8,461.90
13.5 1906E 30/360 No 1 10 12 6,390.50
13.6 1906F 30/360 No 1 10 12 24,680.53
14 7598 Actual/360 No 1 10 12 92,256.62
15 1889 30/360 No 1 10 12 79,916.91
16 6603028 Actual/360 No 1 10 12 86,719.26
17 6392 Actual/360 No 1 5 12 76,528.55
18 9776 Actual/360 No 1 5 12 79,971.21
19 10315 Actual/360 No 1 5 12 75,378.49
20 ACTUAL/360 NO 1 10 12 73,025.69
20.1 6603086 Actual/360 No 1 10 12 56,772.62
20.2 6603085 Actual/360 No 1 10 12 16,253.07
21 810000132 Actual/360 No 1 5 12 73,815.69
22 8355 30/360 Partial 1 5 12 83,891.91
23 8987 Actual/360 No 1 5 12 67,293.77
24 9519 Actual/360 No 1 10 12 71,802.59
25 7529 30/360 No 1 5 12 66,315.43
26 410990101 Actual/360 No 1 5 12 66,370.99
27 9272 30/360 No 1 5 12 68,101.43
28 6604092 Actual/360 No 1 10 12 64,871.55
29 9069 Actual/360 No 1 5 12 64,600.19
30 6603157 Actual/360 No 1 10 12 57,893.79
31 240990070 Actual/360 No 1 5 12 57,390.62
32 10487 Actual/360 No 1 5 12 55,398.77
33 6603490 Actual/360 No 1 10 12 55,818.61
34 7000 30/360 No 1 5 12 51,233.84
35 10382 Actual/360 No 1 5 12 53,724.75
36 6603234 Actual/360 No 1 10 12 49,955.51
37 8770 Actual/360 No 1 5 12 55,116.65
38 10489 Actual/360 No 1 5 12 49,895.99
39 6603048 Actual/360 No 1 10 12 49,611.86
40 9462 30/360 No 1 5 12 48,428.46
41 6603050 Actual/360 No 1 10 12 48,244.55
42 7198 30/360 No 1 5 12 46,942.80
43 9155 Actual/360 No 1 5 12 49,368.69
44 400990084 Actual/360 No 1 5 12 44,865.27
45 8489 30/360 No 1 10 12 44,235.19
46 400990109 Actual/360 No 1 5 12 46,150.10
47 6603029 ACTUAL/360 NO 1 10 12 44,865.27
47.1 6603029A Actual/360 No 1 10 12 34,963.97
47.2 6603029B Actual/360 No 1 10 12 9,901.30
48 240990106 Actual/360 No 1 5 12 42,222.62
49 8512 Actual/360 No 1 5 12 41,890.54
50 410990052 Actual/360 No 1 5 12 41,229.71
51 7723 30/360 No 1 5 12 40,358.54
52 7361 Actual/360 No 1 5 12 43,492.24
53 6603961 Actual/360 No 1 5 12 42,045.39
54 30/360 NO 1 5 12 41,773.42
55 6643 30/360 No 1 5 12 30,333.00
55.1 6643A 30/360 No 1 5 12 25,182.11
55.2 6643B 30/360 No 1 5 12 5,150.89
56 9198 30/360 No 1 5 12 11,440.42
57 7001 30/360 No 1 5 12 37,002.22
58 400000134 ACTUAL/360 YES 1 5 12 40,949.91
58.1 400000134A Actual/360 Yes 1 5 12 15,431.80
58.2 400000134B Actual/360 Yes 1 5 12 9,336.48
58.3 400000134C Actual/360 Yes 1 5 12 16,181.62
59 250990091 Actual/360 No 1 5 12 40,087.35
60 10319 Actual/360 No 1 10 12 38,085.26
61 6913 30/360 No 1 5 12 36,444.53
62 10320 Actual/360 No 1 5 12 37,433.17
63 6603463 Actual/360 No 1 10 12 35,437.26
64 6603498 Actual/360 No 1 10 12 34,496.69
65 7488 Actual/360 No 1 5 12 35,518.34
66 7815 30/360 No 1 5 12 34,043.26
67 800990098 Actual/360 No 1 5 12 37,643.23
68 7371 30/360 No 1 5 12 35,721.15
69 6603237 Actual/360 No 1 10 12 29,831.02
70 6988 30/360 No 1 5 12 34,480.00
71 7805 30/360 No 1 5 12 32,450.91
72 7827 30/360 No 1 5 12 32,015.53
73 258990114 Actual/360 No 1 5 12 32,766.70
74 8714 Actual/360 No 1 5 12 32,733.24
75 400990085 Actual/360 No 1 5 12 29,910.18
76 400990071 Actual/360 No 1 5 12 29,350.58
77 245990073 Actual/360 No 1 5 12 30,022.85
78 9082 Actual/360 No 1 10 12 29,154.91
79 10314 Actual/360 No 1 10 12 29,573.75
80 9179 30/360 No 1 5 12 28,940.63
81 7261 30/360 No 1 5 12 26,839.55
82 240000136 Actual/360 No 1 5 12 26,713.79
83 240990103 30/360 No 1 5 12 25,830.16
84 410990083 Actual/360 No 1 5 12 25,374.14
85 6251 30/360 NO 1 5 12 23,918.74
85.1 6251A 30/360 No 1 5 12 8,809.02
85.2 6251B 30/360 No 1 5 12 6,270.83
85.3 6251C 30/360 No 1 5 12 4,538.89
85.4 6251D 30/360 No 1 5 12 4,300.00
86 9704 30/360 No 1 10 12 25,426.23
87 6909 30/360 No 1 5 12 25,051.47
88 10308 Actual/360 No 1 5 12 23,115.17
89 7184 30/360 No 1 5 12 23,620.36
90 6885 30/360 No 1 5 12 22,344.21
91 255990080 Actual/360 No 1 5 12 21,224.95
92 6000070 Actual/360 No 1 5 12 19,931.15
93 6601140 Actual/360 No 1 10 12 21,507.14
94 7015 30/360 No 1 5 12 21,234.05
95 10311 Actual/360 No 1 5 12 20,797.14
96 7404 30/360 No 1 5 12 20,726.07
97 10318 Actual/360 No 1 5 12 19,889.48
98 10391 Actual/360 No 1 5 12 19,151.97
99 6569 30/360 No 1 5 12 19,664.58
100 10313 Actual/360 No 1 5 12 20,300.67
101 400980023 Actual/360 No 1 5 12 19,728.06
102 ACTUAL/360 YES 1 7 12 19,389.80
102.1 10405 Actual/360 Yes 1 7 12 13,355.62
102.2 10335 Actual/360 Yes 1 7 12 6,034.18
103 5151 30/360 No 1 5 12 18,666.91
104 7552 30/360 No 1 5 12 17,626.00
105 10306 Actual/360 No 1 10 12 17,961.24
106 9391 30/360 No 1 5 12 18,411.85
107 10309 Actual/360 No 1 5 12 17,886.10
108 800990076 Actual/360 No 1 5 12 17,220.89
109 8399 Actual/360 No 1 5 12 17,125.95
110 400990108 Actual/360 No 1 5 12 16,643.80
111 7747 30/360 No 1 5 12 17,055.95
112 10400 Actual/360 Yes 1 7 12 17,551.28
113 300980019 Actual/360 No 1 10 12 26,232.78
114 240990104 30/360 No 1 5 12 15,796.02
115 400990086 Actual/360 No 1 5 12 14,955.09
116 10336 Actual/360 Yes 1 10 12 15,321.63
117 6602981 Actual/360 No 1 10 12 15,420.81
118 405990030 Actual/360 No 1 5 12 14,849.94
119 8698 30/360 No 1 5 12 15,449.58
120 7766 30/360 No 1 5 12 19,894.60
121 8335 30/360 No 1 5 12 15,145.97
122 6568 30/360 No 1 5 12 15,072.73
123 245990072 Actual/360 No 1 5 12 14,061.34
124 220990034 Actual/360 No 1 5 12 14,885.52
125 7237 30/360 No 1 5 12 13,324.64
126 415990117 Actual/360 No 1 5 12 13,930.66
127 400990065 Actual/360 No 1 5 12 13,425.52
128 6567 30/360 No 1 5 12 12,983.07
129 245990074 Actual/360 No 1 5 12 12,883.63
130 400990047 Actual/360 No 1 5 12 11,625.81
131 420990049 Actual/360 No 1 5 12 11,401.08
132 10323 Actual/360 No 1 5 12 11,947.58
133 400990051 Actual/360 No 1 5 12 11,826.75
134 400990029 Actual/360 No 1 10 12 13,495.89
135 ACTUAL/360 NO 1 5 12 11,579.56
135.1 410990077 Actual/360 No 1 5 12 5,988.98
135.2 410990090 Actual/360 No 1 5 12 5,590.58
136 3314 30/360 No 1 5 12 10,129.60
137 415000131 Actual/360 No 1 5 12 11,264.72
138 400990048 Actual/360 No 1 5 12 10,240.91
139 400990041 Actual/360 No 1 5 12 10,805.43
140 10310 Actual/360 No 1 5 12 10,397.96
141 410990045 Actual/360 No 1 5 12 9,803.65
142 245990116 Actual/360 No 1 5 12 10,238.20
143 8669 30/360 No 1 5 12 10,076.52
144 410990061 Actual/360 No 1 5 12 9,427.91
145 400990119 Actual/360 No 1 5 12 11,012.55
146 400990095 Actual/360 No 1 5 12 9,137.19
147 7748 30/360 No 1 5 12 8,968.97
148 10407 Actual/360 Yes 1 7 12 9,166.52
149 6010 30/360 No 1 5 12 8,419.53
150 400990107 Actual/360 No 1 5 12 7,837.82
151 415990102 Actual/360 No 1 5 12 7,777.90
152 400990089 Actual/360 No 1 5 12 8,085.99
153 400980012 Actual/360 No 1 5 12 8,306.53
154 400990064 Actual/360 No 1 5 12 7,552.32
155 10399 Actual/360 Yes 1 7 12 8,229.05
156 410990066 Actual/360 No 1 5 12 7,588.39
157 400990097 Actual/360 No 1 5 12 8,837.84
158 5847 30/360 No 1 5 12 6,182.25
159 400990060 Actual/360 No 1 5 12 6,108.30
160 8526 30/360 No 1 5 12 7,367.28
161 10337 Actual/360 Yes 1 7 12 5,848.13
162 30/360 NO 1 5 12 6,208.18
162.1 6667 30/360 No 1 5 12 3,104.09
162.2 6668 30/360 No 1 5 12 3,104.09
163 10338 Actual/360 Yes 1 7 12 5,203.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
CROSS
CONTROL LOAN COLLATERALIZED/
NUMBER NUMBER CROSS DEFAULTED SEASONING LO DEF YM5 YM4 YM3 YM2 YM1
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 5 29 88 0 0 0 0 0
2 6603515 10 34 80 0 0 0 0 0
3 5557 11 35 82 0 0 0 0 0
4 260990082 &260990081 7 60 0 0 0 0 0 57
4.1 260990081 260990082 7 60 0 0 0 0 0 57
4.2 260990082 260990081 7 60 0 0 0 0 0 57
5 6603656 5 29 89 0 0 0 0 0
6 10756 2 48 69 0 0 0 0 0
7 10761 5 48 69 0 0 0 0 0
8 7816 6 30 99 0 0 0 0 0
9 415990039 11 36 81 0 0 0 0 0
10 6603700 6 30 87 0 0 0 0 0
11 9569 4 28 113 0 0 0 0 0
12 2806 29 53 25 0 0 0 0 0
13 1906 29 0 0 0 0 0 0 144
13.1 1906A 29 0 0 0 0 0 0 144
13.2 1906B 29 0 0 0 0 0 0 144
13.3 1906C 29 0 0 0 0 0 0 144
13.4 1906D 29 0 0 0 0 0 0 144
13.5 1906E 29 0 0 0 0 0 0 144
13.6 1906F 29 0 0 0 0 0 0 144
14 7598 9 33 96 0 0 0 0 0
15 1889 21 0 0 0 0 72 48 0
16 6603028 10 34 79 0 0 0 0 0
17 6392 9 33 108 0 0 0 0 0
18 9776 4 28 89 0 0 0 0 0
19 10315 12 36 81 0 0 0 0 0
20 6603086 & 6603085 8 31 86 0 0 0 0 0
20.1 6603086 6603085 8 32 86 0 0 0 0 0
20.2 6603085 6603086 8 32 86 0 0 0 0 0
21 810000132 2 36 81 0 0 0 0 0
22 8355 9 33 84 0 0 0 0 0
23 8987 5 29 88 0 0 0 0 0
24 9519 3 27 90 0 0 0 0 0
25 7529 9 33 84 0 0 0 0 0
26 410990101 5 29 88 0 0 0 0 0
27 9272 3 27 114 0 0 0 0 0
28 6604092 4 28 90 0 0 0 0 0
29 9069 4 28 89 0 0 0 0 0
30 6603157 10 34 83 0 0 0 0 0
31 240990070 9 36 81 0 0 0 0 0
32 10487 1 25 92 0 0 0 0 0
33 6603490 8 32 85 0 0 0 0 0
34 7000 10 36 0 0 0 0 0 81
35 10382 2 26 91 0 0 0 0 0
36 6603234 12 36 81 0 0 0 0 0
37 8770 4 28 89 0 0 0 0 0
38 10489 1 25 92 0 0 0 0 0
39 6603048 11 35 82 0 0 0 0 0
40 9462 5 36 0 0 0 0 0 93
41 6603050 10 34 83 0 0 0 0 0
42 7198 9 33 84 0 0 0 0 0
43 9155 2 26 91 0 0 0 0 0
44 400990084 6 36 80 0 0 0 0 0
45 8489 6 0 0 0 0 0 60 57
46 400990109 5 60 0 0 0 0 0 57
47 6603029 11 35 82 0 0 0 0 0
47.1 6603029A 11 35 82 0 0 0 0 0
47.2 6603029B 11 35 82 0 0 0 0 0
48 240990106 6 36 0 0 0 0 0 81
49 8512 6 30 111 0 0 0 0 0
50 410990052 10 36 81 0 0 0 0 0
51 7723 9 33 84 0 0 0 0 0
52 7361 9 33 84 0 0 0 0 0
53 6603961 4 28 89 0 0 0 0 0
54 9198 & 6643 5 29 88 0 0 0 0 0
55 6643 9198 5 29 88 0 0 0 0 0
55.1 6643A 9198 5 29 88 0 0 0 0 0
55.2 6643B 9198 5 29 88 0 0 0 0 0
56 9198 6643 5 29 88 0 0 0 0 0
57 7001 10 36 0 0 0 0 0 81
58 400000134 3 36 81 0 0 0 0 0
58.1 400000134A 3 36 81 0 0 0 0 0
58.2 400000134B 3 36 81 0 0 0 0 0
58.3 400000134C 3 36 81 0 0 0 0 0
59 250990091 4 36 81 0 0 0 0 0
60 10319 8 32 85 0 0 0 0 0
61 6913 10 0 0 72 12 12 12 9
62 10320 5 29 88 0 0 0 0 0
63 6603463 9 33 82 0 0 0 0 0
64 6603498 11 35 82 0 0 0 0 0
65 7488 6 30 99 0 0 0 0 0
66 7815 11 48 0 0 0 36 0 33
67 800990098 4 60 0 0 0 0 0 57
68 7371 6 30 87 0 0 0 0 0
69 6603237 12 36 81 0 0 0 0 0
70 6988 10 34 83 0 0 0 0 0
71 7805 9 33 84 0 0 0 0 0
72 7827 9 33 84 0 0 0 0 0
73 258990114 2 36 81 0 0 0 0 0
74 8714 3 27 90 0 0 0 0 0
75 400990085 6 36 80 0 0 0 0 0
76 400990071 9 48 0 0 0 0 0 68
77 245990073 6 60 0 0 0 0 0 57
78 9082 7 31 50 0 0 0 0 0
79 10314 5 29 88 0 0 0 0 0
80 9179 7 36 0 0 0 0 0 81
81 7261 10 34 107 0 0 0 0 0
82 240000136 1 36 81 0 0 0 0 0
83 240990103 3 36 0 0 0 0 0 81
84 410990083 7 48 0 0 0 0 0 69
85 6251 11 35 82 0 0 0 0 0
85.1 6251A 11 35 82 0 0 0 0 0
85.2 6251B 11 35 82 0 0 0 0 0
85.3 6251C 11 35 82 0 0 0 0 0
85.4 6251D 11 35 82 0 0 0 0 0
86 9704 4 28 89 0 0 0 0 0
87 6909 11 35 82 0 0 0 0 0
88 10308 8 32 82 0 0 0 0 0
89 7184 7 31 86 0 0 0 0 0
90 6885 7 31 86 0 0 0 0 0
91 255990080 8 60 0 0 0 0 0 57
92 6000070 23 72 0 0 0 0 0 124
93 6601140 20 35 201 0 0 0 0 0
94 7015 10 34 83 0 0 0 0 0
95 10311 5 36 0 0 0 0 0 81
96 7404 10 34 83 0 0 0 0 0
97 10318 10 34 83 0 0 0 0 0
98 10391 3 48 0 0 0 0 0 69
99 6569 11 35 82 0 0 0 0 0
100 10313 5 29 85 0 0 0 0 0
101 400980023 12 48 0 0 0 0 0 69
102 10405 & 10335 7 60 0 0 0 0 0 57
102.1 10405 10335 (Defaulted only) 7 60 0 0 0 0 0 57
102.2 10335 10405 (Defaulted Only) 7 60 0 0 0 0 0 57
103 5151 15 39 78 0 0 0 0 0
104 7552 10 34 107 0 0 0 0 0
105 10306 32 72 0 0 0 72 36 24
106 9391 3 27 114 0 0 0 0 0
107 10309 7 31 86 0 0 0 0 0
108 800990076 7 60 0 0 0 0 0 57
109 8399 7 31 86 0 0 0 0 0
110 400990108 2 60 0 0 0 0 0 57
111 7747 7 0 0 0 0 0 0 117
112 10400 4 60 0 0 0 0 0 57
113 300980019 43 48 0 0 0 0 0 126
114 240990104 5 36 0 0 0 0 0 81
115 400990086 6 36 80 0 0 0 0 0
116 10336 8 60 0 0 0 0 0 57
117 6602981 11 35 82 0 0 0 0 0
118 405990030 11 36 0 0 0 0 0 78
119 8698 6 30 87 0 0 0 0 0
120 7766 8 32 109 0 0 0 0 0
121 8335 7 31 86 0 0 0 0 0
122 6568 11 35 82 0 0 0 0 0
123 245990072 6 60 0 0 0 0 0 57
124 220990034 11 60 0 0 0 0 0 57
125 7237 9 33 84 0 0 0 0 0
126 415990117 2 36 0 0 0 0 0 81
127 400990065 9 48 0 0 0 0 0 69
128 6567 11 35 82 0 0 0 0 0
129 245990074 7 36 0 0 0 0 0 81
130 400990047 12 36 81 0 0 0 0 0
131 420990049 8 60 0 0 0 0 0 57
132 10323 7 31 86 0 0 0 0 0
133 400990051 12 48 0 0 0 0 0 69
134 400990029 10 60 0 0 0 0 0 176
135 410990077 & 410990090 5 36 0 0 0 0 0 81
135.1 410990077 410990090 5 36 0 0 0 0 0 81
135.2 410990090 410990077 5 36 0 0 0 0 0 81
136 3314 21 0 0 96 0 0 0 0
137 415000131 2 48 0 0 0 0 0 69
138 400990048 12 48 0 0 0 0 0 69
139 400990041 13 60 0 0 0 0 0 58
140 10310 5 29 88 0 0 0 0 0
141 410990045 11 36 0 0 0 0 0 81
142 245990116 5 36 81 0 0 0 0 0
143 8669 3 0 0 108 0 0 0 0
144 410990061 6 60 0 0 0 0 0 57
145 400990119 2 36 0 0 0 0 0 141
146 400990095 7 36 0 0 0 0 0 81
147 7748 7 0 0 0 0 0 0 117
148 10407 4 60 0 0 0 0 0 57
149 6010 11 0 0 117 0 0 0 0
150 400990107 5 48 0 0 0 0 0 69
151 415990102 4 48 0 0 0 0 0 69
152 400990089 5 60 0 0 0 0 0 57
153 400980012 13 36 0 0 0 0 0 24
154 400990064 8 48 0 0 0 0 0 69
155 10399 3 60 0 0 0 0 0 57
156 410990066 7 60 0 0 0 0 0 57
157 400990097 7 48 0 0 0 0 0 129
158 5847 10 0 0 117 0 0 0 0
159 400990060 6 36 0 0 0 0 0 81
160 8526 5 0 0 120 0 0 0 0
161 10337 7 60 0 0 0 0 0 57
162 6668 & 6667 11 0 0 117 0 0 0 0
162.1 6667 6668 11 0 0 117 0 0 0 0
162.2 6668 6667 11 0 0 117 0 0 0 0
163 10338 5 60 0 0 0 0 0 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
YIELD
YIELD MAINTENANCE
CONTROL LOAN MAINTENANCE CALCULATION
NUMBER NUMBER YM.5 YM 5% 4% 3% 2% 1% OPEN DESCRIPTION METHOD
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 0 0 0 0 0 0 0 3
2 6603515 0 0 0 0 0 0 0 5
3 5557 0 0 0 0 0 0 0 3
4 0 0 0 0 0 0 0 3 TREASURY FLAT 3
4.1 260990081 0 0 0 0 0 0 0 3 Treasury Flat 3
4.2 260990082 0 0 0 0 0 0 0 3 Treasury Flat 3
5 6603656 0 0 0 0 0 0 0 2
6 10756 0 0 0 0 0 0 0 3
7 10761 0 0 0 0 0 0 0 3
8 7816 0 0 0 0 0 0 0 3
9 415990039 0 0 0 0 0 0 0 3
10 6603700 0 0 0 0 0 0 0 3
11 9569 0 0 0 0 0 0 0 3
12 2806 0 0 0 0 0 0 0 6
13 1906 0 0 0 0 0 0 24 12 TREASURY FLAT 1
13.1 1906A 0 0 0 0 0 0 24 12
13.2 1906B 0 0 0 0 0 0 24 12
13.3 1906C 0 0 0 0 0 0 24 12
13.4 1906D 0 0 0 0 0 0 24 12
13.5 1906E 0 0 0 0 0 0 24 12
13.6 1906F 0 0 0 0 0 0 24 12
14 7598 0 0 0 0 0 0 0 3
15 1889 0 0 0 0 0 0 12 12 Treasury Flat 1
16 6603028 0 0 0 0 0 0 0 7
17 6392 0 0 0 0 0 0 0 3
18 9776 0 0 0 0 0 0 0 3
19 10315 0 0 0 0 0 0 0 3
20 0 0 0 0 0 0 0 2
20.1 6603086 0 0 0 0 0 0 0 2
20.2 6603085 0 0 0 0 0 0 0 2
21 810000132 0 0 0 0 0 0 0 3
22 8355 0 0 0 0 0 0 0 3
23 8987 0 0 0 0 0 0 0 3
24 9519 0 0 0 0 0 0 0 3
25 7529 0 0 0 0 0 0 0 3
26 410990101 0 0 0 0 0 0 0 3
27 9272 0 0 0 0 0 0 0 3
28 6604092 0 0 0 0 0 0 0 2
29 9069 0 0 0 0 0 0 0 3
30 6603157 0 0 0 0 0 0 0 3
31 240990070 0 0 0 0 0 0 0 3
32 10487 0 0 0 0 0 0 0 3
33 6603490 0 0 0 0 0 0 0 3
34 7000 0 0 0 0 0 0 0 3 Treasury Flat 1
35 10382 0 0 0 0 0 0 0 3
36 6603234 0 0 0 0 0 0 0 3
37 8770 0 0 0 0 0 0 0 3
38 10489 0 0 0 0 0 0 0 3
39 6603048 0 0 0 0 0 0 0 3
40 9462 0 0 0 0 0 0 0 3
41 6603050 0 0 0 0 0 0 0 3
42 7198 0 0 0 0 0 0 0 3
43 9155 0 0 0 0 0 0 0 3
44 400990084 0 0 0 0 0 0 0 4
45 8489 0 0 0 0 0 0 0 3 Treasury Flat 1
46 400990109 0 0 0 0 0 0 0 3 Treasury Flat 3
47 6603029 0 0 0 0 0 0 0 3
47.1 6603029A 0 0 0 0 0 0 0 3
47.2 6603029B 0 0 0 0 0 0 0 3
48 240990106 0 0 0 0 0 0 0 3 Treasury Flat 3
49 8512 0 0 0 0 0 0 0 3
50 410990052 0 0 0 0 0 0 0 3
51 7723 0 0 0 0 0 0 0 3
52 7361 0 0 0 0 0 0 0 3
53 6603961 0 0 0 0 0 0 0 3
54 0 0 0 0 0 0 0 3
55 6643 0 0 0 0 0 0 0 3
55.1 6643A 0 0 0 0 0 0 0 3
55.2 6643B 0 0 0 0 0 0 0 3
56 9198 0 0 0 0 0 0 0 3
57 7001 0 0 0 0 0 0 0 3 Treasury Flat 1
58 400000134 0 0 0 0 0 0 0 3 TREASURY FLAT 3
58.1 400000134A 0 0 0 0 0 0 0 3 Treasury Flat 3
58.2 400000134B 0 0 0 0 0 0 0 3 Treasury Flat 3
58.3 400000134C 0 0 0 0 0 0 0 3 Treasury Flat 3
59 250990091 0 0 0 0 0 0 0 3
60 10319 0 0 0 0 0 0 0 3
61 6913 0 0 0 0 0 0 0 3 Treasury Flat 1
62 10320 0 0 0 0 0 0 0 3
63 6603463 0 0 0 0 0 0 0 5
64 6603498 0 0 0 0 0 0 0 3
65 7488 0 0 0 0 0 0 0 3
66 7815 0 0 0 0 0 0 0 3 Treasury Flat 1
67 800990098 0 0 0 0 0 0 0 3 Treasury Flat 3
68 7371 0 0 0 0 0 0 0 3
69 6603237 0 0 0 0 0 0 0 3
70 6988 0 0 0 0 0 0 0 3
71 7805 0 0 0 0 0 0 0 3
72 7827 0 0 0 0 0 0 0 3
73 258990114 0 0 0 0 0 0 0 3
74 8714 0 0 0 0 0 0 0 3
75 400990085 0 0 0 0 0 0 0 4
76 400990071 0 0 0 0 0 0 0 4 Treasury Flat 3
77 245990073 0 0 0 0 0 0 0 3 Treasury Flat 3
78 9082 0 0 0 0 0 0 0 3
79 10314 0 0 0 0 0 0 0 3
80 9179 0 0 0 0 0 0 0 3 Treasury Flat 1
81 7261 0 0 0 0 0 0 0 3
82 240000136 0 0 0 0 0 0 0 3
83 240990103 0 0 0 0 0 0 0 3 Treasury Flat 3
84 410990083 0 0 0 0 0 0 0 3 Treasury Flat 3
85 6251 0 0 0 0 0 0 0 3
85.1 6251A 0 0 0 0 0 0 0 3
85.2 6251B 0 0 0 0 0 0 0 3
85.3 6251C 0 0 0 0 0 0 0 3
85.4 6251D 0 0 0 0 0 0 0 3
86 9704 0 0 0 0 0 0 0 3
87 6909 0 0 0 0 0 0 0 3
88 10308 0 0 0 0 0 0 0 6
89 7184 0 0 0 0 0 0 0 3
90 6885 0 0 0 0 0 0 0 3
91 255990080 0 0 0 0 0 0 0 3 Treasury Flat 3
92 6000070 0 0 0 0 0 0 0 2 Treasury Flat 5
93 6601140 0 0 0 0 0 0 0 4
94 7015 0 0 0 0 0 0 0 3
95 10311 0 0 0 0 0 0 0 3 Treasury Flat 1
96 7404 0 0 0 0 0 0 0 3
97 10318 0 0 0 0 0 0 0 3
98 10391 0 0 0 0 0 0 0 3 Treasury Flat 1
99 6569 0 0 0 0 0 0 0 3
100 10313 0 0 0 0 0 0 0 6
101 400980023 0 0 0 0 0 0 0 3 Treasury Flat 3
102 0 0 0 0 0 0 0 3 TREASURY FLAT 2
102.1 10405 0 0 0 0 0 0 0 3 Treasury Flat 2
102.2 10335 0 0 0 0 0 0 0 3 Treasury Flat 2
103 5151 0 0 0 0 0 0 0 3
104 7552 0 0 0 0 0 0 0 3
105 10306 0 0 0 0 0 0 0 12 Treasury Flat 1
106 9391 0 0 0 0 0 0 0 3
107 10309 0 0 0 0 0 0 0 3
108 800990076 0 0 0 0 0 0 0 3 Treasury Flat 3
109 8399 0 0 0 0 0 0 0 3
110 400990108 0 0 0 0 0 0 0 3 Treasury Flat 3
111 7747 0 0 0 0 0 0 0 3 Treasury Flat 1
112 10400 0 0 0 0 0 0 0 3 Treasury Flat 2
113 300980019 0 0 0 0 0 0 0 6 Treasury Flat 4
114 240990104 0 0 0 0 0 0 0 3 Treasury Flat 3
115 400990086 0 0 0 0 0 0 0 4
116 10336 0 0 0 0 0 0 0 3 Treasury Flat 2
117 6602981 0 0 0 0 0 0 0 3
118 405990030 0 0 0 0 0 0 0 6 Treasury Flat 3
119 8698 0 0 0 0 0 0 0 3
120 7766 0 0 0 0 0 0 0 3
121 8335 0 0 0 0 0 0 0 3
122 6568 0 0 0 0 0 0 0 3
123 245990072 0 0 0 0 0 0 0 3 Treasury Flat 3
124 220990034 0 0 0 0 0 0 0 3 Treasury Flat 3
125 7237 0 0 0 0 0 0 0 3
126 415990117 0 0 0 0 0 0 0 3 Treasury Flat 3
127 400990065 0 0 0 0 0 0 0 3 Treasury Flat 3
128 6567 0 0 0 0 0 0 0 3
129 245990074 0 0 0 0 0 0 0 3 Treasury Flat 3
130 400990047 0 0 0 0 0 0 0 3
131 420990049 0 0 0 0 0 0 0 3 Treasury Flat 3
132 10323 0 0 0 0 0 0 0 3
133 400990051 0 0 0 0 0 0 0 3 Treasury Flat 3
134 400990029 0 0 0 0 0 0 0 4 Treasury Flat 3
135 0 0 0 0 0 0 0 3 TREASURY FLAT 3
135.1 410990077 0 0 0 0 0 0 0 3 Treasury Flat 3
135.2 410990090 0 0 0 0 0 0 0 3 Treasury Flat 3
136 3314 0 0 12 0 0 0 0 12 Treasury Flat 1
137 415000131 0 0 0 0 0 0 0 3 Treasury Flat 3
138 400990048 0 0 0 0 0 0 0 3 Treasury Flat 3
139 400990041 0 0 0 0 0 0 0 3 Treasury Flat 3
140 10310 0 0 0 0 0 0 0 3
141 410990045 0 0 0 0 0 0 0 3 Treasury Flat 3
142 245990116 0 0 0 0 0 0 0 3 Treasury Flat 3
143 8669 0 0 9 0 0 0 0 3 Treasury Flat 1
144 410990061 0 0 0 0 0 0 0 3 Treasury Flat 3
145 400990119 0 0 0 0 0 0 0 3 Treasury Flat 3
146 400990095 0 0 0 0 0 0 0 3 Treasury Flat 3
147 7748 0 0 0 0 0 0 0 3 Treasury Flat 1
148 10407 0 0 0 0 0 0 0 3 Treasury Flat 2
149 6010 0 0 0 0 0 0 0 3 Treasury Flat 1
150 400990107 0 0 0 0 0 0 0 3 Treasury Flat 3
151 415990102 0 0 0 0 0 0 0 3 Treasury Flat 3
152 400990089 0 0 0 0 0 0 0 3 Treasury Flat 3
153 400980012 0 0 12 12 12 12 9 3 Treasury Flat 3
154 400990064 0 0 0 0 0 0 0 3 Treasury Flat 3
155 10399 0 0 0 0 0 0 0 3 Treasury Flat 2
156 410990066 0 0 0 0 0 0 0 3 Treasury Flat 3
157 400990097 0 0 0 0 0 0 0 3 Treasury Flat 3
158 5847 0 0 0 0 0 0 0 3 Treasury Flat 1
159 400990060 0 0 0 0 0 0 0 3 Treasury Flat 3
160 8526 0 0 9 0 0 0 0 3 Treasury Flat 1
161 10337 0 0 0 0 0 0 0 3 Treasury Flat 2
162 0 0 0 0 0 0 0 3 TREASURY FLAT 1
162.1 6667 0 0 0 0 0 0 0 3 Treasury Flat 1
162.2 6668 0 0 0 0 0 0 0 3 Treasury Flat 1
163 10338 0 0 0 0 0 0 0 3 Treasury Flat 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
ORIGINAL REMAINING
ORIGINAL TERM TO MATURITY REMAINING TERM TO BALLOON/ARD
CONTROL LOAN AMORTIZATION MATURITY OR DATE OR AMORTIZATION MATURITY OR AMORTIZING OR HYPER BALLOON/ARD
NUMBER NUMBER TERM ARD ARD TERM ARD AMORTIZING BALANCE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 360 120 1/1/10 355 115 Balloon 27,547,216
2 6603515 360 119 7/1/09 350 109 ARD 23,303,340
3 5557 360 120 7/1/09 349 109 Balloon 18,669,511
4 300 120 11/1/09 293 113 BALLOON 17,546,514
4.1 260990081 300 120 11/1/09 293 113 Balloon 9,770,412
4.2 260990082 300 120 11/1/09 293 113 Balloon 7,776,102
5 6603656 360 120 1/1/10 355 115 Balloon 18,046,594
6 10756 360 120 4/1/10 358 118 Balloon 16,478,395
7 10761 360 120 1/1/10 355 115 Balloon 15,702,683
8 7816 360 132 12/1/10 354 126 Balloon 15,427,316
9 415990039 360 120 7/1/09 349 109 Balloon 13,274,244
10 6603700 360 120 12/1/09 354 114 Balloon 13,274,867
11 9569 360 144 2/1/12 356 140 Hyper Amortizing 12,138,847
12 2806 360 84 1/1/05 331 55 Hyper Amortizing 13,011,885
13 1906 360 180 1/1/13 331 151 BALLOON 10,366,738
13.1 1906A 331 151 Balloon 510,230
13.2 1906B 331 151 Balloon 3,242,586
13.3 1906C 331 151 Balloon 2,336,569
13.4 1906D 331 151 Balloon 915,554
13.5 1906E 331 151 Balloon 691,434
13.6 1906F 331 151 Balloon 2,670,365
14 7598 300 132 9/1/10 291 123 Balloon 9,768,773
15 1889 360 144 9/1/10 339 123 Balloon 9,815,280
16 6603028 360 120 8/1/09 350 110 Balloon 10,371,075
17 6392 344 144 9/1/11 335 135 Balloon 8,795,785
18 9776 300 120 2/1/10 296 116 Hyper Amortizing 8,414,491
19 10315 300 120 6/1/09 288 108 Balloon 8,091,311
20 348 120 10/1/09 340 112 BALLOON 8,559,653
20.1 6603086 360 120 10/1/09 352 112 Balloon 6,877,894
20.2 6603085 300 120 10/1/09 292 112 Balloon 1,681,758
21 810000132 360 120 4/1/10 358 118 Hyper Amortizing 8,695,299
22 8355 240 120 9/1/09 231 111 Balloon 6,731,593
23 8987 360 120 1/1/10 355 115 Balloon 8,266,016
24 9519 360 120 3/1/10 357 117 Balloon 8,355,045
25 7529 360 120 9/1/09 351 111 Balloon 7,923,920
26 410990101 360 120 1/1/10 355 115 Balloon 8,042,777
27 9272 360 144 3/1/12 357 141 Balloon 7,500,134
28 6604092 360 120 2/1/10 356 116 Balloon 7,820,574
29 9069 360 120 2/1/10 356 116 Balloon 7,330,715
30 6603157 360 120 8/1/09 350 110 Balloon 7,057,489
31 240990070 360 120 9/1/09 351 111 Balloon 6,891,501
32 10487 360 120 5/1/10 359 119 Balloon 6,729,222
33 6603490 360 120 10/1/09 352 112 Balloon 6,743,158
34 7000 360 120 8/1/09 350 110 Balloon 6,284,783
35 10382 360 120 4/1/10 358 118 Balloon 6,337,486
36 6603234 360 120 6/1/09 348 108 Balloon 6,227,088
37 8770 360 120 2/1/10 356 116 Balloon 6,271,624
38 10489 360 120 5/1/10 359 119 Balloon 6,091,116
39 6603048 360 120 7/1/09 349 109 Balloon 6,084,986
40 9462 360 132 1/1/11 355 127 Balloon 5,678,028
41 6603050 360 120 8/1/09 350 110 Balloon 5,906,458
42 7198 360 120 9/1/09 351 111 Balloon 5,441,679
43 9155 300 120 4/1/10 298 118 Balloon 5,105,102
44 400990084 360 120 12/1/09 354 114 Balloon 5,400,569
45 8489 360 120 12/1/09 354 114 Balloon 5,277,719
46 400990109 300 120 1/1/10 295 115 Balloon 4,952,186
47 6603029 360 120 7/1/09 349 109 BALLOON 5,402,057
47.1 6603029A 360 120 7/1/09 349 109 Balloon 4,209,879
47.2 6603029B 360 120 7/1/09 349 109 Balloon 1,192,178
48 240990106 360 120 12/1/09 354 114 Balloon 5,118,617
49 8512 360 144 12/1/11 354 138 Balloon 4,830,407
50 410990052 360 120 8/1/09 350 110 Balloon 4,983,362
51 7723 344 120 9/1/09 335 111 Balloon 4,738,383
52 7361 290 120 9/1/09 281 111 Balloon 4,481,702
53 6603961 360 120 2/1/10 356 116 Balloon 4,857,038
54 300 120 1/1/10 295 115 BALLOON 4,294,754
55 6643 300 120 1/1/10 295 115 Balloon 3,118,573
55.1 6643A 300 120 1/1/10 295 115 Balloon 2,589,004
55.2 6643B 300 120 1/1/10 295 115 Balloon 529,569
56 9198 300 120 1/1/10 295 115 Balloon 1,176,181
57 7001 360 120 8/1/09 350 110 Balloon 4,539,010
58 400000134 300 120 3/1/10 297 117 BALLOON 4,301,023
58.1 400000134A 300 120 3/1/10 297 117 Balloon 1,620,823
58.2 400000134B 300 120 3/1/10 297 117 Balloon 980,623
58.3 400000134C 300 120 3/1/10 297 117 Balloon 1,699,577
59 250990091 360 120 2/1/10 356 116 Balloon 4,621,284
60 10319 360 120 10/1/09 352 112 Balloon 4,562,031
61 6913 360 120 8/1/09 350 110 Balloon 4,387,336
62 10320 360 120 1/1/10 355 115 Balloon 4,459,770
63 6603463 360 120 9/1/09 351 111 Balloon 4,375,205
64 6603498 360 120 7/1/09 349 109 Balloon 4,345,486
65 7488 360 132 12/1/10 354 126 Balloon 4,201,863
66 7815 360 120 7/1/09 349 109 Balloon 4,132,208
67 800990098 360 120 2/1/10 356 116 Balloon 4,228,401
68 7371 300 120 12/1/09 294 114 Hyper Amortizing 3,674,672
69 6603237 360 120 6/1/09 348 108 Balloon 3,797,855
70 6988 300 120 8/1/09 290 110 Balloon 3,521,560
71 7805 300 120 9/1/09 291 111 Balloon 3,459,780
72 7827 300 120 9/1/09 291 111 Balloon 3,415,448
73 258990114 360 120 4/1/10 358 118 Balloon 3,782,984
74 8714 360 120 3/1/10 357 117 Balloon 3,681,079
75 400990085 360 120 12/1/09 354 114 Balloon 3,600,380
76 400990071 360 120 9/1/09 351 111 Balloon 3,582,401
77 245990073 360 120 12/1/09 354 114 Balloon 3,569,675
78 9082 360 84 11/1/06 353 77 Balloon 3,670,185
79 10314 360 120 1/1/10 355 115 Hyper Amortizing 3,469,573
80 9179 360 120 11/1/09 353 113 Balloon 3,330,386
81 7261 360 144 8/1/11 350 134 Hyper Amortizing 3,130,055
82 240000136 360 120 5/1/10 359 119 Balloon 3,165,716
83 240990103 360 120 3/1/10 357 117 Balloon 3,034,188
84 410990083 360 120 11/1/09 353 113 Balloon 2,989,494
85 6251 360 120 7/1/09 349 109 BALLOON 2,843,161
85.1 6251A 360 120 7/1/09 349 109 Balloon 1,047,107
85.2 6251B 360 120 7/1/09 349 109 Balloon 745,398
85.3 6251C 360 120 7/1/09 349 109 Balloon 539,526
85.4 6251D 360 120 7/1/09 349 109 Balloon 511,130
86 9704 360 120 2/1/10 356 116 Balloon 2,858,820
87 6909 300 120 7/1/09 289 109 Balloon 2,591,060
88 10308 360 120 10/1/09 352 112 Balloon 2,788,465
89 7184 336 120 11/1/09 329 113 Balloon 2,635,273
90 6885 360 120 11/1/09 353 113 Balloon 2,584,488
91 255990080 300 120 10/1/09 292 112 Balloon 2,273,426
92 6000070 300 198 12/31/14 277 175 Balloon 1,614,051
93 6601140 240 240 10/1/18 220 220 Fully Amortizing 108,513
94 7015 300 120 8/1/09 290 110 Balloon 2,198,876
95 10311 300 120 1/1/10 295 115 Balloon 2,196,317
96 7404 300 120 8/1/09 290 110 Balloon 2,125,722
97 10318 300 120 8/1/09 290 110 Balloon 2,141,037
98 10391 360 120 3/1/10 357 117 Balloon 2,242,473
99 6569 300 120 7/1/09 289 109 Balloon 2,019,274
100 10313 300 120 1/1/10 295 115 Balloon 2,073,808
101 400980023 300 120 5/27/09 288 108 Balloon 2,053,685
102 300 120 11/1/09 293 113 BALLOON 2,018,917
102.1 10405 300 120 11/1/09 293 113 Balloon 1,390,625
102.2 10335 300 120 11/1/09 293 113 Balloon 628,292
103 5151 300 120 3/1/09 285 105 Balloon 1,948,271
104 7552 360 144 8/1/11 350 134 Balloon 2,001,956
105 10306 360 216 10/1/15 328 184 Balloon 1,745,112
106 9391 300 144 3/1/12 297 141 Balloon 1,747,669
107 10309 360 120 11/1/09 353 113 Balloon 2,079,634
108 800990076 360 120 11/1/09 353 113 Balloon 2,036,006
109 8399 300 120 11/1/09 293 113 Hyper Amortizing 1,823,120
110 400990108 360 120 4/1/10 358 118 Balloon 1,940,243
111 7747 300 120 11/1/09 293 113 Balloon 1,747,207
112 10400 300 120 2/1/10 296 116 Balloon 1,780,560
113 300980019 180 180 11/1/11 137 137 Fully Amortizing -
114 240990104 360 120 1/1/10 355 115 Balloon 1,844,599
115 400990086 360 120 12/1/09 354 114 Balloon 1,800,190
116 10336 360 120 10/1/09 352 112 Balloon 1,810,985
117 6602981 360 120 7/1/09 349 109 Balloon 1,814,299
118 405990030 360 120 7/1/09 349 109 Hyper Amortizing 1,797,542
119 8698 300 120 12/1/09 294 114 Balloon 1,620,310
120 7766 180 144 10/1/11 172 136 Balloon 643,895
121 8335 300 120 11/1/09 293 113 Balloon 1,553,413
122 6568 300 120 7/1/09 289 109 Balloon 1,547,756
123 245990072 360 120 12/1/09 354 114 Balloon 1,671,872
124 220990034 360 120 7/1/09 349 109 Balloon 1,695,589
125 7237 300 120 9/1/09 291 111 Balloon 1,371,544
126 415990117 300 120 4/1/10 298 118 Balloon 1,409,580
127 400990065 300 120 9/1/09 291 111 Balloon 1,387,420
128 6567 300 120 7/1/09 289 109 Balloon 1,321,255
129 245990074 300 120 11/1/09 293 113 Balloon 1,340,736
130 400990047 360 120 6/1/09 348 108 Balloon 1,426,426
131 420990049 360 120 10/1/09 352 112 Balloon 1,355,632
132 10323 300 120 11/1/09 293 113 Balloon 1,249,662
133 400990051 300 120 6/1/09 288 108 Balloon 1,248,676
134 400990029 240 240 8/1/19 230 230 Fully Amortizing 100,027
135 VARIOUS 120 1/1/10 VARIOUS 115 BALLOON 1,273,110
135.1 410990077 360 120 1/1/10 355 115 Balloon 699,456
135.2 410990090 300 120 1/1/10 295 115 Balloon 573,654
136 3314 300 120 9/1/08 279 99 Balloon 1,134,763
137 415000131 360 120 4/1/10 358 118 Balloon 1,281,949
138 400990048 360 120 6/1/09 348 108 Balloon 1,256,508
139 400990041 300 121 6/1/09 287 108 Balloon 1,152,553
140 10310 300 120 1/1/10 295 115 Balloon 1,086,903
141 410990045 360 120 7/1/09 349 109 Balloon 1,155,835
142 245990116 300 120 12/16/09 295 115 Balloon 1,036,059
143 8669 300 120 3/1/10 297 117 Balloon 969,643
144 410990061 300 120 12/1/09 294 114 Balloon 961,182
145 400990119 180 180 4/1/15 178 178 Fully Amortizing 40,765
146 400990095 300 120 11/1/09 293 113 Balloon 931,122
147 7748 300 120 11/1/09 293 113 Balloon 905,161
148 10407 300 120 2/1/10 296 116 Balloon 902,761
149 6010 300 120 7/1/09 289 109 Balloon 859,917
150 400990107 360 120 1/1/10 355 115 Balloon 927,264
151 415990102 360 120 2/1/10 356 116 Balloon 908,186
152 400990089 300 120 1/1/10 295 115 Balloon 839,062
153 400980012 300 120 5/1/09 287 107 Balloon 846,016
154 400990064 360 120 10/1/09 352 112 Balloon 874,890
155 10399 300 120 3/1/10 297 117 Balloon 804,069
156 410990066 300 120 11/1/09 293 113 Balloon 778,693
157 400990097 180 180 11/1/14 173 173 Fully Amortizing 34,984
158 5847 360 120 8/1/09 350 110 Balloon 728,898
159 400990060 300 120 12/1/09 294 114 Balloon 649,580
160 8526 204 132 1/1/11 199 127 Balloon 408,643
161 10337 300 120 11/1/09 293 113 Balloon 600,775
<PAGE>
162 300 120 7/1/90 289 109 BALLOON 595,670
162.1 6667 300 120 7/1/09 289 109 Balloon 297,835
162.2 6668 300 120 7/1/09 289 109 Balloon 297,835
163 10338 300 120 1/1/10 295 115 Balloon 526,522
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
CURRENT OR
FUTURE APPRAISAL
CONTROL LOAN BALLOON/ARD DUE ON SUBDORDINATE APPRAISAL VALUE "AS CURRENT
NUMBER NUMBER LTV RATIO DUE ON SALE ENCUMBRANCE FINANCING VALUE OF" DATE LTV RATIO
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 65.59% Yes Yes No 42,000,000 4/1/00 72.41%
2 6603515 69.56% Yes Yes No 33,500,000 3/1/99 77.16%
3 5557 68.14% Yes Yes No 27,400,000 5/10/99 76.12%
4 59.28% NO YES NO 29,600,000 8/19/99 68.89%
4.1 260990081 58.86% No Yes No 16,600,000 8/19/99 68.40%
4.2 260990082 59.82% No Yes No 13,000,000 8/19/99 69.51%
5 6603656 66.84% Yes Yes No 27,000,000 8/6/99 74.23%
6 10756 73.89% Yes-No Fee Yes-No Fee No 22,300,000 2/16/00 79.73%
7 10761 70.73% Yes-No Fee Yes-No Fee No 22,200,000 11/10/99 78.60%
8 7816 56.10% Yes Yes No 27,500,000 10/6/99 63.42%
9 415990039 60.89% No No Yes 21,800,000 5/3/99 67.68%
10 6603700 71.76% Yes Yes No 18,500,000 9/10/99 79.73%
11 9569 62.41% Yes Yes No 19,450,000 11/18/99 72.31%
12 2806 69.40% Yes Yes No 18,750,000 3/30/00 73.12%
13 1906 47.69% YES YES NO 21,740,000 VARIOUS 61.55%
13.1 1906A 47.69% Yes Yes No 1,070,000 3/16/00 61.55%
13.2 1906B 47.69% Yes Yes No 6,800,000 3/2/00 61.55%
13.3 1906C 47.69% Yes Yes No 4,900,000 3/15/00 61.55%
13.4 1906D 47.69% Yes Yes No 1,920,000 3/10/00 61.55%
13.5 1906E 47.69% Yes Yes No 1,450,000 3/10/00 61.55%
13.6 1906F 47.69% Yes Yes No 5,600,000 3/17/00 61.55%
14 7598 61.05% Yes Yes No 16,000,000 6/21/99 76.61%
15 1889 63.32% Yes Yes No 15,500,000 3/16/00 76.01%
16 6603028 67.78% Yes Yes No 15,300,000 5/7/99 74.76%
17 6392 60.66% Yes Yes No 14,500,000 7/6/99 71.96%
18 9776 58.03% Yes Yes No 14,500,000 11/30/99 69.39%
19 10315 60.38% Yes Yes No 13,400,000 3/1/99 72.27%
20 60.74% YES YES NO 14,200,000 7/23/99 67.71%
20.1 6603086 63.68% Yes Yes No 10,800,000 7/23/99 70.58%
20.2 6603085 49.46% Yes Yes No 3,400,000 7/23/99 58.42%
21 810000132 63.89% No Yes No 13,610,000 2/7/00 70.47%
22 8355 42.34% Yes Yes No 15,900,000 8/1/99 58.89%
23 8987 68.31% Yes Yes No 12,100,000 5/1/99 76.22%
24 9519 67.93% Yes Yes No 12,300,000 11/30/99 74.51%
25 7529 60.95% Yes Yes No 13,000,000 7/2/99 68.90%
26 410990101 71.81% No Yes No 11,200,000 10/19/99 79.77%
27 9272 70.09% Yes Yes No 10,700,000 11/11/99 82.09%
28 6604092 71.75% Yes Yes No 10,900,000 11/17/99 79.63%
29 9069 61.09% Yes Yes No 12,000,000 11/15/99 66.54%
30 6603157 67.21% Yes Yes No 10,500,000 5/3/99 74.57%
31 240990070 64.83% No Yes No 10,630,000 7/1/99 71.78%
32 10487 67.97% Yes Yes No 9,900,000 12/28/99 75.72%
33 6603490 82.54% Yes Yes No 8,170,000 6/23/99 91.39%
34 7000 66.51% Yes Yes No 9,450,000 7/13/99 75.63%
35 10382 67.42% Yes Yes No 9,400,000 2/18/00 74.39%
36 6603234 69.97% Yes Yes No 8,900,000 4/15/99 78.06%
37 8770 67.80% Yes Yes Yes 9,250,000 11/1/99 73.91%
38 10489 64.80% Yes Yes No 9,400,000 3/1/00 72.31%
39 6603048 70.35% Yes Yes No 8,650,000 4/21/99 78.11%
40 9462 37.11% Yes Yes No 15,300,000 11/28/99 42.99%
41 6603050 69.49% Yes Yes No 8,500,000 3/12/99 77.19%
42 7198 54.42% Yes Yes No 10,000,000 6/28/99 61.04%
43 9155 60.06% Yes Yes No 8,500,000 10/1/99 71.35%
44 400990084 44.27% No Yes Yes 12,200,000 9/1/99 49.02%
45 8489 63.59% Yes Yes No 8,300,000 11/5/99 72.00%
46 400990109 53.25% No Yes No 9,300,000 10/28/99 64.20%
47 6603029 74.51% YES YES NO 7,250,000 VARIOUS 82.27%
47.1 6603029A 74.51% Yes Yes No 5,650,000 4/13/99 82.27%
47.2 6603029B 74.51% Yes Yes No 1,600,000 4/12/99 82.27%
48 240990106 62.42% No Yes No 8,200,000 10/22/99 69.28%
49 8512 61.93% Yes Yes No 7,800,000 10/12/99 70.93%
50 410990052 66.44% No Yes No 7,500,000 5/20/99 73.52%
51 7723 59.23% Yes Yes No 8,000,000 6/22/99 68.26%
52 7361 47.93% Yes Yes No 9,350,000 6/9/99 58.28%
53 6603961 68.17% Yes Yes No 7,125,000 11/19/99 74.65%
54 60.62% YES YES NO 7,100,000 8/11/99 73.68%
55 6643 58.84% Yes Yes No 5,300,000 8/11/99 71.67%
55.1 6643A 58.84% Yes Yes No 4,400,000 8/11/99 71.67%
55.2 6643B 58.84% Yes Yes No 900,000 8/11/99 71.67%
56 9198 65.34% Yes Yes No 1,800,000 8/11/99 79.60%
57 7001 69.19% Yes Yes No 6,560,000 7/13/99 78.68%
58 400000134 50.81% NO YES NO 8,465,000 1/25/00 60.68%
58.1 400000134A 50.81% No Yes No 3,190,000 1/25/00 60.68%
58.2 400000134B 50.81% No Yes No 1,930,000 1/25/00 60.68%
58.3 400000134C 50.81% No Yes No 3,345,000 1/25/00 60.68%
59 250990091 64.18% No No Yes 7,200,000 9/2/99 70.24%
60 10319 63.80% Yes Yes No 7,150,000 4/9/99 70.47%
61 6913 54.16% Yes Yes No 8,100,000 5/26/99 61.30%
62 10320 66.56% Yes Yes No 6,700,000 7/14/99 73.55%
63 6603463 64.15% Yes Yes No 6,820,000 7/16/99 71.51%
64 6603498 71.00% Yes Yes No 6,120,000 3/26/99 79.50%
65 7488 58.36% Yes Yes No 7,200,000 9/14/99 65.76%
66 7815 70.04% Yes Yes No 5,900,000 6/1/99 79.37%
67 800990098 67.12% No Yes No 6,300,000 10/1/99 72.88%
68 7371 56.53% Yes Yes No 6,500,000 4/7/99 68.81%
69 6603237 70.33% Yes Yes No 5,400,000 4/7/99 78.99%
70 6988 60.72% Yes Yes No 5,800,000 6/8/99 73.39%
71 7805 62.91% Yes Yes Yes 5,500,000 8/12/99 77.39%
72 7827 63.25% Yes Yes Yes 5,400,000 7/15/99 77.83%
73 258990114 63.58% No Yes No 5,950,000 12/14/99 69.69%
74 8714 61.35% Yes Yes No 6,000,000 9/3/99 66.60%
75 400990085 41.38% No Yes Yes 8,700,000 9/1/99 45.83%
76 400990071 56.86% No Yes Yes 6,300,000 6/22/99 63.16%
77 245990073 71.39% No Yes No 5,000,000 7/20/99 78.76%
78 9082 72.82% Yes Yes No 5,040,000 7/7/99 77.27%
79 10314 68.03% Yes Yes No 5,100,000 11/16/99 74.81%
80 9179 67.97% Yes Yes No 4,900,000 10/12/99 76.20%
81 7261 56.40% Yes Yes No 5,550,000 4/30/99 67.08%
82 240000136 55.30% No Yes No 5,725,000 2/21/00 61.10%
83 240990103 63.21% No Yes No 4,800,000 11/3/99 71.42%
84 410990083 64.99% No Yes No 4,600,000 6/18/99 71.48%
85 6251 70.99% YES YES NO 4,005,000 VARIOUS 80.02%
85.1 6251A 70.99% Yes Yes No 1,475,000 3/15/00 80.02%
85.2 6251B 70.99% Yes Yes No 1,050,000 3/2/00 80.02%
85.3 6251C 70.99% Yes Yes No 760,000 3/2/00 80.02%
85.4 6251D 70.99% Yes Yes No 720,000 3/2/00 80.02%
86 9704 65.57% Yes Yes No 4,360,000 12/5/99 73.23%
87 6909 59.22% Yes Yes No 4,375,000 4/21/99 71.85%
88 10308 68.01% Yes Yes Yes 4,100,000 4/27/99 75.28%
89 7184 67.57% Yes Yes No 3,900,000 9/3/99 77.94%
90 6885 65.43% Yes Yes No 3,950,000 7/15/99 73.45%
91 255990080 56.48% No Yes No 4,025,000 6/12/99 67.80%
92 6000070 41.92% Yes Yes No 3,850,000 3/18/98 70.72%
93 6601140 3.01% Yes Yes No 3,600,000 6/2/98 74.72%
94 7015 43.98% Yes Yes No 5,000,000 6/8/99 53.43%
95 10311 64.60% Yes Yes No 3,400,000 12/10/99 77.28%
96 7404 51.85% Yes Yes No 4,100,000 6/16/99 62.77%
97 10318 62.97% Yes Yes No 3,400,000 4/21/99 75.63%
98 10391 64.07% Yes Yes No 3,500,000 7/15/99 70.42%
99 6569 43.90% Yes Yes No 4,600,000 4/20/99 53.11%
100 10313 53.17% Yes Yes No 3,900,000 9/20/99 62.64%
101 400980023 59.01% No Yes No 3,480,000 1/6/99 69.65%
102 62.60% YES SILENT NO 3,225,000 7/9/99 74.27%
102.1 10405 62.78% Yes Silent No 2,215,000 7/9/99 74.48%
102.2 10335 62.21% Yes Silent No 1,010,000 7/9/99 73.80%
103 5151 54.88% Yes Yes No 3,550,000 2/29/00 66.50%
104 7552 61.60% Yes Yes No 3,250,000 4/14/99 72.58%
105 10306 58.17% Yes Yes Yes 3,000,000 10/25/99 77.27%
106 9391 55.84% Yes Yes No 3,130,000 12/10/99 73.26%
107 10309 67.08% Yes Yes No 3,100,000 2/8/99 73.49%
108 800990076 64.64% No Yes No 3,150,000 8/2/99 71.17%
109 8399 36.83% Yes Yes No 4,950,000 8/19/99 44.15%
110 400990108 64.89% No Yes No 2,990,000 10/18/99 71.34%
111 7747 62.96% Yes Yes No 2,775,000 8/26/99 76.43%
112 10400 64.16% Yes Silent No 2,775,000 12/1/99 75.42%
113 300980019 0.00% No Yes Yes 6,600,000 8/1/96 31.53%
114 240990104 65.88% No Yes No 2,800,000 11/3/99 74.23%
115 400990086 60.01% No Yes Yes 3,000,000 9/1/99 66.45%
116 10336 47.66% Yes Silent No 3,800,000 8/23/99 52.42%
117 6602981 65.97% Yes Yes No 2,750,000 3/29/99 72.34%
118 405990030 61.98% No Yes No 2,900,000 2/26/99 68.55%
119 8698 42.53% Yes Yes No 3,810,000 8/27/99 52.16%
120 7766 15.94% Yes Yes No 4,040,000 7/15/99 48.40%
121 8335 62.89% Yes Yes No 2,470,000 10/5/99 76.38%
122 6568 53.37% Yes Yes No 2,900,000 4/20/99 64.57%
123 245990072 69.09% No Yes No 2,420,000 7/13/99 76.21%
124 220990034 67.02% No Yes No 2,530,000 3/3/99 72.78%
125 7237 60.29% Yes Yes No 2,275,000 6/30/99 73.16%
126 415990117 64.07% No Yes No 2,200,000 12/15/99 75.34%
127 400990065 60.06% No Yes No 2,310,000 5/26/99 70.87%
128 6567 41.29% Yes Yes No 3,200,000 4/30/99 49.79%
129 245990074 55.63% No Yes No 2,410,000 9/21/99 65.98%
130 400990047 71.32% No Yes No 2,000,000 3/15/99 79.18%
131 420990049 61.90% No Yes No 2,190,000 3/23/99 68.21%
132 10323 55.54% Yes Yes No 2,250,000 5/10/99 66.02%
133 400990051 53.59% No Yes No 2,330,000 4/1/99 63.66%
134 400990029 4.03% No Yes No 2,480,000 3/1/99 59.63%
135 59.91% NO YES NO 2,125,000 VARIOUS 68.01%
135.1 410990077 59.53% No Yes No 1,175,000 8/4/99 65.37%
135.2 410990090 60.38% No Yes No 950,000 10/7/99 71.28%
136 3314 51.58% Yes Yes No 2,200,000 3/2/00 63.68%
137 415000131 73.25% No Yes No 1,750,000 1/6/00 79.93%
138 400990048 67.92% No Yes No 1,850,000 3/15/99 75.41%
139 400990041 65.49% No Yes No 1,760,000 3/2/99 78.48%
140 10310 54.48% Yes Yes No 1,995,000 9/3/99 64.87%
141 410990045 70.05% No Yes No 1,650,000 3/19/99 76.85%
142 245990116 49.34% No Yes No 2,100,000 5/13/99 57.86%
143 8669 53.87% Yes Yes No 1,800,000 10/6/99 64.12%
144 410990061 59.15% No Yes No 1,625,000 9/1/99 69.51%
145 400990119 2.53% No Yes No 1,610,000 12/14/99 68.89%
146 400990095 54.77% No Yes No 1,700,000 8/23/99 64.33%
147 7748 56.57% Yes Yes No 1,600,000 8/19/99 68.29%
148 10407 64.48% Yes Silent No 1,400,000 11/28/99 74.77%
149 6010 41.95% Yes Yes No 2,050,000 3/13/00 50.65%
150 400990107 65.30% No Yes No 1,420,000 10/20/99 71.99%
151 415990102 49.09% No Yes No 1,850,000 10/19/99 53.94%
152 400990089 43.93% No Yes No 1,910,000 8/19/99 52.13%
153 400980012 58.75% No Yes No 1,440,000 12/8/98 68.67%
154 400990064 64.81% No Yes No 1,350,000 5/28/99 70.85%
155 10399 50.25% Yes Silent No 1,600,000 9/15/99 58.02%
156 410990066 56.63% No Yes No 1,375,000 6/21/99 66.73%
157 400990097 2.50% No Yes No 1,400,000 9/13/99 60.68%
158 5847 64.79% Yes Yes No 1,125,000 3/17/00 72.94%
159 400990060 51.97% No Yes No 1,250,000 4/26/99 62.29%
160 8526 24.77% Yes Yes No 1,650,000 11/29/99 44.99%
161 10337 60.99% Yes Silent No 985,000 7/21/99 71.91%
<PAGE>
162 62.70% YES YES NO 950,000 1/5/99 74.04%
162.1 6667 62.70% Yes Yes No 475,000 1/5/99 74.04%
162.2 6668 62.70% Yes Yes No 475,000 1/5/99 74.04%
163 10338 58.50% Yes Silent No 900,000 9/1/99 68.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NET
CONTROL LOAN YEAR RENTABLE SF
NUMBER NUMBER YEAR BUILT RENOVATED OWNERSHIP INTEREST /UNITS LARGEST TENANT NAME
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10312 1999 Fee Simple 197,601 Bed, Bath, & Beyond
2 6603515 1996 Fee Simple 273,940 Burlington Coat
3 5557 1980 Fee Simple 856
4 VARIOUS VARIOUS FEE SIMPLE 309
4.1 260990081 1965/73/81 1998 Fee Simple 179
4.2 260990082 1962/1980 1999 Fee Simple 130
5 6603656 1983 1998 Fee Simple 112,764 Time Warner Entertainment Co
6 10756 1998 Fee Simple 220
7 10761 1998 Fee Simple 192
8 7816 1978 Fee Simple 219,300 The Aerospace Corporation
9 415990039 1969 1996-1998 Fee Simple 173
10 6603700 1998 Fee Simple 264
11 9569 1999 Fee Simple 98,770 Best Buy
12 2806 1995 Fee Simple 118,308 Michaels Store, Inc.
13 1906 VARIOUS FEE SIMPLE 481,901 VARIOUS
13.1 1906A 1984 Fee Simple 22, Roy R. Smith, D.D.S.
13.2 1906B 1980 Fee Simple 75,069 LAM Research Corp.
13.3 1906C 1975 Fee Simple 251,800 Quorum International
13.4 1906D 1987 Fee Simple 21,509 First Teamcare, P.A.
13.5 1906E 1984 Fee Simple 26,923 Richard Ferrara
13.6 1906F 1986 Fee Simple 84,472 Haverty Furniture
14 7598 1987 Fee Simple 108,000 NEC America, Inc.
15 1889 1986 Fee Simple 136,275 The Kroger Co.
16 6603028 1967 1998 Fee Simple 536,800 Transilwrap Company
17 6392 1985 Fee Simple 112,406 Edwards
18 9776 1997 Fee Simple 115,449 Gart Bros. Sporting Goods
19 10315 1999 Fee Simple 254,002 Hawk Pacific Corporation
20 1988 LEASEHOLD VARIOUS VARIOUS
20.1 6603086 1988 Leasehold 43
20.2 6603085 1988 Leasehold 21,230 Battery Park City Authority
21 810000132 1981 1997-1999 Fee Simple 153,819 Harbor Printing
22 8355 1985 1998 Fee Simple 251
23 8987 1987 Fee Simple 208,435 Kmart
24 9519 1917 1983 Fee Simple 30,407 Adidas America, Inc
25 7529 1979 Leasehold/Fee Simple 121,016 Vons
26 410990101 1999 Fee Simple 67,215 Genuardi's
27 9272 1979 Fee Simple 272
28 6604092 1997 Fee Simple 122,121 Mobil Corporation
29 9069 1983 Fee Simple 67,100 Ana Trading
30 6603157 1962 1998 Fee Simple 62,300 Oliver Peoples
31 240990070 1960 1998/1999 Fee Simple 97,005 Rite Aid
32 10487 1999 Fee Simple 204
33 6603490 1989 Fee Simple 238,938 John D. Stephens
34 7000 1985 Fee Simple 316
35 10382 1952 Fee Simple 54,200 General Motors
36 6603234 1983 Fee Simple 195
37 8770 1998 Fee Simple 69,204 King Foods
38 10489 1999 Fee Simple 192
39 6603048 1972 1999 Fee Simple 304
40 9462 1980 Fee Simple 173,996 Real Education
41 6603050 1980 Fee Simple 42,380 Calibre, Inc.
42 7198 1925 Fee Simple 73,700 Tommy Hilfiger
43 9155 1967 1988 Fee Simple 99,200 Home Base
44 400990084 1975 1998/1999 Fee Simple 69,605 Reproductive Medical Assoc.
45 8489 1975 Fee Simple 250
46 400990109 1974/83 Fee Simple 394
47 6603029 VARIOUS VARIOUS FEE SIMPLE 34,806 BALDUCCI ENTERPRISES, INC.
47.1 6603029A 1957 Fee Simple 6,666 Balducci Enterprises, Inc.
47.2 6603029B 1947 1987 Fee Simple 28,140 Balducci Enterprises, Inc.
48 240990106 1999 Fee Simple 145,416 Anheuser-Busch, Inc.
49 8512 1986 Fee Simple 49,347 Arnold J. Brender
50 410990052 1975 Fee Simple 114,879 Universal Synergetics
51 7723 1977 Fee Simple 55,259 Provident Funding
52 7361 1974 Fee Simple 219,300 Weber Distribution Building
53 6603961 1997 Fee Simple 62,760 ABCO Desert Market
54 VARIOUS FEE SIMPLE 360
55 6643 Various Fee Simple 278
55.1 6643A 1950 Fee Simple 231
55.2 6643B 1980 Fee Simple 47
56 9198 1995 1999 Fee Simple 82
57 7001 1985 Fee Simple 274
58 400000134 VARIOUS FEE SIMPLE 362
58.1 400000134A 1964 Fee Simple 129
58.2 400000134B 1953 Fee Simple 77
58.3 400000134C 1962 Fee Simple 156
59 250990091 1999 Fee Simple 60,010 Cardiff Software
60 10319 1999 Fee Simple 109,740 Precor
61 6913 1978 Fee Simple 216
62 10320 1984 Fee Simple 62,577 Alaska Housing Finance Corpora
63 6603463 Various 1998 Fee Simple 33,632 Pottery Barn
64 6603498 1974 1998 Fee Simple 155
65 7488 1912 1999 Leasehold/Fee Simple 23,168 A&R Partners
66 7815 1991 Fee Simple 410
67 800990098 1979 1999 Fee Simple 50,884 Department of Corrections
68 7371 1978 1987 Fee Simple 295,392 Client Distribution
69 6603237 1986 Fee Simple 128
70 6988 1986 Fee Simple 72,315 SAI
71 7805 1968 Fee Simple 226
72 7827 1966 Fee Simple 137
73 258990114 1983 1997-1999 Fee Simple 75,373 Provident Home Care LLC
74 8714 1969 1999 Fee Simple 54,519 Spain's Cards & Gifts
75 400990085 1970 1999 Fee Simple 50,256 Select Management Service
76 400990071 1920 1984/1985 Fee Simple 81,222 GBQC Architects
77 245990073 1970 1997 Fee Simple 187
78 9082 1967 Fee Simple 210
79 10314 1999 Fee Simple 41,126 The P.M. Group, Inc.
80 9179 1984 Fee Simple 164
81 7261 1999 Fee Simple 45,472 Best Buy, Inc.
82 240000136 1996 Fee Simple 28,036 Staples
83 240990103 1999 Fee Simple 32,000 Linens N' Things
84 410990083 1981 1996 Fee Simple 114,770 R & R Operating Partnership, L. P.
85 6251 VARIOUS FEE SIMPLE 238
85.1 6251A 1972 Fee Simple 81
85.2 6251B 1970 Fee Simple 62
85.3 6251C 1970 Fee Simple 52
85.4 6251D 1970 Fee Simple 43
86 9704 1984 Fee Simple 50,000 World Gym
87 6909 1993 Fee Simple 68
88 10308 1963 Fee Simple 180
89 7184 1999 Fee Simple 44,200 Food Lion
90 6885 1998 Fee Simple 90
91 255990080 1989 Fee Simple 175,000 Owens Corning
92 6000070 1989 Fee Simple 86,600 K-Mart Corporation
93 6601140 1968 1986 Fee Simple 44,055 Donelan's Supermarket
94 7015 1976 Fee Simple 202
95 10311 1989 Fee Simple 63,960 Festival Foods
96 7404 1983 Fee Simple 48,521 Primary Provider Management Co
97 10318 1998 Fee Simple 11,713 Hollywood Video
98 10391 1927 1977 Fee Simple 13
99 6569 1926 1986 Fee Simple 46,589 University Legal Services
100 10313 1973 1994 Fee Simple 163,383 Vinyl Source, Inc.
101 400980023 1968 Fee Simple 86
102 VARIOUS VARIOUS VARIOUS 123
102.1 10405 1965 Fee Simple 89
102.2 10335 1960 1997 Leasehold/Fee Simple 34
103 5151 1976 Leasehold 27,403 Wendy's
104 7552 1986 Fee Simple 63,570 QC Inspection
105 10306 1972 1997 Fee Simple 78
106 9391 1972 Fee Simple 80
107 10309 1998 Fee Simple 44,000 MAC Equipment, Inc.
108 800990076 1970 1999 Fee Simple 33,846 Circuit Services
109 8399 1966 1998 Fee Simple 96,646 K-Mart
110 400990108 1989, 1992 Fee Simple 41,209 Master Wood
111 7747 1964 Fee Simple 97
112 10400 1988 Fee Simple 47
113 300980019 1972 Leasehold 159
114 240990104 1999 Fee Simple 14,600 S&J Schatz Enterprises
115 400990086 1973 1998 Fee Simple 34,075 New Jersey Title Insurance Company
116 10336 1994 Fee Simple 35
117 6602981 1910 1998 Fee Simple 26,268 Hyperion Telecommunications
118 405990030 1974 Fee Simple 112
119 8698 1970 Fee Simple 102
120 7766 1975 Fee Simple 932
121 8335 1965 Fee Simple 154
122 6568 1929 1984 Fee Simple 27,451 World Vision, U.S.
123 245990072 1972 Fee Simple 94
124 220990034 1930/1970s 1998 Fee Simple 122,534 Action Box & Containers
125 7237 1962 Fee Simple 104
126 415990117 1970 Fee Simple 120
127 400990065 1981 1997 Fee Simple 14,185 Elliot & True Medical Group
128 6567 1954 1980 Fee Simple 30,714 N.A.P.W.A.
129 245990074 1963/66/76 1996/98/99 Fee Simple 120
130 400990047 1974 Fee Simple 71
131 420990049 1909 1998 Fee Simple 18
132 10323 1999 Fee Simple 22,475 DMJM
133 400990051 1952/1987 1998/99 Fee Simple 19,135 Pacific Clinics
134 400990029 1960's 1990 Fee Simple 121
135 VARIOUS VARIOUS FEE SIMPLE 44,900 VARIOUS
135.1 410990077 1989 1997-99 Fee Simple 34,000 Decora Industries
135.2 410990090 1970s Fee Simple 10,900 Sherwin-Williams
136 3314 1982 Fee Simple 34,459 Family Dollar Store
137 415000131 1977 1997-1998 Leasehold 49
138 400990048 1971 1996-1999 Fee Simple 73
139 400990041 1971-1999 Fee Simple 115
140 10310 1930 1995 Fee Simple 38
141 410990045 1900 1986 Fee Simple 31
142 245990116 1997 Fee Simple 252
143 8669 1991 Fee Simple 35,700 The Office Furniture Place
144 410990061 1956/1988 1996-1997 Fee Simple 22,380 Hollywood Entertainment Corporation
145 400990119 1960's 1998-1999 Fee Simple 126
146 400990095 1991 Fee Simple 328
147 7748 1974 Fee Simple 50,000 Eastern Seaboard Packaging
148 10407 1918 1978 Fee Simple 40,656 The Furniture Galleries
149 6010 1982 Fee Simple 23,179 SB &O Inc.
150 400990107 1962 Fee Simple 69
151 415990102 1961 Fee Simple 67
152 400990089 1984 Fee Simple 70
153 400980012 1968 Fee Simple 46
154 400990064 1959 Fee Simple 50
155 10399 1976 Fee Simple 145
156 410990066 1987 1996/1997 Fee Simple 14,403 Wawa, Inc.
157 400990097 1950 Fee Simple 34
158 5847 1997 Fee Simple 25
159 400990060 1970 1996/1997 Fee Simple 65
160 8526 1969 Fee Simple 75,000 AJAX Corporation
161 10337 1970 Fee Simple 72
162 1963 FEE SIMPLE 26
162.1 6667 1963 Fee Simple 13
162.2 6668 1963 Fee Simple 13
163 10338 1991 Fee Simple 234
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
LARGEST
TENANT SF PHYSICAL 1998 NOI
CONTROL LOAN LARGEST AS A % OF OCCUPANCY OCCUPANCY ORIGINAL "AS OF"
NUMBER NUMBER TENANT SF TOTAL % AS OF DATE LTV RATIO 1998 NOI DATE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 35,450 17.94% 95.48% 3/9/00 72.60%
2 6603515 68,400 24.97% 92.01% 4/24/00 77.61% 2,186,056 12/31/98
3 5557 89.72% 12/31/99 76.64% 2,118,742 12/31/98
4 67.68% 11/30/99 69.26% 3,119,546 12/31/98
4.1 260990081 63.22% 11/30/99 68.80% 1,639,003 12/31/98
4.2 260990082 73.28% 11/30/99 69.90% 1,480,543 12/31/98
5 6603656 95,692 84.86% 100.00% 11/29/99 74.44% 2,555,076 12/31/98
6 10756 95.91% 1/18/00 79.73%
7 10761 93.75% 3/28/00 78.83%
8 7816 219,300 100.00% 100.00% 12/31/99 63.64% 2,548,676 12/31/98
9 415990039 100.00% 12/31/99 68.10% 1,766,360 12/31/98
10 6603700 90.20% 11/2/99 80.00% 896,524 12/31/98
11 9569 45,000 45.56% 100.00% 12/3/99 72.49%
12 2806 32,163 27.19% 97.46% 12/31/99 74.67% 1,437,075 12/31/98
13 1906 VARIOUS VARIOUS 97.65% VARIOUS 63.03% 1,730,786 12/31/98
13.1 1906A 4,072 18.40% 91.04% 12/1/99 63.03% 52,057 12/31/98
13.2 1906B 24,804 33.04% 100.00% 12/31/99 63.03% 554,580 12/31/98
13.3 1906C 251,800 100.00% 100.00% 12/31/99 63.03% 477,782 12/31/98
13.4 1906D 6,300 29.29% 100.00% 12/31/99 63.03% 134,130 12/31/98
13.5 1906E 5,666 21.05% 81.55% 12/1/99 63.03% 107,788 12/31/98
13.6 1906F 43,461 51.45% 94.80% 12/31/99 63.03% 404,449 12/31/98
14 7598 108,000 100.00% 100.00% 12/20/99 77.34%
15 1889 53,450 39.22% 92.85% 12/31/99 77.42% 1,170,534 12/31/98
16 6603028 247,000 46.01% 100.00% 6/2/99 75.16%
17 6392 46,725 41.57% 98.96% 2/8/00 72.41% 1,318,332 12/31/98
18 9776 32,400 28.06% 96.88% 1/31/00 69.66% 687,633 12/31/98
19 10315 254,002 100.00% 100.00% 1/18/00 73.13%
20 VARIOUS VARIOUS 100.00% VARIOUS 68.00% VARIOUS VARIOUS
20.1 6603086 100.00% 8/16/99 70.90% 847,086 12/31/98
20.2 6603085 15,655 73.74% 100.00% 8/30/99 58.82%
21 810000132 98,563 64.08% 100.00% 2/14/00 70.50% 230,498 12/20/98
22 8355 52.59% 12/31/99 59.75% 1,370,778 12/31/98
23 8987 86,479 41.49% 99.28% 11/22/99 76.45% 1,044,781 12/31/98
24 9519 20,000 65.77% 100.00% 2/1/00 74.61% 134,033 12/31/98
25 7529 80,000 66.11% 95.88% 9/30/99 69.32% 928,790 12/31/98
26 410990101 50,065 74.48% 100.00% 10/18/99 80.00%
27 9272 95.22% 2/1/00 82.24% 842,719 12/31/98
28 6604092 21,122 17.30% 100.00% 12/22/99 79.82% 1,130,266 12/31/98
29 9069 8,700 12.97% 100.00% 1/12/00 66.67%
30 6603157 17,853 28.66% 95.40% 5/27/99 75.00% 390,139 12/31/98
31 240990070 17,700 18.25% 81.75% 2/1/00 71.97% 781,538 12/31/98
32 10487 96.08% 3/23/00 75.76%
33 6603490 33,340 13.95% 98.81% 9/8/99 91.80% 598,527 12/31/98
34 7000 96.20% 12/29/99 76.19% 844,254 12/31/98
35 10382 54,200 100.00% 100.00% 2/17/00 74.47%
36 6603234 95.38% 3/31/99 78.65% 913,372 12/31/98
37 8770 46,007 66.48% 98.27% 1/12/00 74.05%
38 10489 91.67% 2/2/00 72.34%
39 6603048 91.45% 6/16/99 78.61% 737,005 12/31/98
40 9462 45,721 26.28% 95.98% 12/16/99 43.14% 1,020,986 12/31/98
41 6603050 5,500 12.98% 97.23% 10/20/99 77.65% 672,320 12/31/98
42 7198 7,700 10.45% 100.00% 2/10/00 61.39% 687,620 12/31/98
43 9155 99,200 100.00% 100.00% 3/16/00 71.47% 841,336 12/31/98
44 400990084 4,928 7.08% 92.02% 3/6/00 49.20% 529,290 12/31/98
45 8489 89.20% 10/26/99 72.29% 674,076 12/31/98
46 400990109 99.23% 3/6/00 64.50% 825,615 12/31/98
47 6603029 34,806 100.00% VARIOUS 6/21/99 82.76%
47.1 6603029A 6,666 100.00% 100.00% 6/21/99 82.76%
47.2 6603029B 28,140 100.00% 100.00% 6/21/99 82.76%
48 240990106 145,416 100.00% 100.00% 10/22/99 69.50%
49 8512 5,833 11.82% 100.00% 4/1/00 71.15% 736,532 12/31/98
50 410990052 4,573 3.98% 97.58% 4/1/00 73.90% 610,006 12/31/98
51 7723 10,249 18.55% 93.92% 12/31/99 68.75% 254,914 12/31/98
52 7361 219,300 100.00% 100.00% 12/31/99 58.82% 936,828 12/31/98
53 6603961 42,678 68.00% 100.00% 12/22/99 74.81% 500,316 12/31/98
54 VARIOUS VARIOUS 74.06% 523,251 12/31/98
55 6643 94.24% 2/16/00 72.04% 372,929 12/31/98
55.1 6643A 94.81% 2/16/00 72.04% 278,431 12/31/98
55.2 6643B 100.00% 2/16/00 72.04% 94,498 12/31/98
56 9198 92.68% 1/19/00 80.00% 150,322 12/31/98
57 7001 97.45% 12/29/99 79.27% 615,986 12/31/98
58 400000134 95.85% 12/31/99 60.84% 681,873 12/31/98
58.1 400000134A 94.57% 12/31/99 0.00% 261,986 12/31/98
58.2 400000134B 98.70% 12/31/99 0.00% 181,421 12/31/98
58.3 400000134C 95.50% 12/31/99 0.00% 238,466 12/31/98
59 250990091 60,010 100.00% 100.00% 9/2/99 70.40%
60 10319 71,750 65.38% 100.00% 2/24/00 70.77%
61 6913 90.74% 12/31/99 61.73% 656,327 12/31/98
62 10320 52,191 83.40% 95.66% 2/1/00 73.75% 865,965 12/31/98
63 6603463 15,784 46.93% 100.00% 7/19/99 71.90%
64 6603498 91.00% 5/21/99 80.07% 654,576 12/31/98
65 7488 23,168 100.00% 100.00% 2/24/00 65.97%
66 7815 99.76% 2/25/00 80.00% 732,566 12/31/98
67 800990098 12,462 24.49% 98.97% 10/31/99 73.00% 294,549 12/31/98
68 7371 295,392 100.00% 100.00% 11/15/99 69.23%
69 6603237 97.66% 6/30/99 79.63% 392,003 12/31/98
70 6988 19,444 26.89% 97.09% 12/31/99 74.14% 540,486 12/31/98
71 7805 89.82% 12/31/99 78.18% 575,679 12/31/98
72 7827 98.54% 12/31/99 78.63% 492,653 12/31/98
73 258990114 10,618 14.09% 91.62% 4/17/00 69.70% 286,768 12/31/98
74 8714 15,842 29.06% 95.95% 3/31/00 66.67% 399,949 12/31/98
75 400990085 5,250 10.45% 89.65% 3/6/00 46.00% 431,099 12/31/98
76 400990071 10,755 13.24% 100.00% 3/6/00 63.50% 442,649 12/31/98
77 245990073 96.00% 11/19/99 79.00% 512,622 11/30/98
78 9082 100.00% 2/1/00 77.58% 427,890 12/31/98
79 10314 20,960 50.97% 100.00% 12/29/99 75.00%
80 9179 95.12% 12/30/99 76.53% 304,904 12/31/98
81 7261 45,472 100.00% 100.00% 1/11/00 67.57%
82 240000136 19,092 68.10% 100.00% 12/20/99 61.10% 578,805 12/31/98
83 240990103 32,000 100.00% 100.00% 11/3/99 71.60%
84 410990083 114,770 100.00% 100.00% 9/17/99 71.70%
85 6251 92.44% VARIOUS 80.62% 402,736 12/31/98
85.1 6251A 98.77% 11/3/99 80.62% 163,982 12/31/98
85.2 6251B 91.94% 2/14/00 80.62% 91,627 12/31/98
85.3 6251C 76.92% 2/22/00 80.62% 74,269 12/31/98
85.4 6251D 95.35% 11/1/99 80.62% 72,858 12/31/98
86 9704 9,000 18.00% 96.80% 12/22/99 73.39% 463,636 12/31/98
87 6909 98.53% 9/30/99 72.69% 401,506 12/31/98
88 10308 86.11% 1/31/00 75.61% 259,443 12/31/98
89 7184 33,000 74.66% 96.83% 2/9/00 78.36%
90 6885 96.67% 12/31/99 73.77% 162,970 12/31/98
91 255990080 175,000 100.00% 100.00% 6/12/99 68.30% 358,404 12/31/98
92 6000070 86,600 100.00% 100.00% 9/30/99 72.73% 343,291 12/31/98
93 6601140 14,500 32.91% 100.00% 9/1/99 77.78% 385,027 12/31/98
94 7015 90.10% 12/31/99 54.00% 351,981 12/31/98
95 10311 44,877 70.16% 93.26% 3/31/00 77.65% 405,294 12/31/98
96 7404 11,758 24.23% 100.00% 12/1/99 63.41% 391,667 12/31/98
97 10318 6,672 56.96% 100.00% 11/30/99 76.38% 99,885 12/31/98
98 10391 100.00% 3/31/00 70.51%
99 6569 7,889 16.93% 100.00% 1/1/00 53.72% 387,114 12/31/98
100 10313 163,383 100.00% 100.00% 12/23/99 62.90% 286,024 12/31/98
101 400980023 100.00% 8/23/99 70.40% 272,225 12/31/98
102 100.00% VARIOUS 74.73% 359,911 12/31/98
102.1 10405 100.00% 1/22/00 74.94% 246,378 12/31/98
102.2 10335 100.00% 2/24/00 74.26% 113,533 12/31/98
103 5151 3,200 11.68% 100.00% 1/1/00 67.61% 353,179 12/31/98
104 7552 10,267 16.15% 97.00% 9/30/99 73.08% 303,817 12/31/98
105 10306 100.00% 1/25/00 78.73% 260,292 12/31/98
106 9391 98.77% 1/31/00 73.48% 276,341 12/31/98
107 10309 44,000 100.00% 100.00% 3/27/00 73.74%
108 800990076 19,849 58.65% 100.00% 12/31/99 71.40% 282,929 12/31/98
109 8399 96,646 100.00% 100.00% 10/15/99 44.44% 179,787 12/31/98
110 400990108 11,400 27.66% 100.00% 3/3/00 71.40% 247,962 12/31/98
111 7747 95.88% 1/5/00 76.97% 286,045 12/31/98
112 10400 100.00% 11/30/99 75.68% 327,379 12/31/98
113 300980019 100.00% 8/30/99 36.40% 455,680 12/31/98
114 240990104 14,600 100.00% 100.00% 12/8/99 74.50%
115 400990086 8,648 25.38% 89.10% 3/6/00 66.70% 57,906 12/31/98
116 10336 97.14% 11/30/99 52.63% 241,065 12/31/98
117 6602981 20,368 77.54% 100.00% 6/28/99 72.73%
118 405990030 95.00% 3/27/00 69.00% 241,427 12/31/98
119 8698 91.18% 10/31/99 52.49% 440,355 12/31/98
120 7766 87.23% 12/31/99 49.50% 414,181 12/31/98
121 8335 95.45% 12/31/99 76.92% 265,455 12/31/98
122 6568 15,910 57.96% 100.00% 1/1/00 65.31% 283,721 12/31/98
123 245990072 94.68% 11/1/99 76.45% 186,039 9/30/98
124 220990034 40,000 32.64% 96.80% 12/31/99 73.10% 133,612 12/31/98
125 7237 100.00% 2/29/00 73.85% 237,959 12/31/98
126 415990117 95.83% 12/22/99 75.50% 229,042 12/31/98
127 400990065 7,279 51.31% 100.00% 2/25/00 71.40% 182,697 12/31/98
128 6567 8,488 27.64% 94.57% 12/1/99 50.34% 285,692 12/31/98
129 245990074 100.00% 12/31/99 66.40% 208,351 12/31/98
130 400990047 100.00% 12/30/99 79.80% 185,906 12/31/98
131 420990049 95.92% 12/31/99 68.50% 180,196 12/31/98
132 10323 15,150 67.41% 87.80% 12/27/99 66.44%
133 400990051 8,000 41.81% 100.00% 12/31/99 64.40% 116,423 12/31/98
134 400990029 98.33% 12/31/99 60.50% 202,550 12/31/98
135 VARIOUS VARIOUS 100.00% VARIOUS 68.24% 242,828 12/31/98
135.1 410990077 34,000 100.00% 100.00% 12/17/99 65.50% 153,757 12/31/98
135.2 410990090 4,689 43.02% 100.00% 12/18/99 71.60% 89,071 12/31/98
136 3314 9,366 27.18% 100.00% 2/14/00 65.50% 226,600 12/31/98
137 415000131 95.92% 2/28/00 80.00% (53,855) 12/31/98
138 400990048 100.00% 12/30/99 75.90% 160,140 12/31/98
139 400990041 96.50% 11/1/99 79.55% 194,841 12/31/98
140 10310 100.00% 2/19/00 65.16% 161,657 12/31/98
141 410990045 100.00% 12/22/99 77.30% 181,812 12/31/98
142 245990116 90.00% 10/31/99 58.10% 1,006 12/31/98
143 8669 20,000 56.02% 100.00% 1/31/00 64.28% (26,180) 12/31/98
144 410990061 10,300 46.02% 100.00% 2/9/00 69.80% 140,999 12/31/98
145 400990119 94.44% 2/18/00 69.25% 158,689 12/31/98
146 400990095 82.00% 7/28/99 64.70% 187,611 12/31/98
147 7748 50,000 100.00% 100.00% 1/5/00 68.75% 147,645 12/31/98
148 10407 40,656 100.00% 100.00% 1/6/00 75.00% 170,579 12/31/98
149 6010 7,062 30.47% 94.98% 12/22/99 51.22% 182,478 12/31/98
150 400990107 97.10% 1/1/00 72.20% 114,378 12/31/98
151 415990102 95.52% 12/10/99 54.10% 166,003 12/31/98
152 400990089 100.00% 12/20/99 52.40% 198,214 12/31/98
153 400980012 100.00% 1/31/00 69.40% 138,155 12/31/98
154 400990064 94.00% 12/31/99 71.10% 119,116 12/31/98
155 10399 86.90% 12/31/99 58.13% 140,561 12/31/98
156 410990066 3,000 20.83% 100.00% 1/17/00 67.10% 98,152 12/31/98
157 400990097 100.00% 3/31/00 61.80% 129,911 12/31/98
158 5847 96.00% 9/30/99 73.42% 137,658 12/31/98
159 400990060 97.00% 11/16/99 62.64% 82,883 12/31/98
160 8526 75,000 100.00% 100.00% 3/15/00 45.45%
161 10337 97.22% 1/31/00 72.34% 101,967 12/31/98
162 100.00% 3/31/00 74.74% 135,276 12/31/98
162.1 6667 100.00% 3/31/00 74.74% 68,712 12/31/98
162.2 6668 100.00% 3/31/00 74.74% 66,564 12/31/98
163 10338 82.48% 1/31/00 68.89% 92,669 12/31/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
ANNUAL
ANNUAL UNDERWRITTEN
1999 NOI UNDERWRITTEN REPLACEMENT
CONTROL LOAN "AS OF" UNDERWRITTEN UNDERWRITTEN REPLACEMENT RESERVES PER U/W/NOI
NUMBER NUMBER 1999 NOI DATE NOI NET CASH FLOW RESERVES UNIT/SF DSCR
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 2,842,798 2/29/00 3,565,114 3,473,557 19,760 0.10 1.28
2 6603515 2,749,304 12/31/99 2,990,130 2,821,790 41,091 0.16 1.31
3 5557 2,390,902 12/31/99 2,219,463 2,219,463 214,000 250.00 1.24
4 3,851,169 12/31/99 3,187,308 3,187,308 538,447 1,742.58 1.51
4.1 260990081 2,133,022 12/31/99 1,780,772 1,780,772 285,700 1,596.09 1.51
4.2 260990082 1,718,147 12/31/99 1,406,536 1,406,536 252,747 1,944.21 1.50
5 6603656 2,537,686 7/31/99 2,381,163 2,245,846 22,553 0.20 1.33
6 10756 1,996,658 1/31/00 2,039,488 2,039,488 74,800 340.00 1.28
7 10761 1,783,570 2/29/00 1,868,977 1,868,977 48,000 250.00 1.20
8 7816 2,558,227 12/31/99 2,505,788 2,330,495 54,825 0.25 1.62
9 415990039 1,911,845 12/31/99 1,846,674 1,846,674 47,469 274.39 1.43
10 6603700 1,095,680 8/31/99 1,666,502 1,600,502 66,000 250.00 1.27
11 9569 1,432,229 11/30/99 1,554,341 1,548,823 14,775 0.15 1.26
12 2806 1,209,160 12/31/99 1,594,225 1,497,757 17,746 0.15 1.35
13 1906 1,888,892 9/30/99 1,765,314 1,444,322 79,162 0.16 1.54
13.1 1906A 21,863 9/30/99 101,029 79,341 5,531 0.25 1.54
13.2 1906B 622,297 9/30/99 508,855 376,121 18,767 0.25 1.54
13.3 1906C 493,239 9/30/99 422,323 371,132 26,347 0.10 1.54
13.4 1906D 204,228 9/30/99 157,490 139,778 6,213 0.29 1.54
13.5 1906E 145,752 9/30/99 107,567 91,947 5,410 0.20 1.54
13.6 1906F 401,513 9/30/99 468,050 386,003 16,894 0.20 1.54
14 7598 1,617,870 1,500,085 43,667 0.40 1.46
15 1889 1,260,386 12/31/99 1,264,749 1,202,345 20,434 0.15 1.32
16 6603028 503,711 6/30/99 1,463,151 1,352,440 53,680 0.10 1.41
17 6392 1,273,529 12/31/99 1,278,133 1,221,201 18,896 0.17 1.39
18 9776 1,261,408 10/31/99 1,263,623 1,229,287 16,777 0.15 1.32
19 10315 1,327,477 12/31/99 1,149,109 1,136,895 25,400 0.10 1.27
20 VARIOUS VARIOUS 1,139,156 1,097,622 14,996 VARIOUS 1.30
20.1 6603086 1,013,156 7/31/99 860,035 829,038 10,750 250.00 1.26
20.2 6603085 279,121 248,337 4,246 0.20 1.43
21 810000132 319,125 12/20/99 1,315,598 1,135,371 23,073 0.15 1.49
22 8355 1,975,911 2/28/00 1,558,856 1,558,856 228,246 909.35 1.55
23 8987 1,053,009 11/30/99 1,081,736 1,044,504 31,265 0.15 1.34
24 9519 672,570 12/31/99 1,059,446 1,033,967 7,602 0.25 1.23
25 7529 1,008,453 12/31/99 1,029,807 994,732 17,002 0.14 1.29
26 410990101 1,004,442 967,783 10,082 0.15 1.26
27 9272 1,020,385 10/31/99 1,009,645 1,009,645 72,080 265.00 1.24
28 6604092 796,571 9/30/99 948,603 936,390 12,212 0.10 1.22
29 9069 1,151,337 11/30/99 1,051,449 987,442 14,905 0.22 1.36
30 6603157 564,260 5/31/99 925,486 869,416 9,345 0.15 1.33
31 240990070 678,570 12/31/99 1,024,377 963,727 20,371 0.21 1.49
32 10487 1,233,822 2/28/00 821,933 821,933 51,000 250.00 1.24
33 6603490 869,496 766,753 31,062 0.13 1.30
34 7000 814,463 12/31/99 789,016 789,016 71,100 225.00 1.28
35 10382 824,191 809,722 12,466 0.23 1.28
36 6603234 826,089 771,879 54,210 278.00 1.38
37 8770 568,076 12/31/99 842,814 826,856 10,381 0.15 1.27
38 10489 1,160,790 2/28/00 753,274 753,274 48,000 250.00 1.26
39 6603048 704,936 5/28/99 805,308 719,884 85,424 281.00 1.35
40 9462 1,379,087 10/31/99 1,225,295 999,605 43,449 0.25 2.11
41 6603050 686,210 3/31/99 813,023 762,167 8,476 0.20 1.40
42 7198 718,546 12/31/99 809,041 705,131 18,425 0.25 1.44
43 9155 915,654 6/30/99 853,711 801,160 14,880 0.15 1.44
44 400990084 746,055 12/31/99 1,062,463 959,519 10,441 0.15 1.97
45 8489 724,010 9/30/99 675,657 675,657 62,500 250.00 1.27
46 400990109 884,165 12/31/99 876,738 876,738 19,700 50.00 1.58
47 6603029 683,689 666,901 5,650 0.16 1.27
47.1 6603029A 541,226 528,288 1,800 0.27 1.27
47.2 6603029B 142,463 138,613 3,850 0.14 1.27
48 240990106 695,263 662,376 7,271 0.05 1.37
49 8512 882,641 10/31/99 694,734 629,299 12,337 0.25 1.38
50 410990052 750,662 12/31/99 714,945 634,478 17,232 0.15 1.45
51 7723 645,739 12/31/99 712,651 631,472 13,815 0.25 1.47
52 7361 885,782 9/30/99 830,631 786,595 40,420 0.18 1.59
53 6603961 645,862 9/25/99 639,803 606,277 9,414 0.15 1.27
54 681,727 12/31/99 626,943 626,943 19,216 53.38 1.25
55 6643 508,386 12/31/99 454,990 454,990 15,116 54.37 1.25
55.1 6643A 420,136 12/31/99 360,924 360,924 12,766 55.26 1.25
55.2 6643B 88,249 12/31/99 94,066 94,066 2,350 50.00 1.25
56 9198 173,341 9/30/99 171,953 171,953 4,100 50.00 1.25
57 7001 666,422 12/31/99 569,856 569,856 61,650 225.00 1.28
58 400000134 695,075 12/31/99 656,119 656,119 18,100 50.00 1.34
58.1 400000134A 282,858 12/31/99 267,553 267,553 6,450 50.00 1.34
58.2 400000134B 163,793 12/31/99 117,453 117,453 3,850 50.00 1.34
58.3 400000134C 248,423 12/31/99 271,113 271,113 7,800 50.00 1.34
59 250990091 657,280 618,648 6,001 0.10 1.37
60 10319 634,606 12/31/99 593,897 571,576 10,974 0.10 1.30
61 6913 621,831 12/31/99 601,278 601,278 67,176 311.00 1.37
62 10320 872,653 12/21/99 657,525 587,435 10,638 0.17 1.46
63 6603463 532,158 510,297 5,045 0.15 1.25
64 6603498 601,650 4/30/99 640,715 599,330 41,385 267.00 1.55
65 7488 628,272 12/31/99 585,638 554,325 5,793 0.25 1.37
66 7815 162,081 12/31/99 526,974 526,974 29,894 72.91 1.29
67 800990098 525,437 12/31/99 595,347 545,903 5,088 0.10 1.32
68 7371 595,578 564,300 19,280 0.07 1.39
69 6603237 425,665 6/30/99 496,189 453,949 42,240 330.00 1.39
70 6988 583,455 12/31/99 578,449 537,043 10,847 0.15 1.40
71 7805 584,828 11/30/99 498,132 498,132 47,984 212.32 1.28
72 7827 526,655 12/31/99 480,341 480,341 34,250 250.00 1.25
73 258990114 384,773 12/31/99 619,935 558,861 11,306 0.15 1.58
74 8714 399,916 12/31/99 557,606 513,561 8,190 0.15 1.42
75 400990085 585,125 12/31/99 689,129 609,788 7,538 0.15 1.92
76 400990071 585,797 12/31/99 573,554 461,291 17,869 0.22 1.63
77 245990073 518,694 10/31/99 435,768 435,768 46,750 250.00 1.21
78 9082 452,722 12/31/99 441,276 441,276 13,230 63.00 1.26
79 10314 353,454 12/31/99 455,485 433,459 6,169 0.15 1.28
80 9179 454,488 12/31/99 435,511 435,511 42,560 259.51 1.25
81 7261 444,500 12/31/99 416,508 416,508 5,457 0.12 1.29
82 240000136 574,694 12/31/99 499,754 461,663 4,205 0.15 1.56
83 240990103 401,235 387,564 3,200 0.10 1.29
84 410990083 419,720 388,435 11,477 0.10 1.38
85 6251 325,291 9/30/99 385,012 385,012 11,850 49.79 1.34
85.1 6251A 128,112 9/30/99 142,276 142,276 4,050 50.00 1.34
85.2 6251B 84,774 9/30/99 100,955 100,955 3,100 50.00 1.34
85.3 6251C 45,083 9/30/99 76,615 76,615 2,600 50.00 1.34
85.4 6251D 67,322 9/30/99 65,166 65,166 2,100 48.84 1.34
86 9704 491,292 9/27/99 456,598 418,847 17,320 0.35 1.50
87 6909 412,505 9/30/99 377,544 377,544 34,680 510.00 1.26
88 10308 356,270 1/31/00 348,077 348,077 45,000 250.00 1.25
89 7184 367,916 12/31/99 360,341 354,410 6,630 0.15 1.27
90 6885 365,718 12/31/99 338,492 338,492 15,750 175.00 1.26
91 255990080 418,300 12/31/99 376,906 352,799 26,250 0.15 1.48
92 6000070 345,396 9/30/99 327,815 306,165 21,650 0.25 1.37
93 6601140 349,679 9/1/99 356,830 328,194 7,930 0.18 1.38
94 7015 444,018 9/30/99 376,313 376,313 50,500 250.00 1.48
95 10311 693,361 12/31/99 331,664 318,526 8,954 0.15 1.33
96 7404 357,629 12/31/99 381,029 321,007 12,130 0.25 1.53
97 10318 347,680 11/30/99 304,614 297,720 1,757 0.15 1.28
98 10391 314,687 1/31/00 288,475 284,507 2,750 211.54 1.26
99 6569 441,189 12/31/99 385,302 306,873 11,647 0.25 1.63
100 10313 308,697 12/14/99 346,268 312,756 24,507 0.15 1.42
101 400980023 330,841 12/31/99 275,759 275,759 4,300 50.00 1.16
102 351,737 12/31/99 312,594 312,594 6,150 50.00 1.34
102.1 10405 245,136 12/31/99 223,467 223,467 4,450 50.00 1.39
102.2 10335 106,601 12/31/99 89,127 89,127 1,700 50.00 1.23
103 5151 292,140 12/31/99 301,987 279,157 4,110 0.15 1.35
104 7552 298,531 9/30/99 308,667 266,141 10,120 0.16 1.46
105 10306 296,065 12/31/99 272,429 272,429 20,046 257.00 1.26
106 9391 323,143 12/31/99 276,385 276,385 20,000 250.00 1.25
107 10309 314,754 12/31/99 289,558 267,778 4,400 0.10 1.35
108 800990076 327,787 12/31/99 287,314 267,498 5,077 0.15 1.39
109 8399 476,321 10/1/99 349,052 323,821 14,504 0.15 1.70
110 400990108 268,748 12/31/99 288,807 266,615 6,181 0.15 1.45
111 7747 226,907 12/31/99 255,927 255,927 21,825 225.00 1.25
112 10400 315,623 11/30/99 304,070 304,070 14,950 318.09 1.44
113 300980019 645,389 12/31/99 541,058 541,058 7,950 50.00 1.72
114 240990104 259,368 248,084 1,460 0.10 1.37
115 400990086 246,471 12/31/99 298,459 243,485 5,111 0.15 1.66
116 10336 257,699 11/30/99 240,612 240,612 8,750 250.00 1.31
117 6602981 263,410 232,094 5,254 0.20 1.42
118 405990030 145,439 12/31/99 267,347 267,347 39,200 350.00 1.50
119 8698 501,401 9/30/99 232,907 232,907 32,235 316.03 1.26
120 7766 387,901 12/31/99 307,645 307,645 41,156 44.16 1.29
121 8335 210,764 12/31/99 233,386 233,386 38,500 250.00 1.28
122 6568 322,622 12/31/99 268,382 235,222 6,863 0.25 1.48
123 245990072 174,244 5/30/99 203,990 203,990 23,500 250.00 1.21
124 220990034 218,949 12/31/99 284,401 231,680 12,253 0.10 1.59
125 7237 249,332 9/30/99 215,660 215,660 26,000 250.00 1.35
126 415990117 282,810 10/31/99 203,729 203,729 30,000 250.00 1.22
127 400990065 215,877 12/31/99 223,553 202,787 7,660 0.54 1.39
128 6567 309,232 12/31/99 248,043 202,580 7,679 0.25 1.59
129 245990074 243,940 12/31/99 198,117 198,117 44,400 370.00 1.28
130 400990047 188,285 12/31/99 170,897 170,897 2,840 40.00 1.22
131 420990049 179,413 12/31/99 169,895 167,385 5,400 300.00 1.24
132 10323 207,486 8/31/99 194,990 181,220 3,947 0.18 1.36
133 400990051 169,822 12/31/99 218,801 201,406 3,253 0.17 1.54
134 400990029 207,228 12/31/99 213,500 213,500 6,050 50.00 1.32
135 253,405 VARIOUS 199,544 173,155 8,435 0.19 1.44
135.1 410990077 139,129 9/30/99 108,191 89,618 6,800 0.20 1.51
135.2 410990090 114,276 12/31/99 91,353 83,537 1,635 0.15 1.36
136 3314 234,111 12/27/99 206,553 184,534 5,169 0.15 1.70
137 415000131 11,953 12/31/99 164,300 164,300 12,250 250.00 1.22
138 400990048 165,452 12/31/99 151,376 151,376 1,825 25.00 1.23
139 400990041 192,048 12/31/99 185,511 185,511 6,237 54.24 1.43
140 10310 169,671 10/31/99 173,292 173,292 9,408 247.58 1.39
141 410990045 195,670 12/31/99 183,969 183,969 8,215 265.00 1.56
142 245990116 170,891 12/31/99 181,304 181,304 3,478 13.80 1.48
143 8669 109,049 12/31/99 181,410 151,269 8,425 0.24 1.50
144 410990061 184,970 12/31/99 165,137 146,572 4,476 0.20 1.46
145 400990119 179,836 12/31/99 163,086 163,086 6,300 50.00 1.23
146 400990095 178,625 12/31/99 157,025 157,025 4,097 12.49 1.43
147 7748 115,291 12/31/99 143,738 134,594 14,000 0.28 1.34
148 10407 118,648 12/31/99 162,804 162,804 6,085 0.15 1.48
149 6010 202,869 12/31/99 167,195 135,605 5,795 0.25 1.65
150 400990107 123,661 12/31/99 113,630 113,630 3,450 50.00 1.21
151 415990102 152,819 11/30/99 161,475 161,475 3,350 50.00 1.73
152 400990089 184,219 12/31/99 177,950 177,950 3,500 50.00 1.83
153 400980012 154,035 12/31/99 130,630 130,630 2,392 52.00 1.31
154 400990064 139,280 12/31/99 117,266 117,266 2,500 50.00 1.29
155 10399 128,225 12/31/99 126,257 126,257 7,250 50.00 1.28
156 410990066 118,887 12/31/99 135,234 119,580 4,033 0.28 1.49
157 400990097 146,195 12/31/99 119,953 119,953 1,700 50.00 1.1R3
158 5847 112,999 9/30/99 92,942 92,942 5,000 200.00 1.25
159 400990060 103,027 9/30/99 91,631 91,631 3,250 50.00 1.25
160 8526 149,112 132,338 9,951 0.13 1.69
161 10337 89,493 12/31/99 88,615 88,615 3,500 48.61 1.26
162 118,250 12/31/99 100,960 100,960 6,500 250.00 1.36
162.1 6667 58,290 12/31/99 50,979 50,979 3,250 250.00 1.37
162.2 6668 59,961 12/31/99 49,981 49,981 3,250 250.00 1.34
163 10338 93,782 9/30/99 80,627 80,627 5,439 23.24 1.29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
U/W NET CUT-OFF DATE MONTHLY MONTHLY MONTHLY
CONTROL LOAN CASH FLOW ORIGINAL LOAN LOAN PER PAID TO REPLACEMENT MONTHLY INSURANCE TI/LC
NUMBER NUMBER DSCR PER UNIT/SF UNIT/SF DATE RESERVES TAX ESCROW ESCROW PAYMENT
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10312 1.25 154.31 153.90 6/1/00
2 6603515 1.24 98.89 98.32 6/1/00 3,193 14,733 971
3 5557 1.24 24,532.71 24,365.28 6/1/00 52,439
4 1.51 66,343.04 65,992.14 6/1/00 37,588 30,333
4.1 260990081 1.51 63,770.95 63,433.65 6/1/00 24,792 17,833
4.2 260990082 1.50 69,884.62 69,514.98 6/1/00 12,796 12,500
5 6603656 1.26 178.25 177.74 6/1/00 1,879 15,137 2,207 9,397
6 10756 1.28 80,818.18 80,818.18 6/1/00 4,583 27,647
7 10761 1.20 91,145.83 90,882.43 6/1/00 4,000 14,838 1,042
8 7816 1.50 79.80 79.53 6/1/00 2,741
9 415990039 1.43 85,838.15 85,286.22 6/1/00 6,873 1,536
10 6603700 1.22 56,060.61 55,871.65 6/1/00 5,500 14,440 1,354
11 9569 1.25 142.76 142.40 6/1/00 1,231 18,188 879
12 2806 1.27 118.34 115.89 6/1/00 596 11,938
13 1906 1.26 28.44 27.77 6/1/00 34,954
13.1 1906A 1.26 30.48 29.76 6/1/00
13.2 1906B 1.26 57.10 55.75 6/1/00
13.3 1906C 1.26 12.27 11.98 6/1/00
13.4 1906D 1.26 56.26 54.94 6/1/00
13.5 1906E 1.26 33.95 33.15 6/1/00
13.6 1906F 1.26 41.79 40.80 6/1/00
14 7598 1.35 114.58 113.50 6/1/00
15 1889 1.25 88.06 86.45 6/1/00 22,344
16 6603028 1.30 21.42 21.31 6/1/00 2,684 27,042 1,519
17 6392 1.33 93.41 92.82 6/1/00 1,405 29,317 4,181
18 9776 1.28 87.48 87.15 6/1/00 11,595
19 10315 1.26 38.58 38.13 6/1/00 83 3,184 1,689 6,000
20 1.25 VARIOUS VARIOUS 6/1/00 1,250 834
20.1 6603086 1.22 178,069.77 177,276.93 6/1/00 896 417
20.2 6603085 1.27 94.21 93.56 6/1/00 354 417
21 810000132 1.28 62.41 62.35 6/1/00 1,923 10,230 3,208 10,000
22 8355 1.55 37,848.61 37,305.89 6/1/00 19,021 16,967 3,313
23 8987 1.29 44.38 44.24 6/1/00 2,604 11,428 1,266
24 9519 1.20 301.81 301.42 6/1/00 11,167 1,500
25 7529 1.25 74.47 74.01 6/1/00 1,580
26 410990101 1.22 133.30 132.92 6/1/00 841 8,402 943 3,055
27 9272 1.24 32,352.94 32,294.57 6/1/00 6,007 12,802 2,083
28 6604092 1.20 71.24 71.07 6/1/00 13,561 714
29 9069 1.27 119.23 118.99 6/1/00 1,242 10,390 1,545
30 6603157 1.25 126.40 125.68 6/1/00 779 4,565 3,250 2,595
31 240990070 1.40 78.86 78.65 6/1/00 5,424 1,311 582
32 10487 1.24 36,764.71 36,748.63 6/1/00 9,410
33 6603490 1.14 31.39 31.25 6/1/00 2,589 17,431 1,613 5,975
34 7000 1.28 22,784.81 22,616.94 6/1/00 16,557 3,885
35 10382 1.26 129.15 129.02 6/1/00 1,035
36 6603234 1.29 35,897.44 35,627.56 6/1/00 4,425 11,220 2,607
37 8770 1.25 98.98 98.79 6/1/00 865 3,920 558
38 10489 1.26 35,416.67 35,400.77 6/1/00 7,269
39 6603048 1.21 22,368.42 22,226.32 6/1/00 7,119 8,947 2,308
40 9462 1.72 37.93 37.80 6/1/00 12,167 1,234
41 6603050 1.32 155.73 154.83 6/1/00 704 6,492 2,816
42 7198 1.25 83.30 82.82 6/1/00 26,639 1,889
43 9155 1.35 61.24 61.14 6/1/00 5,625
44 400990084 1.78 86.20 85.92 6/1/00 20,082
45 8489 1.27 24,000.00 23,902.74 6/1/00 5,208 8,422
46 400990109 1.58 15,228.43 15,153.55 6/1/00 12,831 424
47 6603029 1.24 172.38 VARIOUS 6/1/00 471 12,231 1,352 928
47.1 6603029A 1.24 701.45 697.30 6/1/00
47.2 6603029B 1.24 47.06 46.78 6/1/00
48 240990106 1.31 39.20 39.07 6/1/00
49 8512 1.25 112.47 112.11 6/1/00 1,152 6,519 715
50 410990052 1.28 48.27 48.00 6/1/00 1,436 11,802 750 6,630
51 7723 1.30 99.53 98.82 6/1/00 1,151 4,799 848
52 7361 1.51 25.08 24.85 6/1/00 5,362 2,045
53 6603961 1.20 84.93 84.75 6/1/00 785 4,323 529 2,009
54 1.25 14,605.56 31,136.96 6/1/00 1,517 19,391 666
55 6643 1.25 13,733.81 13,664.55 6/1/00 1,158 16,301 515
55.1 6643A 1.25 13,721.47 13,652.27 6/1/00
55.2 6643B 1.25 13,794.47 13,724.89 6/1/00
56 9198 1.25 17,560.98 17,472.41 6/1/00 358 3,090 152
57 7001 1.28 18,978.10 18,838.27 6/1/00 10,909 3,090
58 400000134 1.34 14,226.52 14,190.48 6/1/00 1,533 6,320 650
58.1 400000134A 1.34 15,044.62 15,006.51 6/1/00
58.2 400000134B 1.34 15,249.19 15,210.56 6/1/00
58.3 400000134C 1.34 13,045.23 13,012.18 6/1/00
59 250990091 1.29 84.45 84.28 6/1/00 500 8,500 3,150
60 10319 1.25 46.11 45.91 6/1/00 268 5,891 2,372
61 6913 1.37 23,148.15 22,985.84 6/1/00 7,777 918
62 10320 1.31 78.96 78.75 6/1/00 1,025 7,537 597
63 6603463 1.20 145.81 145.01 6/1/00 462 6,256 394
64 6603498 1.45 31,612.90 31,391.47 6/1/00 3,229 4,628 1,276
65 7488 1.30 205.02 204.36 6/1/00 7,013 1,609 2,015
66 7815 1.29 11,512.20 11,421.14 6/1/00 1,458 4,092 875
67 800990098 1.21 90.40 90.23 6/1/00 425 4,837 1,092 4,240
68 7371 1.32 15.23 15.14 6/1/00 7,909 1,663
69 6603237 1.27 33,593.75 33,322.07 6/1/00 2,667 4,241 961
70 6988 1.30 59.46 58.86 6/1/00 3,365 339
71 7805 1.28 19,026.55 18,833.83 6/1/00 9,100 1,551
72 7827 1.25 30,992.70 30,678.28 6/1/00 3,712 839
73 258990114 1.42 55.06 55.01 6/1/00 961 2,213 1,196 4,200
74 8714 1.31 73.37 73.29 6/1/00 683 4,317 1,354
75 400990085 1.70 79.59 79.33 6/1/00 11,923
76 400990071 1.31 49.25 48.99 6/1/00 8,727
77 245990073 1.21 21,122.99 21,057.83 6/1/00 3,896 5,334 1,442
78 9082 1.26 18,619.05 18,545.71 6/1/00 1,099 1,940 448
79 10314 1.22 93.01 92.77 6/1/00 1,121 666
80 9179 1.25 22,865.85 22,767.61 6/1/00 3,547 8,686 1,280
81 7261 1.29 82.47 81.87 6/1/00
82 240000136 1.44 124.84 124.79 6/1/00 3,385
83 240990103 1.25 107.34 107.14 6/1/00 810 272
84 410990083 1.28 28.75 28.65 6/1/00 957 6,133 996 2,593
85 6251 1.34 13,567.23 13,465.73 6/1/00 4,562 582
85.1 6251A 1.34 14,681.57 14,571.73 6/1/00
85.2 6251B 1.34 13,654.10 13,551.95 6/1/00
85.3 6251C 1.34 11,783.54 11,695.38 6/1/00
85.4 6251D 1.34 13,499.87 13,398.87 6/1/00
86 9704 1.37 64.00 63.85 6/1/00 1,458 4,464 833 7,500
87 6909 1.26 46,764.71 46,226.33 6/1/00 1,417 7,877 499
88 10308 1.25 17,222.22 17,146.77 6/1/00 2,662 4,943 2,094
89 7184 1.25 69.14 68.77 6/1/00
90 6885 1.26 32,377.78 32,236.67 6/1/00 5,973 1,470
91 255990080 1.39 15.71 15.59 6/1/00 150
92 6000070 1.28 32.33 31.44 6/1/00 1,269 235
93 6601140 1.27 63.56 61.05 6/1/00 661 5,167 1,208 514
94 7015 1.48 13,366.34 13,226.48 6/1/00 680 3,504
95 10311 1.28 41.28 41.08 6/1/00 578 5,603 236
96 7404 1.29 53.59 53.04 6/1/00 3,717 309 2,175
97 10318 1.25 221.72 219.53 6/1/00
98 10391 1.24 189,846.15 189,597.05 6/1/00 229 6,703 674
99 6569 1.30 53.04 52.44 6/1/00 4,559 235
100 10313 1.28 15.01 14.95 6/1/00 2,076 3,307 87
101 400980023 1.16 28,488.37 28,185.74 6/1/00 360 1,779
102 1.34 19,593.50 40,457.25 6/1/00 1,484 1,124
102.1 10405 1.39 18,651.69 18,535.65 6/1/00 960 675
102.2 10335 1.23 22,058.82 21,921.59 6/1/00 524 449
103 5151 1.25 87.58 86.15 6/1/00 2,527 850
104 7552 1.26 37.36 37.11 6/1/00 8,827 344
105 10306 1.26 30,282.05 29,719.20 6/1/00 1,247 795
106 9391 1.25 28,750.00 28,664.87 6/1/00 5,568 1,953
107 10309 1.25 51.95 51.78 6/1/00 354 697 3,109
108 800990076 1.29 66.48 66.23 6/1/00 198 1,610 982
109 8399 1.58 22.76 22.61 6/1/00
110 400990108 1.33 51.81 51.76 6/1/00 418 1,862 424 1,849
111 7747 1.25 22,020.62 21,865.56 6/1/00 3,855
112 10400 1.44 44,680.85 44,529.28 6/1/00 5,354 1,125
113 300980019 1.72 15,094.34 13,087.91 6/1/00 6,612
114 240990104 1.31 142.81 142.35 6/1/00 565 201
115 400990086 1.36 58.69 58.50 6/1/00 2,806
116 10336 1.31 57,142.86 56,911.70 6/1/00 2,897 669
117 6602981 1.25 76.14 75.73 6/1/00 438 105 453 1,314
118 405990030 1.50 17,857.14 17,749.29 6/1/00 3,267 2,305 500
119 8698 1.26 19,607.84 19,482.26 6/1/00 1,930 690
120 7766 1.29 2,145.92 2,097.99 6/1/00 2,618 875
121 8335 1.28 12,337.66 12,250.51 6/1/00 3,208 3,223
122 6568 1.30 69.00 68.22 6/1/00 3,783 148
123 245990072 1.21 19,680.85 19,620.14 6/1/00 1,958 1,750 2,585
124 220990034 1.30 15.10 15.03 6/1/00 1,021 3,750 525 4,346
125 7237 1.35 16,153.85 16,004.66 6/1/00 1,643 745
126 415990117 1.22 13,833.33 13,812.02 6/1/00 2,500 4,104 1,600
127 400990065 1.26 116.32 115.41 6/1/00 640 1,350 493 1,680
128 6567 1.30 52.45 51.87 6/1/00 3,343 196
129 245990074 1.28 13,333.33 13,250.55 6/1/00 3,700 2,351 2,074
130 400990047 1.22 22,464.79 22,305.24 6/1/00 1,213 160
131 420990049 1.22 83,333.33 82,988.17 6/1/00 450 690 271
132 10323 1.26 66.52 66.10 6/1/00 283 331 3,700
133 400990051 1.42 78.39 77.52 6/1/00 272 1,291 560 1,662
134 400990029 1.32 12,396.69 12,220.66 6/1/00 2,249
135 1.25 32.29 32.19 6/1/00 703 3,001 211 2,198
135.1 410990077 1.25 22.65 22.59 6/1/00 567 1,964 141 1,548
135.2 410990090 1.25 62.39 62.12 6/1/00 136 1,037 70 650
136 3314 1.52 41.82 40.66 6/1/00 3,687 848
137 415000131 1.22 28,571.43 28,547.24 6/1/00 1,021 2,373 472
138 400990048 1.23 19,246.58 19,109.88 6/1/00 569 204
139 400990041 1.43 12,173.91 12,011.57 6/1/00 471 3,411 232
140 10310 1.39 34,210.53 34,056.35 6/1/00 784 2,045 216
141 410990045 1.56 41,129.03 40,905.58 6/1/00 1,033 1,875 855
142 245990116 1.48 4,841.27 4,821.79 6/1/00 290 2,110 523
143 8669 1.25 32.41 32.33 6/1/00 1,080 920
144 410990061 1.30 50.71 50.47 6/1/00 373 2,614 675 1,547
145 400990119 1.23 8,849.21 8,802.43 6/1/00 525 1,218 237
146 400990095 1.43 3,353.66 3,334.32 6/1/00 342 1,515 693
147 7748 1.25 22.00 21.85 6/1/00 1,210 1,400
148 10407 1.48 25.83 25.75 6/1/00 2,196 166
149 6010 1.34 45.30 44.80 6/1/00 1,508 252
150 400990107 1.21 14,855.07 14,815.90 6/1/00 827 167
151 415990102 1.73 14,925.37 14,893.28 6/1/00 692 186
152 400990089 1.83 14,285.71 14,222.93 6/1/00 1,670 300
153 400980012 1.31 21,739.13 21,497.52 6/1/00 998 55
154 400990064 1.29 19,200.00 19,128.50 6/1/00 208 1,300 303
155 10399 1.28 6,413.79 6,401.77 6/1/00 862 490
156 410990066 1.31 64.08 63.71 6/1/00 337 621 280 1,302
157 400990097 1.13 25,441.18 24,984.66 6/1/00 146 950 267
158 5847 1.25 33,040.00 32,820.93 6/1/00 2,512 199
159 400990060 1.25 12,046.15 11,978.70 6/1/00 2,021 372
160 8526 1.50 10.00 9.90 6/1/00 1,109 553 1,334
161 10337 1.26 9,895.83 9,837.10 6/1/00 976 290
162 1.36 27,307.69 27,051.72 6/1/00 2,370 769
162.1 6667 1.37 27,307.69 27,051.72 6/1/00 1,185 385
162.2 6668 1.34 27,307.69 27,051.72 6/1/00 1,185 385
163 10338 1.29 2,649.57 2,638.91 6/1/00 295 225
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
MONTHLY CURRENT
ECONOMIC REPAIR & CURRENT CURRENT CURRENT
RESERVE REMEDIATION REPLACEMENT TAX INSURANCE
CONTROL LOAN (& OTHER) RESERVE RESERVE RESERVE RESERVE
NUMBER NUMBER PAYMENT BALANCE BALANCE BALANCE BALANCE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10312
2 6603515 29,060 132,599 6,796
3 5557 199,675
4 VARIOUS 165,568 333,663 94,313
4.1 260990081 51,528 99,528 196,163 51,057
4.2 260990082 39,332 66,040 137,500 43,256
5 6603656 20,061 30,273 8,456
6 10756 4,583 165,884
7 10761 16,038 107,574 11,466
8 7816 16,448
9 415990039 11,438 26,545 42,688
10 6603700 24,334 70,264 2,707
11 9569 4,925 54,563 12,620
12 2806 17,704 24,194
13 1906 136,023
13.1 1906A
13.2 1906B
13.3 1906C
13.4 1906D
13.5 1906E
13.6 1906F
14 7598
15 1889 119,231
16 6603028 11,018 24,428 88,476 23,957
17 6392 12,646 34,877 38,123
18 9776 17,345
19 10315 1,000 7,527 7,093
20 1,014 8,821 7,718
20.1 6603086 363 6,324 3,859
20.2 6603085 652 2,497 3,859
21 810000132 3,846 45,394 20,405
22 8355 152,168 20,144 20,762
23 8987 7,811 34,283 3,797
24 9519 55,837
25 7529 3,159
26 410990101 4,205 26,179 8,489
27 9272 18,021 12,802 4,100
28 6604092 81,364 5,709
29 9069 4,968 22,596 7,725
30 6603157 51,884 7,788 15,668 5,110
31 240990070 31,388 26,221
32 10487
33 6603490 78,800 20,836 35,392 11,422
34 7000 80,732 38,845
35 10382 33,124 2,069
36 6603234 11,425 8,883 -393 12,256
37 8770 3,460 26,508 1,091
38 10489
39 6603048 141,243 56,825 62,632 27,700
40 9462 99,884 13,579
41 6603050 2,438 16,781
42 7198 143,540 10,391
43 9155 71,875
44 400990084 42 40,165
45 8489 15,870 45,873
46 400990109 42 90,572 3,040
47 6603029 385 4,767 65,614 21,632
47.1 6603029A
47.2 6603029B
48 240990106
49 8512 6,912 21,975 5,003
50 410990052 14,360 26,628 5,250
51 7723 10,361 21,397 11,024
52 7361 21,352 28,632
53 6603961 3,146 18,290 5,287
54 19,925 7,583 58,173 8,181
55 6643 5,792 48,902 6,360
55.1 6643A
55.2 6643B
56 9198 19,925 1,792 9,271 1,821
57 7001 54,544 30,899
58 400000134 42 31,050 4,603 31,598 5,201
58.1 400000134A
58.2 400000134B
58.3 400000134C
59 250990091 2,000 33,918 12,000
60 10319 2,146 14,250
61 6913 54,907 4,590
62 10320 5,125 90,444 6,563
63 6603463 10,573 22,983 4,731
64 6603498 2,500 12,611 14,053 5,275
65 7488 28,052 15,060
66 7815 67,975 17,496 23,686 10,495
67 800990098 1,700 25,213 7,641
68 7371 9,375 79,094 21,618
69 6603237 17,403 8,481 6,457
70 6988 7,041 339
71 7805 91,757 48,223 17,859
72 7827 26,875 29,696 10,062
73 258990114 1,922 17,803 13,155
74 8714 2,048 27,905 7,166
75 400990085 42 23,847
76 400990071 83 45,223
77 245990073 23,376 44,800 7,574
78 9082 7,690 18,587 3,584
79 10314 4,750 25,000 6,835 5,325
80 9179 17,226 52,114 10,697
81 7261 10,202
82 240000136 16,924
83 240990103 5,547 1,360
84 410990083 6,699 59,511 8,964
85 6251 24,409 9,811
85.1 6251A
85.2 6251B
85.3 6251C
85.4 6251D
86 9704 88,129 5,870 31,247 4,166
87 6909 15,583 78,772 3,029
88 10308 1,258 21,522 33,109 18,235
89 7184 21,499 5,160
90 6885 35,840 10,758
91 255990080 4,700
92 6000070 29,987 23,518
93 6601140 1,696 10,993 2,496
94 7015 34,875 4,362 19,369
95 10311 205,000 2,912 49,667 708
96 7404 16,248 3,713
97 10318
98 10391 25,000 688 40,217 6,779
99 6569 16,855 1,084
100 10313 10,447 11,914 1,068
101 400980023 42 13,843 4,356 7,074
102 13,359 8,990
102.1 10405 8,643 5,401
102.2 10335 4,715 3,589
103 5151 8,218 6,465
104 7552 6,510 3,436
105 10306 8,728 720
106 9391 38,978 19,530
107 10309 - 2,479 3,484 24,873
108 800990076 1,386 6,940 5,225
109 8399
110 400990108 83 1,254 9,308 1,698
111 7747 11,669
112 10400 42,556 6,752
113 300980019 6,612
114 240990104 3,957 3,825
115 400990086 42 5,611
116 10336 9,136 6,274
117 6602981 94,063 4,414 999 906
118 405990030 3,000 9,801 15,648 1,515
119 8698 1,919 4,093
120 7766 426,377 23,563 4,166
121 8335 81,875 22,458 21,318
122 6568 2,750 13,267 648
123 245990072 15,095 11,748 14,000 11,826
124 220990034 2,500 11,231 47,148 2,143
125 7237 149 6,248
126 415990117 7,125 7,500 32,834 9,768
127 400990065 42 24,572 6,389 2,667
128 6567 11,947 897
129 245990074 33,914 13,845 20,563 33,184
130 400990047 21 8,846 1,623
131 420990049 4,050 10,009 5,954
132 10323 3,966 3,314
133 400990051 42 3,295 6,450 3,599
134 400990029 83 12,671
135 9,344 7,903 20,141 2,312
135.1 410990077 4,969 2,835 9,820 1,547
135.2 410990090 4,375 5,068 10,321 765
136 3314 14,092 4,580
137 415000131 3,042 12,866 2,829
138 400990048 21 4,293 1,901
139 400990041 42 8,172 17,853 1,854
140 10310 5,375 3,920 19,245 1,513
141 410990045 11,363 11,497 11,878
142 245990116 1,449 14,770 4,590
143 8669 3,240 4,600
144 410990061 28,330 2,238 15,847 6,075
145 400990119 42 1,105 8,526 1,185
146 400990095 42 2,750 12,120 5,337
147 7748 10,887
148 10407 5,250 6,589 1,490
149 6010 4,775 1,035
150 400990107 42 4,137 2,167
151 415990102 3,464 1,859
152 400990089 42 5,988 3,900
153 400980012 6,708 441
154 400990064 42 1,884 10,233 3,031
155 10399 10,344 2,938
156 410990066 2,359 8,073 4,200
157 400990097 42 1,026 10,453 1,500
158 5847 2,565 2,194
159 400990060 42 16,164 2,979
160 8526 3,328 3,317
161 10337 5,545 1,475
162 2,370 1,778
162.1 6667 1,185 1,263
162.2 6668 1,185 515
163 10338 1,604 899
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CURRENT
ECONOMIC
CURRENT RESERVE
CONTROL LOAN CURRENT TI/LC ENVIRONMENTAL (& OTHER)
NUMBER NUMBER RESERVE BALANCE RESERVE BALANCE PAYMENT
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 10312 1,542,245
2 6603515 124,221 1,897,493
3 5557
4 263,799
4.1 260990081 163,666
4.2 260990082 100,132
5 6603656 2,180,344 1,875
6 10756
7 10761 1,000,000 LOC
8 7816
9 415990039
10 6603700
11 9569
12 2806 5,000
13 1906
13.1 1906A
13.2 1906B
13.3 1906C
13.4 1906D
13.5 1906E
13.6 1906F
14 7598
15 1889
16 6603028 300,000 LOC 25,624
17 6392
18 9776
19 10315 210,373
20 150,000
20.1 6603086
20.2 6603085 150,000
21 810000132 20,000 99,836
22 8355
23 8987
24 9519 4,519 1,125
25 7529
26 410990101 15,275
27 9272 400,000 LOC
28 6604092 733,388
29 9069 7,500
30 6603157 25,950
31 240990070 2,329
32 10487
33 6603490 48,086 1,389,441
34 7000
35 10382 1,007 10,068
36 6603234
37 8770
38 10489
39 6603048
40 9462
41 6603050 8,377
42 7198 15,000
43 9155 5,625 1,625
44 400990084 292
45 8489 4,507
46 400990109 250
47 6603029 9,398 1,256,917
47.1 6603029A
47.2 6603029B
48 240990106
49 8512
50 410990052 66,300
51 7723
52 7361
53 6603961 8,058
54
55 6643
55.1 6643A
55.2 6643B
56 9198
57 7001
58 400000134 167
58.1 400000134A
58.2 400000134B
58.3 400000134C
59 250990091 12,600
60 10319 4,744
61 6913 520
62 10320 450,000 LOC
63 6603463
64 6603498
65 7488 12,214 236,500 LOC
66 7815
67 800990098 75,080
68 7371 226,289
69 6603237
70 6988 52,002
71 7805
72 7827
73 258990114 158,400
74 8714 3,000
75 400990085 292
76 400990071 833
77 245990073
78 9082
79 10314
80 9179
81 7261
82 240000136
83 240990103
84 410990083 18,179 151,898
85 6251 4,990
85.1 6251A
85.2 6251B
85.3 6251C
85.4 6251D
86 9704 30,193
87 6909
88 10308
89 7184
90 6885 1,016
91 255990080 46,500
92 6000070
93 6601140 9,994
94 7015
95 10311
96 7404 71,853
97 10318
98 10391 222,903
99 6569
100 10313 5,000
101 400980023 542
102
102.1 10405
102.2 10335
103 5151
104 7552
105 10306
106 9391 625
107 10309
108 800990076
109 8399 25,000
110 400990108 5,548 250
111 7747
112 10400
113 300980019
114 240990104
115 400990086 292
116 10336
117 6602981 13,242
118 405990030 53,000
119 8698
120 7766
121 8335 72,074
122 6568 132,182
123 245990072
124 220990034 47,806
125 7237
126 415990117
127 400990065 15,214 417
128 6567 36,685
129 245990074
130 400990047 271
131 420990049
132 10323 26,134 330,000 LOC
133 400990051 20,136 500
134 400990029 917
135 20,990
135.1 410990077 7,740
135.2 410990090 13,250
136 3314
137 415000131
138 400990048 271
139 400990041 86,763
140 10310
141 410990045
142 245990116
143 8669 90,000 LOC
144 410990061 9,282
145 400990119 125
146 400990095 333
147 7748 9,922
148 10407
149 6010
150 400990107 250
151 415990102
152 400990089 250
153 400980012
154 400990064 375
155 10399
156 410990066 9,114
157 400990097 333
158 5847
159 400990060 292
160 8526 6,670
161 10337
162 1,240
162.1 6667 620
162.2 6668 620
163 10338
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
LOAN CUTOFF DATE
LOAN NUMBER CONTRIBUTOR BALANCE PROPERTY NAME PROPERTY COUNTY
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5557 NRF $ 20,856,683 The Bristol Apartments Harris
10756 Key $ 17,780,000 Sterling University Village Bragos
10761 Key $ 17,449,427 Red Rock Villas Apartments Clark
415990039 Bridger $ 14,754,516 Highlander Apartments Santa Clara
6603700 Salomon $ 14,750,115 Lenoxgate Apartments Davidson
-----------------------------------------------------------------------------------------------------------------------------------
9272 Key $ 8,784,123 Garden Quarter Apartments Vigo
6603086 Salomon $ 7,622,908 Cove Club Residential New York
10487 Key $ 7,496,720 The Hornbrook Estates Apartments Vanderbaugh
7000 NRF $ 7,146,952 Havenwood Apartments Tarrant
6603234 Salomon $ 6,947,375 Harbor Tower Portsmouth City
-----------------------------------------------------------------------------------------------------------------------------------
10489 Key $ 6,796,948 The Martin Estates Apartments Shelby
6603048 Salomon $ 6,756,803 Chowder Bay Apartments Orange
8489 NRF $ 5,975,684 Fox Hunt Apartments Montgomery
7001 NRF $ 5,161,687 Copper Creek Apartments Tarrant
6913 NRF $ 4,964,941 Redwood Park Apartments Lane
-----------------------------------------------------------------------------------------------------------------------------------
6603498 Salomon $ 4,865,678 The Towers Apartments Bernalillo
7815 NRF $ 4,682,669 Birch Plaza Madison
6603237 Salomon $ 4,265,225 Evergreen Apartments Riverside
7805 NRF $ 4,256,445 Salem Woods Apartments Montgomery
7827 NRF $ 4,202,924 Colonial Gardens Apartments New Castle
-----------------------------------------------------------------------------------------------------------------------------------
245990073 Bridger $ 3,937,815 Country Meadows Estates Jackson
9179 NRF $ 3,733,887 Summit Ridge Apartments Tarrant
6909 NRF $ 3,143,390 Charleston Apartments Coles
10308 Key $ 3,086,419 Oceanside Village Apartments Brevard
6885 NRF $ 2,901,300 North Village Apartments Webb
-----------------------------------------------------------------------------------------------------------------------------------
7015 NRF $ 2,671,750 The Misty Bayou Apartments Terrebonne
10391 Key $ 2,464,762 56 Court Street Kings
10306 Key $ 2,318,098 Eagles Run Apartments, Phase II Dekalb
9391 Key $ 2,293,189 Coral Way Gardens Apartments Dade
7747 NRF $ 2,120,959 Madison Court Apartments Bucks
-----------------------------------------------------------------------------------------------------------------------------------
10400 Key $ 2,092,876 Renaissance Village Clinton
10336 Key $ 1,991,910 The Alderview Apartments King
405990030 Bridger $ 1,987,920 Aspen Village Apartments
8698 NRF $ 1,987,190 Palm Desert Apartments Maricopa
8335 NRF $ 1,886,578 Oakwood Manor and Monterey Apartments Shawnee
-----------------------------------------------------------------------------------------------------------------------------------
245990072 Bridger $ 1,844,293 Nancene Apartments Jackson
7237 NRF $ 1,664,485 Bellwood Terrace Apartments Chesterfield
415990117 Bridger $ 1,657,442 Casa de Barcelona Taylor
245990074 Bridger $ 1,590,066 University Properties Lyon
420990049 Bridger $ 1,493,787 1128-1142 Valencia Street Apts. San Francisco
-----------------------------------------------------------------------------------------------------------------------------------
415000131 Bridger $ 1,398,815 Desert Dorado Villas Riverside
10310 Key $ 1,294,141 Gallatin Manor Apartments Waslenaw
410990045 Bridger $ 1,268,073 Green Street Manor Apartments Philadelphia
5847 NRF $ 820,523 Summerfield Apartments Benton
6667 Key $ 351,672 410 Third Avenue Monmouth
-----------------------------------------------------------------------------------------------------------------------------------
6668 Key $ 351,672 407 Third Avenue Monmouth
</TABLE>
E = Electrical W = Water S = Sewer T = Trash G = Gas HW = Hot Water U = Utility
Service I = Irrigation L = Lighting
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
LOAN ARE THERE
LOAN NUMBER CONTRIBUTOR PROPERTY ZIP LOAN PURPOSE ELEVATORS? ALL UTILITIES LANDLORD PAID?
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5557 NRF 77034 Refinance No W,S,T
10756 Key 77840 Refinance No T
10761 Key 89134 Refinance No W,S,T
415990039 Bridger 94086 Refinance Yes W,S,T, HW & common area utilities
6603700 Salomon 37072 Refinancing No Only common area
-------------------------------------------------------------------------------------------------------------------------------
9272 Key 47802 Refinance No T
6603086 Salomon 10280 Refinancing No W, S & common area utilities
10487 Key 47715 Refinance No W,S,T,G
7000 NRF 76112 Refinance No W,S,T
6603234 Salomon 23704 Refinancing Yes W, S, T, G
-------------------------------------------------------------------------------------------------------------------------------
10489 Key 46176 Refinance No W,S,T,G
6603048 Salomon 32839 Refinancing No E, S, W, U, I, L
8489 NRF 45429 Refinance No W,S,T
7001 NRF 75321 Refinance No W,S,T
6913 NRF 97402 Refinance No W,S,T
-------------------------------------------------------------------------------------------------------------------------------
6603498 Salomon 87109 Refinancing Yes W, S, T, G, E
7815 NRF 83440 Refinance No W,S,T,E
6603237 Salomon 92503 Refinancing No W, S, T, G, E
7805 NRF 45426 Acquisition No W,S,T
7827 NRF 19711 Acquisition No W,S,T,G
-------------------------------------------------------------------------------------------------------------------------------
245990073 Bridger 64086 Refinance No W,S,T & common area utilities
9179 NRF 76126 Refinance No W,S,T
6909 NRF 61920 Refinance No T
10308 Key 32920 Refinance No W,S,T,E
6885 NRF 78041 Refinance No W,S,T
-------------------------------------------------------------------------------------------------------------------------------
7015 NRF 70364 Refinance No W,S,T
10391 Key 11201 Refinance Yes G,T
10306 Key 30316 Refinance No W,S,T
9391 Key 33145 Refinance Yes W,S,T
7747 NRF 19040 Refinance No W,S,T,G
-------------------------------------------------------------------------------------------------------------------------------
10400 Key 12901 Refinance No W,S,T,E,
10336 Key 98122 Refinance No W,S,T
405990030 Bridger 83440 Refinance No All
8698 NRF 85051 Refinance No W,S,T
8335 NRF 66606 Refinance No W,S,T
-------------------------------------------------------------------------------------------------------------------------------
245990072 Bridger 64063 Acquisition No W,S,T,HW & common area utilities
7237 NRF 23237 Refinance No W,S,T
415990117 Bridger 79605 Acquisition No W,S,T, G & common area utilities
245990074 Bridger 66801 Refinance No W,S,T & common area utilities
420990049 Bridger 94110 Refinance No W,S,T,HW & common area utilities
-------------------------------------------------------------------------------------------------------------------------------
415000131 Bridger 92262 Acquisition No W,S,T & common area utilities
10310 Key 48104 Refinance No T
410990045 Bridger 19123 Refinance Yes W,S,T,HW & common area utilities
5847 NRF 56304 Acquisition No W,S,T
6667 Key 07712 Refinance No E
-------------------------------------------------------------------------------------------------------------------------------
6668 Key 07712 Refinance No E
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
LOAN NUMBER OF NUMBER OF ONE AVERAGE RENT ONE NUMBER OF TWO
LOAN NUMBER CONTRIBUTOR STUDIO UNITS AVERAGE RENT STUDIO UNITS BEDROOM UNITS BEDROOM UNITS BEDROOM UNITS
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5557 NRF 0 $0 480 $487 360
10756 Key 0 $0 0 $0 40
10761 Key 0 $0 0 $0 192
415990039 Bridger 0 $0 57 $1,172 101
6603700 Salomon 0 $0 90 $645 132
----------------------------------------------------------------------------------------------------------------------------------
9272 Key 47 $360 68 $441 109
6603086 Salomon 0 $0 41 $3,340 2
10487 Key 0 $0 6 $500 198
7000 NRF 0 $0 160 $425 156
6603234 Salomon 0 $0 94 $771 97
----------------------------------------------------------------------------------------------------------------------------------
10489 Key 0 $0 6 $595 186
6603048 Salomon 112 $434 80 $490 88
8489 NRF 0 $0 82 $479 124
7001 NRF 0 $0 198 $401 76
6913 NRF 7 $428 161 $462 48
----------------------------------------------------------------------------------------------------------------------------------
6603498 Salomon 6 $442 43 $611 101
7815 NRF 0 $0 2 $221 0
6603237 Salomon 0 $0 0 $0 128
7805 NRF 0 $0 55 $368 154
7827 NRF 9 $392 81 $540 47
----------------------------------------------------------------------------------------------------------------------------------
245990073 Bridger 0 $0 76 $341 108
9179 NRF 0 $0 72 $452 92
6909 NRF 0 $0 2 $500 4
10308 Key 2 $230 78 $392 100
6885 NRF 0 $0 45 $473 45
----------------------------------------------------------------------------------------------------------------------------------
7015 NRF 0 $0 36 $351 124
10391 Key 5 $1,860 0 $0 6
10306 Key 0 $0 12 $333 48
9391 Key 0 $0 29 $535 51
7747 NRF 0 $0 42 $531 55
----------------------------------------------------------------------------------------------------------------------------------
10400 Key 0 $0 0 $0 0
10336 Key 0 $0 25 $842 10
405990030 Bridger 0 $0 0 $0 84
8698 NRF 0 $0 48 $451 54
8335 NRF 39 $259 88 $312 27
----------------------------------------------------------------------------------------------------------------------------------
245990072 Bridger 0 $0 20 $440 54
7237 NRF 0 $0 82 $307 22
415990117 Bridger 14 $295 31 $377 54
245990074 Bridger 0 $0 36 $289 79
420990049 Bridger 3 $934 0 $0 11
----------------------------------------------------------------------------------------------------------------------------------
415000131 Bridger 0 $0 0 $0 49
10310 Key 11 $600 20 $669 7
410990045 Bridger 0 $0 13 $638 16
5847 NRF 0 $0 14 $478 11
6667 Key 0 $0 10 $520 3
----------------------------------------------------------------------------------------------------------------------------------
6668 Key 0 $0 10 $520 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
LOAN AVERAGE RENT TWO NUMBER OF THREE AVERAGE RENT THREE
LOAN NUMBER CONTRIBUTOR BEDROOM UNITS BEDROOM UNITS BEDROOM UNITS
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5557 NRF $630 16 $805
10756 Key $1,010 40 $1,185
10761 Key $1,224 0 $0
415990039 Bridger $1,445 15 $1,664
6603700 Salomon $745 42 $895
------------------------------------------------------------------------------------------------------------------------
9272 Key $520 39 $611
6603086 Salomon $4,875 0 $0
10487 Key $650 0 $0
7000 NRF $557 0 $0
6603234 Salomon $896 0 $0
------------------------------------------------------------------------------------------------------------------------
10489 Key $662 0 $0
6603048 Salomon $598 24 $736
8489 NRF $592 44 $692
7001 NRF $555 0 $0
6913 NRF $560 0 $0
------------------------------------------------------------------------------------------------------------------------
6603498 Salomon $747 4 $1,248
7815 NRF $0 408 $182
6603237 Salomon $563 0 $0
7805 NRF $451 17 $515
7827 NRF $619 0 $0
------------------------------------------------------------------------------------------------------------------------
245990073 Bridger $424 3 $550
9179 NRF $545 0 $0
6909 NRF $771 61 $844
10308 Key $476 0 $0
6885 NRF $577 0 $0
------------------------------------------------------------------------------------------------------------------------
7015 NRF $405 41 $492
10391 Key $2,600 0 $0
10306 Key $615 0 $0
9391 Key $658 0 $0
7747 NRF $625 0 $0
------------------------------------------------------------------------------------------------------------------------
10400 Key $0 4 $945
10336 Key $1,320 0 $0
405990030 Bridger NAV - See Comments 28 NAV - See Comments
8698 NRF $552 0 $0
8335 NRF $366 0 $0
------------------------------------------------------------------------------------------------------------------------
245990072 Bridger $511 20 $564
7237 NRF $403 0 $0
415990117 Bridger $439 20 $640
245990074 Bridger $419 5 $552
420990049 Bridger $1,008 0 $0
------------------------------------------------------------------------------------------------------------------------
415000131 Bridger $586 0 $0
10310 Key $860 0 $0
410990045 Bridger $791 2 $1,048
5847 NRF $567 0 $0
6667 Key $765 0 $0
------------------------------------------------------------------------------------------------------------------------
6668 Key $765 0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
LOAN
LOAN NUMBER CONTRIBUTOR TOTAL APTS COMMENTS
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5557 NRF 856
10756 Key 220 140 - 4 bdrm - $1,380.00
10761 Key 192
415990039 Bridger 173
6603700 Salomon 264
----------------------------------------------------------------------------------------------------------------------------------
9272 Key 272 9 - 4 bdrm - $982.00
6603086 Salomon 43
10487 Key 204
7000 NRF 316
6603234 Salomon 191 There are 191 units on the site, and 4 rooftop antennae units totaling 195.
----------------------------------------------------------------------------------------------------------------------------------
10489 Key 192
6603048 Salomon 304
8489 NRF 250
7001 NRF 274
6913 NRF 216
----------------------------------------------------------------------------------------------------------------------------------
6603498 Salomon 154 There are 155 units on the site. 1 is used for retail purposes.
7815 NRF 410 Based on beds not units
6603237 Salomon 128
7805 NRF 226
7827 NRF 137
----------------------------------------------------------------------------------------------------------------------------------
245990073 Bridger 187
9179 NRF 164
6909 NRF 68 1 - 4 bdrm - $1,160.00
10308 Key 180
6885 NRF 90
----------------------------------------------------------------------------------------------------------------------------------
7015 NRF 202 1 - 4 bdrm - $425.00
10391 Key 13 Inludes 2 Retail Tenants
10306 Key 78 18 - 4 bdrm - $755.00
9391 Key 80
7747 NRF 97
----------------------------------------------------------------------------------------------------------------------------------
10400 Key 47 43 - 4 bdrm - $1,213.00
10336 Key 35
Student housing - rents are paid on a per bed basis, per room basis and/or per unit
basis. Scheduled rates are based on various periods: monthly, school year, school
405990030 Bridger 112 semester or summer.
8698 NRF 102
8335 NRF 154
----------------------------------------------------------------------------------------------------------------------------------
245990072 Bridger 94
7237 NRF 104
415990117 Bridger 119 Unit count does not include the manager unit.
245990074 Bridger 120
Unit count and Average Rent does not include one 2BR unit that is rented by the
420990049 Bridger 14 previous owner for 75 years @ $200/month.
----------------------------------------------------------------------------------------------------------------------------------
415000131 Bridger 49
10310 Key 38
410990045 Bridger 31
5847 NRF 25
6667 Key 13
----------------------------------------------------------------------------------------------------------------------------------
6668 Key 13
</TABLE>
<PAGE>
ANNEX C
ADDITIONAL STEP LOAN AND INTEREST-ONLY LOAN CHARACTERISTICS
INTEREST-ONLY LOANS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
CONTROL LOAN ORIGINAL INTEREST REMAINING INTEREST ONLY
NUMBER NUMBER PROPERTY NAME ONLY PERIOD PERIOD
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10756 Sterling University Village 24 22
</TABLE>
STEP LOANS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
STEP
CONTROL LOAN MONTHLY PAYMENT
NUMBER NUMBER PROPERTY NAME PERIOD PAYMENT DATE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[NO STEP LOANS]
</TABLE>
C-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX D
AFFILIATED BORROWERS (1)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PERCENT OF CUT-OFF CROSS COLLATERALIZED AND CROSS
LOAN NUMBERS DATE BALANCE RELATIONSHIP OF BORROWER DEFAULTED
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cross Collateralized and Cross
260990081, 26099082 2.49% Affiliated Entities Defaulted
------------------------------------------------------------------------------------------------------------------
400990071, 400990084,
400990085, 400990086 1.95% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
10487, 10489 1.75% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
240990070, 240990103,
240990104 1.61% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
7000, 7001 1.50% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
Cross Collateralized and Cross
6603085, 6603086 1.17% Affiliated Entities Defaulted
------------------------------------------------------------------------------------------------------------------
7805, 7827 1.03% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
6567, 6568, 6569 0.72% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
245990072, 245990073 0.71% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
Cross Collateralized and Cross
6643, 9198 0.64% Affiliated Entities Defaulted
------------------------------------------------------------------------------------------------------------------
7747, 7748 0.39% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
400990047, 400990048 0.36% Affiliated Entities No
------------------------------------------------------------------------------------------------------------------
10335, 10405 0.29% Same Borrower Default Only
------------------------------------------------------------------------------------------------------------------
Cross Collateralized and Cross
410990077, 410990090 0.18% Affiliated Entities Defaulted
------------------------------------------------------------------------------------------------------------------
Cross Collateralized and Cross
6667, 6668 0.09% Affiliated Entities Defaulted
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Affiliated Borrower means that a principal of or person that has control of
a borrower (through ownership of a controlling interest in its general partner
or managing member or otherwise) also has control of another borrower (in any
such manner).
D-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX E
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
DISTRIBUTION DATE: 17-Jul-2000
RECORD DATE: 29-Jun-2000
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 18-Aug-2000
MATURITY DATE:
--------------------------------------------------------------------------------
CONTACT INFORMATION
================================================================================
FUNCTION NAMES/ADDRESSES
-------- ---------------
DEPOSITOR Prudential Securities Secured Financing Corp.
One New York Plaza, 18th Floor
New York, NY 10292
(212) 214-1000
MASTER SERVICER Key Commercial Mortgage
911 Main Street
Kansas City, MO 64105
(888) 979-1200
SPECIAL SERVICER Lennar Partners, Inc.
760 N.W. 107th Avenue,
Miami, FL 33172
(305) 485-2000
RELATIONSHIP MANAGER Nina Velastegui
450 W. 33rd Street 14th Floor
New York, NY 10001
(212) 946-3246
ADMINISTRATOR Matthew Duncan
(212) 946-8651
Email: [email protected]
REPORTS AVAILABLE AT www.chase.com/sfa
================================================================================
TABLE OF CONTENTS
================================================================================
STATEMENT SECTIONS PAGE(S)
------------------ -------
Certificate Distribution Detail 2-7
Certificate Ratings Detail 8
Mortgage Loan Stratification Tables 9-11
Loan Status Detail 12
Property History Detail 13
Delinquency Loan Detail 14
Historical Delinquency Detail 15
Specially Serviced Loan Detail 16
Specially Serviced Historical Information 17
Principal Prepayment Detail 18
Modified Loan Detail 19
Realized Loss Detail 20
================================================================================
The information contained herein has been obtained from sources believed to be
reliable, but The Chase Manhattan Bank does not warrant its completeness or
accuracy. All cashflows, prices, and yields herein were compiled by Chase from
sources associated with the transactions responsible for providing such
information for purposes of computing cashflows, prices and yields. Chase makes
no representations as to the appropriateness for any person of any investment in
the securities.
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa COPYRIGHT 2000, CHASE MANHATTAN BANK
E-1
<PAGE>
PAGE 2 OF 20
STDDEAL
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
DISTRIBUTION DATE: 17-Jul-2000
RECORD DATE: 29-Jun-2000
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
--------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Distribution in Dollars
<TABLE>
<CAPTION>
===================================================================================================================================
Class CUSIP Current Pass Original Beginning Principal Interest Prepayment Total Realized Ending
Through Rate Face Principal Premiums/Yield Losses/Trust Principal
Value Balance Maint Charges Expenses Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
B
C
D
E
F
G
H
J
K
L
M
N
R1
R2
R3
-----------------------------------------------------------------------------------------------------------------------------------
TOTALS 0 0 0 0 0 0 0 0
===================================================================================================================================
===================================================================================================================================
Class CUSIP Current Pass Original Beginning Principal Interest Prepayment Total Realized Ending
Through Rate Face Principal Premiums/Yield Losses/Trust Principal
Value Balance Maint Charges Expenses Balance
-----------------------------------------------------------------------------------------------------------------------------------
X
===================================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa COPYRIGHT 2000, CHASE MANHATTAN BANK
E-2
<PAGE>
PAGE 3 OF 20
STDDEAL
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
DISTRIBUTION DATE: 17-Jul-2000
RECORD DATE: 29-Jun-2000
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
--------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Factor Information per $1,000 of Original Face
<TABLE>
<CAPTION>
=========================================================================================================
Class CUSIP Beginning Principal Interest Prepayment Total Realized Ending
Principal Premiums/Yield Losses/Trust Principal
Factor Maint Charges Expenses Balance
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
B
C
D
E
F
G
H
J
K
L
M
N
R1
R2
R3
---------------------------------------------------------------------------------------------------------
TOTALS
=========================================================================================================
=========================================================================================================
Class CUSIP Beginning Principal Interest Prepayment Total Realized Ending
Principal Premiums/Yield Losses/Trust Principal
Factor Maint Charges Expenses Balance
---------------------------------------------------------------------------------------------------------
X
=========================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa COPYRIGHT 2000, CHASE MANHATTAN BANK
E-3
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 4 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Available Funds 0
Principal Distribution Amount 0
Scheduled Principal Distribution Amount 0
Unscheduled Principal Distribution Amount 0
Miscellaneous Trust Fund Expenses 0
Interest Reserve Account
Deposits 0
Withdrawals 0
<TABLE>
<CAPTION>
Balance Information
------------------------------------------------------------------------------------------------------------------------------------
Scheduled
Loan Count at Balance at Beginning Loan Beginning Beginning Unpaid Ending Loan Ending Scheduled Ending Unpaid
Group Securitization Securitization Count Scheduled Balance Balance Count Balance Balance
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTALS
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Number and Aggregate Principal Amounts of Mortgage Loans in Delinquency
--------------------------------------------------------------------------------
Aggregated
Period Number Principal Balance Percentage
--------------------------------------------------------------------------------
1 Month %
2 Months %
3+ Months %
In Foreclosure %
REO %
Bankruptcies %
--------------------------------------------------------------------------------
TOTALS %
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-4
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 5 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Prepayment Penalties
-----------------------------------------------
Prepayment
Class Premium Yield Maintenance
-----------------------------------------------
TOTALS
-----------------------------------------------
Advance Summary
Principal & Interest Advances
Current Principal & Interest Advances
Outstanding Principal & Interest Advances
Reimbursement of Interest on any P&I Advances
Reimbursement of Interest on any T&I Advances
-------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-5
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 6 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
CERTIFICATE DISTRIBUTION DETAIL
Fee Summary
Servicing Fees 0
Sub Servicing Fees 0
Trustee Fees 0
Special Servicer Fee 0
Workout Fee 0
Appraisal Reduction Amounts
-----------------------------------------------------------------------
Appraisal
Reduction Appraisal
Loan Number Effected Date Reduction Amount
-----------------------------------------------------------------------
none
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-6
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 PAGE 7 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
CERTIFICATE DISTRIBUTION DETAIL
Interest Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Class Accrued Prepayment Beginning Unpaid Interest Loss Total Interest Certificate Interest Ending Unpaid
Certificate Interest Interest Payable Distributable Interest
Interest Shortfall
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
B
C
D
E
F
G
H
J
K
L
M
N
R1
R2
R3
X
------------------------------------------------------------------------------------------------------------------------------------
TOTALS
====================================================================================================================================
Reports Available at www.chase.com/sfa (Copyright) 2000, CHASE MANHATTAN BANK
</TABLE>
E-7
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 PAGE 8 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
CERTIFICATE RATINGS DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
Class CUSIP Original Ratings Changed Ratings/Change Date(1)
-------------------------------------------------- --------------------------------------------------------
DCR Fitch Moody's S & P DCR Fitch Moody's S & P
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 N/A X X X X
A-2 N/A X X X X
B N/A X X X X
C N/A X X X X
D N/A X X X X
E N/A X X X X
F N/A X X X X
G N/A X X X X
H N/A X X X X
J N/A X X X X
K N/A X X X X
L N/A X X X X
M N/A X X X X
N N/A X X X X
R1 N/A X X X X
R2 N/A X X X X
R3 N/A X X X X
X N/A X X X X
====================================================================================================================================
NR - Designates that the class was not rated by the above agency at the time of original issuance.
N/A - Not applicable.
X - Designates that the rating agency did not rate class at the time of issuance.
(1) The information contained herein has been received directly from the applicable rating agency within 30 days of this report.
It is possible that the current ratings may have changed before the release of this report, hence, Chase recommends contacting the
rating agency listed below directly for more recent information and further details supporting the rating issued for each class.
------------------------------------------------------------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa (Copyright) 2000, CHASE MANHATTAN BANK
</TABLE>
E-8
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 PAGE 9 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
MORTGAGE LOAN STRATIFICATION TABLES
STRATIFICATION BY ENDING SCHEDULED BALANCE AMOUNT
<TABLE>
<CAPTION>
===============================-============================================================
| Weighted Average
Ending Scheduled # of Principal Balance % of Agg. |--------------------------
Balance Amount Loans ($) Prin. Bal |WAM Note Rate(%) DSCR
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 or Less 0 0.00 0 0.000000 0.000000
$ 1,000,001 to $ 2,000,000 0 0.00 0 0.000000 0.000000
$ 2,000,001 to $ 4,000,000 0 0.00 0 0.000000 0.000000
$ 4,000,001 to $ 6,000,000 0 0.00 0 0.000000 0.000000
$ 6,000,001 to $ 8,000,000 0 0.00 0 0.000000 0.000000
$ 8,000,001 to $10,000,000 0 0.00 0 0.000000 0.000000
$10,000,001 to $15,000,000 0 0.00 0 0.000000 0.000000
$15,000,001 to $20,000,000 0 0.00 0 0.000000 0.000000
---------------------------------------------------------------------------------------------
Totals 0 0.00 0 0.000000 0.000000
=============================================================================================
Average Principal Balance: 0.00
</TABLE>
Stratification by STATE CODE
<TABLE>
<CAPTION>
============================================================================================
| Weighted Average
# of Principal Balance % of Agg. |--------------------------
State Code Loans ($) Prin. Bal |WAM Note Rate(%) DSCR
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FLORIDA 0 0.00 0 0.000000 0.000000
---------------------------------------------------------------------------------------------
Totals 0 0.00 00.0 0 0.000000 0.000000
=============================================================================================
Reports Available at www.chase.com/sfa (Copyright) 2000, CHASE MANHATTAN BANK
</TABLE>
E-9
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 10 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY 1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
MORTGAGE LOAN STRATIFICATION TABLES
<TABLE>
<CAPTION>
STRATIFICATION BY CURRENT NOTE RATE
----------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance % of Agg. ------------------------------
Current Note Rate Loans ($) Prin. Bal. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.000000% to 7.500000% 0 0.00 0 0.000000 0.000000
7.510000% to 7.750000% 0 0.00 0 0.000000 0.000000
7.760000% to 8.000000% 0 0.00 0 0.000000 0.000000
8.010000% to 8.250000% 0 0.00 0 0.000000 0.000000
8.260000% to 8.500000% 0 0.00 0 0.000000 0.000000
8.510000% to 8.750000% 0 0.00 0 0.000000 0.000000
8.760000% to 9.000000% 0 0.00 0 0.000000 0.000000
9.010000% to 9.250000% 0 0.00 0 0.000000 0.000000
9.260000% to 9.500000% 0 0.00 0 0.000000 0.000000
9.510000% to 9.750000% 0 0.00 0 0.000000 0.000000
9.760000% to 10.000000% 0 0.00 0 0.000000 0.000000
10.010000% to 11.010000% 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
Totals 0 0.00 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY REMAINING STATED TERM (BALLOON LOANS ONLY)
----------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance % of Agg. ------------------------------
Remaining Stated Term Loans ($) Prin. Bal. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0 0.000000 0.000000
201 months to 274 months 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
Totals 0 0.00 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY DEBT SERVICE COVERAGE RATIO
----------------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance % of Agg. -------------------------------
Debt Service Coverage Ratio Loans ($) Prin. Bal. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0.000000 to 1.000000 0 0.00 0 0.000000 0.000000
1.010000 to 1.200000 0 0.00 0 0.000000 0.000000
1.210000 to 1.240000 0 0.00 0 0.000000 0.000000
1.250000 to 1.300000 0 0.00 0 0.000000 0.000000
1.310000 to 1.400000 0 0.00 0 0.000000 0.000000
1.410000 to 1.500000 0 0.00 0 0.000000 0.000000
1.510000 to 1.600000 0 0.00 0 0.000000 0.000000
1.610000 to 1.700000 0 0.00 0 0.000000 0.000000
1.710000 to 1.800000 0 0.00 0 0.000000 0.000000
1.810000 to 1.900000 0 0.00 0 0.000000 0.000000
1.910000 to 2.000000 0 0.00 0 0.000000 0.000000
2.010000 to 2.300000 0 0.00 0 0.000000 0.000000
2.310000 to 2.400000 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------------
Totals 0 0.00 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY REMAINING STATED TERM (FULLY AMORTIZING LOANS ONLY)
----------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance % of Agg. ------------------------------
Remaining Stated Term Loans ($) Prin. Bal. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0 0.000000 0.000000
201 months to 0 months 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
Totals 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-10
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 11 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY 1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
MORTGAGE LOAN STRATIFICATION TABLES
<TABLE>
<CAPTION>
STRATIFICATION BY PROPERTY TYPE
----------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance ------------------------------
Property Type Loans ($) % of Agg. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 0 0.00 0 0.000000 0.000000
Retail/Office 0 0.00 0 0.000000 0.000000
Hotel 0 0.00 0 0.000000 0.000000
Industrial 0 0.00 0 0.000000 0.000000
Multi-Family 0 0.00 0 0.000000 0.000000
Retail, Anchored 0 0.00 0 0.000000 0.000000
Retail, Unanchored 0 0.00 0 0.000000 0.000000
Mixed Use 0 0.00 0 0.000000 0.000000
Mobile Home 0 0.00 0 0.000000 0.000000
Self Storage 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
Totals 0 0.00 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STRATIFICATION BY SEASONING
----------------------------------------------------------------------------------------------------
Weighted Average
# of Principal Balance % of Agg. ------------------------------
Seasoning Loans ($) Prin. Bal. WAM Note Rate(%) DSCR
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12 months or Less 0 0.00 0 0.000000 0.000000
13 months to 24 months 0 0.00 0 0.000000 0.000000
25 months to 36 months 0 0.00 0 0.000000 0.000000
37 months to 48 months 0 0.00 0 0.000000 0.000000
49 months to 60 months 0 0.00 0 0.000000 0.000000
61 months to 72 months 0 0.00 0 0.000000 0.000000
73 months to 84 months 0 0.00 0 0.000000 0.000000
85 months to 96 months 0 0.00 0 0.000000 0.000000
97 months to 108 months 0 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
Totals 0 0.00 0.00 0 0.000000 0.000000
----------------------------------------------------------------------------------------------------
</TABLE>
Debt Coverage Service Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The Trustee makes no representation as to the
accuracy of the data provided by the borrower for this calculation.
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-11
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 12 of 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY 1
STATEMENT TO CERTIFICATEHOLDERS
-------------------------------------------------------------------------------
LOAN STATUS DETAIL
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Offering
Memo Property Scheduled Scheduled Neg Beginning Ending
Loan Cross Type Principal Interest Note Maturity Amt Scheduled Scheduled
Number Reference (I) City State Amount Amount Rate Date Flag Balance Balance
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
123456 50 OF TAMPA FL $0.00 $0.00 .00000 N/A N $0.00 $0.00
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------
Has Loan
Ever Been Loan
Paid Appraisal Appraisal Specially Status
Loan Through Reduction Reduction Serviced? Code
Number Date Date Amount (Y/N) (II)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
123456 N/A N/A $0.00 N
-------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(I) PROPERTY TYPE CODE:
<S> <C> <C> <C> <C> <C> <C> <C>
IN Industrial MU Mixed Use RT Retail
CH Church LO Lodging NE Non-Exempt SC School, HCF or WF
CO Condo, Coop or TH MF Multi Family OF Office SE Securities
HC Health Care MH Mobile Home Park OT Other SF Single Family
HO Hotel MP Multiple Properties PD Plan Unit Development SS Self Storage
IF Industrial/Flex MS Mini Storage RO Retail/Office WH Warehouse
</TABLE>
(II) LOAN STATUS CODE:
6. Discounted Payoff
1. Specially Serviced 7. Foreclosure Sale
2. Foreclosure 8. Bankruptcy Sale
3. Bankruptcy 9. REO Disposal
4. REO 10. Modification/Workout
5. Prepayment in Full 11. Rehabilitation
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa
(Copyright)2000, CHASE MANHATTAN BANK
E-12
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 13 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
Property History Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Offering Memo Data of Last No. Months Annual Esitmate based on
Cross -------------------- Revenue Current Quarter Prior Full Year
Loan Number Reference Property Name Inspection Financial Annualized NOI DSCR Occupancy NOI DSCR Occupancy
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NO PROPERTY HISTORY REPORTED THIS PERIOD
====================================================================================================================================
</TABLE>
Reports Available at www.chase.com/sfa (Copyright) 2000, CHASE MANHATTAN BANK
E-13
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 14 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
Delinquency Loan Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Loan Number Offering # of Months Paid Through Current Loan Balance Current Outstanding P&I Advance
Memo Cross Delinquent Date P&I Advances** Description
Reference Advances (I)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NO DELINQUENT LOANS REPORTED THIS PERIOD
====================================================================================================================================
Delinquency Loan Detail
<CAPTION>
====================================================================================================================================
Loan Number Loan Special Foreclosure Current Outstanding Outstanding
Status Servicer Date Property Property Property
Start Date Protection Protection Bankruptcy REO
Advances Advances Date Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NO DELINQUENT LOANS REPORTED THIS PERIOD
====================================================================================================================================
</TABLE>
(I) ADVANCE DESCRIPTION: A. In grace period
B. late but (greater) 1 month
1. 1 month delinquent
2. 2 months delinquent
3. 3+ months delinquent
** Outstanding P&I advances include current period.
(II) LOAN STATUS CODE: 6. Discounted Payroll
1. Specialty Serviced 7. Foreclosure Sale
2. Foreclosure 8. Bankruptcy Sale
3. Bankruptcy 9. REO Disposal
4. REO 10. Modification/Workout
5. Prepayment in Full 11. Rehabilitation
Reports Available at www.chase.com/sfa (copyright) 2000, CHASE MANHATTAN BANK
E-14
<PAGE>
DISTRIBUTION DATE: 17-Jul-2000 Page 15 OF 20
RECORD DATE: 29-Jun-2000 STDDEAL
CLOSING DATE: 29-Jun-2000
NEXT PMT DATE: 17-Aug-2000
MATURITY DATE:
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-KEY1
STATEMENT TO CERTIFICATEHOLDERS
Historical Delinquency Detail
<TABLE>
<CAPTION>
====================================================================================================================================
Delinquencies Prepayments
Distrib. -------------------------------------------------------------------------------------------------------------------------
Date 1 Month 2 Months 3 Months(+) Foreclosures REO Modifications Curtailment Payoff
-------------------------------------------------------------------------------------------------------------------------
# Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/18/2000 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00 0 $0.00
0.000% 0.000% 0.000% 0.000% 0.000%
====================================================================================================================================
*** Note: Foreclosures and REO Totals are excluded from the Delinquent Aging Categories
</TABLE>
Historical Delinquency Detail
<TABLE>
<CAPTION>
===============================================================================
Rates & Maturities
Distrib. ---------------------------------------------------------------------
Date Next Weighted Avg. WAM
---------------------------------------------------------------------
Coupon Remit
--------------------------------------------------------------------------------
<S> <C> <C> <C>
07/18/2000 0.000000 0.000000 0
================================================================================
</TABLE>
E-15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DISTRIBUTION DATE: 17-Jul-2000 PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION PAGE 16 OF 20
RECORD DATE: 29-Jun-2000 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES STDDEAL
CLOSING DATE: 29-Jun-2000 SERIES 2000-KEY1
NEXT PMT DATE: 17-Aug-2000 STATEMENT TO CERTIFICATEHOLDERS
MATURITY DATE:
</TABLE>
SPECIALLY SERVICED LOAN DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Date of
Offering Transfer
Special Memo Property Balance to
Loan Service Cross Type Specially Inspection Appraisal Appraisal
Number Code (II) Reference Code (I) Serviced Date Date Value Comments
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NO SPECIALLY SERVICED LOANS REPORTED THIS PERIOD
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(I) PROPERTY TYPE CODE:
IN Industrial MU Mixed Use RT Retail
CH Church LO Lodging NE Non-Exempt SC School, HCF or WF
CO Condo, Coop or TH MF Multi Family OF Office SE Securities
HC Health Care MH Mobile Home Park OT Other SF Single Family
HO Hotel MP Multiple Properties PD Plan Unit Development SS Self Storage
IF Industrial/Flex MS Mini Storage RO Retail/Office WH Warehouse
</TABLE>
(II) SPECIAL SERVICE CODE:
(1) Request to waive prepayment penalty (5) In Foreclosure
(2) Payment default (6) Now REO
(3) Request to modify or workout (7) Paid Off
(4) Borrower Bankruptcy (8) Returned to Master Servicer
Reports Available at www.chase.com/sfa
(Copyright) 2000, CHASE MANHATTAN BANK
E-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DISTRIBUTION DATE: 17-Jul-2000 PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION PAGE 17 OF 20
RECORD DATE: 29-Jun-2000 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES STDDEAL
CLOSING DATE: 29-Jun-2000 SERIES 2000-KEY1
NEXT PMT DATE: 17-Aug-2000 STATEMENT TO CERTIFICATEHOLDERS
MATURITY DATE:
</TABLE>
SPECIALLY SERVICED HISTORICAL INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================================
Balance
Offering Change
Memo Special Current since Property
Distribution Loan Cross Service Date of Scheduled Transfer Type
Date Number Reference Code (II) Correction Balance Date Code (I) State
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NO SPECIALLY SERVICED LOANS REPORTED THIS PERIOD
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
Debt
Net Service Paid
Distribution Interest Operating NOI Coverage Note Through Maturity Rem
Date Rate Income Date Ratio Date Date Date Term
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NO SPECIALLY SERVICED LOANS REPORTED THIS PERIOD
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(I) PROPERTY TYPE CODE:
IN Industrial MU Mixed Use RT Retail
CH Church LO Lodging NE Non-Exempt SC School, HCF or WF
CO Condo, Coop or TH MF Multi Family OF Office SE Securities
HC Health Care MH Mobile Home Park OT Other SF Single Family
HO Hotel MP Multiple Properties PD Plan Unit Development SS Self Storage
IF Industrial/Flex MS Mini Storage RO Retail/Office WH Warehouse
</TABLE>
(II) SPECIAL SERVICE CODE:
(1) Request to waive prepayment penalty (5) In Foreclosure
(2) Payment default (6) Now REO
(3) Request to modify or workout (7) Paid Off
(4) Borrower Bankruptcy (8) Returned to Master Servicer
Reports Available at www.chase.com/sfa
(Copyright) 2000, CHASE MANHATTAN BANK
E-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DISTRIBUTION DATE: 17-Jul-2000 PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION PAGE 18 OF 20
RECORD DATE: 29-Jun-2000 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES STDDEAL
CLOSING DATE: 29-Jun-2000 SERIES 2000-KEY1
NEXT PMT DATE: 17-Aug-2000 STATEMENT TO CERTIFICATEHOLDERS
MATURITY DATE:
</TABLE>
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Offering
Principal Memo Mortgage
Prepayment Loan Cross Property Curtailment Payoff Prepayment Repurchase
Date Number Reference Type (I) Amount Amount Premium Price
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
NO PRINCIPAL PREPAYMENT REPORTED THIS PERIOD
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(I) PROPERTY TYPE CODE:
IN Industrial MU Mixed Use RT Retail
CH Church LO Lodging NE Non-Exempt SC School, HCF or WF
CO Condo, Coop or TH MF Multi Family OF Office SE Securities
HC Health Care MH Mobile Home Park OT Other SF Single Family
HO Hotel MP Multiple Properties PD Plan Unit Development SS Self Storage
IF Industrial/Flex MS Mini Storage RO Retail/Office WH Warehouse
</TABLE>
Reports Available at www.chase.com/sfa
(Copyright) 2000, CHASE MANHATTAN BANK
E-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DISTRIBUTION DATE: 17-Jul-2000 PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION PAGE 19 of 20
RECORD DATE: 29-Jun-2000 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES STDDEAL
CLOSING DATE: 29-Jun-2000 SERIES 2000-KEY1
NEXT PMT DATE: 17-Aug-2000 STATEMENT TO CERTIFICATEHOLDERS
MATURITY DATE:
</TABLE>
MODIFIED LOAN DETAIL
--------------------------------------------------------------------------------
Loan Offering Modification Modification Description
Number Memorandum Date
Cross
Reference
--------------------------------------------------------------------------------
NO MODIFICATION LOANS REPORTED THIS PERIOD
--------------------------------------------------------------------------------
Reports Available at www.chase.com/sfa (copyright) 2000, CHASE MANHATTAN BANK
E-19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DISTRIBUTION DATE: 17-Jul-2000 PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION PAGE 20 of 20
RECORD DATE: 29-Jun-2000 COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES STDDEAL
CLOSING DATE: 29-Jun-2000 SERIES 2000-KEY1
NEXT PMT DATE: 17-Aug-2000 STATEMENT TO CERTIFICATEHOLDERS
MATURITY DATE:
</TABLE>
REALIZED LOSS DETAIL
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Loan Offering Appraisal Appraisal Value Beginning Gross Proceeds Gross Liquidation Net Net Realized Loss
Number Memo Date Scheduled Proceeds % Expenses Liquidation Proceeds %
Cross Balance Scheduled Proceeds Scheduled
Reference Principal Balance
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NO REALIZED LOSSES REPORTED THIS PERIOD
--------------------------------------------------------------------------------
</TABLE>
Reports Available at www.chase.com/sfa (copyright) 2000, CHASE MANHATTAN BANK
E-20
<PAGE>
ANNEX F
F-1
--------------------------------------------------------------------------------
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Commercial Mortgage Pass-Through Certificates, Series 2000-KEY1
Classes A-1, A-2, B, C, D, E, F and G
$734,519,000 (Approximate)
STRUCTURAL AND COLLATERAL TERM SHEET
June 11, 2000
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Phone Fax Email
------------- -------------- ----------------------------
PSI Trading/Sales
--- -------------
<S> <C> <C> <C> <C>
John Mulligan 212-778-4365 212-778-1905 [email protected]
Jake Kaercher 212-778-4365 212-778-1905 [email protected]
Joe Accurso 212-778-4365 212-778-1905 [email protected]
Investment Banking
------------------
David Rodgers 212-778-3225 212-778-5099 [email protected]
Anna Caston 212-778-8610 212-778-5099 [email protected]
Michael Won 212-778-1175 212-778-5099 [email protected]
Structuring
-----------
Januar Laude 212-778-7176 212-778-3716 [email protected]
SSB Trading/Sales
--- -------------
Paul Vanderslice 212-723-6156 212-723-8599 [email protected]
Jeff Lewis 212-723-6156 212-723-8599 [email protected]
Jeff Sturdevant 212-723-6156 212-723-8599 [email protected]
Investment Banking
------------------
Angela Hutzel 212-816-8087 212-816-8307 [email protected]
Joe Siragusa 212-816-7973 212-816-8307 [email protected]
Elsie Mao 212-816-1299 212-816-8307 [email protected]
McDonald Trading/Sales
-------- -------------
Dennis Melchior 216-443-2600 216-443-3851 [email protected]
Joe Chinnici 216-443-2890 216-443-3851 [email protected]
</TABLE>
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-2
STRUCTURAL AND COLLATERAL TERM SHEET
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION (DEPOSITOR)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-KEY1
$734,519,000 (APPROXIMATE)
--------------------------------------------------------------------------------
The information included herein is provided solely by Prudential Securities
Incorporated, Salomon Smith Barney Inc., and McDonald Investments Inc.
(collectively as "Underwriters") for the Prudential Securities Secured Financing
Corporation Series 2000-KEY1 transaction. The analysis in this report is based
on information provided by KeyBank National Association, Bridger Commercial
Realty Finance LLC and Salomon Brothers Realty Corp., (collectively known as the
"Sellers"). The Underwriters make no representations as to the accuracy of such
information. All opinions and conclusions in this report are subject to change.
All analyses are based on certain assumptions noted herein and different
assumptions could yield substantially different results. You are cautioned that
there is no universally accepted method for analyzing financial instruments or
commercial mortgage loans. You should review the assumptions; there may be
differences between these assumptions and your actual business practices.
Further, the Underwriters do not guarantee any results and there is no guarantee
as to the liquidity of the instruments involved in this analysis. The decision
to adopt any strategy remains your responsibility. The Underwriters (or any of
their affiliates) or their officers, directors, analysts or employees may have
positions in securities, or derivative instruments thereon referred to herein,
and may, as principal or agent, buy or sell such securities, or derivative
instruments. In addition, the Underwriters may make a market in the securities
referred to herein, but are not obligated to do so. Finally, the Underwriters
have not addressed the legal, accounting and tax implications of the analysis
with respect to you and the Underwriters strongly urge you to seek advice from
your counsel, accountant and tax advisor.
Neither the information nor the opinions expressed shall be construed to be, or
constitute, an offer to sell or buy or a solicitation of an offer to sell or buy
any securities, or derivative instruments mentioned herein.
[KEYBANK LOGO] [BRIDGER COMMERCIAL FUNDING LOGO]
[SALOMON SMITH BARNEY]
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
ANNEX F
F-3
--------------------------------------------------------------------------------
STRUCTURAL AND COLLATERAL TERM SHEET
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION (DEPOSITOR)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-KEY1
$734,519,000 (APPROXIMATE)
--------------------------------------------------------------------------------
APPROXIMATE SECURITIES STRUCTURE:
---------------------------------
Approx. Expected Weighted
Expected Face/Notional Credit Average
Rating Amount Support Life Payment
Class (Moody'/S&P) ($000) (% of UPB) (years)(a) Window(a)
--------------------------------------------------------------------------
PUBLICLY OFFERED
A-1 Aaa/AAA 134,000 26.00 5.689 7/00 - 6/09
A-2 Aaa/AAA 471,621 26.00 9.311 6/09 - 2/10
B Aa2/AA 34,782 21.75 9.661 2/10 - 3/10
C A2/A 40,920 16.75 9.774 3/10 - 4/10
D A3/A- 10,230 15.50 9.792 4/10 - 4/10
E Baa1/BBB+ 10,230 14.25 9.850 4/10 - 5/10
F Baa2/BBB 18,414 12.00 10.037 5/10 - 9/10
G Baa3/BBB- 14,322 10.25 10.258 9/10 - 12/10
PRIVATELY OFFERED
X (IO) Aaa/AAAr 818,407(b) NAP 9.036 NAP
H NR/BB+ 32,736 6.25 10.660 12/10 - 9/11
J Ba2/BB 4,092 5.75 11.208 9/11 - 9/11
K Ba3/BB- 6,138 5.00 11.352 9/11 - 12/11
L NR/B+ 12,276 3.50 11.600 12/11 - 2/12
M B2/NR 10,230 2.25 11.693 2/12 - 3/12
N B3/NR 6,138 1.50 12.368 3/12 - 1/13
O NR/NR 12,278 0.00 13.897 1/13 - 8/19
--------------------------------------------------------------------------
Total 818,407
(a) Calculated at 0% CPR and no balloon or ARD extensions
(b) Notional Balance
COLLATERAL FACTS:
-----------------
Cut-off Date Balance: $818,406,907
Number of Mortgage Loans: 167
Number of Properties: 179
Average Cut-off Date Balance: $4,900,640
Weighted Average Gross Coupon: 8.195%
Weighted Average Net Coupon: 8.123%
Weighted Average Remaining Amortization Term (months): 335.12
Weighted Average Remaining Term to Balloon/Maturity (months): 115.89
Weighted Average Cut-off Date U/W DSCR:(c) 1.306x
Weighted Average Cut-off Date LTV: 71.52%
Weighted Average Balloon/ARD LTV Ratio: 62.28%
(c) See explanatory note on general pool characteristics on page F-3
SIGNIFICANT PROPERTY TYPE CONCENTRATIONS:
-----------------------------------------
<TABLE>
<CAPTION>
Cut-off Date # of Wtd. Avg. Wtd. Avg.
Property Type Balance Properties % of Pool U/W DSCR Coupon
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Multifamily $ 227,870,837 46 27.84% 1.28x 8.053%
Manufactured Housing 45,511,849 30 5.56 1.36 8.433
Total Housing Related $ 273,382,686 76 33.40% 1.29x 8.116%
Retail-Anchored 177,594,097 18 21.70 1.27 8.065
Office 162,513,189 31 19.86 1.35 8.187
Industrial 80,230,218 20 9.80 1.29 8.267
Retail-Unanchored 46,983,262 14 5.74 1.25 8.207
Hotel-Full Service 29,755,349 3 3.64 1.52 9.124
Mixed Use 23,139,145 6 2.83 1.31 8.557
Retail-Single Tenant 18,526,355 6 2.26 1.35 8.330
Self-Storage 4,881,581 4 0.60 1.37 8.840
Retail-Shadow Anchor 1,401,025 1 0.17 1.52 6.940
----------------------------------------------------------------------------------------------
Total $ 818,406,907 179 100.00% 1.31x 8.195%
</TABLE>
IMPORTANT CHARACTERISTICS:
--------------------------
Co-Lead Managers, Joint Book Prudential Securities Incorporated ("PSI")
Runners & Placement Agents: Salomon Smith Barney Inc. ("SSB")
Co-Manager: Mcdonald Investments Inc.
Mortgage Loan Sellers: KeyBank National Association ("KEY")
Bridger Commercial Realty Finance LLC ("BRIDGER")
Salomon Brothers Realty Corp. ("SBRC")
Master Servicer: Key Corporate Capital Inc. d/b/a Key Commercial
Mortgage
Special Servicer: Lennar Partners, Inc.
Trustee: The Chase Manhattan Bank
Pricing Date: June ____, 2000
Settlement Date: June ____, 2000
Cut-off Date: June 1, 2000
Determination Date: The 11th of each month, or if the 11th is not a
Business Day, the next Business Day.
Distribution Date: The 15th of each month, or if the 15th day is not
a Business Day, the Business Day immediately
following the 15th day. The Distribution Date
will be no fewer than four business days after
the related Determination Date.
First Determination Date: July 11, 2000
First Distribution Date: July 17, 2000
ERISA Eligible: A-1, A-2 & X (IO)
SMMEA: Not eligible
Structure: Sequential. See "Structural Overview" herein for
further details.
Interest Accrual Period: Calendar month preceding distribution
Day Count: 30/360
Tax Treatment: REMIC
Rated Final
Distribution Date: May 17, 2032
Clean-up Call: 1%
Minimum The Class A-1 & Class A-2 Certificates will be
Denominations: issued in minimum denominations of $25,000
initial Certificate Balance. The Class B
Certificates will be issued in minimum
denominations of $50,000 initial Certificate
Balance. The Class C, Class D, Class E, Class F &
Class G Certificates will be issued in minimum
denominations of $100,000 initial Certificate
Balance.
Pricing Assumption: Each loan will be assumed to pay as scheduled to
its respective maturity or Anticipated Repayment
Date.
SIGNIFICANT STATE CONCENTRATIONS: (>5%)
---------------------------------------
# of
State Cut-off Date Balance Properties % of Pool
--------------------------------------------------------------------------------
California $ 186,745,147 34 22.82%
Texas 99,484,348 20 12.16
Maryland 46,239,958 3 5.65
Other 485,937,454 122 59.38
--------------------------------------------------------------------------------
Total $ 818,406,907 179 100.00%
COLLATERAL CONTRIBUTORS:
------------------------
Collateral Cut-off Date # of Wtd. Avg. Wtd. Avg.
Contributors Balance Loans % of Pool U/W DSCR Coupon
--------------------------------------------------------------------------------
KEY $483,065,357 92 59.03% 1.30X 8.149%
BRIDGER 176,718,506 55 21.59 1.38 8.481
SBRC 158,623,044 20 19.38 1.25 8.018%
------------------------------------------------------------------------------
Total $818,406,907 167 100.00% 1.31X 8.195%
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-4
--------------------------------------------------------------------------------
TRANSACTION HIGHLIGHTS
--------------------------------------------------------------------------------
o Diversification:
- 167 loans secured by 179 properties
- Top 5 loans equal 14.36% of pool; Top 10 equal 24.40%
- 34 states and District of Columbia in total, including California
22.82%, Texas 12.16%, Maryland 5.65%, Nevada 4.86%, New York
4.80%, Washington 4.60%, no other state > 3.80%
- Balloon/ARD distribution equals 49.61% in 2009, and 39.31% in
2010.
o Underwriting:
- 1.31x Weighted Average Cut-off Date U/W DSCR
- 71.52% Weighted Average Cut-off Date LTV 62.28% Weighted Average
Balloon/ARD LTV
- 335.1 Month Weighted Average Remaining Amortization Term
o Servicing:
- The Master Servicer will be Key Corporate Capital Inc. d/b/a Key
Commercial Mortgage, which is approved by Moody's and Standard and
Poor's as both a master servicer and special servicer.
- The Special Servicer will be Lennar Partners, Inc. which is
approved by Moody's and Standard and Poor's.
--------------------------------------------------------------------------------
GENERAL POOL CHARACTERISTICS
--------------------------------------------------------------------------------
Number of Loans: 167
Number of Properties: 179
Aggregate Cut-off Date Principal Balance: $818,406,907
Aggregate Original Principal Balance: $823,571,350
Weighted Average Gross Coupon: 8.195%
Gross Coupon Range: 6.880 - 10.300%
Weighted Average Net Coupon: 8.123%
Net Coupon Range: 6.808 - 9.608%
Average Cut-off Date Principal Balance: $4,900,640
Average Original Principal Balance: $4,931,565
Maximum Cut-off Date Principal Balance: $30,410,327
Minimum Cut-off Date Principal Balance: $351,672
Maximum Original Principal Balance: $30,492,000
Minimum Original Principal Balance: $355,000
Weighted Average Cut-off Date U/W DSCR:* 1.306x
Cut-off Date U/W DSCR Range: 1.13 - 1.83x
Weighted Average Cut-off Date LTV: 71.52%
Cut-off Date LTV Range: 31.53 - 91.39%
Weighted Average Original LTV: 71.95%
Original LTV Range: 36.40 - 91.80%
Weighted Average Balloon/ARD LTV: 62.28%
Balloon/ARD LTV Range: 0.00 - 82.54%
Weighted Average Age (First Pay through Cut-off): 8.12 months
Age Range: 1 - 43 months
Weighted Avg. Remaining Amortization Term: 335.12 months
Remaining Amortization Term Range: 137 - 359 months
Weighted Average Original Amortization Term: 343.24 months
Original Amortization Term Range: 180 - 360 months
Weighted Avg. Rem. Term to Balloon/Maturity: 115.89 months
Remaining Term Range: 55 - 230 months
Weighted Average Original Term to Balloon/Maturity: 124.01 months
Original Term Range: 84 - 240 months
*The Underwritten NOI and Underwritten NCF for Control Number 28 (Loan number
6604092) is stated on an "as-stabilized" basis instead of an "in-place" basis.
If the "in-place" figures were used, the loan's Underwritten NOI DSCR would be
1.12x, the loan's Underwritten NCF DSCR would be 1.11x and the pool's Weighted
Average Cut-off Date U/W DSCR would be 1.305x.
--------------------------------------------------------------------------------
STRUCTURAL OVERVIEW
--------------------------------------------------------------------------------
o The Mortgage Pool will be comprised of 167 fixed rate mortgage loans with an
approximate Cut-off Date principal balance of $818,406,907.
- The regularly scheduled monthly principal payments from the loans
will be paid on a straight sequential basis (i.e., A-1, A-2,
etc.).
- All other principal collections from the loans will be distributed
on a straight sequential basis.
- If all Classes other than Classes A-1 and A-2 have been reduced to
zero, principal will be allocated to Class A-1 and A-2 on a
pro-rata basis.
o Each of the Classes (other than Classes A-1, A-2 and X) will be
subordinate to earlier alphabetically lettered classes. Realized Losses
and Appraisal Reductions will be allocated in reverse alphabetical order
to such Classes with certificate balances, and then pro-rata to Classes
A-1 and A-2.
o All Classes will pay interest on a 30/360 basis.
o Shortfalls resulting from servicer modifications or special servicer
compensation will be allocated in reverse alphabetical order to Classes with
certificate balances.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-5
--------------------------------------------------------------------------------
STRUCTURAL OVERVIEW (Continued)
--------------------------------------------------------------------------------
o The Special Servicer will be responsible for servicing loans that, in
general, are in default or are in imminent default, and for administering
REO properties. The Special Servicer may modify such loans if, among other
things, such modifications in the judgement of the Special Servicer increase
the recovery to Certificateholders on an estimated net present value basis.
The Special Servicer, as agent for the trust and all Certificateholders is
responsible for all collections, modifications and extensions for defaulted
loans or REO properties.
o Appraisal Reductions will occur no later than the earliest of 120 days after
a delinquency in payment, 60 days after receipt of notice that a bankruptcy
petition has been filed with respect to the borrower or a receiver has been
appointed in respect of the related Mortgaged Properties, the effective date
of any modification to the date on which a reduction in the amount of
Monthly Payment of one such Mortgage Loan, or a change in any other material
economic term of such Mortgage Loan (other than an extension of its maturity
date), becomes effective as a result of a modification of such Mortgage Loan
by the Special Servicer (other than an extension of the date that a Balloon
Payment is due for a period of less than six months) and immediately after a
Mortgaged Property becomes a REO Property. An Appraisal Reduction will be
created in the amount, if any, by which the stated Principal Balance of the
particular mortgage loan (plus other amounts overdue in connection with such
loan) exceeds 90% of the value plus certain amounts held in escrow as
determined by a MAI appraiser or internal appraisal; and if an internal
appraisal is performed the greater of 25% of the Stated Principal Balance or
the amount calculated above. An internal appraisal is permitted with respect
to a mortgaged property if the Stated Principal Balance of the particular
mortgage loan is less than or equal to $2,000,000.
o The Directing Certificateholder is the holder of Certificates representing
more than 50% of the aggregate Certificate Balance of the most subordinate
Class of Principal Balance Certificates (or if the Certificate Balance of
such Class is less than 25% of the original balance thereof then the next
most subordinate Class of Principal Balance Certificates).
--------------------------------------------------------------------------------
CALL PROTECTION TABLE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Months Current Pool Total
from Balance Pool Lockout/ Lockout Fixed
Month - Year Cutoff Date ($MM) * Factor Defeas. Yield Maint. & YM % Prem. Open Total
------------ ----------- ------- ------ -------- ------------ ---- ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 2000 0 818.4 100.0% 94.5% 5.5% 100.0% 0.0% 0.0% 100.0%
June 2001 12 811.0 99.1 94.2 5.8 100.0 0.0 0.0 100.0
June 2002 24 803.0 98.1 94.2 5.8 100.0 0.0 0.0 100.0
June 2003 36 794.1 97.0 88.4 11.6 100.0 0.0 0.0 100.0
June 2004 48 784.7 95.9 84.7 15.1 99.9 0.1 0.0 100.0
June 2005 60 761.3 93.0 76.6 23.3 99.9 0.1 0.0 100.0
June 2006 72 750.2 91.7 76.6 23.2 99.9 0.1 0.0 100.0
June 2007 84 734.5 89.7 76.6 23.1 99.7 0.3 0.0 100.0
June 2008 96 721.6 88.2 76.7 23.1 99.7 0.1 0.2 100.0
June 2009 108 678.3 82.9 57.9 17.1 75.0 1.6 23.4 100.0
June 2010 120 107.3 13.1 68.6 11.4 80.0 10.9 9.2 100.0
June 2011 132 59.5 7.3 63.3 9.6 72.9 18.3 8.8 100.0
June 2012 144 17.3 2.1 8.0 30.9 38.9 0.0 61.1 100.0
June 2013 156 6.1 0.7 19.8 80.2 100.0 0.0 0.0 100.0
June 2014 168 5.4 0.7 18.9 81.1 100.0 0.0 0.0 100.0
June 2015 180 3.2 0.4 26.0 19.3 45.2 0.0 54.8 100.0
June 2016 192 1.1 0.1 55.2 44.8 100.0 0.0 0.0 100.0
June 2017 204 0.8 0.1 51.2 48.8 100.0 0.0 0.0 100.0
June 2018 216 0.4 0.1 39.9 60.1 100.0 0.0 0.0 100.0
June 2019 228 0.1 0.0 0.0 0.0 0.0 0.0 100.0 100.0
</TABLE>
* Calculated at 0% CPR and no balloon or ARD extensions.
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-6
--------------------------------------------------------------------------------
ALLOCATION OF PREPAYMENT PREMIUMS AND YIELD MAINTENANCE CHARGES
--------------------------------------------------------------------------------
All collected Prepayment Premiums and Yield Maintenance Charges associated with
principal prepayments will be allocated between the Offered Certificates and the
Class X Certificates as follows:
Yield Maintenance Charges:
--------------------------
o The Yield Maintenance Charges will be allocated between such Classes of
Certificates based on the product of (a) the principal distributed to
each such Class (other than the Class X Certificates) as a percentage
of the principal distributed to all Classes and (b) the Base Interest
Fraction, with the remainder being distributed to the Class X
Certificates.
Base (Pass-Through Rate - Discount Rate)
Interest = -----------------------------------------
Fraction (Mortgage Rate - Discount Rate)
o In general, this formula provides for an increase in the allocation of
yield maintenance charges to the Offered Certificates then entitled to
principal distribution relative to the Class X Certificates as interest
rates decrease, and a decrease in the allocation to such Classes as
interest rates rise.
Fixed Percentage Prepayment Premiums:
-------------------------------------
o 75% of all Fixed Percentage Prepayment Premiums will be allocated to
the Class X Certificates. The remaining 25% of the Fixed Percentage
Prepayment Premiums will be allocated to the Offered Certificates then
entitled to principal distributions.
--------------------------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION BY PERCENT OF CUT-OFF DATE PRINCIPAL BALANCE*
--------------------------------------------------------------------------------
[PIE CHART]
Retail-Anchored 22%
Office 20%
Industrial 10%
Retail-Unanchored 6%
Hotel-Full Service 4%
Mixed Use 3%
Retail-Single Tenant 2%
Self-Storage 1%
Retail-Shadow Anchored .2%
Mulitfamily 28%
Manufactured Housing 6%
* Figures may not sum due to rounding.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-7
--------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION BY CUT-OFF DATE PRINCIPAL BALANCE
--------------------------------------------------------------------------------
[MAP OF AMERICA]
Massachusetts Kentucky Nevada Michigan
1.47% of total 1.37% of total 4.86% of total 1.62% of total
Rhode Island Louisiana Oregon Indiana
0.12% of total 0.83% of total 1.00% of total 2.82% of total
New Jersey Oklahoma Washington Ohio
3.50% of total 0.09% of total 4.60% of total 1.75% of total
Delaware Texas Idaho Pennsylvania
0.90% of total 12.16% of total 0.82% of total 3.79% of total
District of Columbia Kansas Utah New York
0.72% of total 0.42% of total 0.36% of total 4.80% of total
Maryland Colorado Nebraska
5.65% of total 1.59% of total 3.72% of total
Virginia New Mexico Missouri
3.61% of total 0.59% of total 0.98% of total
Tennessee Arizona Minnesota
2.35% of total 1.02% of total 1.57% of total
Georgia Alaska Illinois
1.57% of total 0.89% of total 3.08% of total
Florida California Wisconsin
2.22% of total 22.82% of total 0.33% of total
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-8
--------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION BY CUT-OFF DATE PRINCIPAL BALANCE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGED CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
STATES PROPERTIES BALANCE INTEREST RATE* (MONTHS) LTV U/W DSCR CUT-OFF DATE
------ ---------- ------- -------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
California 34 22.82% 8.252% 115.5 69.30% 1.33x $186,745,147
Texas 20 12.16 7.802 120.9 73.05 1.27 99,484,348
Maryland 3 5.65 8.551 110.8 73.51 1.36 46,239,958
Nevada 7 4.86 8.118 124.3 73.06 1.26 39,781,780
New York 12 4.80 8.452 112.8 72.01 1.25 39,266,731
Washington 6 4.60 8.141 92.9 70.53 1.27 37,635,167
Pennsylvania 10 3.79 8.321 113.5 72.51 1.26 31,037,407
Nebraska 1 3.72 8.380 115.0 72.41 1.25 30,410,327
Virginia 4 3.61 7.834 116.7 77.64 1.29 29,548,534
New Jersey 7 3.50 8.078 120.8 63.49 1.47 28,612,319
Illinois 7 3.08 8.257 111.7 73.72 1.29 25,170,000
Indiana 3 2.82 8.240 127.4 77.14 1.24 23,077,791
Tennessee 2 2.35 8.115 114.0 77.19 1.24 19,222,742
Florida 7 2.22 8.317 115.1 74.14 1.27 18,190,292
Ohio 5 1.75 8.229 113.4 71.09 1.28 14,311,452
Michigan 4 1.62 8.201 114.7 64.01 1.46 13,265,117
Colorado 4 1.59 8.218 109.5 58.45 1.51 13,004,495
Minnesota 5 1.57 8.681 131.1 72.45 1.28 12,876,079
Georgia 3 1.57 8.246 125.3 85.65 1.19 12,824,770
Massachusetts 2 1.47 8.325 135.3 62.42 1.49 12,053,531
Kentucky 2 1.37 8.020 113.9 75.53 1.29 11,211,303
Arizona 3 1.02 8.555 115.4 68.96 1.22 8,328,450
Oregon 3 1.00 8.005 110.4 66.37 1.33 8,153,835
Missouri 3 0.98 8.464 113.7 76.69 1.22 8,060,266
Delaware 4 0.90 8.052 111.2 75.39 1.27 7,393,340
Alaska 3 0.89 8.389 114.3 73.78 1.32 7,322,635
Louisiana 2 0.83 8.567 114.9 63.32 1.44 6,818,009
Idaho 2 0.82 7.911 109.0 76.14 1.35 6,670,589
District of Columbia 3 0.72 8.400 109.0 55.85 1.30 5,908,937
New Mexico 1 0.59 7.570 109.0 79.50 1.45 4,865,678
Kansas 2 0.42 8.435 113.0 71.62 1.28 3,476,644
Utah 2 0.36 7.930 108.0 77.41 1.23 2,978,693
Wisconsin 1 0.33 7.079 175.0 70.72 1.28 2,722,580
Rhode Island 1 0.12 8.550 115.0 52.13 1.83 995,605
Oklahoma 1 0.09 9.380 127.0 44.99 1.50 742,358
- ---- ----- ----- ----- ---- -------
Total 179 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
* The Weighted Average Interest Rate on each stratification table listed herein
indicates the Gross Mortgage Rate.
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-9
--------------------------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION BY CUT-OFF DATE PRINCIPAL BALANCE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGED CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
PROPERTY TYPES PROPERTIES BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
-------------- ---------- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily 46 27.84% 8.053% 114.6 75.09% 1.28x $227,870,837
Manufactured Housing 30 5.56 8.433 117.5 67.55 1.36 45,511,849
-- ---- ----- ----- ----- ---- ----------
Total Housing Related 76 33.40% 8.116% 115.1 73.83% 1.29x $273,382,686
Retail-Anchored 18 21.70 8.065 113.9 73.38 1.27 177,594,097
Office 31 19.86 8.187 118.0 67.29 1.35 162,513,189
Industrial 20 9.80 8.267 114.4 72.06 1.29 80,230,218
Retail-Unanchored 14 5.74 8.207 123.9 72.47 1.25 46,983,262
Hotel-Full Service 3 3.64 9.124 112.4 65.74 1.52 29,755,349
Mixed Use 6 2.83 8.557 115.3 69.75 1.31 23,139,145
Retail-Single Tenant 6 2.26 8.330 120.0 67.81 1.35 18,526,355
Self-Storage 4 0.60 8.840 123.0 56.88 1.37 4,881,581
Retail-Shadow Anchor 1 0.17 6.940 99.0 63.68 1.52 1,401,025
- ---- ----- ---- ----- ---- ---------
Total 179 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
--------------------------------------------------------------------------------
LTV RANGE BY CUT-OFF DATE PRINCIPAL BALANCE
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGE CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
LOAN-TO-VALUE RATIO LOANS BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
------------------- ----- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.01 - 35.00 1 0.25% 10.300% 137.0 31.53% 1.72x $ 2,080,978
40.01 - 45.00 3 1.16 8.131 123.8 43.41 1.67 9,505,167
45.01 - 50.00 4 1.65 8.305 116.6 48.08 1.63 13,516,193
50.01 - 55.00 7 1.48 8.333 111.6 52.69 1.42 12,125,707
55.01 - 60.00 6 2.50 8.649 120.2 58.63 1.48 20,420,923
60.01 - 65.00 18 9.22 8.089 123.3 62.51 1.38 75,419,295
65.01 - 70.00 28 14.30 8.469 114.6 68.14 1.35 117,049,915
70.01 - 75.00 56 35.40 8.273 115.6 72.70 1.27 289,693,992
75.01 - 80.00 40 30.94 7.937 113.5 77.67 1.26 253,174,302
80.01 - 85.00 3 2.19 8.363 124.7 81.78 1.26 17,953,471
85.01 - 95.00 1 0.91 8.150 112.0 91.39 1.14 7,466,965
- ---- ----- ----- ----- ---- ---------
Total 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-10
--------------------------------------------------------------------------------
LTV RANGE AT MATURITY DATE OR BALLOON DATE/ARD
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGE CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
LOAN-TO-VALUE RATIO LOANS BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
------------------- ----- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Zero - 5.00 5 1.00% 8.587% 190.2 58.81% 1.37x $ 8,208,016
15.01 - 35.00 2 0.33 8.865 133.5 47.46 1.35 2,697,683
35.01 - 40.00 2 1.07 8.025 123.5 43.28 1.69 8,762,810
40.01 - 45.00 10 4.01 8.297 117.1 54.29 1.54 32,783,173
45.01 - 50.00 6 3.06 7.926 132.9 59.38 1.35 25,020,711
50.01 - 55.00 15 4.83 8.291 112.0 62.66 1.36 39,559,374
55.01 - 60.00 25 12.35 8.438 119.1 67.54 1.37 101,052,036
60.01 - 65.00 49 27.32 8.151 117.8 71.86 1.30 223,604,539
65.01 - 70.00 35 30.68 8.166 109.6 74.94 1.26 251,051,861
70.01 - 75.00 17 14.44 8.106 114.4 79.58 1.25 118,199,739
80.01 - 85.00 1 0.91 8.150 112.0 91.39 1.14 7,466,965
- ---- ----- ----- ----- ---- ---------
Total 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
--------------------------------------------------------------------------------
PAYMENT TYPES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGE CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
PAYMENT TYPES LOANS BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
------------- ----- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Amortizing Balloon 152 88.07% 8.211% 115.9 71.57% 1.31x $720,739,965
Hyper Amortizing 10 10.93 8.032 109.0 72.25 1.27 89,458,926
Fully Amortizing 5 1.00 8.587 190.2 58.81 1.37 8,208,016
- ---- ----- ----- ----- ---- ---------
Total 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-11
--------------------------------------------------------------------------------
UNDERWRITTEN DEBT SERVICE COVERAGE RATIO
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
MORTGAGE CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
U/W DSCR (x) LOANS BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
------------- ----- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.01 - 1.15 2 1.02% 8.250% 118.2 88.26% 1.14x $ 8,316,443
1.16 - 1.20 6 5.85 8.289 114.9 76.39 1.20 47,913,653
1.21 - 1.25 50 33.27 8.156 116.3 74.69 1.24 272,255,158
1.26 - 1.30 53 31.98 8.110 114.9 71.85 1.28 261,688,367
1.31 - 1.35 20 9.70 8.185 120.2 70.65 1.33 79,358,025
1.36 - 1.40 8 2.91 8.261 112.2 68.73 1.38 23,805,224
1.41 - 1.45 8 4.07 8.133 111.7 69.61 1.43 33,316,241
1.46 - 1.50 7 4.17 8.516 119.6 64.30 1.50 34,142,178
1.51 - 1.55 4 3.37 8.765 111.2 62.93 1.52 27,568,174
1.56 - 1.60 3 1.15 8.065 113.7 61.25 1.58 9,423,820
1.66 - 1.70 1 0.49 8.200 114.0 45.83 1.70 3,987,052
1.71 - 1.75 3 1.18 8.560 128.0 41.65 1.72 9,656,388
1.76 - 1.80 1 0.73 8.200 114.0 49.02 1.78 5,980,579
1.81 - 1.85 1 0.12 8.550 115.0 52.13 1.83 995,605
- ---- ----- ----- ----- ---- -------
Total 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
--------------------------------------------------------------------------------
MORTGAGE INTEREST RATES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED SCHEDULED
AVERAGE WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF WEIGHTED REMAINING AVERAGE WEIGHTED BALANCE
RANGE OF GROSS MORTGAGE CUT-OFF DATE AVERAGE TERM CUT-OFF DATE AVERAGE AS OF THE
MORTGAGE RATES LOANS BALANCE INTEREST RATE (MONTHS) LTV U/W DSCR CUT-OFF DATE
-------------- ----- ------- ------------- -------- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.751 - 7.000% 2 0.50% 6.901% 178.6 70.94% 1.36x $ 4,090,779
7.001 - 7.250% 2 1.77 7.023 132.8 75.02 1.26 14,503,925
7.251 - 7.500% 2 2.16 7.481 140.6 65.76 1.26 17,645,989
7.501 - 7.750% 10 10.16 7.645 103.5 75.92 1.29 83,128,191
7.751 - 8.000% 21 18.36 7.931 115.8 71.34 1.32 150,295,109
8.001 - 8.250% 36 28.10 8.121 114.3 72.56 1.31 229,950,340
8.251 - 8.500% 42 20.60 8.383 116.1 70.64 1.28 168,628,507
8.501 - 8.750% 23 7.97 8.635 119.5 69.59 1.32 65,186,891
8.751 - 9.000% 16 4.95 8.892 119.7 71.08 1.30 40,508,738
9.001 - 9.250% 4 2.13 9.118 119.0 67.94 1.26 17,421,036
9.251 - 9.500% 5 2.85 9.319 113.8 68.16 1.49 23,334,822
9.501 - 9.750% 3 0.20 9.595 113.6 64.92 1.31 1,631,602
10.251 - 10.500% 1 0.25 10.300 137.0 31.53 1.72 2,080,978
- ---- ------ ----- ----- ---- ---------
Total 167 100.00% 8.195% 115.9 71.52% 1.31x $818,406,907
</TABLE>
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-12
--------------------------------------------------------------------------------
SUMMARIES OF THE TEN LARGEST MORTGAGE LOANS
--------------------------------------------------------------------------------
<TABLE>
WEIGHTED SCHEDULED
AVERAGE PRINCIPAL
NUMBER OF PERCENT OF BALANCE
PROPERTY MORTGAGED CUT-OFF DATE INTEREST CUT-OFF DATE AS OF THE
PROPERTY NAME TYPE PROPERTIES BALANCE RATE LTV U/W DSCR CUT-OFF DATE
------------- ---- ---------- ------- ---- --- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
SouthPointe Pavilions Retail-Anchored 1 3.72% 8.380% 72.41% 1.25x $ 30,410,327
Gateway Village Shopping Center Retail-Anchored 1 3.16 7.960 77.16 1.24 25,848,385
The Bristol Apartments Multifamily 1 2.55 7.670 76.12 1.24 20,856,683
Quality Inn - Crossed Loans* Hotel-Full Service 2 2.49 9.300 68.89 1.51 20,391,572
4000 Alameda Office 1 2.45 8.110 74.23 1.26 20,042,294
Sterling University Village Multifamily 1 2.17 8.180 79.73 1.28 17,780,000
Red Rock Villas Apartments Multifamily 1 2.13 8.084 78.60 1.20 17,449,427
The Aerospace Corporation Office 1 2.13 8.070 63.42 1.50 17,441,330
Highlander Apartments Multifamily 1 1.80 7.895 67.68 1.43 14,754,516
Lenoxgate Apartments Multifamily 1 1.80 8.050 79.73 1.22 14,750,115
- ---- ----- ----- ---- ----------
Total 11 24.4% 8.187% 73.83% 1.31x $199,724,649
</TABLE>
* Represents two cross-defaulted and cross-collateralized mortgage loans.
================================================================================
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-13
CONTROL #1: SOUTHPOINTE PAVILIONS: LOAN # 10312
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Cut-off Date Balance: $30,410,327 Property Type: Anchored Retail
Loan Type: Principal and Interest Location: Lincoln, NE
Origination Date: 12/31/99 Year Built/Renovated: 1999
Maturity Date: 01/01/2010 Square Footage: 197,601
Anticipated Repay Date: N/A Cut-off Date Balance/sf: $153.90
Mortgage Rate: 8.38% Appraised Value: $42,000,000
Annual Debt Service: $2,782,426.20 Current LTV: 72.41%
DSCR: 1.25 Balance at Maturity LTV: 65.59%
Underwritten Cash Flow: $3,473,557 Percent Occupied: 95.48%
Balance at Maturity: $27,547,216 Occupancy as of Date: 3/9/2000
------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The SouthPointe Pavilions Shopping Center Loan (the "SouthPointe Pavilions
Shopping Center Loan") is secured by a first deed of trust on a 197,601 square
foot shopping center located in Lincoln, Nebraska (the "SouthPointe Pavilions
Shopping Center Property"). The SouthPointe Pavilions Shopping Center Loan was
originated by KeyBank on December 31, 1999 and subsequently contributed by KEY.
BORROWER. The SouthPointe Pavilions Shopping Center Borrower is R.E.D.
Capital Management, L.L.C., a special purpose Kansas limited liability
company (the "SouthPointe Pavilions Shopping Center Borrower").
SECURITY. The SouthPointe Pavilions Shopping Center Loan is evidenced
by a promissory note (the "Note") secured by a Deed of Trust and
Security Agreement (the "Deed of Trust"), UCC Financing Statements, and
certain additional security documents. The Deed of Trust is a first
lien on a fee interest in the SouthPointe Pavilions Shopping Center
Property.
RECOURSE. The SouthPointe Pavilions Shopping Center Loan is
non-recourse, subject to certain exceptions set forth in the Note which
generally include, among other things, liabilities relating to fraud,
material misrepresentation, misapplication and misappropriation of
funds, intentional or grossly negligent waste, and unauthorized
transfers or encumbrances of the SouthPointe Pavilions Shopping Center
Property (the "Recourse Carveouts"). The obligations of the SouthPointe
Pavilions Shopping Center Borrower under the Recourse Carveouts are
guaranteed by Daniel H. Lowe, Michael L. Ebert, Michael N. Helmuth, and
Scott P. Rehorn. (the Sponsors) pursuant to the terms of the Guaranty
and Indemnity Agreement. In addition, under the terms of an
Environmental Indemnity Agreement, SouthPointe Pavilions Shopping
Center Borrower and Sponsors assume liability for, guarantee payment to
Lender of, and indemnify Lender from specified costs and liabilities
arising out of the environmental condition of the Property.
PAYMENT TERMS. The interest rate is fixed at 8.38% per annum. The
SouthPointe Pavilions Shopping Center Loan requires monthly payments of
principal and interest of $231,868.85 until January 01, 2010 ("Maturity
Date"), at which time all unpaid principal and accrued but unpaid
interest is due. The SouthPointe Pavilions Shopping Center Loan accrues
interest computed on the basis of the actual days elapsed each month in
a 360-day year.
PREPAYMENT/DEFEASANCE. Except in connection with certain casualty or
condemnation events or any other involuntary prepayment contemplated by
the Loan Documents, the SouthPointe Pavilions Shopping Center Borrower
is prohibited from prepaying the Loan any time before the date three
(3) months prior to the Maturity Date; provided, however, that if
certain conditions of a Tenant Improvements and Leasing Commissions
Agreement ("Escrow Agreement") are not satisfied on or before August 1,
2000, a partial prepayment of the Note with funds escrowed pursuant to
the Escrow Agreement shall occur on August 15, 2000, in which event the
funds then remaining in the escrow account pursuant to the Escrow
Agreement shall be applied in partial payment of the principal balance
of the Note, and such prepayment shall be accompanied by all accrued
interest thereon and prepayment consideration in an amount equal to the
greater of (i) one percent (1%) of the principal balance of the Note
being prepaid; and (ii) the yield maintenance amount as specified in
the Note. The SouthPointe Pavilions Shopping Center Loan may be prepaid
at par on or after the date that is three (3) months prior to Maturity
Date. The SouthPointe Pavilions Shopping Center Borrower may defease
the SouthPointe Pavilions Shopping Center Loan, in whole but not in
part, on the earlier to occur of (i) last day of fourth loan year and
(ii) second anniversary of the "start-up date" of the REMIC Trust, by
providing the Lender with non-callable U.S. Treasury obligations
sufficient to pay its remaining obligations under the SouthPointe
Pavilions Shopping Center Loan.
TRANSFER OF SOUTHPOINTE PAVILIONS SHOPPING CENTER PROPERTY OR INTEREST
IN SOUTHPOINTE PAVILIONS SHOPPING CENTER BORROWER. Lender shall have
the option to declare the SouthPointe Pavilions Shopping Center Loan
immediately due and payable upon the transfer of the SouthPointe
Pavilions Shopping Center Property or certain ownership interests in
the SouthPointe Pavilions Shopping Center Borrower, except in
connection with the rights of transfer described below. Lender shall
consent to a one time sale or transfer of the SouthPointe Pavilions
Shopping Center Property upon the satisfaction of certain conditions,
including Lender's approval of transferee and payment of the specified
assumption fee. Lender shall also consent to certain transfers of
member interests in SouthPointe Pavilions Shopping Center Borrower upon
satisfaction of certain conditions.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-14
ESCROWS/RESERVES.
Taxes, Insurance and Capital Expenditures
There is a tax escrow which requires semi-annual deposits in an amount
estimated to be sufficient to pay real estate taxes when due. There is
also an escrow required for future capital expenditures which is
required to be funded monthly in the amount of $1,317.13 due to begin
on January 1, 2003.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The SouthPointe Pavilions Shopping Center Property is a 197,601 square foot
retail center located in Lincoln, Nebraska. According to a rent roll provided by
the SouthPointe Pavilions Shopping Center Borrower, the SouthPointe Pavilions
Shopping Center Property is 95.48% leased, as of March 9, 2000, to approximately
34 tenants. The center is anchored by Beth Bath & Beyond (BBB by S&P) the
largest tenant with approximately 17.94% of the overall space, Gap/Gap Kids (A
by S&P) with 4.61% of the space, Banana Republic (A by S&P) with 3.73%, and
Barnes & Noble (BB by S&P) with 13.40% of the overall space.
Operating History*
------------------
1997* 1998* 1999* Underwritten
----- ----- ----- ------------
Effective Gross Income NAP NAP NAP 4,995,576
Net Operating Income NAP NAP NAP 3,565,114
Cash Flow NAP NAP NAP 3,473,557
*The SouthPointe Pavilions Shopping Center Property was constructed in 1999,
therefore there is no historical operating history for 1997, 1998, and 1999.
THE MANAGEMENT
The SouthPointe Pavilions Shopping Center Property is managed by Cohen-Esrey
Real Estate Services, Inc. Founded in 1969, the company is headquartered in
Kansas City. The company provides the services of leasing, brokerage, and
asset/property management services for office buildings, shopping centers,
industrial facilities, and multi-family projects. Cohen-Esrey Real Estate
Service, Inc. currently manages over 15 million SF of space in Missouri, Iowa,
Nebraska and Kansas. The commercial space that they manage is broken out as
follows: 2.6 million SF of retail space, 1.1 million SF of industrial space, and
3.5 million SF of office space.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-15
CONTROL #2: GATEWAY VILLAGE SHOPPING CENTER: LOAN # 6603515
-----------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Cut-off Date Balance: $25,848,385 Property Type: Retail-Anchored
Loan Type: Principal and Interest; Hyperamort Location: Annapolis, MD
Origination Date: 7/2/99 Year Built/Renovated: 1996
Maturity Date: 8/1/29 Square Footage: 273,940
Anticipated Repay Date: 7/1/09 Cut-off Date Balance/sf: $98.32
Mortgage Rate: 7.960% Appraised Value: $33,500,000
Annual Debt Service: $2,280,651 Current LTV: 77.16%
DSCR: 1.33x Balance at Maturity LTV: 69.56%
Underwritten Cash Flow: $2,821,790 Percent Occupied: 92.01%
Balance at Maturity: $23,303,340 Occupancy as of Date: 4/24/00
------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Gateway Village Shopping Center Loan (the "Gateway Village Shopping Center
Loan") is secured by a first mortgage on a 273,940 square foot shopping center
located in Annapolis, MD (the "Gateway Village Shopping Center Property"). The
Gateway Village Shopping Center Loan was originated by SBRC on July 2, 1999.
BORROWER:
The Gateway Village Shopping Center Borrower is Cordish Gateway
Village, LLC, a single purpose, bankruptcy-remote Maryland limited
liability company that has a non-consolidation opinion and an
independent director (the "Gateway Village Shopping Center Borrower").
SECURITY:
The Gateway Village Shopping Center Loan is evidenced by a promissory
note (the "Note") secured by a Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing (the "Mortgage"), UCC Financing
Statements, and certain additional security documents. The Mortgage is
a first lien on a fee interest in the Gateway Village Shopping Center
Property.
RECOURSE:
The Gateway Village Shopping Center Loan is non-recourse, subject to
certain exceptions set forth in the Note which generally include, among
other things, liabilities relating to fraud, material
misrepresentation, misapplication and misappropriation of funds,
intentional or material waste, failure to maintain single asset entity
and unauthorized transfers or encumbrances of the Gateway Village
Shopping Center Property (the "Recourse Carveouts"). In addition, under
the terms of an Environmental Indemnity Agreement, the Gateway Village
Shopping Center Borrower will assume liability for, guarantee payment
to Lender of, and indemnify Lender from specified costs and liabilities
arising out of the environmental condition of the Property.
PAYMENT TERMS:
The Mortgage Rate is fixed at 7.960% per annum until the Anticipated
Repayment Date of July 1, 2009 (the "ARD"). The Gateway Village
Shopping Center Loan requires monthly payments of principal and
interest of $190,054.28 through the ARD. If the Gateway Village
Shopping Center Loan is not paid in full on the ARD date, interest
shall accrue thereafter on the unpaid principal at the Revised Rate,
which is equal to the Mortgage Rate plus two hundred (200) basis
points. From and after the ARD, excess cashflows from the Property,
after funding of specified reserves, and payment of debt service,
certain operating expenses and capital expenditures, will be applied to
the outstanding principal balance of the Note. The Gateway Village
Shopping Center Loan accrues interest computed on the basis of the
actual days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE:
The Gateway Village Shopping Center Loan may not be prepaid in whole or
in part until 5 months prior to the ARD. The Loan may be prepaid in
whole but not in part anytime thereafter. The Gateway Village Shopping
Center Borrower may defease the Loan, (i) at the earlier of July 1,
2003 or (ii) the second (2) anniversary of the "startup day" of the
REMIC, by providing the Lender with non-callable U.S. Treasury
obligations sufficient to pay its remaining obligations under the Loan.
CASH MANAGEMENT/LOCKBOX:
The Gateway Village Shopping Center Borrower has established a Lockbox
Account at Closing, into which the Borrower shall deposit all rents (as
defined in the Cash Management Agreement). From the Closing date until
the earlier of ARD or an Event of Default, Borrower shall have sole
control of the Lockbox Account. Thereafter, the Account shall be under
sole control of the Lender in accordance with the terms of the Lockbox
Agreement.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-16
TRANSFER OF GATEWAY VILLAGE SHOPPING CENTER PROPERTY OR INTEREST IN
GATEWAY VILLAGE SHOPPING CENTER BORROWER:
Lender shall have the option to declare the Gateway Village Shopping
Center Loan immediately due and payable upon the transfer of the
Gateway Village Shopping Center Property or change in controlling
interest in the Gateway Village Shopping Center Borrower, except in
connection with the rights of transfer described below. The Gateway
Village Shopping Center Borrower has the right, once during the term of
the Loan, to transfer the Gateway Village Shopping Center Park Property
upon the satisfaction of certain conditions, including Lender's
approval of transferee and payment of the specified assumption fee. In
addition, ownership interests in the Gateway Village Shopping Center
Borrower may be sold or transferred provided the Sponsor maintains a
majority interest in the Borrower.
ESCROWS/RESERVES:
There is a tax and insurance escrow, which requires monthly deposits in
an amount, estimated to be sufficient to pay real estate taxes and
insurance premiums when due. An initial TI/LC escrow of $121,000 was
deposited and if the balance falls below that amount, a monthly payment
of $10,083.33 will be required. An escrow for future capital
expenditures is required to be funded monthly in the amount of
$3,192.60. At closing, $1,827,490 of the loan amount was deposited into
an interest bearing account pending further expansion of the Property.
The funds will be released when at least 10,000 square feet of new
building area is added and the Property achieves a DSCR of at least
1.25.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness and encumbrances are prohibited.
THE PROPERTY
The Gateway Village Shopping Center Property is a 273,940 square foot retail
center located in Annapolis, MD. According to the April 24, 2000 rent roll, the
Gateway Village Shopping Center Property is 92.01% leased to 12 tenants. The
center is anchored by Burlington Coat Factory (the largest tenant with
approximately 25% of the overall space), Best Buy, Home Place, PetsMart and
Staples. The current occupancy percentage excludes 7,500 square feet of the
property that has been preleased to Mattress King and Standard Carpet and is
currently under preparation.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITTEN
---- ---- ---- ------------
Effective Gross Income 2,807,371 2,681,624 3,246,134 3,536,647
Net Operating Income 2,392,293 2,186,056 2,749,304 2,990,130
Cash Flow 2,392,293 2,186,056 2,749,304 2,821,790
* The Operating History for 1997, 1998, and 1999 represent unaudited figures
provided by the Gateway Village Shopping Center Borrower.
THE MANAGEMENT
The Gateway Village Shopping Center Property is managed by the Borrower.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-17
CONTROL #3: BRISTOL APARTMENTS: LOAN # 5557
-------------------------------------------
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
Cut-off Date Balance: $ 20,856,682.96 Property Type: Multifamily
Loan Type: Principal and Interest Location: Houston, TX
Origination Date: 06/30/99 Year Built/Renovated: 1980
Maturity Date: 07/01/2009 Number of Units: 856
Anticipated Repay Date: N/A Cut-off Date Balance/Unit: $24,365.28
Mortgage Rate: 7.67% Appraised Value: $27,400,000
Annual Debt Service: $1,791,447.60 Current LTV: 76.21%
Underwritten DSCR: 1.24 Balance at ARD LTV: 68.14%
Underwritten Cash Flow: $2,219,463.00 Percent Leased: 89.72%
Balance at Maturity: $18,669,511.35 Leasing Status Date: 12/31/99
----------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Bristol Apartments Loan (the "Bristol Apartments Loan") is secured by a
first deed of trust on an 856-unit apartment complex located in Houston, Texas
(the "Bristol Apartments Property"). The Bristol Apartments Loan was originated
by National Realty Funding L.C. ("NRF") on June 30, 1999. NRF subsequently
assigned its interest in the Note (defined below) and other loan documents to
KeyBank National Association. KEY is the current holder thereof.
BORROWER. The borrower is Brigadoon Associates Limited Partnership, a
special purpose Texas limited partnership ("the Bristol Apartments
Borrower").
SECURITY. The Bristol Apartments Loan is evidenced by a Promissory Note
(the "Note") secured by a Deed of Trust, Assignment of Leases and
Rents, Security Agreement, and Fixture Filing (the "Deed of Trust"), an
Assignment of Leases and Rents, UCC Financing Statements, and certain
additional security documents. The Deed of Trust is a first lien on a
fee interest in the Bristol Apartments Property.
RECOURSE. The Bristol Apartments Loan is non-recourse, subject to
certain exceptions set forth in the Note. These exceptions include,
among other things, liabilities relating to fraud, material
misrepresentation, misapplication and misappropriation of funds, and
intentional or grossly negligent waste (the "Recourse Carveouts"). The
obligations of the Bristol Apartments Borrower under the Recourse
Carveouts are guaranteed by Brigadoon Associates-856, Inc. (the
"Sponsor") pursuant to the terms of the Key Principal's Guaranty
Agreement. Additionally, under the terms of the Environmental Indemnity
Agreement, the Bristol Apartments Borrower assumed liability for,
guarantee payment to Lender of, and indemnify Lender from specified
costs and liabilities arising out of the environmental condition of the
Bristol Apartments Property.
PAYMENT TERMS. The interest rate on the Note is fixed at 7.67% per
annum until the maturity date of July 1, 2009 (the "Maturity Date").
The Bristol Apartments Loan requires monthly payments of principal and
interest in the amount of $149,287.30 through the Maturity Date. The
Bristol Apartments Loan accrues interest computed on the basis of the
actual number of days elapsed each month in a 360-day year.
CASH MANAGEMENT/LOCKBOX. None.
PREPAYMENT/DEFEASANCE. Except in connection with certain casualty or
condemnation events, the Bristol Apartments Borrower is prohibited from
prepaying the Bristol Apartments Loan, in whole or in part at any time
before the date three (3) months prior to the Maturity Date. The
Bristol Apartments Loan may be prepaid at par at any time thereafter.
The Bristol Apartments Borrower may defease the Bristol Apartments
Loan, in whole, but not in part, at any time after the earlier to occur
of (i) thirty-six (36) months after the date of the Note or (ii) the
second anniversary of the REMIC "start-up" date by providing Lender
with non-callable U.S. Treasury obligations sufficient to pay its
remaining obligations under the Bristol Apartments Loan.
TRANSFER OF BRISTOL APARTMENTS PROPERTY OR INTEREST IN BRISTOL
APARTMENTS PROPERTY BORROWER. The Lender shall have the option to
declare the Bristol Apartments Loan immediately due and payable upon
the transfer of the Bristol Apartments Property or certain ownership
interests in the Bristol Apartments Borrower, except in connection with
the rights of transfer described below. The Bristol Apartments Borrower
has the right to transfer, provided that: (i) the assignment, sale,
transfer or conveyance of any legal or beneficial ownership interest in
Bristol Apartments Borrower or any partnership, limited liability
company, corporation or other entity or trust which is a subsequent
owner of the Bristol Apartments Property, provided that: (A) one or
more "eligible persons" (as defined in the Deed of Trust) continue to
own, directly or indirectly, not less than twenty-five percent (25%) of
the beneficial interest in the Bristol Apartments Borrower; (B) the
general partner of the Bristol Apartments Borrower, as of the date of
the execution of the Deed of Trust, continues to be the sole general
partner of Bristol Apartments Borrower, unless such change is approved
with Lender's consent; (C) none of the covenants and provision set
forth in the special purpose entity requirements of the Deed of Trust
shall be violated or breached; (D) the by-laws and articles of
incorporation of the General Partner of the Bristol Apartments Borrower
are not amended without Lender's consent; and (E) the Bristol
Apartments Borrower's partnership agreement is not amended without
Lender's consent; (ii) any pledge of, assignment as security
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-18
of, or grant of a security interest in any beneficial interest in the
Bristol Apartments Borrower or any stock, partnership interest, limited
liability company membership interest or other legal beneficial
ownership interest in the Bristol Apartments Borrower or any partners
of the Bristol Apartments Borrower provided such pledge, assignment, or
grant is in compliance with all provision set forth in the special
purpose entity requirements of the Deed of Trust (provided, however,
that the actual transfer of ownership due to the existence of any such
pledge, assignment as security or grant of security interest shall give
rise to a right of acceleration unless such transfer is permitted by
the provisions of the Deed of Trust or is approved by Lender); (iii)
any assignment, transfer or conveyance of the Bristol Apartments
Property, or any direct or indirect legal or beneficial ownership
interest therein, to a partnership, limited liability company,
corporation or other entity or trust, provided that (A) "eligible
persons" (as defined in the Deed of Trust) continue to own, directly or
indirectly twenty-five percent (25%) of the beneficial interest in the
Bristol Apartments Property, (B) the new borrower meets all Lender's
Underwriting Standards; and (C) the new borrower executes any
additional documents required by Lender; (iv) any contract or agreement
to sell the Bristol Apartments Property provides that such contract or
agreement contemplates that (A) the Note will be paid in full at the
time of sale, or that a defeasance will occur in accordance with the
provisions of the Note or (B) the sale will be a "permitted transfer"
(as defined in the Deed of Trust); and/or (v) any sale, assignment,
transfer, pledge or conveyance which is made with the consent of the
Lender.
ESCROWS/RESERVES.
Taxes, Insurance and Capital Expenditures
There is a tax escrow which requires monthly deposits in an amount
estimated to be sufficient to pay real estate taxes when due. An
insurance escrow will be required if the Bristol Apartments Borrower
fails to comply at all times with Lender's requirements.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness or encumbrances are
prohibited without prior written consent of Lender.
THE PROPERTY
The Bristol Apartments Property consists of an 856-unit garden-style apartment
project in Houston, Texas, approximately 10 miles southeast of the central
business district. The units were constructed between 1980 and 1982 and have
been continually updated. The dwelling units are contained within 69 two-story
buildings of wood frame construction with stucco and painted wood siding. The
roofs are pitched with composition shingles. The grounds are attractively
landscaped. The Bristol Apartments Property has a net rentable area of 693,328
square feet, constituting an average unit size of approximately 810 square feet.
The leasing office, clubhouse, fitness center, maintenance shop, boiler rooms,
laundry rooms, and other common areas measure approximately 16,000 square feet.
There are 12 separate floor plans, with 480 one-bedroom/one-bath units, 148
two-bedroom/one-bath units, 212 two-bedroom/two-bath units, and 16
three-bedroom/two-bath units. Amenities include a leasing office, separate
clubroom building, fitness center, seven (7) laundry rooms, a maintenance shop,
three (3) swimming pools, two (2) fountains, two (2) hot tubs, and a playground.
Unit amenities consist of walk-in closets, private patios/balconies, outside
storage, ceiling fans, and washer/dryer connections in all two and three-bedroom
units. Standard unit amenities include a refrigerator, dishwasher, garbage
disposal, wood cabinets, laminate countertops, incandescent light fixtures,
mini-blinds, and ample closets. According to a rent roll provided by the Bristol
Apartments Borrower, the Bristol Apartments Property is 89.72% leased, as of
December 31, 1999.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITTEN
---- ---- ---- ------------
Effective Gross Income $3,865,963 $4,470,658 $4,925,346 $4,915,188
Net Operating Income $1,674,638 $2,118,742 $2,390,902 $2,219,463
Net Cash Flow $ 659,678 $ 35,832 $2,390,902 $2,219,463
*The Operating History for 1997, 1998, and 1999 represent unaudited figures
provided by the Bristol Apartments Borrower.
THE MANAGEMENT
The Bristol Apartments Property is managed by Bluestone Management Services
Limited Partnership, an affiliate of the Sponsor.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-19
CONTROL #4.1: QUALITY INN-BOARDWALK: LOAN #260990081
----------------------------------------------------
<TABLE>
<CAPTION>
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Cut-off Date Balance: $11,354,624 Property Type: Hospitality, Full Service
Loan Type: Amortizing Balloon Location: Ocean City, MD
Origination Date: 10/20/1999 Year Built/Renovated: 1965,1973,1981/1998
Maturity Date: 11/01/2009 Number of Rooms: 179
Anticipated Repay Date: 11/01/2009 Cut-off Date Balance/Room: $63,434
Mortgage Rate: 9.30% Appraised Value: $16,600,000
Annual Debt Service: $1,177,801 Current LTV: 68.40%
DSCR: 1.51x Balance at Maturity LTV: 58.86%
Underwritten Cash Flow: $1,780,772 Percent Occupied: 63.22%
Balance at Maturity: $9,770,412 Occupancy as of Date: 11/30/1999
------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Quality Inn-Boardwalk loan (the "Quality Inn-Boardwalk Loan") is secured by
a first mortgage on a 179 room full service hotel located in Ocean City,
Maryland (the "Quality Inn-Boardwalk Property"). The Quality Inn-Boardwalk Loan
was originated by BRIDGER on October 20, 1999 to provide refinancing of debt and
pay transactional costs.
BORROWER:
The Quality Inn-Boardwalk Loan borrower is Harrison QI 17 Funding, LLC,
a special purpose Maryland limited liability company (the "Quality
Inn-Boardwalk Borrower"), whose sole member is Harrison QI 17, LLC.
SECURITY:
The Quality Inn-Boardwalk Loan is evidenced by a promissory note (the
"Note") and is secured by an Indemnity Deed of Trust and Absolute
Assignment of Rents and Leases (the "Primary Boardwalk Mortgage") and
UCC Financing Statements executed by Harrison QI 17, LLC, as a
guarantor of the Quality Inn-Boardwalk Loan and owner of the Quality
Inn-Boardwalk Property, and certain additional security documents
executed by the Quality Inn-Boardwalk Borrower. In addition, Harrison
QI 54, LLC also guarantees the Quality Inn-Boardwalk Loan, which
guaranty is secured by an Indemnity Deed of Trust and Absolute
Assignment of Rents and Leases (the "Additional Oceanfront Mortgage")
and UCC Financing Statements executed by Harrison QI 54, LLC, as a
guarantor of the Quality Inn-Boardwalk Loan and owner of the Quality
Inn-Oceanfront Property. The Quality Inn-Boardwalk Loan is
cross-defaulted and cross-collateralized with the Quality
Inn-Oceanfront Loan so that (i) an event of default under either loan
constitutes an event of default under the other loan and (ii) the
Quality Inn-Boardwalk Property and the Quality Inn-Oceanfront Property
secure the guarantees provided for the Quality Inn-Boardwalk Loan and
the Quality Inn-Oceanfront Loan in the aggregate original amount of
$20,500,000. The Lender has the right to release the cross-default and
cross-collateralization feature without the consent of any other party.
RECOURSE:
The Quality Inn-Boardwalk Loan is non-recourse, subject to certain
exceptions set forth in the Note which generally include, among other
things, liabilities relating to fraud or material misrepresentation,
waste of the property, misappropriation of funds, bankruptcy, and
environmental non-compliance (the "Recourse Carveouts"). John Harrison
and Hale Harrison (the "Sponsors") are liable for the Recourse
Carveouts pursuant to the terms of a Limited Guaranty Agreement. In
addition, under the terms of an Environmental Indemnity Agreement, the
Quality Inn-Boardwalk Borrower, the Trustor of the Primary Boardwalk
Mortgage, the Trustor of the Additional Oceanfront Mortgage and the
Sponsors assume liability for, guarantee payment to Lender of, and
indemnify Lender from specified costs and liabilities arising from the
environmental condition of the Quality Inn-Boardwalk Property. The
Trustor of the Primary Boardwalk Mortgage and the Trustor of the
Additional Oceanfront Mortgage assume liability for and guarantee
payment to Lender of any and all obligations of the Quality
Inn-Boardwalk Borrower pursuant to the terms of a Guaranty agreement.
Subject to the Recourse Carveouts, the Lender's recovery against the
Guaranty agreement is limited solely to the properties.
PAYMENT TERMS:
The Mortgage Rate is fixed at 9.30% per annum. The Quality
Inn-Boardwalk Loan requires monthly payments of principal and interest
of $98,150.12 until loan maturity. The Quality Inn-Boardwalk Loan
accrues interest based on a 360-day year and the actual number of days
elapsed for any whole or partial month in which interest is being
calculated.
CASH MANAGEMENT/LOCKBOX: None.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-20
PREPAYMENT:
Except in connection with certain casualty or condemnation events, the
Quality Inn-Boardwalk Loan is prohibited from voluntary prepayment at
any time before November 1, 2004. In the event the Quality
Inn-Boardwalk Loan is prepaid more than 90 days before the Maturity
Date, the Quality Inn-Boardwalk Borrower must pay a prepayment charge
equal to the greater of (i) 1% of the then outstanding principal
balance of the loan, or (ii) a Yield Maintenance calculation based on
the Treasury Yield. No prepayment charge shall apply with respect to
any insurance or condemnation proceeds applied by Lender to the
outstanding principal balance or to any prepayment occurring during the
90 days immediately preceding the Maturity Date.
TRANSFER OF QUALITY INN-BOARDWALK PROPERTY OR INTEREST IN QUALITY
INN-BOARDWALK BORROWER:
The Lender has the option to declare the Quality Inn-Boardwalk Loan
immediately due and payable upon the transfer of (i) the Quality
Inn-Boardwalk Property, (ii) the Quality Inn-Oceanfront Property, (iii)
the ownership interest in the Trustor of the Primary Boardwalk
Mortgage, (iv) the ownership interest in the Trustor of the Additional
Oceanfront Mortgage, or (v) the ownership interest in the Quality
Inn-Boardwalk Borrower. Provided, however, the Lender shall, one time
only, consent to the transfer of all parcels comprising the collateral
upon the satisfaction of certain conditions, including payment of the
specified assumption fee. In addition, certain transfers of interest in
the Quality Inn-Boardwalk Borrower, the Trustor of the Primary
Boardwalk Mortgage, or the Trustor of the Additional Oceanfront
Mortgage, including certain transfers by demise or descent or for
estate planning purposes, are permitted without Lender's consent upon
the satisfaction of certain conditions set forth in the Note.
ESCROWS/RESERVES:
Taxes, Insurance, Capital Expenditures and Debt Service The Quality
Inn-Boardwalk Loan requires monthly deposits in an amount estimated to
be sufficient to pay real estate taxes when due and payable. The
Quality Inn-Boardwalk Borrower has established a reserve for payment of
insurance premiums by depositing $50,000 with Lender, which amount
shall be remain on deposit with Lender until the Quality Inn-Boardwalk
Loan is paid in full. For future capital expenditures, the Quality
Inn-Boardwalk Borrower is required to make monthly deposits of $24,792.
The Quality Inn-Boardwalk Borrower has established a Debt Service
Reserve by depositing $618,336 with Lender at closing for payment of
the Mortgage Loan payments due during the off-season months of October
through April. The Quality Inn-Boardwalk Loan requires monthly deposits
during the months of July, August and September of each year during the
term of the loan in an amount determined by Lender to be a sufficient
reserve for the payment of the monthly Mortgage Loan payments.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness or encumbrances are prohibited without the
prior written consent of Lender.
THE PROPERTY
The Quality Inn-Boardwalk Property is a full service, Quality Inn hotel located
in Ocean City, Maryland. The improvements are situated on a 2.58-acre parcel of
land and are comprised of 179 rooms housed in three contiguous interconnected
buildings. The original structure was built in 1965 and is a five-story steel
and masonry building containing 70 rooms. In 1973, an eleven-story tower
containing 86 rooms was added. A third stage of development in 1981 added 22
more rooms. There are 155 direct oceanfront rooms and 24 oceanview rooms. The
179 rooms have a combination of double-double or king bed layouts and 168 rooms
include kitchen facilities. The amenities include a restaurant, sundry shop,
pool bar, two outdoor swimming pools, one indoor swimming pool, game room,
exercise room and parking for 179 vehicles. According to the Quality
Inn-Boardwalk Borrower, the occupancy at the Quality Inn-Boardwalk Property was
63.22% for the eleven month period ending November 30, 1999.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITEN
---- ---- ---- -----------
Total Revenues $4,633,886 $4,576,834 $4,782,465 $4,703,115
Net Operating Income $2,197,121 $1,639,003 $2,133,022 $1,780,772
Net Cash Flow $2,197,121 $1,388,250 $2,133,022 $1,780,772
* The Quality Inn-Boardwalk Property Operating History for 1997, 1998 and 1999
represent unaudited figures provided by the Quality Inn-Boardwalk Borrower.
THE MANAGEMENT
The Quality Inn-Boardwalk Property is managed by The Harrison Group ("HG"), an
entity owned by the Sponsors. HG has been active in the Ocean City hospitality
industry for over 35 years and is the largest hotel owner/operator in this
market. The current hospitality portfolio of HG is comprised of eleven hotels
containing 1,211 rooms. In addition to the Quality Inn-Boardwalk Property and
the Quality Inn-Oceanfront Property, the HG hospitality portfolio includes three
other franchised facilities (Holiday Inn, Ramada and Best Western
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-21
CONTROL #4.2: QUALITY INN-OCEANFRONT: LOAN #260990082
-----------------------------------------------------
<TABLE>
<S> <C> <C> <C>
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Cut-off Date Balance: $9,036,948 Property Type: Hospitality, Full Service
Loan Type: Amortizing Balloon Location: Ocean City, MD
Origination Date: 10/20/1999 Year Built/Renovated: 1962&1980/1999
Maturity Date: 11/01/2009 Number of Rooms: 130
Anticipated Repay Date: 11/01/2009 Cut-off Date Balance/Room: $69,515
Mortgage Rate: 9.30% Appraised Value: $13,000,000
Annual Debt Service: $937,392 Current LTV: 69.51%
DSCR: 1.50x Balance at Maturity LTV: 59.82%
Underwritten Cash Flow: $1,406,536 Percent Occupied: 73.28%
Balance at Maturity: $7,776,102 Occupancy as of Date: 11/30/1999
-----------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Quality Inn-Oceanfront loan (the "Quality Inn-Oceanfront Loan") is secured
by a first mortgage on a 130 room full service hotel located in Ocean City,
Maryland (the "Quality Inn-Oceanfront Property"). The Quality Inn-Oceanfront
Loan was originated by BRIDGER on October 20, 1999 to provide refinancing of
debt and pay transactional costs.
BORROWER:
The Quality Inn-Oceanfront Loan borrower is Harrison QI 54 Funding,
LLC, a special purpose Maryland limited liability company (the "Quality
Inn-Oceanfront Borrower"), whose sole member is Harrison QI 54, LLC.
SECURITY:
The Quality Inn-Oceanfront Loan is evidenced by a promissory note (the
"Note") and is secured by an Indemnity Deed of Trust and Absolute
Assignment of Rents and Leases (the "Primary Oceanfront Mortgage") and
UCC Financing Statements executed by Harrison QI 54, LLC, as a
guarantor of the Quality Inn-Oceanfront Loan and owner of the Quality
Inn-Oceanfront Property, and certain additional security documents
executed by the Quality Inn-Oceanfront Borrower. In addition, Harrison
QI 17, LLC also guarantees the Quality Inn-Oceanfront Loan, which
guaranty is secured by an Indemnity Deed of Trust and Absolute
Assignment of Rents and Leases (the "Additional Boardwalk Mortgage")
and UCC Financing Statements executed by Harrison QI 17, LLC, as a
guarantor of the Quality Inn-Oceanfront Loan and owner of the Quality
Inn-Boardwalk Property. The Quality Inn-Oceanfront Loan is
cross-defaulted and cross-collateralized with the Quality Inn-Boardwalk
Loan so that (i) an event of default under either loan constitutes an
event of default under the other loan and (ii) the Quality
Inn-Oceanfront Property and the Quality Inn-Boardwalk Property secure
the guarantees provided for the Quality Inn-Oceanfront Loan and the
Quality Inn-Boardwalk Loan in the aggregate original amount of
$20,500,000. The Lender has the right to release the cross-default and
cross-collateralization feature without the consent of any other party.
RECOURSE:
The Quality Inn-Oceanfront Loan is non-recourse, subject to certain
exceptions set forth in the Note which generally include, among other
things, liabilities relating to fraud or material misrepresentation,
waste of the property, misappropriation of funds, bankruptcy, and
environmental non-compliance (the "Recourse Carveouts"). John Harrison
and Hale Harrison (the "Sponsors") are liable for the Recourse
Carveouts pursuant to the terms of a Limited Guaranty Agreement. In
addition, under the terms of an Environmental Indemnity Agreement, the
Quality Inn-Oceanfront Borrower, the Trustor of the Primary Oceanfront
Mortgage, the Trustor of the Additional Boardwalk Mortgage and the
Sponsors assume liability for, guarantee payment to Lender of, and
indemnify Lender from specified costs and liabilities arising from the
environmental condition of the Quality Inn-Oceanfront Property. The
Trustor of the Primary Oceanfront Mortgage and the Trustor of the
Additional Boardwalk Mortgage assume liability for and guarantee
payment to Lender of any and all obligations of the Quality
Inn-Oceanfront Borrower pursuant to the terms of a Guaranty agreement.
Subject to the Recourse Carveouts, the Lender's recovery against the
Guaranty agreement is limited solely to the properties.
PAYMENT TERMS:
The Mortgage Rate is fixed at 9.30% per annum. The Quality
Inn-Oceanfront Loan requires monthly payments of principal and interest
of $78,115.97 until loan maturity. The Quality Inn-Oceanfront Loan
accrues interest based on a 360-day year and the actual number of days
elapsed for any whole or partial month in which interest is being
calculated.
CASH MANAGEMENT/LOCKBOX:
None.
PREPAYMENT:
Except in connection with certain casualty or condemnation events, the
Quality Inn-Oceanfront Loan is prohibited from voluntary prepayment at
any time before November 1, 2004. In the event the Quality
Inn-Oceanfront Loan is prepaid more than 90 days before the Maturity
Date, the Quality Inn-Oceanfront Borrower must pay a prepayment charge
equal to the greater of (i) 1% of the then outstanding principal
balance of the loan, or (ii) a Yield Maintenance calculation based on
the Treasury Yield. No prepayment charge shall apply with respect to
any insurance or condemnation proceeds applied by Lender to the
outstanding principal balance or to any prepayment occurring during the
90 days immediately preceding the Maturity Date.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-22
TRANSFER OF QUALITY INN-OCEANFRONT PROPERTY OR INTEREST IN QUALITY
INN-OCEANFRONT BORROWER:
The Lender has the option to declare the Quality Inn-Oceanfront Loan
immediately due and payable upon the transfer of (i) the Quality
Inn-Oceanfront Property, (ii) the Quality Inn-Boardwalk Property, (iii)
the ownership interest in the Trustor of the Primary Oceanfront
Mortgage, (iv) the ownership interest in the Trustor of the Additional
Boardwalk Mortgage, or (v) the ownership interest in the Quality
Inn-Oceanfront Borrower. Provided, however, the Lender shall, one time
only, consent to the transfer of all parcels comprising the collateral
upon the satisfaction of certain conditions, including payment of the
specified assumption fee. In addition, certain transfers of interest in
the Quality Inn-Oceanfront Borrower, the Trustor of the Primary
Oceanfront Mortgage, or the Trustor of the Additional Boardwalk
Mortgage, including certain transfers by demise or descent or for
estate planning purposes, are permitted without Lender's consent upon
the satisfaction of certain conditions set forth in the Note.
ESCROWS/RESERVES:
Taxes, Insurance, Capital Expenditures and Debt Service The Quality
Inn-Oceanfront Loan requires monthly deposits in an amount estimated to
be sufficient to pay real estate taxes when due and payable. The
Quality Inn-Oceanfront Borrower has established a reserve for payment
of insurance premiums by depositing $42,500 with Lender, which amount
shall be remain on deposit with Lender until the Quality Inn-Oceanfront
Loan is paid in full. For future capital expenditures, the Quality
Inn-Oceanfront Borrower is required to make monthly deposits of
$12,796. The Quality Inn-Oceanfront Borrower has established a Debt
Service Reserve by depositing $479,854 with Lender at closing for
payment of the Mortgage Loan payments due during the off-season months
of October through April. The Quality Inn-Oceanfront Loan requires
monthly deposits during the months of July, August and September of
each year during the term of the loan in an amount determined by Lender
to be a sufficient reserve for the payment of the monthly Mortgage Loan
payments.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness or encumbrances are prohibited without the
prior written consent of Lender.
THE PROPERTY
The Quality Inn-Oceanfront Property is a full service, Quality Inn hotel located
in Ocean City, Maryland. The improvements are situated on a 3.07-acre parcel of
land and are comprised of 130 rooms housed in two buildings joined by an atrium
connector. The atrium connector contains an indoor swimming pool and restaurant.
The original structure was built in 1962 and is a three-story masonry and frame
structure containing 46 rooms. In 1980, a five-story masonry structure
containing 84 rooms was built and incorporated into the property. There are 84
oceanfront rooms and the remaining 46 rooms have balconies that overlook the
atrium. The 130 rooms have a combination of double-double or king bed layouts
and 126 rooms include full kitchen facilities. The amenities include a
restaurant, tennis court, playground, outdoor swimming pool, indoor swimmng
pool, sauna and whirlpool spa, game room, exercise room, tanning beds and
parking for 130 vehicles. According to the Quality Inn-Oceanfront Borrower, the
occupancy at the Quality Inn-Oceanfront Property was 73.28% for the eleven month
period ending November 30, 1999.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITEN
---- ---- ---- -----------
Effective Gross Income $3,928,891 $4,131,495 $4,218,090 $4,184,068
Net Operating Income $1,488,046 $1,480,543 $1,718,147 $1,406,536
Net Cash Flow $1,286,414 $1,341,831 $1,718,147 $1,406,536
* The Quality Inn-Oceanfront Property Operating History for 1997, 1998 and 1999
represent unaudited figures provided by the Quality Inn-Oceanfront Borrower.
THE MANAGEMENT
The Quality Inn-Oceanfront Property is managed by The Harrison Group ("HG"), an
entity owned by the Sponsors. HG has been active in the Ocean City hospitality
industry for over 35 years and is the largest hotel owner/operator in this
market. The current hospitality portfolio of HG is comprised of eleven hotels
containing 1,211 rooms. In addition to the Quality Inn-Oceanfront Property and
the Quality Inn-Boardwalk Property, the HG hospitality portfolio includes three
other franchised facilities (Holiday Inn, Ramada and Best Western).
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-23
CONTROL#5: 4000 ALAMEDA: LOAN # 6603656
---------------------------------------
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Cut-off Date Balance: $20,042,294 Property Type: Office
Loan Type: Principal and Interest; Balloon Location: Burbank, CA
Origination Date: 12/02/99 Year Built/Renovated: 1983/1998
Maturity Date: 01/01/10 Square Footage: 112,764
Anticipated Repay Date: N/A Cut-off Date Balance/sf: $177.74
Mortgage Rate: 8.110% Appraised Value: $27,000,000
Annual Debt Service: $1,788,371 Current LTV: 74.23%
DSCR: 1.26x Balance at Maturity LTV: 66.84%
Underwritten Cash Flow: $2,245,846 Percent Occupied: 100%
Balance at Maturity: $18,046,594 Occupancy as of Date: 11/29/99
---------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The 4000 Alameda Loan (the "4000 Alameda Loan") is secured by a first mortgage
on a 112,764 square foot office building located in Burbank, CA (the "4000
Alameda Property"). The 4000 Alameda Loan was originated by SBRC on December 2,
1999.
BORROWER:
The 4000 Alameda Borrower is Alameda Enterprise, Inc., a single
purpose, bankruptcy-remote California corporation that has a
non-consolidation opinion and an independent director (the "4000
Alameda Borrower").
SECURITY:
The 4000 Alameda Loan is evidenced by a promissory note (the "Note")
secured by a Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing (the "Mortgage"), UCC Financing Statements, and certain
additional security documents. The Mortgage is a first lien on a fee
interest in the 4000 Alameda Property.
RECOURSE:
The 4000 Alameda Loan is non-recourse, subject to certain exceptions
set forth in the Note which generally include, among other things,
liabilities relating to fraud, material misrepresentation,
misapplication and misappropriation of funds, intentional or material
waste, failure to maintain single asset entity and unauthorized
transfers or encumbrances of the 4000 Alameda Property (the "Recourse
Carveouts"). In addition, under the terms of an Environmental
Liabilities Agreement, the 4000 Alameda Borrower and Sponsor will
assume liability for, guarantee payment to Lender of, and indemnify
Lender from specified costs and liabilities arising out of the
environmental condition of the Property.
PAYMENT TERMS:
The Mortgage Rate is fixed at 8.110% per annum throughout the term of
the Loan. The 4000 Alameda Loan requires monthly payments of principal
and interest of $149,030.91 until the Maturity Date of January 1, 2010,
at which time all unpaid principal and interest is due. The 4000
Alameda Loan accrues interest computed on the basis of the actual days
elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE:
The 4000 Alameda Loan may not be prepaid in whole or in part any time
before the date, which is sixty (60) calendar days prior to the
Maturity Date. The 4000 Alameda Borrower may defease the 4000 Alameda
Loan, in whole but not in part, after the date which is the earlier to
occur of (i) the second (2) anniversary of the REMIC "start-up" day or
(ii) the fourth (4) anniversary of the date of the Note, by providing
the Lender with non-callable U.S. Treasury obligations sufficient to
pay the remaining obligations under the Note.
TRANSFER OF 4000 ALAMEDA PROPERTY OR INTEREST IN 4000 ALAMEDA BORROWER:
Lender shall have the option to declare the 4000 Alameda Loan
immediately due and payable upon the transfer of the 4000 Alameda
Property or change in controlling interest in the 4000 Alameda
Borrower, except in connection with the rights of transfer described
below. The 4000 Alameda Borrower has the right, once during the term of
the Loan, to transfer the entire 4000 Alameda Property upon the
satisfaction of certain conditions, including Lender's approval of
transferee and payment of the specified assumption fee. In addition,
ownership interests in the 4000 Alameda Borrower may be sold or
transferred provided the Sponsor maintains a majority interest in the
Borrower.
ESCROWS/RESERVES:
Taxes, Insurance and Capital Expenditures
There is a tax and insurance escrow, which requires monthly deposits in
an amount, estimated to be sufficient to pay real estate taxes and
insurance premiums when due. The 4000 Alameda Borrower is currently
required to fund a TI/LC escrow in a monthly amount of $9,397. A TI/LC
holdback of $3,109,397 was required at closing. The fund has been
partially released in the amount of $1,000,000 for building
improvements and leasing commissions for Time Warner's renewal of its
lease. There is also an escrow for future capital expenditures which is
required to be funded monthly in the amount of $1,879.40 for the term
of the loan.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness and encumbrances are prohibited.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-24
THE PROPERTY
The 4000 Alameda Center Property is a 112,764 square foot office building
located in Burbank, CA. The building was completed in 1983 and renovated in
1998. According to a rent roll provided by the 4000 Alameda Borrower, the 4000
Alameda Property is 100% leased, as of November 29, 1999, to 3 tenants. The
largest tenant is Time Warner Entertainment Company, which occupies 85% of the
building.
OPERATING HISTORY*
1997 1998 1999** UNDERWRITTEN
---- ---- ------ ------------
Effective Gross Income 3,554,593 3,679,186 3,697,768 3,518,866
Net Operating Income 2,495,604 2,555,076 2,537,686 2,381,163
Cash Flow 2,495,604 2,555,076 2,537,686 2,245,846
* The Operating History for 1997, 1998, and 1999 represent unaudied figures
provided by the 4000 Alameda Borrower.
** Trailing twelve months ended 7/31/99
THE MANAGEMENT
The 4000 Alameda Property is managed by Access Property Services, Inc., a third
party property management company.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-25
CONTROL #6: STERLING UNIVERSITY VILLAGE: LOAN # 10756
-----------------------------------------------------
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Cut-off Date Balance: $17,780,000 Property Type: Multifamily
Loan Type: Interest Only first 2 years, Principal
and Interest thereafter Location: College Station, TX
Origination Date: 03/23/2000 Year Built/Renovated: 1998
Maturity Date: 04/01/2010 Number of Units: 220
Anticipated Repay Date: N/A Cut-off Date Balance/Unit: $80,810
Mortgage Rate: 8.18% Appraised Value: $22,300,000
Annual Debt Service: $1,592,415 Current LTV: 79.73%
Underwritten DSCR: 1.28x Balance at Maturity LTV: 73.89%
Underwritten Cash Flow: $2,039,488 Percent Leased: 95.91
Balance at Maturity: $16,478,395 Leasing Status Date: 01/18/2000
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Sterling University Village Apartments Loan (the "Sterling University
Village Apartments Loan") is secured by a first deed of trust on a 220-unit
student apartment project located in College Station, Texas (the "Sterling
University Village Apartments Property"). The Sterling University Apartments
Loan was originated by First Union National Bank on March 23, 2000 and
subsequently purchased by KEY.
BORROWER. The borrower is College Station Student Housing, I, LTD, a
special purpose Texas limited partnership (the "Sterling University
Village Apartments Borrower").
SECURITY. The Sterling University Village Apartments Loan is evidenced
by a Promissory Note (the "Note") secured by a Deed of Trust and
Security Agreement (the "Deed of Trust"), an Assignment of Leases and
Rents, UCC Financing Statements, and certain additional security
documents. The Deed of Trust is a first lien on a fee interest in the
Sterling University Village Apartments Property.
RECOURSE. The Sterling University Village Apartments Loan is
non-recourse, subject to certain exceptions set forth in the Note which
generally include, among other things, liabilities relating to fraud,
material misrepresentation, misapplication and misappropriation of
funds, and intentional or grossly negligent waste (the "Recourse
Carveouts"). The obligations of the Sterling University Village
Apartments Borrower under the Recourse Carveouts are guaranteed by
Houston Fox Fire Apartments, Inc. ("the Sponsor") pursuant to the terms
of the Indemnity and Guaranty Agreement. Additionally, under the terms
of a Hazardous Substances Indemnity Agreement, the Sterling University
Village Apartments Borrower and the Sponsor assume liability for,
guarantee payment to Lender of, and indemnify Lender from specified
costs and liabilities arising out of the environmental condition of the
Property.
PAYMENT TERMS. The interest rate is fixed at 8.18% per annum until the
maturity date of April 1, 2010, (the "Maturity Date"). The Sterling
University Village Apartments Loan requires monthly payments of
interest only through April 1, 2002. Thereafter, monthly payments of
principal and interest of $132,701.25 beginning on May 1, 2002 are
required through the Maturity Date. The Sterling University Village
Apartments Loan accrues interest computed on the basis of the actual
number of days elapsed each month in a 360-day year.
PREPAYMENT. Except in connection with certain casualty or condemnation
events, the Sterling University Village Apartments Borrower is
prohibited from prepaying the Loan, in whole or in part, at any time
before the date three (3) months prior to the Maturity Date. The Loan
may be prepaid at par at any time thereafter. The Sterling University
Village Apartments Borrower may defease the Loan, in whole but not in
part, at any time after the later to occur of (i) four (4) years from
the first payment date, or (ii) two (2) years after the REMIC
"start-up" date by providing Lender with funds sufficient to purchase
non-callable U.S. Treasury obligations sufficient to pay its remaining
obligations under the Sterling University Village Apartments Loan.
TRANSFER OF STERLING UNIVERSITY VILLAGE APARTMENTS PROPERTY OR INTEREST
IN STERLING UNIVERSITY VILLAGE APARTMENTS BORROWER. The Lender shall
have the option to declare the Sterling University Village Apartments
Loan immediately due and payable upon the transfer of the Sterling
University Village Apartments Property or certain ownership interests
in the Sterling University Village Apartments Borrower, except in
connection with the rights of transfer as described below. Lender shall
consent to the transfer of the entire Sterling University Village
Apartments Property upon the satisfaction of certain conditions, which
include; (i) no event of default has occurred and is continuing; (ii)
New Borrower meets Lender's underwriting standards; (iii) receipt by
Lender of reimbursement of all expenses; (iv) receipt of a $5,000.00
non-refundable application fee; and (v) receipt by Lender of one
percent (1%) assumption fee.
ESCROWS/RESERVES:
Taxes, Insurance and Capital Expenditures
The Sterling University Borrower has established a reserve for payment
of capital repairs by despositing $4,583.33 per month with lender.
There is a tax escrow which requires monthly deposits in an amount
estimated to be sufficient to pay real estate taxes when due. The
requirement for an insurance escrow is waived provided the Sterling
University Village Apartments Borrower complies at all times with
Lender's requirements.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness or encumbrances are prohibited without prior
written consent of Lender.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-26
THE PROPERTY
The Sterling University Village Property consists of 220 rental units located in
College Station, Texas, approximately 95 miles northwest of Houston. The complex
was constructed in 1998 and includes 17 two and three-story, wood frame
apartment buildings with masonite and brick exteriors and pitched roofs covered
with asphalt shingles. The project includes 40 two-bedroom and two-bath units,
which may be leased either by two persons or four persons (two per bedroom). The
project also includes 40 three-bedroom and three bath units and 140 four-bedroom
and two-bath units. All of the three-bedroom and four-bedroom units are rented
by the bedroom with one occupant per bedroom. The subject includes a clubhouse
and management office at the entrance to the property. Amenities within the
clubhouse include a fitness center, a computer center (computers, printers,
copier, fax machine, and internet access), and a game room with an ATM. A
swimming pool, hot tub, sand volleyball court, and basketball court are located
adjacent to the clubhouse building. Unit amenities include a private
balcony/porch, washer/dryer, complete kitchen including microwave, walk-in
closets, vertical blinds, nine-foot ceilings, fire sprinklers, and complete
furnishings available for additional monthly fees. The property is one of four
apartment complexes in College Station which rent "by the bed". Currently,
approximately two-thirds of the units are furnished. According to a rent roll
provided by the Sterling University Village Apartments Borrower (the "Rent
Roll"), the Sterling University Village Apartments was 95.91% leased, as of
January 18, 2000.
OPERATING HISTORY *
TRAILING 6 MO. ENDED
1997 1998 1/31/00 (ANNUALIZED)* UNDERWRITTEN
---- ---- ---------------------- ------------
Effective Gross Income NAP NAP $3,181,142 $3,267,175
Net Operating Income NAP NAP $1,996,658 $2,039,488
Net Cash Flow NAP NAP $1,996,658 $2,039,488
* The Sterling University Village Apartments Property was constructed in 1998.
Trailing 6 months annualized figures represent operating numbers once
stabilized occupancy was reached in the fall of 1999.
THE MANAGEMENT
The Sterling University Village Apartments Property is managed by DMC Management
Co., Ltd., which is a Dinerstein-related entity, an affiliate of the Sponsor.
The Dinerstein Companies own and manage 19 student housing complexes in 11
states at an average of 200 to 250 units per complex.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-27
CONTROL #7: RED ROCK VILLAS APARTMENTS: LOAN # 10761
----------------------------------------------------
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
Cut-off Date Balance: $ 17,449,427 Property Type: Multifamily
Loan Type: Principal and Interest Location: Las Vegas, NV
Origination Date: 12/23/1999 Year Built/Renovated: 1998
Maturity Date: 01/01/2010 Number of Units: 192
Anticipated Repay Date: N/A Cut-off Date Balance/Unit: $90,882.43
Mortgage Rate: 8.084% Appraised Value: $22,200,000
Annual Debt Service: $1,553,220 Current LTV: 78.60%
Underwritten DSCR: 1.20x Balance at Maturity LTV: 70.73%
Underwritten Cash Flow: $1,868,977 Percent Leased: 93.75%
Balance at Maturity: $15,702,683 Leasing Status Date: 03/28/2000
----------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Red Rock Apartments Loan (the "Red Rock Apartments Loan") is secured by a
first deed of trust on a 192-unit multi-family project located in the Summerlin
master plan community of Las Vegas, Nevada (the "Red Rock Apartments Property").
The Red Rock Apartments Loan was originated by First Union National Bank on
December 23, 1999. The Red Rock Apartments Loan was subsequently purchased by
KEY.
BORROWER. The borrower is ORRC Holding II Corporation, a special
purpose Nevada corporation (the "Red Rock Apartments Borrower").
SECURITY. The Red Rock Apartments Loan is evidenced by a Promissory
Note (the "Note") secured by a Deed of Trust and Security Agreement
(the "Deed of Trust"), an Assignment of Leases and Rents, UCC Financing
Statements, and certain additional security documents. The Deed of
Trust is a first lien on a fee interest in the Red Rock Apartments
Property.
RECOURSE. The Red Rock Apartments Loan is non-recourse, subject to
certain exceptions set forth in the Note. These exceptions include,
among other things, liabilities relating to fraud, material
misrepresentation, misapplication and misappropriation of funds, and
intentional or grossly negligent waste (the "Recourse Carveouts"). The
obligations of the Red Rock Apartments Borrower under the Recourse
Carveouts are guaranteed by Igor Olenicoff ("the Sponsor") pursuant to
the terms of the Indemnity and Guaranty Agreement. Additionally, under
the terms of the Hazardous Substances Indemnity Agreement, the Red Rock
Apartments Borrower and the Sponsor assume liability for, guarantee
payment to Lender of, and indemnify Lender from specified costs and
liabilities arising out of the environmental condition of the Red Rock
Apartments Property.
PAYMENT TERMS. The interest rate on the Note is fixed at 8.084% per
annum until the maturity date of January 1, 2010 (the "Maturity Date").
The Red Rock Apartments Loan requires monthly payments of principal and
interest of $129,435.04 through the Maturity Date. The Red Rock
Apartments Loan accrues interest computed on the basis of the actual
number of days elapsed each month in a 360-day year.
CASH MANAGEMENT/LOCKBOX. The Red Rock Apartments Borrower has agreed
that if (i) Net Cash Flow on the Red Rock Apartments Property (as such
term is defined in the Note) providing for a Debt Service Coverage
Ratio ("DSCR") is less than 1.25 to 1 for the trailing 12 months basis
as of any date; or (ii) there is an event of default, that all Rents
and Profits (as such term is defined in the Deed of Trust) will be
deposited into an account (the "Cash Collateral Account") controlled by
Lender with a bank approved by Lender (the "Bank"). At Lender's
request, all such funds shall be transferred by the Bank to an account
(the "Deposit Account") under the sole dominion and control of Lender
established with a bank determined by Lender, to be applied by Lender
in accordance with the terms of the Note.
PREPAYMENT/DEFEASANCE. Except in connection with certain casualty or
condemnation events, the Red Rock Apartments Borrower is prohibited
from prepaying the Red Rock Apartments Loan, in whole or in part, at
any time before the date three (3) months prior to the Maturity Date.
The Red Rock Apartments Loan may be prepaid at par at any time
thereafter. The Red Rock Apartments Borrower may defease the Red Rock
Apartments Loan, in whole, but not in part, at any time after the later
to occur of (i) four (4) years from the first payment date or (ii) two
years after the REMIC "start-up" date by providing Lender funds
sufficient to purchase non-callable U.S. Treasury obligations
sufficient to pay its remaining obligations under the Red Rock
Apartments Loan.
TRANSFER OF RED ROCK APARTMENTS PROPERTY OR INTEREST IN RED ROCK
APARTMENTS BORROWER. The Lender shall have the option to declare the
Red Rock Apartments Loan immediately due and payable upon the transfer
of the Red Rock Apartments Property or certain ownership interests in
the Red Rock Apartments Borrower, except in connection with the rights
of transfer as described below. Lender shall consent to the transfer
the entire Red Rock Apartments Property upon the satisfaction of
certain conditions, which include: (i) no event of default has occurred
and is continuing; (ii) the new borrower meets Lender's underwriting
standards; (iii) receipt by the Lender of reimbursement of all
expenses; (iv) receipt by the Lender of a $5,000.00 non-refundable
application fee; and (v) receipt by the Lender of a one percent (1%)
assumption fee.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-28
ESCROWS/RESERVES.
Taxes, Insurance and Capital Expenditures
There is a tax and insurance escrow which requires monthly deposits in
an amount estimated to be sufficient to pay the real estate taxes and
insurance premiums when due. An escrow for future capital expenditures
is required to be funded monthly in the amount of $4000. The Red Rocks
Apartments Borrower is also required to maintain a $1,000,000.00 letter
of credit (the "Letter of Credit") as additional collateral pursuant to
a Letter of Credit Agreement (the "LOC Agreement"). The LOC Agreement
permits the Red Rocks Apartments Borrower to request the release or
reduction of the Letter of Credit upon the satisfaction of certain
conditions, including (i) the achievement of a DSCR of 1.25 to 1 or
greater, (ii) a determination based upon a current appraisal that the
loan-to-value ratio is less than or equal to 80%, and (iii) evidence
that the economic occupancy level is not less than 90% for the
preceding three (3) consecutive months. Commencing on July 1, 2000 and
continuing on each succeeding January 1 and July 1, Lender is required,
upon request, to evaluate whether the aforementioned conditions have
been satisfied. If satisfied, the Letter of Credit is released or
reduced based upon a formula set forth in the LOC Agreement.
SUBORDINATE/OTHER DEBT: Subordinate indebtedness or encumbrances are
prohibited without the prior written consent of Lender.
THE PROPERTY
The Red Rock Apartments Property consists of 192 multi-family units located in
Las Vegas, Nevada, approximately 9.5 miles west of Las Vegas Boulevard ("The
Strip"). The complex was constructed in 1998. The complex includes 48 separate
four-unit buildings, a clubhouse and a separate rental office. Each building
contains two (2), two-bedroom, single-story end units, and two (2),
three-bedroom, two-story center units. The complex has a controlled-access
gating system. Amenities in each unit include washer/dryer, refrigerator,
microwave oven, and dishwasher. Flooring includes quarry tile in the kitchen and
baths with carpeting throughout the rest of the unit. Each unit has a
direct-access two-car garage and a no-cost, monitored alarm system. Common area
amenities include a clubhouse with fitness center, a billiard room, a social
area with kitchen facilities, a media library, and restroom facilities with
showers. Outside the clubhouse is a pool and spa. According to a rent roll
provided by the Red Rock Apartments Borrower, the Red Rock Apartments Property
is 93.75% leased, as of March 28, 2000.
OPERATING HISTORY*
1999 (YTD 2/29/00
1997 1998 5 MONTHS ANNUALIZED) UNDERWRITTEN
---- ---- -------------------- ------------
Effective Gross Income NAP NAP $2,513,916 $2,665,002
Net Operating Income NAP NAP $1,783,570 $1,868,977
Net Cash Flow NAP NAP $1,783,570 $1,868,977
* The Red Rock Apartments Property was constructed beginning in 1998 and
completed in 1999, therefore, there is no historical Property Operating
History for 1997, 1998, and the first 9 months of 1999.
THE MANAGEMENT
The Red Rock Apartments Property is managed by Andrei Olenicoff of the Olen
Companies, an affiliate of the Sponsor. The Olen Companies manages 28 apartment
complexes across the country.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-29
CONTROL #8: THE AEROSPACE CORPORATION: LOAN # 7816
--------------------------------------------------
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
Cut-off Date Balance: $17,441,330 Property Type: Office
Loan Type: Principal and Interest Location: El Segundo, CA
Origination Date: 11/09/99 Year Built/Renovated: 1978
Maturity Date: 12/01/2010 Square Footage: 219,300
Anticipated Repay Date: N/A Cut-off Date Balance/sf: $79.53
Mortgage Rate: 8.07% Appraised Value: $27,500,000
Annual Debt Service: $1,551,166 Current LTV: 63.42%
DSCR: 1.50 Balance at Maturity LTV: 56.10%
Underwritten Cash Flow: $2,330,495 Percent Occupied: 100%
Balance at Maturity: $15,427,316 Occupancy as of Date: 12/31/1999
---------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Aerospace Corporation Loan (the "Aerospace Corporation Loan") is secured by
a first deed of trust on a 219,300 square foot office building located in El
Segundo, California (the "Aerospace Corporation Property"). The Aerospace
Corporation Loan was originated by National Realty Finance L.C. ("NRF") on
November 9, 1999. NRF subsequently assigned its interest in the Promissory Note
and other loan documents to KeyBank National Association ("KeyBank"), and KEY is
the current holder thereof.
BORROWER. The borrower is Aviation Business Park, a special purpose
California limited partnership (the "Aerospace Corporation Borrower").
SECURITY. The Aerospace Corporation Loan is evidenced by a Promissory
Note (the "Note") secured by a Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing (the "Deed of Trust"), an
Assignment of Leases and Rents, UCC Financing Statements, and certain
additional security documents. The Deed of Trust is a first lien on a
fee interest in the Aerospace Corporation Property.
RECOURSE. The Aerospace Corporation Loan is non-recourse, subject to
certain exceptions set forth in the Note. These exceptions include,
among other things, liabilities relating to fraud, material
misrepresentation, misapplication and misappropriation of funds and
intentional or grossly negligent waste (the "Recourse Carveouts"). The
obligations of the Aerospace Corporation Borrower under the Recourse
Carveouts are guaranteed by William S. Goodglick, Eugene Friedlander,
and Kenneth A. Ruby (the "Sponsors") pursuant to the terms of the Key
Principal's Guaranty Agreement. Additionally, under the terms of the
Environmental Indemnity Agreement, the Aerospace Corporation Borrower
and the Sponsors assume liability for, guarantee payment to Lender of,
and indemnify Lender from specified costs and liabilities arising out
of the environmental condition of the Property.
PAYMENT TERMS. The interest rate on the Note is fixed at 8.07% per
annum. The Aerospace Corporation Loan requires monthly payments of
principal and interest of $129,263.80 until the maturity date of
December 1, 2010 (the "Maturity Date"), at which time all unpaid
principal and unpaid accrued interest is due. The Aerospace Corporation
Loan accrues interest computed on the basis of the actual days elapsed
each month in a 360-day year.
CASH MANAGEMENT/LOCKBOX. None.
PREPAYMENT/DEFEASANCE. Except in connection with certain casualty or
condemnation events or any other involuntary prepayment contemplated by
the Loan Documents, the Aerospace Corporation Borrower is prohibited
from prepaying the Aerospace Corporation Loan any time before the date
ninety (90) days prior to the Maturity Date. The Aerospace Corporation
Loan may be prepaid at par thereafter. The Aerospace Corporation
Borrower may defease the Aerospace Corporation Loan, in whole, but not
in part, at any time after two (2) years and fifteen (15) days after
the REMIC "start-up date" by providing the Lender with non-callable
U.S. Treasury obligations sufficient to pay its remaining obligations
under the Aerospace Corporation Loan.
TRANSFER OF AEROSPACE CORPORATION PROPERTY OR INTEREST IN AEROSPACE
CORPORATION BORROWER. Lender shall have the option to declare the
Aerospace Corporation Loan immediately due and payable upon the
transfer of the Aerospace Corporation Property or certain ownership
interests in the Aerospace Corporation Borrower, except in connection
with the rights of transfer described below. Lender shall not
unreasonably withhold its consent to a transfer of the entire Aerospace
Corporation Property to a third party if: (i) no Event of Default has
occurred and is uncured and no uncured event which with the passage of
time or giving of notice or both would constitute an Event of Default
has occurred; (ii) the new borrower meets all of the Lender's
Underwriting Standards related to its financial condition, cash flow,
operating income, physical condition, management and operation; (iii)
at the time of transfer, the fair market value of the Aerospace
Corporation Property, as reasonably determined by Lender, is not less
than $27,000,000.00; (iv) the Aerospace Corporation Borrower reimburses
Lender for all underwriting costs incurred by Lender in connection with
such transfer including an assumption fee in amount of
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-30
one percent (1%) of the outstanding balance; (v) at Lender's option,
Lender has received an endorsement to Lender's title policy at the
Aerospace Corporation Borrower's sole cost; (vi) Lender has received
copies of all documents evidencing such transfer and reasonably
approves the form and content of all such documents; (vii) Lender is
furnished with a certified copy of the recorded transfer instruments;
(viii) the new borrower executes an assumption agreement and other
documents required by Lender; (ix) the debt service coverage ratio
("DSCR") for the immediately preceding twelve (12) month period is
equal to or greater than 1.45 to 1 and Lender receives satisfactory
evidence that such DSCR will be maintained for the succeeding twelve
(12) months; (x) the new borrower complies with all covenants of the
Special Purpose Entity Requirements; and (xi) Lender has received 30
days prior written notice from the Aerospace Corporation Borrower of
the proposed transfer.
Membership interests in the Aerospace Corporation Borrower may be
transferred to one or more family members (i.e., parents, children,
spouses of children, and issue) of the current partners of the
Aerospace Corporation Borrower or a trust for the benefit of such
person, which transfer is conducted as part of a good faith estate
plan, and provided that after such transfer, the persons then
controlling the Aerospace Corporation Borrower or management of the
Aerospace Corporation Property are the same persons who have such
control and/or management rights immediately prior to such transfer.
The limited partners' interest in the Aerospace Corporation Borrower
may be transferred among the existing limited partners without the
consent of Lender subject to the following conditions: (i) the
Aerospace Corporation Borrower shall promptly notify Lender of all such
transfers; (ii) the Aerospace Corporation Borrower and its general
partner shall continue to manage and operate the Aerospace Corporation
Property; (iii) no indemnitor shall be released from any guaranty or
indemnity agreement by virtue of such transfer.
ESCROWS/RESERVES:
Taxes, Insurance and Capital Expenditures
The tax and insurance escrow is not required provided the Aerospace
Corporation Borrower complies at all time with Lender's requirements.
There is an escrow required for future capital expenditures which is
required to be funded monthly in the amount of $2,741.25 until the
total amount in the account equals $65,790. There is a second escrow
required for tenant rollover costs in the event the Aerospace
Corporation ("Tenant") fails to renew its lease, which expires
September 16, 2009. If the Tenant does not exercise its option to renew
its current lease, beginning on September 1, 2008, and on each month
throughout the remainder of the loan term, the Aerospace Corporation
Borrower shall be required to pay Lender the sum of all available cash
flow from the demised premises, less all expenses.
SUBORDINATE/OTHER DEBT. Subordinate indebtedness and encumbrances are
prohibited.
THE PROPERTY
The Aerospace Corporation Property consists of two (2), one-story office
buildings joined in the center by a three-story steel frame office structure
located in El Segundo, Los Angeles, California, 19 miles southwest of downtown
Los Angeles. The (2) two one-story buildings were constructed in 1978 as light
industrial and converted by The Ruby Group into office space. In 1980, the Ruby
Group developed a three-story steel frame office structure, which joined the two
(2) one-story buildings in the center. The north single story building is 44,532
square feet and the south building is 41,416 square feet. The three-story
building is approximately 132,000 square feet with floorplates of approximately
44,000 square feet. The rehab included a new reflective glass skin, two
landscaped outdoor courtyards, (one on either side of the three story
structure), and tasteful landscaping at the front and rear of the property. The
interior is built out as basic office space with large bullpen areas in the
middle and window offices and meeting rooms along the perimeter. Due to the
sensitive nature of the work that is conducted at the subject property, the
security is significant with multiple cameras around the facility and
combination locks on certain interior doors. In offices where laser work is
taking place, there are security locks on the doors and alarms, both flashing
and audio, in front of the office doors.
The Aerospace Corporation Property is 100% occupied by the Aerospace
Corporation. The Aerospace Corporation is an independent, nonprofit corporation
created in 1960 at the initiative of the Secretary of the Air Force to meet
special research and development needs essential to establishing a national
military space program. The Company's main clients include the Space and Missile
Systems Center (SMC) of Air Force Material Command and the National
Reconnaissance Office (NRO), Aerospace Corporation also provides technical
support to space-related programs managed by other agencies, international
organizations and foreign governments when consistent with the national
interest.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITTEN
---- ---- ---- ------------
Effective Gross Income 2,635,123 2,635,123 2,707,254 3,614,715
Net Operating Income 2,546,266 2,548,676 2,558,227 2,505,788
Cash Flow 2,546,266 2,548,676 2,558,227 2,330,495
* The Operating History 1997, 1998, and 1999 represent unaudited figures
provided by The Aerospace Corporation Borrower.
THE MANAGEMENT
The Aerospace Corporation Property is managed by Ruby Management Company, an
affiliate of the Sponsor.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-31
CONTROL #9: HIGHLANDER APARTMENTS: LOAN #415990039
--------------------------------------------------
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------
Cut-off Date Balance: $14,754,516 Property Type: Multifamily
Loan Type: Amortizing Balloon Location: Sunnyvale, CA
Origination Date: 06/04/1999 Year Built/Renovated: 1969/1996-1998
Maturity Date: 07/01/2009 Number of Units: 173
Anticipated Repay Date: 07/01/2009 Cut-off Date Balance/Unit: $85,286.22
Mortgage Rate: 7.895% Appraised Value: $21,800,000
Annual Debt Service: $1,294,548 Current LTV: 67.68%
Underwritten DSCR: 1.43x Balance at ARD LTV: 60.89%
Underwritten Cash Flow: $1,846,674 Percent Leased: 100%
Balance at ARD: $13,274,244 Leasing Status Date: 12/31/1999
-------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Highlander Apartments loan (the "Highlander Apartments Loan") is secured by
a first mortgage on a 173-unit suburban rental complex located in Sunnyvale,
California (the "Highlander Apartments Property"). The Highlander Apartments
Loan was originated by BRIDGER on June 4, 1999.
BORROWER:
The Highlander Apartments Loan borrower is comprised of two California
limited partnerships, Northwest Investments and Central Investments
(the "Highlander Apartments Borrower"). The limited partnerships were
formed in 1977 by Richard Gregersen (the "Sponsor") to own income
producing real property. The Sponsor holds a 40% ownership interest in
Accounting Data Associates, Inc., the general partner of the limited
partnerships. The remaining 60% ownership interest in Accounting Data
Associates, Inc. is held by the Sponsor's immediate family members.
SECURITY:
The Highlander Apartments Loan is evidenced by a promissory note (the
"Note") secured by a Deed of Trust and Absolute Assignment of Rent and
Leases and Security Agreement (and Fixture Filing) (the "Mortgage"),
UCC Financing Statements, and certain additional security documents.
The Mortgage is a first lien on the fee interest in the Highlander
Apartments Property.
RECOURSE:
The Highlander Apartments Loan is non-recourse, subject to certain
exceptions set forth in the Note which generally include, among other
things, liabilities relating to fraud or material misrepresentation,
waste of the property, misappropriation of funds, bankruptcy, and
environmental non-compliance (the "Recourse Carveouts"). Accounting
Data Associates, Inc., a California corporation, is liable for the
Recourse Carveouts pursuant to the terms of a Limited Guaranty
Agreement. In addition, under the terms of an Environmental Indemnity
Agreement, the Highlander Apartments Borrower assumes liability for,
guarantee payment to Lender of, and indemnify Lender from specified
costs and liabilities arising out of the environmental condition of the
Property.
PAYMENT TERMS:
The Mortgage Rate is fixed at 7.895% per annum. The Highlander
Apartments Loan requires monthly payments of principal and interest of
$107,879.03 until loan maturity. The Highlander Apartments Loan accrues
interest based on a 360-day year and the actual number of days elapsed
for any whole or partial month in which interest is being calculated.
CASH MANAGEMENT/LOCKBOX:
None.
PREPAYMENT:
Except in connection with certain casualty or condemnation events, the
Highlander Apartments Borrower is prohibited from prepaying the
Highlander Apartments Loan at any time before the date that is 90 days
immediately prior to the Maturity Date. No prepayment charge shall
apply with respect to any insurance or condemnation proceeds applied by
Lender to the outstanding principal balance or to full prepayment
occurring during the 90 days immediately preceding the Maturity Date.
The Highlander Apartments Borrower may defease the Highlander
Apartments Loan, in whole but not in part, at any time after the later
to occur of three years from the date of the Note or two years after
the REMIC "start-up" date, by providing Lender with non-callable U.S.
Treasury obligations sufficient to pay its remaining obligations under
the Highlander Apartments Loan.
TRANSFER OF HIGHLANDER APARTMENTS PROPERTY OR INTEREST IN HIGHLANDER
APARTMENTS BORROWER:
The Lender shall have the option to declare the Highlander Apartments
Loan immediately due and payable upon the transfer of the Highlander
Apartments Property or any ownership interest in the Highlander
Apartments Borrower. Provided, however, the Lender shall, one time
only, consent to the transfer of all parcels comprising the Highlander
Apartments Property upon the satisfaction of certain conditions,
including payment of the specified assumption fee. In addition, certain
transfers of interest in the Highlander Apartments Borrower, including
certain transfers by demise or descent or for estate planning purposes,
are permitted without Lender's consent upon the satisfaction of certain
conditions set forth in the Note.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-32
ESCROWS/RESERVES:
Taxes, Insurance and Immediate Repairs
There is a tax and insurance escrow which requires monthly deposits in
an amount estimated to be sufficient to pay real estate taxes and
insurance premiums when due. There is also a reserve for payment of
immediate repairs which was funded at closing in the amount of $11,438.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness or encumbrances are prohibited without prior
written consent of Lender. However, after the first 36 months of the
loan term, Lender's consent will not be unreasonably withheld.
THE PROPERTY
The Highlander Apartments Property is a 173-unit four-story apartment building,
with secured entry, interior halls and a combination of elevator and stairway
access. The improvements are situated on a 4.76-acre site located in the Silicon
Valley area, approximately 45 miles from San Francisco. Construction is
reinforced steel foundation and wood frame over an on grade parking garage of
reinforced concrete construction. The complex has a net rentable area of 171,853
square feet and is comprised of 57 one-bedroom/one-bath units ranging from
713-765 square feet, 20 two-bedroom/one-bath units with 925 square feet, 81
two-bedroom/two-bath units ranging from 988-1,218 square feet, and 15
three-bedroom/two-bath units with 1,169 square feet. All units have been
renovated since the building's original construction in 1969 and units are
renovated upon turnover. Since 1995, sponsorship has invested nearly $1,000,000
in renovating the property. The units are separately metered for gas and
electricity and the tenants are responsible for their own utilities. Amenities
include a laundry facility, exercise weight room, swimming pool and spa, BBQ
area, a sand volleyball area and a two-story clubhouse. The clubhouse includes a
large recreation area, sauna and a lounge area with a kitchenette and fireplace.
There are 156 gated parking spaces in the subterranean garage, 12 carport spaces
and 89 uncovered parking spaces. According to a rent roll provided by the
Highlander Apartments Borrower (the "Rent Roll"), the Highlander Apartments
Property is 100% leased, as of December 31, 1999.
OPERATING HISTORY*
1997 1998 1999 UNDERWRITTEN
---- ---- ---- ------------
Effective Gross Income $2,252,318 $2,412,187 $2,644,116 $2,702,349
Net Operating Income $1,593,078 $1,766,360 $1,911,845 $1,846,674
Net Cash Flow $1,246,820 $1,362,625 $1,888,113 $1,846,674
* The Highlander Apartments Property Operating History for 1997, 1998 and 1999
represent unaudited figures provided by the Highlander Apartments Borrower.
THE MANAGEMENT
The Highlander Apartments Property is managed by Peninsula West, a company
formed in 1986 by the Sponsor to manage closely held properties. Peninsula West
currently managers over 850 residential units in the Silicon Valley.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-33
CONTROL #10: LENOXGATE APARTMENTS: LOAN # 6603700
-------------------------------------------------
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Cut-off Date Balance: $14,750,115 Property Type: Multifamily
Loan Type: Principal and Interest; Balloon Location: Goodlettsville, TN
Origination Date: 11/23/99 Year Built/Renovated: 1998
Maturity Date: 12/01/09 Number of Units: 264
Anticipated Repay Date: N/A Cut-off Date Balance/unit: $55,872
Mortgage Rate: 8.050% Appraised Value: $18,500,000
Annual Debt Service: $1,309,362 Current LTV: 79.73%
DSCR: 1.22x Balance at Maturity LTV: 71.76%
Underwritten Cash Flow: $1,600,502 Percent Occupied: 90%
Balance at Maturity: $13,274,867 Occupancy as of Date: 11/2/99
-----------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Lenoxgate Apartments Loan (the "Lenoxgate Apartments Loan") is secured by a
first mortgage on a 264 unit multifamily apartment complex located in
Goodlettsville, Tennessee (the "Lenoxgate Apartments Property"). The Lenoxgate
Apartments Loan was originated by SBRC on November 23, 1999 and contributed by
SBRC.
BORROWER:
The Lenoxgate Apartments Borrower is J.P. Realty II Inc., a North
Carolina corporation (the "Lenoxgate Apartments Borrower").
SECURITY:
The Lenoxgate Apartments Loan is evidenced by a promissory note (the
"Note") secured by a Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing (the "Mortgage"), UCC Financing Statements, and
certain additional security documents. The Mortgage is a first lien on
a fee interest in the Lenoxgate Apartments Property.
RECOURSE:
The Lenoxgate Apartments Loan is non-recourse, subject to certain
exceptions set forth in the Note which generally include, among other
things, liabilities relating to fraud, material misrepresentation,
misapplication and misappropriation of funds, intentional or material
waste, failure to maintain single asset entity and unauthorized
transfers or encumbrances of the Lenoxgate Apartments (the "Recourse
Carveouts"). In addition, under the terms of an Environmental Indemnity
Agreement, the Lenoxgate Apartments Borrower and Sponsor will assume
liability for, guarantee payment to Lender of, and indemnify Lender
from specified costs and liabilities arising out of the environmental
condition of the Property.
PAYMENT TERMS:
The Mortgage Rate is fixed at 8.050% per annum throughout the life of
the loan. The Lenoxgate Apartments Loan requires monthly payments of
principal and interest of $109,113.47 until the Maturity Date of
December 1, 2009, at which time all unpaid principal and interest is
due. The Lenoxgate Apartments Loan accrues interest computed on the
basis of the actual days elapsed each month in a 360-day year.
PREPAYMENT/DEFEASANCE:
The Lenoxgate Apartments Loan may not be prepaid in whole or in part
prior to October 1, 2009. The Lenoxgate Apartments Borrower may defease
the loan, in whole but not in part, commencing on the date which is the
earlier to occur of (i) the day immediately following two (2) years
after the "start-up" day of the REMIC and (ii) four (4) years from the
last day of the calendar month of the date of the Note, by providing
the Lender with non-callable U.S. Treasury obligations sufficient to
pay its remaining obligations under the loan. The Lenoxgate Apartments
Loan may be prepaid at par on or after October 1, 2009.
TRANSFER OF LENOXGATE APARTMENTS PROPERTY OR INTEREST IN LENOXGATE
APARTMENTS BORROWER:
Lender shall have the option to declare the Lenoxgate Apartments Loan
immediately due and payable upon the transfer of the Lenoxgate
Apartments Property or change in controlling interest in the Lenoxgate
Apartments Borrower, except in connection with the rights of transfer
described below. The Lenoxgate Apartments Borrower has the right, once
during the term of the Loan, to transfer the Lenoxgate Apartments
Property upon the satisfaction of certain conditions, including
Lender's approval of transferee and payment of the specified assumption
fee. In addition, ownership interests in the Lenoxgate Apartments
Borrower may be sold or transferred provided the Sponsor maintains a
majority interest in the Borrower.
ESCROWS/RESERVES:
There is a tax and insurance escrow which requires monthly deposit in
an amount estimated to be sufficient to pay real estate taxes and
insurance premiums when due. In addition, there is an escrow for future
capital expenditures which is required to be funded monthly in the
amount of $5,500.00 and capped at $200,000.
SUBORDINATE/OTHER DEBT:
Subordinate indebtedness and encumbrances are prohibited.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
F-34
THE PROPERTY
The Lenoxgate Apartments Property is a 264-unit multifamily apartment complex
located in Goodlettsville, TN, approximately 20 minutes north of the Nashville
CBD. According to the November 2, 1999 rent roll, the Lenoxgate Apartments
Property is 90% leased. The subject land was acquired by the borrower in 1996
and construction was completed March, 1998. The subject is improved with 11
apartment buildings (24 units/building), a clubhouse and 11 garage buildings (4
units/building). Additional improvements include a mail kiosk, concrete curb,
gutter, and sidewalks, asphalt paved interior roads and parking area (436
spaces), gated entry, playground, and landscaped grounds. The clubhouse includes
a management/leasing office, 4 model units (not included in the 264 unit count),
an indoor/outdoor swimming pool, party room, theatre room (23 seats), exercise
room and racquetball court. The Property also has 24-hour maintenance and video
communication between management, apartment units, entry gate and the clubhouse.
OPERATING HISTORY*
1998 1999** UNDERWRITTEN
---- ------- ------------
Effective Gross Income 1,433,678 1,621,486 2,352,533
Net Operating Income 896,524 1,095,680 1,666,502
Cash Flow 896,524 1,095,680 1,600,502
* The Operating History for 1997, 1998, 1999 represent unaudited figures
provided by The Lenoxgate Apartments Borrower and reflect the performance of
the property prior to stabilization.
** Trailing 12 months ended 8/31/99
THE MANAGEMENT
The Lenoxgate Apartments Property is managed by the Borrower.
THIS STRUCTURAL TERM SHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERM SHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN ANY SUBSEQUENT STRUCTURAL
TERM SHEETS OR IN THE FINAL PROSPECTUS SUPPLEMENT. THIS PAGE MUST BE ACCOMPANIED
BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A DISCLAIMER, PLEASE CONTACT
PRUDENTIAL SECURITIES INCORPORATED, SALOMON SMITH BARNEY INC. OR MCDONALD
INVESTMENTS INC. IMMEDIATELY. THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY
PURSUANT TO A DEFINITIVE FINAL PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS
WHO CONSIDER PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT
DECISION BASED ONLY UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS
USED BUT NOT DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE FINAL
PROSPECTUS SUPPLEMENT.
PRUDENTIAL SECURITIES SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
--------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(Issuable in Series)
THE TRUST FUNDS--
(1) A new trust fund will be established to issue each series of
certificates.
(2) Each trust fund will consist primarily of a pool of mortgage loans
secured by liens on commercial or multifamily residential properties.
THE CERTIFICATES--
(1) will represent interests in the related trust fund and will be paid
only from the related trust fund assets; and
(2) will be issued as part of a designated series that may include one or
more classes.
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE YOU UNDERSTAND THE
STRUCTURE OF THE TRANSACTION AND THE RISKS. SEE ESPECIALLY THE RISK FACTORS
BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The securities to be issued are asset backed certificates issued by a trust.
The securities represent interests only in the related trust fund and do not
represent interests in or obligations of Prudential Securities Secured
Financing Corporation or any of its affiliates. Unless otherwise specified in
the applicable prospectus supplement, neither the certificates nor the
underlying assets are insured or guaranteed by any governmental agency or
other person.
This prospectus may be used to offer and sell any series of certificates only
if accompanied by the prospectus supplement for that series.
March 30, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT 3
WHERE YOU CAN FIND MORE INFORMATION ................. 4
REPORTS ............................................. 4
SUMMARY OF PROSPECTUS ............................... 6
RISK FACTORS ........................................ 7
THE DEPOSITOR ....................................... 23
USE OF PROCEEDS ..................................... 24
DESCRIPTION OF THE CERTIFICATES ..................... 24
THE MORTGAGE POOLS .................................. 30
SERVICING OF THE MORTGAGE LOANS ..................... 35
CREDIT ENHANCEMENT .................................. 45
MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS ....... 50
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ............ 72
STATE AND OTHER TAX CONSIDERATIONS .................. 111
ERISA CONSIDERATIONS ................................ 111
LEGAL INVESTMENT .................................... 114
PLAN OF DISTRIBUTION ................................ 116
LEGAL MATTERS ....................................... 117
FINANCIAL INFORMATION ............................... 117
RATING .............................................. 117
GLOSSARY............................................. 119
</TABLE>
2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents: this prospectus, which provides general information, some of which
may not apply to a particular series of certificates, including your series;
and the applicable prospectus supplement, which will describe the specific
terms of the offered certificates.
IF WE DESCRIBE THE TERMS OF THE SERIES OF OFFERED CERTIFICATES DIFFERENTLY
IN THIS PROSPECTUS THAN WE DO IN THE APPLICABLE PROSPECTUS SUPPLEMENT, YOU
SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and
the applicable prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the
offer is not permitted.
We have included cross-references to captions in these materials where you
can find related discussions that we believe will enhance your understanding
of the topic being discussed. The Table of Contents of this prospectus and
the Table of Contents included in the applicable prospectus supplement list
the pages on which these captions are located. You can also find references
to key topics in the Table of Contents on the preceding page.
We have started with several introductory sections describing the trust
fund and the certificates in abbreviated form, followed by a more complete
description of the terms. The introductory sections are:
* Summary of Prospectus--gives a brief introduction to the
certificates to be offered; and
* Risk Factors--describes briefly some of the risks to investors of a
purchase of the certificates.
You can find the definitions of capitalized terms that are used in this
prospectus under the caption "Glossary" beginning on page in this
prospectus.
Whenever we use words like "intends," "anticipates" or "expects" or
similar words in this prospectus, we are making a forward-looking statement,
or a projection of what we think will happen in the future. Forward-looking
statements are inherently subject to a variety of circumstances, many of
which are beyond our control that could cause actual results to differ
materially from what we think they might be. Any forward-looking statements
in this prospectus speak only as of the date of this prospectus. We do not
assume any responsibility to update or review any forward-looking statement
contained in this prospectus to reflect any change in our expectation about
the subject of that forward-looking statement or to reflect any change in
events, conditions or circumstances on which we have based any
forward-looking statement.
3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (including this prospectus and the prospectus supplement). This
prospectus and the applicable prospectus supplement do not contain all of the
information contained in the registration statement. For further information
regarding the documents referred to in this prospectus and the applicable
prospectus supplement, you should refer to the registration statement and the
exhibits to the registration statement.
The registration statement and the exhibits can be inspected and copied at
the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549 and the Sec's regional offices at Seven World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1500, Chicago, Illinois 60661. Copies of these materials can be
obtained at prescribed rates from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington D.C. 20549. In addition, the SEC maintains
a public access site on the Internet through the World Wide Web at which site
reports, information statements and other information, including all
electronic filings, may be viewed. The Internet address of the World Wide Web
site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that we file
with the SEC, which allows us to disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus and the applicable prospectus
supplement. Information that we file later with the SEC will automatically
update the information in this prospectus and the applicable prospectus
supplement. In all cases, you should rely on the later information over
different information included in this prospectus or the applicable
prospectus supplement. We incorporate by reference any future annual, monthly
and special reports and proxy materials filed with respect to any trust fund
until we terminate offering the certificates. We have determined that our
financial statements are not material to the offering of any of the
certificates. See "Financial Information." As a recipient of this prospectus,
you may request a copy of any document we incorporate by reference, except
exhibits to the documents (unless the exhibits are specifically incorporated
by reference), at no cost, by writing or calling: Prudential Securities
Secured Financing Corporation, One New York Plaza, New York, New York 10292,
attention: David Rodgers, (212) 214-1000.
REPORTS
You will receive statements containing information regarding principal and
interest payments and the related trust fund, as described in this prospectus
and the applicable prospectus supplement for each series of certificates, in
connection with each payment of principal or interest and annually. Any
financial information in those reports will most likely not have been
examined or reported upon by an independent public accountant. For more
information, you should refer to the section in this prospectus titled
"Description of the Certificates--Reports to Certificateholders." The master
servicer for each series of certificates will deliver periodic statements
containing information relating to the mortgage loans to the related trustee,
and, in addition, will deliver to the trustee on a yearly basis a statement
from a firm of independent public accountants
4
<PAGE>
regarding the examination of documents and records relating to the servicing
of the mortgage loans in the related trust fund. For more information, you
should refer to the section in this prospectus titled "Servicing of the
Mortgage Loans--Evidence of Compliance." Copies of the monthly and annual
statements provided by the master servicer to the trustee will be delivered
to certificateholders of each series of certificates upon request addressed
to our principal executive offices located at Prudential Securities Secured
Financing Corporation, One New York Plaza, New York, New York 10292,
attention: David Rodgers, (212) 214-1000.
5
<PAGE>
SUMMARY OF PROSPECTUS
This summary includes selected information from this prospectus. It does
not contain all of the information you need to consider in deciding whether
to buy any class of the offered Certificates. To understand the terms of the
offering of the offered certificates, you should read carefully this entire
prospectus and the applicable prospectus supplement.
TITLE OF CERTIFICATES ......... Commercial Mortgage Pass-Through
Certificates, issuable in series.
DEPOSITOR ..................... Prudential Securities Secured Financing
Corporation, One New York Plaza, New York,
New York 10292. Its telephone number is
(212) 214-1000.
ISSUER ........................ A separate trust fund to be established by
the depositor with respect to each series of
certificates
DESCRIPTION OF CERTIFICATES;
RATING ........................ The certificates of each series will be
issued pursuant to a pooling and servicing
agreement and may be issued in one or more
classes. The certificates of each series
will represent an interest in the property
of the related trust fund, consisting
primarily of commercial mortgage loans and
collections and proceeds on those loans.
Each class will be rated not lower than
investment grade by one or more nationally
recognized statistical rating agencies at
the date of issuance.
The applicable prospectus supplement includes important information on the
trust funds, certificates, and risks, including information on the following:
(1) the name of the master servicer and
special servicer, the circumstances when
a special servicer will be appointed and
their respective obligations (if any) to
make advances to cover delinquent
payments on the mortgage loans, taxes,
assessments or insurance premiums;
(2) the assets in the trust fund, including
a description of the pool of commercial
mortgage loans which are secured by
commercial and multifamily residential
property;
(3) the identity and attributes of each
class within a series of certificates,
including whether any credit enhancement
benefits any class of a series of
certificates;
(4) the tax status of the certificates; and
(5) whether the certificates will be
eligible to be purchased by investors
subject to ERISA or will be mortgage
related securities for purposes of
SMMEA.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks and those in the
applicable prospectus supplement in the section titled "Risk Factors" before
making an investment decision. Your investment in the offered certificates
will involve some degree of risk. If any of the following risks are realized,
your investment could be materially and adversely affected. In addition,
other risks unknown to us or which we currently consider immaterial may also
impair your investment. You can find the definitions of capitalized terms
that are used in this section under the caption "Glossary" beginning on page
102 in this prospectus.
LACK OF OR NATURE OF SECONDARY MARKET FOR THE CERTIFICATES MAY MAKE IT
DIFFICULT TO RESELL YOUR CERTIFICATES AT ALL OR AT THE PRICE YOU WANT
The absence of a secondary market for the certificates could limit your
ability to resell them. There have been times in the past where there have
been very few buyers of asset backed certificates (that is, there has been a
lack of liquidity), and there may be those times in the future. This means
that if in the future you want to sell any of the certificates, before they
mature, you may not be able to find a buyer or, if you find a buyer, the
selling price may be less than it would have been if a secondary market
existed for the certificates.
ANY SERIES OF CERTIFICATES MAY RELY ONLY ON THE ASSETS IN ITS RELATED
TRUST FUND FOR PAYMENTS OF PRINCIPAL AND INTEREST AND INSUFFICIENT
AMOUNT OF ASSETS IN THE TRUST FUND MAY RESULT IN REDUCED PAYMENTS ON
YOUR CERTIFICATES
The certificates will not be guaranteed by us or any of our affiliates.
The only sources of funds for payment on a series of certificates will
generally be the assets of the related trust fund and, to the extent provided
in the applicable prospectus supplement, any credit enhancement. A portion of
the amounts remaining in some funds or accounts may be withdrawn under
conditions described in the applicable prospectus supplement. A series of
certificates will have a claim against or security interest in the trust
funds for another series only if specified in the applicable prospectus
supplement. As a result, you may suffer a loss on your certificates if the
sources for payment are insufficient to pay all the principal of and interest
on the certificates.
SUBORDINATED CERTIFICATES MAY NOT RECEIVE FULL PAYMENT IF LOSSES OCCUR
ON THE RELATED MORTGAGE LOANS
If provided in the applicable prospectus supplement, distributions of
interest and principal on one or more classes of a series of certificates may
be subordinated in priority of payment to distributions of interest and
principal due on one or more other classes of that series of certificates.
Subordination has the effect of increasing the likelihood of payment on the
senior classes of that series of certificates and decreasing the likelihood
of payment on the subordinated class of certificates. If there are losses in
the collection of principal of or interest on mortgage loans or shortfalls
upon foreclosure on the security for the mortgage loans, the amount of those
losses or shortfalls will be borne first by one or more classes of the
subordinated certificates. The remaining
7
<PAGE>
amount of those losses or shortfalls, if any, will be borne by the remaining
classes of certificates in the priority and subject to the limitations
specified in the applicable prospectus supplement. In addition, any credit
enhancement may be used by the certificates of a higher priority class before
the principal of the lower priority classes of certificates of that series
has been repaid. Therefore, the impact of significant losses in the
collection of the mortgage loans and shortfalls upon foreclosure on the
security for the mortgage loans may fall primarily upon those classes of
certificates with a lower payment priority.
CREDIT ENHANCEMENT WILL NOT BE PROVIDED FOR ALL CERTIFICATES; CREDIT
ENHANCEMENT WILL NOT COVER ALL LOSSES SO YOU MAY NOT RECEIVE FULL
PAYMENT EVEN WHERE THERE IS CREDIT ENHANCEMENT
The prospectus supplement for a series of certificates will describe any
credit enhancement in the related trust fund, such as letters of credit,
insurance policies, surety bonds, limited guarantees, reserve funds or other
types of credit support. Credit enhancement will be subject to the conditions
and limitations described in this prospectus and in the applicable prospectus
supplement and is not expected to cover all potential losses or risks or
guarantee repayment of principal of and interest on the certificates.
Credit enhancement cannot guarantee that losses will not be incurred on
the certificates, particularly for classes of a series of certificates that
may have a lower priority of payments, be subordinated to other classes, or
share a limited amount of one form of credit enhancement with other series of
certificates.
SINCE MORTGAGE LOANS ARE NOT GUARANTEED, IF THERE ANY SHORTFALLS IN
THE PAYMENTS UNDER THE MORTGAGE LOANS, YOU MAY NOT RECEIVE FULL
PAYMENT ON YOUR CERTIFICATES
No mortgage loan is insured or guaranteed by the United States of America,
any governmental agency or instrumentality or any private mortgage insurer.
No mortgage loan is insured or guaranteed by us, the transferor, the mortgage
loan sellers, the master servicer, the special servicer, the trustee or any
of their respective affiliates. As a result, if one or more borrowers default
on their payment obligations on the mortgage loans, there may not be
sufficient funds to make payments on the certificates and you may suffer
losses on your investment.
THE ACTUAL PREPAYMENT RATE AND ANY REPURCHASES OF MORTGAGE LOANS MAY
REDUCE THE YIELD ON YOUR INVESTMENT
In deciding whether to purchase any offered certificates, you should make
an independent decision as to the appropriate prepayment assumptions to be
used. The pre-tax return on your investment will change from time to time for
a number of reasons, including the following:
The rate of return of principal is uncertain. The amount of distributions
of principal of the certificates and the times when you receive those
distributions depends on the amount and the times at which borrowers make
principal payments of the underlying mortgage loans, and on whether we or
the servicer purchases the underlying mortgage loans.
8
<PAGE>
Prepayments of the mortgage loans in any trust fund by the related
borrowers generally will result in a faster rate of principal payments on
one or more classes of the related certificates than if payment on those
mortgage loans are made as scheduled. The prepayment rate on mortgage
loans may be influenced by a variety of economic, tax, legal and social
factors. While one prepayment rate may be used for the purpose of pricing
the certificates, there can be no assurance that the actual prepayment
rate will be faster or slower than any assumed prepayment rate.
In addition, the master servicer or the special servicer, under the
circumstances described in the prospectus supplement, may have the option
to extend the maturity of the mortgage loans following a default, which
would have the effect of extending the life of the certificates.
We will be required to repurchase a mortgage loan from the trust if we
breach our representations and warranties with respect to that mortgage
loan. In addition, the servicer may have the option to purchase the
mortgage loans in the trust fund and may be obligated to purchase mortgage
loans from the trust fund under the circumstances described in the
prospectus supplement.
You bear reinvestment risk. You will bear the risk that the timing and
amount of distributions on your certificates will prevent you from
attaining your desired yield. If you receive a payment of principal of the
certificates prior to when you expect, you may not be able to reinvest
that amount at a rate of interest equal to the interest rate on the
certificates. If prevailing interest rates fall significantly below the
applicable rates borne by the mortgage loans included in a trust fund,
principal prepayments are likely to be higher than if prevailing rates
remain at or above the rates borne by those mortgage loans. The
certificates are thus likely to produce more returns of principal to
investors when market interest rates fall below the interest rates on the
mortgage loans and produce fewer returns of principal when market interest
rates are above the interest rates on the mortgage loans. As a result, you
are likely to receive more money to reinvest at a time when other
investments generally are producing a lower yield than that on the
certificates, and are likely to receive less money to reinvest when other
investments generally are producing a higher yield than that on the
certificates.
For more information on principal and prepayments and their effect on the
average life of related certificates, you should refer to the section in the
applicable prospectus supplement titled "Yield and Maturity Considerations."
RESTRICTIONS ON VOLUNTARY PREPAYMENTS MAY PROVE INEFFECTIVE AND MAY
REDUCE THE YIELD ON YOUR INVESTMENT
The restrictions on voluntary prepayments contained in a promissory note
(including lockout periods, yield maintenance charges and prepayment
premiums) affect the rate and timing of principal payments made on the
related mortgage loan. Most of the mortgage loans provide that, with limited
exceptions, a prepayment of the mortgage loans must be accompanied by a yield
maintenance charge or other prepayment premium. The existence of yield
maintenance charges or other prepayment premiums generally will result in the
mortgage loans prepaying at a lower rate. However, the requirement that a
prepayment be accompanied by a yield maintenance charge or other
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prepayment premium may not provide a sufficient economic disincentive to a
borrower seeking to refinance at a more favorable interest rate (if, for
example, interest rates fall). An obligation to pay a yield maintenance
charge or other prepayment premium may potentially be unenforceable under
applicable state or federal law (including federal bankruptcy law). Even if a
yield maintenance charge or prepayment premium is enforceable, the
foreclosure proceeds received with respect to a defaulted mortgage loan may
be insufficient to provide the yield you expect. If either event were to
occur, the yield on your investment may be reduced.
For more information about restrictions on voluntary prepayments, you
should refer to the section in the applicable prospectus supplement titled
"Description of the Mortgage Pool--Material Terms and Conditions of the
Mortgage Loans--Prepayment Provisions."
RATINGS ON THE CERTIFICATES DO NOT GUARANTEE THE TIMING OR PAYMENT IN
FULL OF THE CERTIFICATES
The rating assigned by a rating agency to a class of certificates reflects
the rating agency's assessment of the likelihood that holders of certificates
of that class will receive all payments to which the holders of those
certificates are entitled under the certificates. The ratings will be based
on the structural, legal and issuer-related aspects associated with those
certificates, the nature of the underlying mortgage loans and the credit
quality of any credit enhancer. The rating does not constitute an assessment
of the likelihood of principal prepayments by borrowers of the loans
underlying the certificates. A rating will not address the possibility of
prepayment at higher rates than anticipated by an investor which may cause
the investor to experience a lower than anticipated yield. In extreme cases,
holders of stripped interest certificates may fail to recoup their initial
investments.
COMMERCIAL AND MULTIFAMILY MORTGAGE LOANS ARE SUBJECT TO SPECIAL RISKS
WHICH MAY CAUSE REDUCTION IN PAYMENTS ON YOUR CERTIFICATES
Your investment decision should take into account that commercial and
multifamily mortgage lending generally involves risks that are different than
those faced in connection with other types of lending. The following factors,
among others, contribute to these risks:
(1) Larger loans provide lenders with less diversification of risk and
the potential for greater losses from the delinquency and/or default
of individual loans;
(2) Many of the mortgage loans are non-recourse obligations, the
repayment of which is often solely dependent upon the successful
operation of the related mortgaged properties;
(3) Commercial and multifamily property values and net operating income
can be volatile;
(4) Many of the mortgage loans are balloon loans, which principal amounts
do not fully amortize but instead provide for a substantial principal
payment at their stated maturity, so your investment may be exposed
to additional risks associated with both the value of the related
mortgaged property and the borrower's ability to obtain new financing
when the balloon payment is due;
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(5) An increase in vacancy rates, a decline in rental rates, or an
increase in operating expenses or necessary capital expenditures may
impair a borrower's ability to repay its loan;
(6) Changes in the general economic climate, an excess of comparable
space in the area, a reduction in demand for real estate in the area,
the attractiveness of the property to tenants and guests and
perceptions of the property's safety, convenience and services may
adversely affect the income from and market value of a mortgaged
property; and
(7) Government regulations and changes in real estate, zoning or tax
laws, changes in interest rate levels or potential liability under
environmental and other laws may affect real estate values and
income.
AGING, DETERIORATION AND POOR CONSTRUCTION QUALITY OF MORTGAGED
PROPERTIES MAY SUBJECT BORROWERS TO ADDITIONAL EXPENSES WHICH MAY
ADVERSELY AFFECT THEIR ABILITY TO PAY THEIR LOANS AND WHICH MAY RESULT
IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Old or poorly constructed mortgaged properties are likely to require more
expenditures for maintenance, repairs and improvements. Even mortgaged
properties that were well constructed and have been well maintained will
require improvements in order for them to maintain their value and retain
tenants and other occupants. Therefore, borrowers may from time to time be
required to incur significant expenses to improve their mortgaged properties,
which may adversely affect their ability to meet their obligations on the
related mortgage loans. If borrowers default on their payment obligations,
you may suffer losses on your certificates.
LIMITED ADAPTABILITY FOR OTHER USES MAY SUBSTANTIALLY LOWER THE VALUE
OF SOME MORTGAGED PROPERTIES WHICH MAY RESULT IN REDUCED PAYMENTS ON
YOUR CERTIFICATES
Some of the mortgaged properties would require substantial capital
expenditures to convert to an alternative use. If the operation of a
mortgaged property with this characteristic becomes unprofitable due to,
among other factors,
(1) competition;
(2) age of the improvements;
(3) decreased demand; or
(4) zoning restrictions,
and as a result the borrower becomes unable to meet its obligations, the
liquidation value of that mortgaged property may be substantially less than
would be the case if that property were more readily adaptable to other uses.
IF A LEASE EXPIRES OR IS OTHERWISE TERMINATED, IT MAY NOT BE RENEWED
IN A TIMELY MANNER OR AT ALL OR IT MAY BE RENEWED FOR LOWER LEASE
PAYMENTS, WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
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We cannot assure you that:
(1) leases that expire can be renewed;
(2) the space covered by leases that expire or are terminated can be
leased in a timely manner at comparable rents or on comparable terms;
or
(3) the borrower will have the cash or be able to obtain the financing to
fund any required tenant improvements.
If vacant space in the mortgaged properties could not be leased for a
significant period of time, if tenants were unable to meet their lease
obligations or if, for any other reason, rental payments could not be
collected, income from and the market value of the mortgaged properties would
be adversely affected. If a tenant defaults, delays and costs in enforcing
the lessor's rights could occur. In addition, tenants at the mortgaged
properties may be entitled to terminate their leases or reduce their rents
based upon negotiated lease provisions. For example, some leases provide that
tenants may terminate or reduce their rents if an important tenant known as
an "anchor tenant" ceases operations at the related mortgaged property. A
tenant's lease may also be terminated or otherwise affected if the tenant
becomes the subject of a bankruptcy proceeding.
THE MORTGAGED PROPERTIES FACE COMPETITION FROM VARIOUS SOURCES, WHICH
COULD ADVERSELY AFFECT THE NET OPERATING INCOME AND MARKET VALUES OF
THE PROPERTIES, RESULTING IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Factors affecting the competitive position of the mortgaged properties
include:
(1) the existence of similar properties located in the same area, which
attract similar types of occupants on the basis of more favorable
rental rates, location, condition and features;
(2) the existence of any oversupply of available space in a particular
market either as a result of new construction or a decrease in the
number of occupants, which adversely affects the rental rates for the
mortgaged properties; and
(3) the possibility of other properties being converted to competitive
uses as a result of trends in the use of property by occupants (for
example, the establishment of more home-based offices and businesses
or the conversion of warehouse space for multifamily use).
POOR MANAGEMENT OF THE MORTGAGED PROPERTIES MAY ADVERSELY AFFECT THE
OPERATION OF THOSE PROPERTIES, WHICH COULD LOWER THE CASH FLOW AND
MARKET VALUE OF THOSE PROPERTIES, RESULTING IN REDUCED PAYMENTS ON
YOUR CERTIFICATES
The successful operation of the mortgaged properties also depends on the
performance of the respective property managers of the mortgaged properties.
The property managers may be responsible for:
(1) responding to changes in local market factors such as competition and
patterns of demand;
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(2) managing leasing activities such as planning and implementing the
rental rate structure, including establishing levels of rent
payments; and
(3) ensuring that maintenance and capital improvements can be carried out
in a timely fashion.
To the extent the property managers do not properly perform these duties,
the cash flow and market value for the related mortgaged properties could
suffer, which could have an adverse affect on the certificates.
IF TENANT LEASES DO NOT CONTAIN ATTORNMENT PROVISIONS OR IF LEASES ARE
SUBORDINATED TO MORTGAGE LOANS, THE FORECLOSURE VALUE OF THE MORTGAGED
PROPERTY CAN BE ADVERSELY AFFECTED AND MAY REDUCE PAYMENTS ON YOUR
CERTIFICATES
Some of the tenant leases, including some of the anchor tenant leases, may
not contain provisions that require the tenant to attorn to, or recognize as
landlord under the lease, a successor owner of the property following
foreclosure. In some states, if tenant leases do not contain attornment
provisions, those leases may terminate upon the transfer of the property to a
foreclosing lender or purchaser at foreclosure.
In addition, some of the tenant leases, including some of the anchor
tenant leases, may be either subordinate to the liens created by the mortgage
loans or contain a provision that requires the tenant to subordinate the
lease if the lender agrees to enter into a non-disturbance agreement. In some
states, if tenant leases are subordinate to the liens created by the mortgage
loans, those leases may terminate upon the transfer of the property to a
foreclosing lender or purchaser at foreclosure.
If a foreclosure of a mortgaged property occurs in a state where leases
may terminate as described above, the property could experience a further
decline in value if those leases are terminated (for example, if those
tenants were paying above-market rents). The decline in the foreclosure value
of those properties may result in insufficient funds to make payments on your
certificates.
If the lease contains provisions inconsistent with the mortgage (for
example, provisions relating to application of insurance proceeds or
condemnation awards), the provisions of the lease will take precedence over
the provisions of the mortgage.
IF TENANT LEASES ARE NOT SUBORDINATE TO MORTGAGE LIENS, THE
FORECLOSURE VALUE OF THE MORTGAGED PROPERTY COULD BE ADVERSELY
AFFECTED AND MAY REDUCE PAYMENTS ON YOUR CERTIFICATES
If a mortgage loan is subordinate to a lease, the lender of that loan will
not (unless it has otherwise agreed with the tenant) possess the right to
dispossess the tenant upon foreclosure of the property, which may reduce the
value of the property. The decline in the foreclosure value of those
properties may result in insufficient funds to make payments on your
certificates.
REGIONAL FACTORS MAY ADVERSELY AFFECT THE VALUE AND CASH FLOW OF
MORTGAGED PROPERTIES, WHICH MAY REDUCE PAYMENTS ON YOUR CERTIFICATES
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Repayments by borrowers and the market values of the mortgaged properties
could be affected by:
(1) economic conditions generally or in the regions where the borrowers
and the mortgaged properties are located;
(2) conditions in the real estate markets where the mortgaged properties
are located;
(3) changes in governmental rules and fiscal policies;
(4) natural disasters; and
(5) other factors that are beyond the control of the borrowers.
The economy of any state or region in which a mortgaged property is
located may be adversely affected to a greater degree than that of other
areas of the country by developments affecting industries concentrated in
that state or region.
IF A BORROWER USES THE MORTGAGED PROPERTY AS SECURITY FOR ANOTHER
LOAN, THE VALUE OF THE MORTGAGED PROPERTY MAY BE REDUCED, WHICH MAY
RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
In general, the borrowers are prohibited from using the mortgaged property
to secure other loans without the lender's approval. The pooling and
servicing agreement will permit the master servicer and the special servicer
to approve another loan if specified conditions are met, including approval
by each rating agency rating the certificates. The absence of these
conditions may not become evident, however, until the related mortgage loan
otherwise defaults. If one or more subordinate liens are imposed on a
mortgaged property or the borrower incurs other indebtedness, the trust fund
is subject to additional risks. Some of those risks are:
(1) the borrower may defer necessary maintenance of the mortgaged
property in order to pay the required debt service on the subordinate
loan, and the value of the mortgaged property may decline as a
result;
(2) the borrower may have an incentive (for example, because the interest
rate is higher)to repay the subordinate or unsecured loan before the
mortgage loan, which would reduce payments to the trust fund;
(3) it may be more difficult for the borrower to refinance the mortgage
loan or to sell the mortgaged property for the purpose of making any
balloon payment upon the maturity of the mortgage loan or for the
purpose of making a prepayment in full on or about the anticipated
repayment date in the case of any mortgage loan structured so that,
after the anticipated repayment date, the loan bears interest at a
markedly higher interest rate; and
(4) additional debt increases the risks that the borrower could become
insolvent or subject to bankruptcy or similar proceedings or might
complicate bankruptcy proceedings, delaying foreclosure on the
mortgaged property.
APPRAISALS AND ENGINEERING REPORTS ARE OF LIMITED VALUE SINCE THE
ACTUAL VALUE OF THE PROPERTIES MAY BE DIFFERENT FROM THEIR APPRAISED
VALUE
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In making your investment decision, you should not rely on appraisals and
engineering reports on mortgaged properties as your only indicator of the
actual value or physical characteristics of the mortgaged properties. In
general, appraisals represent the analysis and opinion of qualified experts
and are not guarantees of present or future value. Moreover, appraisals seek
to establish the amount a willing buyer would pay a willing seller. That
amount could be significantly higher than the amount received upon the sale
of a mortgaged property under a distressed or liquidation sale. The
architectural and engineering reports represent the analysis of the
individual engineers or site inspectors at or before the origination of the
respective mortgage loans. The reports may not have been updated since they
were originally conducted and may not have revealed all necessary or
desirable repairs, maintenance or capital improvement items.
CHANGES IN ZONING LAWS MAY REDUCE THE VALUE AND INCOME OF THE RELATED
MORTGAGED PROPERTIES AND COULD LOWER THE CASH FLOW OF THOSE
PROPERTIES, WHICH MAY REDUCE THE PAYMENTS ON THE CERTIFICATES
The mortgaged properties are typically subject to applicable building and
zoning ordinances and codes affecting the construction and use of real
property. Because the zoning laws applicable to a mortgaged property
(including density, use, parking and set back requirements) are generally
subject to change at any time, some improvements upon the mortgaged
properties may not comply fully with all applicable current and future zoning
laws. Changes in zoning laws may limit the ability of the related borrower to
renovate the premises and, in the event of a substantial casualty loss,
rebuild or utilize the premises "as is." These changes may reduce the value
and income of the mortgaged property.
A BORROWER'S COSTS OF COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS
MAY REDUCE ITS ABILITY TO REPAY THE MORTGAGE LOAN, WHICH MAY RESULT IN
REDUCED PAYMENTS ON YOUR CERTIFICATES
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged property. These costs, or the imposition of injunctive
relief, penalties or fines in connection with the borrower's noncompliance,
could negatively impact the borrower's cash flow and, consequently, its
ability to pay its mortgage loan.
For more detailed information about regulatory compliance costs, you
should refer to the section of this prospectus titled "Material Legal Aspects
of the Mortgage Loans--Americans With Disabilities Act."
A TENANT'S DEFAULT ON ITS LEASE OF A SINGLE TENANT PROPERTY COULD
ADVERSELY AFFECT THE BORROWER'S ABILITY TO PAY ITS LOANS WHICH MAY
RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Some of the mortgaged properties are leased wholly or in large part to a
single tenant or are wholly or in large part owner-occupied. If a single
tenant failed to perform its obligations under its lease (or, in the case of
an owner-occupied mortgaged property,
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under the related mortgage loan documents), that failure could reduce the
mortgaged property's value and the cash flow and adversely affect the related
borrower's ability to make payments on its mortgage loan.
If a significant portion of a mortgaged property is leased to a single
tenant who vacates or fails to perform its obligations, the failure of the
borrower to release the portion of the mortgaged property will have a greater
adverse effect on your investment than if the mortgaged property were leased
to a larger number of tenants.
For more information on risks associated with default of single tenant
properties, you should refer to the section in the applicable prospectus
supplement titled "Description of the Mortgage Pool--Material Characteristics
of the Mortgage Pool--Tenant Matters" and in "Schedule A" to the applicable
prospectus supplement.
MOST OF THE MORTGAGE LOANS ARE BALLOON LOANS THAT ARE SUBJECT TO A
GREATER RISK OF DEFAULT, AND THE FAILURE OF ANY BORROWER TO MAKE THE
BALLOON PAYMENT COULD RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Most of the mortgage loans are balloon loans. Balloon loans involve a
greater risk of default than self-amortizing loans. A borrower's ability to
make a balloon payment typically will depend upon its ability either to
refinance the related mortgaged property or to sell the mortgaged property at
a price sufficient to allow it to make the balloon payment. A number of
factors will affect the borrower's ability to sell or refinance the mortgaged
property, including:
(1) available mortgage rate levels;
(2) the related mortgaged property's fair market value;
(3) the borrower's equity in the related mortgaged property;
(4) the borrower's financial condition;
(5) the related mortgaged property's operating history;
(6) tax laws;
(7) prevailing economic conditions; and
(8) the availability of credit for multifamily or commercial properties.
For more information about risks of default of balloon payments, you
should refer to the section in the applicable prospectus supplement titled
"Yield and Maturity Considerations--Yield Considerations--Balloon
Payments/ARD Loan Payments."
DELINQUENT MORTGAGE LOANS, BY CAUSING DEFAULTS AND PREPAYMENTS, MAY
RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
If so provided in the applicable prospectus supplement, the trust fund for
a particular series of certificates may include mortgage loans that are past
due and would be serviced by a special servicer. The inclusion of delinquent
mortgage loans in a trust fund may increase the risk of defaults and
prepayments on mortgage loans and
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consequently adversely affect the yield on that series of certificates.
Certificates may benefit from credit enhancement if provided in the
applicable prospectus supplement. However, any credit enhancement may not
cover all losses related to delinquent mortgage loans.
EXTENSIONS AND MODIFICATIONS OF DEFAULTED MORTGAGE LOANS WILL NOT
ASSURE INCREASE IN THE AMOUNT OF RECEIPTS FROM THE DEFAULTED MORTGAGE
LOANS AND MAY RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
To maximize recoveries on defaulted mortgage loans, a master servicer or
special servicer may extend and modify mortgage loans that are in default or
are likely to be in default, particularly with respect to balloon payments,
within the parameters specified in the applicable prospectus supplement. A
master servicer or a special servicer may receive workout fees, management
fees, liquidation fees or other similar fees based on receipts from or
proceeds of those mortgage loans. Although a master servicer or special
servicer generally will be required to determine that any extension or
modification is reasonably likely to produce a greater recovery amount than
liquidation, there can be no assurance that any extensions or modifications
will increase the amount of receipts from mortgage loans that are in default
or are likely to be in default.
LOANS MADE TO NONINDIVIDUALS MAY POSE GREATER RISKS OF REDUCED CASH
FLOW WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES BECAUSE
THOSE BORROWERS MAY HAVE LIMITED ASSETS, MAY SEEK PROTECTION UNDER THE
BANKRUPTCY LAWS AND MAY ENGAGE IN PROTRACTED LITIGATION DUE TO THEIR
SOPHISTICATION
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. For example, an entity, as
opposed to an individual, may be more inclined to seek legal protection from
its creditors, such as the trust fund, under the bankruptcy laws. Many of
these entities do not have personal assets and creditworthiness at stake,
unlike individuals involved in bankruptcies. The borrower's sophistication
may increase the likelihood of protracted litigation or bankruptcy in default
situations because a sophisticated borrower will be aware of its rights
against the lender and may have more resources to make effective use of all
of its defenses to payment, including filing for bankruptcy.
BANKRUPTCY OF BORROWERS MAY ADVERSELY AFFECT PAYMENTS ON MORTGAGE
LOANS WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Some of the borrowers may have businesses and liabilities unrelated to the
mortgaged property which may make the borrower more likely to become
insolvent or the subject of a bankruptcy proceeding. In addition, a borrower,
as an owner of real estate, will be subject to potential liabilities and
risks which may or may not be related to ownership of the mortgaged property.
We cannot assure you that a borrower will not file for bankruptcy protection
or that creditors of a borrower, or a corporate or
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individual general partner or member of a borrower, will not initiate a
bankruptcy or similar proceeding against that borrower. If this happens, the
cash flow associated with the mortgage loan could be delayed, reduced or
eliminated.
For more information about risks of bankruptcy, you should refer to the
section in this prospectus titled "Material Legal Aspects of the Mortgage
Loans--Foreclosure--Bankruptcy Laws."
LITIGATION AGAINST A BORROWER MAY REDUCE ITS ABILITY TO MEET ITS
MORTGAGE OBLIGATIONS WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
From time to time, legal proceedings may be threatened or instituted
against a borrower and its affiliates relating to their business. Litigation
may reduce a borrower's ability to meet its obligations under the related
mortgage loan and therefore reduce the trust fund's cash flow.
CONCENTRATION OF MORTGAGE LOANS AND BORROWERS DECREASES
DIVERSIFICATION AND MAY INCREASE THE RISK THAT YOU WILL NOT RECEIVE
FULL PAYMENT ON YOUR CERTIFICATES
In general, a mortgage pool composed of loans having larger average
balances and a smaller number of loans may be subject to losses that are more
severe than if the aggregate balance of the mortgage loans in the pool was
more evenly distributed. In all cases, you should carefully consider all
aspects of any mortgage loan representing a significant percentage of the
initial pool balance to ensure it is subject to risks acceptable to you.
Additionally, a mortgage pool with a high concentration of mortgage loans to
the same borrower or related borrowers is subject to the potential risk that
a borrower undergoing financial difficulties might divert its resources or
undertake remedial actions (such as a bankruptcy) in order to alleviate those
difficulties. If this occurs, it could adversely affect payments on the
mortgage loans or the value of the mortgage properties and therefore your
investment.
For more information concerning the mortgage pool and the exposure to
concentration risks, you should refer to the section in the applicable
prospectus supplement titled "Description of the Mortgage Pool--Material
Characteristics of the Mortgage Pool--Concentration of Mortgage Loans and
Borrowers."
LIMITATIONS ON THE ENFORCEABILITY OF CROSS-COLLATERALIZATION
ARRANGEMENTS MAY HAVE AN ADVERSE EFFECT ON RECOURSE AFTER A DEFAULT ON
A CROSS-COLLATERALIZED MORTGAGE LOAN, RESULTING IN REDUCED PAYMENTS ON
YOUR CERTIFICATES
Arrangements by which some of the mortgage loans are cross-collateralized
and cross-defaulted with one or more related mortgage loans could be
challenged as fraudulent conveyances by the creditors or the bankruptcy
estate of any of the related borrowers. Under federal and most state
fraudulent conveyance statutes, the granting of a mortgage lien by a person
may be voided if a court were to determine that:
(1) the borrower did not receive fair consideration or reasonably
equivalent value when pledging mortgaged property for the equal
benefit of the other related borrowers, and
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(2) the borrower was insolvent at the time of granting the lien, was
rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured.
A lien granted by a borrower on a cross-collateralized loan to secure the
mortgage loan of an affiliated borrower, or any payment on a loan of an
affiliated borrower, could potentially be avoided as a fraudulent conveyance.
If this were to occur, the trust fund's security in the mortgage loan and
resulting cash flows may be reduced.
NATURE OF NON-RECOURSE LOANS MAY RESULT IN INSUFFICIENT AMOUNTS TO PAY
OFF THE RELATED MORTGAGE LOAN UPON DEFAULT WHICH COULD REDUCE THE
PAYMENTS ON YOUR CERTIFICATES
The majority of the mortgage loans are non-recourse loans. Under these
non-recourse loans, if a borrower defaults, the trust fund may recover
amounts due generally only against the specific mortgaged property securing
the mortgage loan and any other assets (if any) pledged to secure the
mortgage loan. As a result, the payment of each non-recourse mortgage loan
depends primarily upon the sufficiency of the net operating income from the
related mortgaged property and, at maturity, upon the market value of that
mortgaged property.
For a more detailed description of the mortgage pool, you should refer to
the applicable prospectus supplement, including the section titled
"Description of the Mortgage Pool--General."
In those cases where recourse against the borrower is permitted by the
loan documents, the ability to collect from the borrower is dependent upon
the creditworthiness, solvency and other factors specific to the borrower and
generally are not within our control or the control of any of the mortgage
loan sellers, the transferor, the master servicer, the special servicer, the
trustee or any of their affiliates. Therefore, even if there is recourse, we
cannot assure you that significant amounts will be realized in respect of
that recourse in the event of a default or any mortgage loan.
FORECLOSURE OF ANY MORTGAGED PROPERTY MAY SUBJECT THE TRUST FUND TO
TAXES, WHICH COULD LOWER THE CASH FLOW FROM THAT PROPERTY, RESULTING
IN REDUCED PAYMENTS ON YOUR CERTIFICATES
If the trust fund acquires a mortgaged property in a foreclosure or
deed-in-lieu of foreclosure, the trust fund might become subject to federal
(and possibly state or local) tax, at the highest marginal corporate rate
(currently 35%), on a portion of its net income from the operation and
management of that mortgaged property. As a consequence, the net proceeds
available for distribution to certificateholders would be reduced.
COURTS MAY REFUSE TO ENFORCE DUE-ON-SALE, DUE-ON-ENCUMBRANCE AND
DEBT-ACCELERATION CLAUSES, ADVERSELY AFFECTING EXERCISE OF REMEDIES
UPON DEFAULTED MORTGAGE LOANS, WHICH MAY LOWER THE CASH FLOW FROM THE
MORTGAGED PROPERTIES, RESULTING IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
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The mortgage loans will generally contain "due-on-sale" and
"due-on-encumbrance" clauses. These clauses permit the lender to accelerate
the maturity of the mortgage loan if the related borrower sells or otherwise
transfers or encumbers the related mortgaged property in violation of the
mortgage. The mortgage loans will also generally include a debt-acceleration
clause. A debt-acceleration clause permits the lender to accelerate the debt
upon specified monetary or non-monetary defaults of the borrower.
The courts of a state, however, may refuse to permit the foreclosure or
other sale of a mortgaged property or refuse to permit the acceleration of
the indebtedness if the breach or default is immaterial or does not
materially adversely affect the lender's security, or if enforcement of the
clause would be inequitable, unjust, or unconscionable. In that case, the
lender will not be able to exercise its remedies under the mortgage loan and
there may be insufficient funds to make payments on your certificates.
TRUST FUNDS MAY NOT HAVE A PERFECTED SECURITY INTEREST IN ALL
ASSIGNMENTS OF LEASES AND RENTS, WHICH MAY LOWER THE CASH FLOW FROM
THE MORTGAGED LOANS, RESULTING IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
The applicable prospectus supplement will describe whether and to what
extent the mortgage loans will be secured by an assignment of leases and
rents. Under an assignment of leases and rents, the borrower typically
assigns its rights as landlord under the leases on the related mortgaged
property and the related income 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. If the borrower defaults, the license terminates and
the lender is entitled to collect rents. These assignments are typically not
perfected as security interests until the lender takes possession of the
related mortgaged property or a receiver is appointed. 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 borrower, the lender's ability to collect the rents may be
adversely affected.
For a more detailed description of these issues, you should refer to the
section of this prospectus titled "Material Legal Aspects of the Mortgage
Loans-Leases and Rents."
THE ENVIRONMENTAL CONDITION OF MORTGAGED PROPERTIES MAY SUBJECT THE
TRUST FUND TO LIABILITY UNDER FEDERAL AND STATE LAWS WHICH MAY REDUCE
THE VALUE AND CASH FLOW OF THE MORTGAGED PROPERTY AND POSSIBLY
RESULTING IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Tenants and occupants may affect the environmental condition of a
mortgaged property. Current and future environmental laws, ordinances or
regulations may impose additional compliance obligations on business
operations that can be met only by significant capital expenditures.
Adverse environmental conditions subject to the trust fund to the
following risks:
(1) a diminution in the value of a mortgaged property or the inability to
foreclose against that mortgaged property;
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(2) inability to lease the mortgaged property to potential tenants;
(3) the potential that the related borrower may default on a mortgage
loan due to the borrower's inability to pay high investigation and/or
remediation costs or difficulty in bringing its operations into
compliance with environmental laws; and
(4) liability for clean-up costs or other remedial actions which could
exceed the value of the mortgaged property.
Under federal and state laws, a statutory lien over the subject property
may secure the reimbursement of remedial costs incurred by regulatory
agencies to address environmental violations. That statutory lien over a
mortgage property would adversely affect its value and could make foreclosure
upon it following default by the related borrower impractical. Under various
federal, state and local laws, ordinances and regulations, the trust fund may
be liable for the costs of removal or remediation of hazardous or toxic
substances on, under, adjacent to or in that property. Liability for the cost
of any required remediation generally is not limited under applicable laws,
and could exceed the value of the property.
For more information on the trust fund's potential environmental risks,
you should refer to the section in this prospectus titled "Material Legal
Aspects of the Mortgage Loans--Environmental Risks" and the section in the
applicable prospectus supplement titled "Description of the Mortgage
Pool--Material Characteristics of the Mortgage Pool--Environmental Risks."
Under federal and state laws, it is possible that the trust fund may be
held liable for the costs of addressing releases or threatened releases of
hazardous substances at a mortgaged property.
For more information on the trust fund's potential liability for releases
of hazardous substances, you should refer to the section in this prospectus
titled "Material Legal Aspects of the Mortgage Loans--Environmental Risks."
JUNIOR MORTGAGE LOANS WILL BE PAID ONLY AFTER THE SENIOR CLAIMS ARE
PAID IN FULL, SO THERE MAY NOT BE ADEQUATE FUNDS LEFT TO PAY THE
JUNIOR CLAIMS IN FULL, WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
Some of the mortgage loans may be junior mortgage loans. The primary risk
to holders of mortgage loans secured by junior liens is the possibility that
a foreclosure of a related senior lien would extinguish the junior lien and
that adequate funds will not be received in connection with the foreclosure
to pay the debt held by the holder of the junior mortgage loan after
satisfaction of all related senior liens.
For more detailed information on the risks to holder of mortgage loans
secured by junior liens, you should refer to the sections in this prospectus
titled "Material Legal Aspects Of The Mortgage Loans--Junior Mortgages;
Rights of Senior Mortgagees or Beneficiaries" and "--Foreclosure."
BANKRUPTCY OF THE DEPOSITOR COULD RESULT IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
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If we become subject to bankruptcy proceedings, you could experience
losses or delays in the payments on your securities. We will sell the
mortgage loans to the trust. However, if we become subject to a bankruptcy
proceeding, the court in the bankruptcy proceeding could conclude that we
effectively still owns the mortgage loans by concluding that the sale to any
trust fund was not a "true sale" for bankruptcy purposes. If a court were to
reach this conclusion, you could experience losses or delays in payments on
the certificates as a result of, among other things:
(1) the "automatic stay" which prevents secured creditors from exercising
remedies against a debtor in bankruptcy without permission from the
court and provisions of the United States bankruptcy code that permit
substitution for collateral in certain circumstances;
(2) certain tax or government liens on the our property (that arose prior
to the transfer of mortgage loans to the trust funds) having a prior
claim on collections before the collections are used to make payments
on your certificates; and
(3) the trust funds not having a perfected security interest in (a) one
or more of the properties securing the related mortgage loans or (b)
any cash collections held by the master servicer at the time the
master servicer becomes the subject of a bankruptcy proceeding.
See "Material Legal Aspects of the Mortgage Loans--Bankruptcy
Considerations relating to the Depositor" in this prospectus.
THE INTERESTS OF THE MASTER SERVICER OR THE SPECIAL SERVICER MAY
CONFLICT WITH THOSE OF THE TRUST FUND REGARDING THE MASTER SERVICER OR
SPECIAL SERVICER'S PURCHASE OF CERTIFICATES AND SERVICING OF NON-TRUST
FUND LOANS, WHICH MAY ADVERSELY AFFECT THEIR PERFORMANCE IN RESPECT OF
THE TRUST FUND AND WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR
CERTIFICATES
The master servicer and/or special servicer may purchase and own
certificates, including subordinate certificates. Under those circumstances,
it is possible that the interests of the master servicer or special servicer,
as a holder of the certificates of any class, may differ from those of the
holders of certificates of any other class. The master servicer and special
servicer may continue to service existing mortgage loans and new mortgage
loans for third parties, including portfolios of mortgage loans similar to
the mortgage loans owned by the trust fund. These mortgage loans and the
related mortgaged properties may be in the same markets as, or have owners,
borrowers and/or property managers in common with, some of the mortgage loans
owned by the trust fund and the related mortgaged properties. To the extent
that overlap exists, the interests of the master servicer, the special
servicer and their respective affiliates and their other clients may differ
from, and compete with, the interests of the trust fund. The master servicer
and the special servicer are required, however, to service the mortgage loans
owned by the trust fund in accordance with the servicing standard contained
in the pooling and servicing agreements.
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ERISA IMPOSES LIMITATIONS ON WHO CAN PURCHASE THE CERTIFICATES;
NONCOMPLIANCE MAY MATERIALLY AND ADVERSELY AFFECT THE TRUST FUND AND
RESULT IN REDUCED PAYMENTS ON YOUR CERTIFICATES
Generally, Title I of ERISA and various sections of the Tax Code apply to
investments made by employee benefit plans and transactions involving the
assets of those plans. Due to the complexity of regulations that govern those
plans, prospective benefit plan investors that are subject to ERISA or the
Tax Code are urged to consult their own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the certificates of any
series.
For more detailed information, you should refer to the section in this
prospectus titled "ERISA Considerations."
SUBORDINATED CERTIFICATES CAN BE ALLOCATED TAXABLE INCOME IN EXCESS OF
DISTRIBUTIONS RECEIVED IN A DEFAULT SITUATION
A holder of a certificate in a class of subordinate certificates could be
allocated taxable income attributable to accruals of interest and original
issue discount in excess of cash distributed to that holder if mortgage loans
were in default giving rise to delays in distributions.
For more detailed information, you should refer to the section in this
prospectus titled "Material Federal Income Tax Consequences--Taxation of
Regular Certificates."
You can find the definitions of capitalized terms that are used in the
remainder of this prospectus under the caption "Glossary" beginning on page
92 in this prospectus.
THE DEPOSITOR
The Depositor will deposit the Mortgage Loans into the Trust Fund. The
Depositor was incorporated in the State of Delaware on August 26, 1988 as a
wholly owned, limited purpose finance subsidiary of Prudential Securities
Group Inc. The principal executive offices of the Depositor are located at
One New York Plaza, New York, New York 10292, attention David Rodgers, (212)
214-1000.
The Depositor will have no servicing obligations or responsibilities with
respect to any series of Certificates, Mortgage Pool or Trust Fund. The
Depositor does not have, and does not expect to have, any significant assets.
The Depositor was organized for the purposes of establishing trusts,
selling interests in the trusts and acquiring and selling mortgage assets to
those trusts. Neither the Depositor, its parent nor any of its affiliates
will insure or guarantee collections on the Mortgage Loans or distributions
on the Certificates. Unless otherwise specified in the applicable prospectus
supplement, the assets of a Trust Fund will be acquired by the Depositor
directly or through one or more affiliates.
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USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each series of Offered Certificates to:
(1) purchase the Mortgage Loans relating to that series;
(2) repay debt that was incurred to acquire Mortgage Loans;
(3) obtain credit enhancement, if any, for the series; and
(4) pay costs of structuring, issuing and underwriting the Certificates.
Certificates may be exchanged by the Depositor for Mortgage Loans if so
specified in the applicable prospectus supplement.
DESCRIPTION OF THE CERTIFICATES
The Certificates of each series will be issued pursuant to a separate
Pooling and Servicing Agreement to be entered into among the Depositor, the
Master Servicer, the Special Servicer, if any, and the Trustee for that
series of Certificates and any other parties described in the applicable
prospectus supplement, substantially in the form filed as an exhibit to the
Registration Statement of which this prospectus is a part or in another form
as may be described in the applicable prospectus supplement. The following
summaries describe general provisions of the Certificates and the Pooling and
Servicing Agreement. However, the prospectus supplement for each series of
Certificates will more fully describe the Certificates and the provisions of
the related Pooling and Servicing Agreement, which may be different from the
following summaries.
At the time of issuance, the Offered Certificates of each series will be
rated in one of the four highest categories by a nationally recognized
statistical rating organization. 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 Agency.
GENERAL
Each series of Certificates will be issued in registered or book-entry
form and will represent beneficial ownership interests in the Trust Fund for
that series. The Trust Fund for each series will primarily include, to the
extent provided in the Pooling and Servicing Agreement:
(1) the Mortgage Loans conveyed to the Trustee pursuant to the Pooling
and Servicing Agreement;
(2) all payments on or collections from the Mortgage Loans due after the
Cut-off Date;
(3) all REO property, as defined in the applicable prospectus supplement;
(4) all revenue received in respect of any REO Property;
(5) all insurance policies with respect to the Mortgage Loans;
(6) all assignments of leases, rents and profits and security agreements;
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(7) all indemnities or guaranties given as additional security for the
Mortgage Loans;
(8) the Trustee's interest in all Reserve Accounts;
(9) the Collection Account;
(10) the Distribution Account and the REO Account;
(11) all environmental indemnities relating to the Mortgaged Properties;
(12) all rights and remedies under the Mortgage Loan Purchase and Sale
Agreement; and
(13) all proceeds of any of the foregoing (excluding interest earned on
deposits in any Reserve Account, to the extent that interest belongs
to the related borrower).
In addition, the Trust Fund for a series may include mortgage pass through
certificates not issued by the Depositor, certificates issued or guaranteed
by the FHLMC, Fannie Mae and GNMA, as well as various forms of Credit
Enhancement. See "Credit Enhancement."
If so specified in the applicable prospectus supplement, Certificates of a
given series may be issued in several classes. The classes may:
(1) pay interest at different rates,
(2) represent different allocations of the right to receive principal and
interest payments, such as subordination,
(3) be structured to receive principal payments in sequence by class
(each class in a group of sequential pay classes would be entitled to
be paid in full before the next class in the group is entitled to
receive any principal payments), or
(4) provide for payments of principal only or interest only or for
disproportionate payments of principal and interest. Subordinate
Certificates of a given series of Certificates may be offered in the
same prospectus supplement as the senior Certificates of that series
or may be offered in a separate offering document.
Each class of Certificates will be issued in the minimum denominations
specified in the applicable prospectus supplement.
The prospectus supplement for each series will contain a description of
their characteristics and specific risk factors, including, as applicable,
the following:
(1) mortgage principal prepayment effects on the weighted average lives
of classes;
(2) the risk that interest only, or disproportionately interest weighted,
classes purchased at a premium may not return their purchase prices
under rapid prepayment scenarios; and
(3) the degree to which an investor's yield is sensitive to principal
prepayments.
The Offered Certificates of each series will be freely transferable and
exchangeable at the office specified in the related Pooling and Servicing
Agreement and prospectus supplement. Some classes of Certificates, however,
may be subject to transfer restrictions described in the applicable
prospectus supplement.
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DISTRIBUTIONS ON CERTIFICATES
The Trustee (or a paying agent that may be identified in the applicable
prospectus supplement) will distribute to the Certificateholders amounts
described in the applicable prospectus supplement on the related Distribution
Date. These distributions will begin on the date specified in the applicable
prospectus supplement following the establishment of the related Trust Fund.
In general, the distributions will include previously undistributed payments
of principal (including principal prepayments, if any) and interest on the
Mortgage Loans received by the Master Servicer or the Special Servicer after
the related Cut-off Date and prior to the date specified in the applicable
prospectus supplement for each Distribution Date. The Trustee shall mail
checks for the distributions to the address of the person entitled to the
payment as it appears on the certificate register maintained by the Trustee
(or wire transfer those funds if so specified in the applicable prospectus
supplement). The final distribution in retirement of the Certificates of each
series will be made only upon presentation and surrender of the Certificates
at the office or agency specified in the notice to the Certificateholders of
the final distribution.
ACCOUNTS
The Master Servicer will establish and maintain a Collection Account in
the name of the Trustee for the benefit of the Certificateholders for each
Series of Certificates. The Master Servicer generally will be required to
deposit into the Collection Account all amounts received on or in respect of
the Mortgage Loans. The Master Servicer will be entitled to withdraw amounts
from the Collection Account to, among other things:
(1) transfer designated amounts for the related Distribution Date into
the Distribution Account;
(2) pay Property Protection Expenses, taxes, assessments and insurance
premiums and designated third-party expenses;
(3 pay accrued and unpaid servicing fees and other servicing
compensation to the Master Servicer and the Special Servicer, if any;
and
(4) reimburse the Master Servicer, the Special Servicer, the Trustee and
the Depositor for designated expenses and indemnify the Depositor,
the Master Servicer and the Special Servicer.
The applicable prospectus supplement may provide for additional
circumstances in which the Master Servicer will be entitled to make
withdrawals from the Collection Account.
The Trustee will establish a Distribution Account in the name of the
Trustee for the benefit of the Certificateholders for each series of
Certificates. The Master Servicer generally will be required to transfer to
the Distribution Account amounts held in the Collection Account to make
distributions to Certificateholders for a given Distribution Date. On each
Distribution Date, the Trustee will use amounts on deposit in the
Distribution Account to distribute interest and principal to the
Certificateholders in the manner described in the applicable prospectus
supplement.
The amount in the Collection Account or the Distribution Account at any
time may be invested in Permitted Investments that are payable on demand or
mature, or are
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subject to withdrawal or redemption, on or before the business day before the
next Master Servicer Remittance Date, in the case of the Collection Account,
or the business day before the next Distribution Date, in the case of the
Distribution Account. The Master Servicer will be required to remit to the
Distribution Account on or before the Master Servicer Remittance Date amounts
on deposit in the Collection Account that are required for distribution to
Certificateholders. The income from the investment of funds in the Collection
Account and the Distribution Account in Permitted Investments will be paid to
the Master Servicer as additional servicing compensation, and the Master
Servicer will bear the risk of loss of funds in the Collection Account and
the Distribution Account resulting from these investments. The Master
Servicer will be required to deposit the amount of any loss in the Collection
Account or the Distribution Account, as the case may be, promptly as
realized.
The Master Servicer or the Special Servicer generally will establish and
maintain a REO Account to be used in connection with REO Properties and other
Mortgaged Properties specified in the applicable prospectus supplement, if
any. To the extent set forth in the Pooling and Servicing Agreement,
withdrawals from the REO Account will be made to, among other things,
(1) make remittances to the Collection Account;
(2) pay taxes, assessments, insurance premiums, other amounts necessary
for the proper operation, management and maintenance of the REO
Properties and those Mortgaged Properties and designated third-party
expenses; and
(3) provide for the reimbursement of specific expenses in respect of the
REO Properties and those Mortgaged Properties.
The amount in the REO Account at any time may be invested in Permitted
Investments that are payable on demand or mature, or are subject to
withdrawal or redemption, on or before the business day before the day on
which those 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 will be paid to the Master Servicer,
or the Special Servicer, if applicable, as additional servicing compensation,
and the Master Servicer or the Special Servicer, as applicable, will bear the
risk of loss of funds in the REO Account resulting from those investments.
The Master Servicer or the Special Servicer, as applicable, will be required
to deposit the amount of any loss in the REO Account promptly as realized.
AMENDMENT OF POOLING AND SERVICING AGREEMENT
Generally, the Pooling and Servicing Agreement for each series may be
amended from time to time by the parties thereto without the consent of any
of the Certificateholders to:
(1) cure any ambiguity,
(2) correct or supplement any provisions that may be inconsistent with
any other provisions,
(3) amend any provision to the extent necessary or desirable to maintain
the rating or ratings assigned to each of the classes of Certificates
by each Rating Agency, or
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(4) address other matters or questions arising under the Pooling and
Servicing Agreement that will not (a) be inconsistent with the
provisions of the Pooling and Servicing Agreement, (b) result in the
downgrading, withdrawal or qualification of the rating or ratings
then assigned to any outstanding class of Certificates and (c)
adversely affect in any material respect the interests of any
Certificateholder, as evidenced by an opinion of counsel.
Each Pooling and Servicing Agreement may be amended from time to time by
the parties thereto with the consent of the holders of each of the classes of
Certificates representing at least a percentage specified in the related
Pooling and Servicing Agreement of each class of Certificates affected by the
amendment. However, no amendment shall:
(1) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans that are required to be distributed on any
Certificate, without the consent of each affected Certificateholder;
(2) change the percentage of Certificates required to consent to any
action or inaction under the Pooling and Servicing Agreement, without
the consent of the holders of all outstanding Certificates; or
(3) alter the obligations of the Master Servicer or the Trustee to make
an advance, without the consent of the holders of all Certificates
representing all of the Voting Rights of the class or classes
affected by that amendment.
Further, the Pooling and Servicing Agreement for each series may provide
that the parties, without the consent of the Certificateholders, may amend
the Pooling and Servicing Agreement to modify, eliminate or add to any of its
provisions to the extent necessary or helpful to maintain the qualification
of any REMIC related to the series or to prevent the imposition of any
additional material state or local taxes, while any of the Certificates are
outstanding. However, those actions, as evidenced by an opinion of counsel,
must not adversely affect in any material respect the interest of any
Certificateholder.
The applicable prospectus supplement will specify the method for
allocating Voting Rights among holders of Certificates of a class. Any
Certificate beneficially owned by the Depositor, the Master Servicer, the
Special Servicer, any borrower, the Trustee or any of their respective
affiliates will be deemed not to be outstanding. However, Certificates
beneficially owned by the Master Servicer, the Special Servicer, or any of
their affiliates will be deemed to be outstanding in connection with any
required consent to an amendment of the Pooling and Servicing Agreement that
relates to an action that would materially adversely affect in any material
respect the interests of the Certificateholders of any class while the Master
Servicer, the Special Servicer, or any of their affiliates owns at least a
percentage of that class specified in the related Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement relating to each series may provide
that no amendment to the Pooling and Servicing Agreement will be made unless
there has been delivered in accordance with the Pooling and Servicing
Agreement an opinion of counsel to the effect that that amendment will not
cause that series to fail to qualify as a REMIC at any time that any of the
Certificates are outstanding.
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The prospectus supplement for a series may describe other or different
provisions concerning the amendment of the related Pooling and Servicing
Agreement required by the Rating Agencies rating Certificates of that series.
TERMINATION OF POOLING AND SERVICING AGREEMENT
The obligations of the parties to the Pooling and Servicing Agreement for
each series will terminate upon:
(1) the purchase of all of the assets of the related Trust Fund, as
described in the applicable prospectus supplement;
(2) the later of (a) the distribution to Certificateholders of that
series of the final payment on the last outstanding Mortgage Loan or
(b) the disposition of all property acquired upon foreclosure or
deed-in-lieu of foreclosure with respect to the last outstanding
Mortgage Loan and the remittance to the Certificateholders of all
funds due under the Pooling and Servicing Agreement;
(3) the sale of the assets of the related Trust Fund after the principal
amounts of all Certificates have been reduced to zero under
circumstances set forth in the Pooling and Servicing Agreement; or
(4) the mutual consent of the parties and all Certificateholders.
For each series, the Trustee will give or cause to be given written notice
of termination of the Pooling and Servicing Agreement to each
Certificateholder and the final distribution under the Pooling and Servicing
Agreement will be made only upon surrender and cancellation of the related
Certificates at an office or agency specified in the notice of termination.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution for each series, the Trustee (or a
paying agent identified in the applicable prospectus supplement) will forward
to each Certificateholder a statement setting forth information relating to
the distribution as specified in the Pooling and Servicing Agreement and
described in the applicable prospectus supplement.
THE TRUSTEE
The Depositor will select a bank or trust company to act as Trustee under
the Pooling and Servicing Agreement for each series and the Trustee will be
identified, and its obligations under that Pooling and Servicing Agreement
will be described, in the applicable prospectus supplement. The Rating
Agencies rating Certificates of a series may require the appointment of a
Fiscal Agent to guarantee one or more obligations of the Trustee who would be
a party to the Pooling and Servicing Agreement. In that event, the Fiscal
Agent will be identified, and its obligations under the Pooling and Servicing
Agreement will be described, in the applicable prospectus supplement. See
"Servicing of the Mortgage Loan--Material Matters with Respect to the Master
Servicer, the Special Servicer, the Trustee and the Depositor."
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THE MORTGAGE POOLS
GENERAL
Each Mortgage Pool will consist of mortgage loans secured by first or
junior Mortgages on, or Installment Contracts for the sale of, fee simple or
leasehold interests in Mortgaged Properties consisting of properties improved
by office buildings, health-care related properties, congregate care
facilities, hotels and motels, industrial properties, warehouse,
mini-warehouse, and self-storage facilities, mobile home parks, multifamily
properties, cooperative apartment buildings, nursing homes, office/retail
properties, anchored retail properties, single-tenant retail properties,
unanchored retail properties and other commercial real estate properties,
multifamily residential properties and/or mixed residential commercial
properties.
All Mortgage Loans will be of one or more of the following types:
(1) Mortgage Loans with fixed interest rates;
(2) Mortgage Loans with adjustable interest rates;
(3) Mortgage Loans whose principal balances fully amortize over their
remaining terms to maturity;
(4) Mortgage Loans whose principal balances do not fully amortize, but
instead provide for a substantial principal payment at the stated
maturity of the loan (commonly known as balloon loans);
(5) Mortgage Loans that provide for recourse against only the Mortgaged
Properties; and
(6) Mortgage Loans that provide for recourse against the other assets of
the related borrowers.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements or operating agreements relating to the
Mortgaged Property and in some cases by letters of credit, personal
guarantees or both. Pursuant to an assignment of leases and rents, the
obligor on the related Note assigns its right, title and interest as landlord
under each lease and the income derived from that lease to the related
mortgagee, while retaining a license to collect the rents for so long as
there is no default. If the obligor defaults, the license terminates and the
related mortgagee is entitled to collect the rents from tenants to be applied
to the monetary obligations of the obligor. State law may limit or restrict
the enforcement of the assignment of leases and rents by a mortgagee until
the mortgagee takes possession of the related mortgaged property and/or a
receiver is appointed. For more detailed information, you should refer to the
section in this prospectus titled "Material Legal Aspects Of The Mortgage
Loans--Leases and Rents."
If specified in the applicable prospectus supplement, a Trust Fund may
include a number of Mortgage Loans with a single obligor or related obligors,
however, the principal balance of mortgage loans to a single obligor or group
of related obligors will not exceed 45% of the initial principal amount of
the Certificates for a series. If the Mortgage Pool securing Certificates for
any series includes a Mortgage Loan or mortgage-backed security or a group of
Mortgage Loans or mortgage-backed securities
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of a single obligor or group of related obligors representing 10% or more,
but less than 45%, of the principal amount of those Certificates, the
prospectus supplement will contain information, including financial
information, regarding the credit quality of the obligors. The Mortgage Loans
will be newly originated or seasoned, and will be acquired by the Depositor
either directly or through one or more affiliates.
Unless otherwise specified in the prospectus supplement, the Mortgage
Loans will not be insured or guaranteed by the United States, any
governmental agency, any private mortgage insurer or any other person or
entity.
The applicable prospectus supplement relating to each series will specify
(1) the Mortgage Loan Seller or Mortgage Loan Sellers relating to the
Mortgage Loans, which may include REITs, commercial banks, savings and loan
associations, other financial institutions, mortgage banks, credit companies,
insurance companies, real estate developers or other HUD approved lenders,
and (2) the underwriting criteria to the extent available in connection with
originating the Mortgage Loans. The criteria applied by the Depositor in
selecting the Mortgage Loans to be included in a Mortgage Pool will vary from
series to series. The prospectus supplement relating to each series also will
provide specific information regarding the characteristics of the Mortgage
Loans as of the Cut-off Date, including:
(1) the aggregate principal balance of the Mortgage Loans;
(2) the types of properties securing the Mortgage Loans and the aggregate
principal balance of the Mortgage Loans secured by each type of
property;
(3) the interest rate or range of interest rates of the Mortgage Loans;
(4) the origination dates and the original and, for seasoned Mortgage
Loans, remaining terms to stated maturity of the Mortgage Loans;
(5) the loan-to-value ratios at origination and, for seasoned Mortgage
Loans, current loan balance-to-original value ratios of the Mortgage
Loans;
(6) the geographic distribution of the Mortgaged Properties underlying
the Mortgage Loans;
(7) the minimum interest rates, margins, adjustment caps, adjustment
frequencies, indices and other similar information applicable to
adjustable rate Mortgage Loans;
(8) the debt service coverage ratios relating to the Mortgage Loans; and
(9) payment delinquencies, if any, relating to the Mortgage Loans.
On the Closing Date, not more than 5% of the aggregate principal balances
of the Mortgage Loans will be Mortgage Loans not described in the related
prospectus supplement.
The applicable prospectus supplement will also specify any materially
inadequate documentation relating to the Mortgage Loans and other
characteristics of the Mortgage Loans relating to each series. If specified
in the applicable prospectus supplement, the Depositor may segregate the
Mortgage Loans in a Mortgage Pool into
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separate "Mortgage Loan Groups" (as described in the applicable prospectus
supplement) as part of the structure of the payments of principal and
interest on the Certificates of a series. In that case, the Depositor will
disclose the above-specified information by Mortgage Loan Group.
The Depositor will file a current report on Form 8-K with the SEC within
15 days after the Closing Date of each series of Certificates, as specified
in the applicable prospectus supplement, which will set forth information
with respect to the Mortgage Loans included in the Trust Fund for a series as
of the related Closing Date. The Form 8-K will be available to the
Certificateholders of the related series promptly after its filing.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates of each series, the Depositor
will assign to the Trustee the Mortgage Loans, together with all scheduled
payments of interest and principal due after the Cut-off Date (regardless
whether received prior to the Cut-off Date) and all payments of interest and
principal received by the Depositor or the Master Servicer on or with respect
to the Mortgage Loans after the Cut-off Date. The Trustee will execute and
deliver Certificates evidencing the beneficial ownership interests in the
related Trust Fund to the Depositor in exchange for the Mortgage Loans. Each
Mortgage Loan will be identified in the Mortgage Loan Schedule appearing as
an exhibit to the Pooling and Servicing Agreement for the related series. The
Mortgage Loan Schedule will contain information on each Mortgage Loan,
including the outstanding principal balance as of the close of business on
the Cut-off Date, the interest rate, the scheduled monthly (or other
periodic) payment of principal and interest as of the Cut-off Date, the
maturity date of each Note and the address of the property securing the Note.
In addition, the Depositor will, as to each Mortgage Loan, deliver to the
Trustee:
(1) the Note, endorsed to the order of the Trustee without recourse;
(2) the Mortgage and an executed assignment of the Mortgage in favor of
the Trustee or otherwise as required by the Pooling and Servicing
Agreement;
(3) any assumption, modification or substitution agreements relating to
the Mortgage Loan;
(4) a mortgagee's title insurance policy (or owner's policy in the case
of an Installment Contract), together with endorsements, or an
attorney's opinion of title issued as of the date of origination of
the Mortgage Loan; and
(5) other relevant documents described in the applicable prospectus
supplement.
REPRESENTATIONS AND WARRANTIES
The Mortgage Loan Seller will make representations and warranties in the
Mortgage Loans sold by the Mortgage Loan Seller to the Depositor. The
Mortgage Loan Seller may be an affiliate of the Depositor. The
representations and warranties will generally include:
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(1) that title insurance (or in the case of Mortgaged Properties located
in areas where title insurance is generally not available, an
attorney's opinion of title) and any required hazard insurance on the
related Mortgaged Property was effective at the origination of each
Mortgage Loan, and that each policy (or opinion of title) remained in
effect on the date of purchase of the Mortgage Loan from the Mortgage
Loan Seller,
(2) that the Mortgage Loan Seller had good and marketable (or
indefeasible, in the case of real property located in Texas) title to
each Mortgage Loan,
(3) that each mortgage constituted a valid first lien on the Mortgaged
Property (subject only to permissible title insurance exceptions);
(4) that there were no delinquent tax or assessment liens against the
Mortgaged Property; and
(5) that all required payments were current for each Mortgage Loan.
Each prospectus supplement will specify the representations and warranties
being made by the Mortgage Loan Seller.
All of the representations and warranties of a Mortgage Loan Seller about
a Mortgage Loan generally will be made as of the date the Mortgage Loan
Seller sold the Mortgage Loan to the Depositor. The applicable prospectus
supplement will indicate if a different date is applicable. A substantial
period of time may have elapsed between that date and the date of the initial
issuance of the series of Certificates evidencing an interest in that
Mortgage Loan. Since the representations and warranties of the Mortgage Loan
Seller do not address events that may occur following the sale of a Mortgage
Loan by the Mortgage Loan Seller, the repurchase obligation of the Mortgage
Loan Seller described below will not arise if, on or after the date of the
sale of a Mortgage Loan by the Mortgage Loan Seller to the Depositor, the
relevant event occurs that would have given rise to that obligation. However,
the Depositor will not include any Mortgage Loan in the Trust Fund for any
series of Certificates if anything has come to the its attention that would
cause it to believe that the representations and warranties of the Mortgage
Loan Seller about the Mortgage Loan will not be accurate and complete in all
material respects as of the related Cut-off Date. If specified in the
applicable prospectus supplement, the Depositor will make representations and
warranties about a Mortgage Loan for the benefit of Certificateholders of a
series as of the date of sale of that Mortgage Loan to the Depositor.
Upon the discovery of the breach of any representation or warranty made by
the Mortgage Loan Seller about a Mortgage Loan that materially and adversely
affects the interests of the Certificateholders of the related series, the
Mortgage Loan Seller generally will be obligated to repurchase that Mortgage
Loan. The purchase price for that Mortgage Loan will generally equal the
unpaid principal balance of that Mortgage Loan at the date of repurchase or,
in the case of a series of Certificates as to which the Depositor has elected
to treat the related Trust Fund as a REMIC, at a price that avoids a tax on a
prohibited transaction, as described in Section 860F(a) of the Tax Code, in
each case together with accrued interest at the interest rate for that
Mortgage Loan to the first day of the month following the repurchase and the
amount of any unreimbursed
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advances made by the Master Servicer in respect of the Mortgage Loan,
together with interest on that advanced amount at the reimbursement rate. The
Master Servicer must enforce the repurchase obligation of the Mortgage Loan
Seller for the benefit of the Trustee and the Certificateholders following
the practices it would employ in its good faith business judgment were it the
owner of the Mortgage Loan. This repurchase obligation will generally
constitute the sole remedy available to the Certificateholders of a series
for a breach of a representation or warranty by a Mortgage Loan Seller, and
the Depositor and the Master Servicer will have no liability to the Trust
Fund for any breach of that sort. The applicable prospectus supplement will
indicate whether any additional remedies will be available to the
Certificateholders. No assurance can be given that a Mortgage Loan Seller
will carry out its repurchase obligation with respect to the Mortgage Loans.
If specified in the applicable prospectus supplement, the Mortgage Loan
Seller may be permitted to substitute alternate Mortgage Loans upon the
occurrence of the following:
(1) Mortgage Loans initially included in a Trust Fund do not conform to
their description in the applicable prospectus supplement; or
(2) a breach of a representation or warranty by the Mortgage Loan Seller
that materially and adversely affects the interests of the
Certificateholders is discovered or a document in the related
Mortgage Loan File is materially defective.
The Mortgage Loan Seller may substitute alternate Mortgage Loans by
delivering replacement Mortgage Loans to the Trustee within a specified
period of time after the issuance of that series of Certificates. The
applicable prospectus supplement will describe any required characteristics
of substituted Mortgage Loans.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer will be specified in the applicable prospectus
supplement and may be an affiliate of the Depositor. Each prospectus
supplement will provide information about the Master Servicer. The Master
Servicer will be responsible for servicing the Mortgage Loans pursuant to the
Pooling and Servicing Agreement for the related series. To the extent
described in the applicable prospectus supplement, one or more Special
Servicers may be a party to the Pooling and Servicing Agreement or may be
appointed by holders of designated classes of Regular Certificates or by
another specified party. Information about the Special Servicer will be set
forth in the applicable prospectus supplement.
A Special Servicer for any series of Certificates may be an affiliate of
the Depositor or the Master Servicer and may hold, or be affiliated with the
holder of, Subordinate Certificates of that series. A Special Servicer may be
entitled to any of the rights and subject to any of the obligations of a
Master Servicer. In general, a Special Servicer's duties will relate to
defaulted Mortgage Loans or Specially Serviced Mortgage Loans, including
instituting foreclosures, negotiating work-outs and asset management
activities with respect to any REO Property. The applicable prospectus
supplement will describe the rights, obligations and compensation of any
Special Servicer for a particular series of Certificates. The Master Servicer
or Special Servicer generally may subcontract the servicing of all or a
portion of the Mortgage Loans to one or more sub-servicers provided that
specified conditions are met. A sub-servicer may be an affiliate of the
Depositor and may have other business relationships with Depositor and its
affiliates.
COLLECTIONS AND OTHER SERVICING PROCEDURES
The Master Servicer and the Special Servicer will each use reasonable
efforts to collect all payments under the Mortgage Loans and will follow
collection procedures as it deems necessary or desirable. Unless otherwise
specified in the applicable prospectus supplement, the Master Servicer or the
Special Servicer may, in its discretion, waive any late payment charge or
penalty fees in connection with a late payment of a Mortgage Loan and, if
specified in the applicable prospectus supplement, may extend the due dates
for payments due on a Mortgage Loan.
The Master Servicer will establish and maintain an Escrow Account in which
the Master Servicer must deposit amounts received from each borrower, if
required by the terms of the related Mortgage Loan documents, to provide for
the Escrow Payments. The Special Servicer must remit amounts received for
that purpose on Mortgage Loans serviced by it to the Master Servicer for
deposit into the Escrow Account, and will be entitled to direct the Master
Servicer to make withdrawals from the Escrow Account if required for
servicing of those Mortgage Loans. Withdrawals from the Escrow Account
generally may be made to:
(1) effect timely payment of taxes, assessments, mortgage and hazard
insurance premiums and other comparable items;
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(2) transfer funds to the Collection Account to reimburse the Master
Servicer or the Trustee, as applicable, for any advance, with
interest, relating to Escrow Payments;
(3) restore or repair the Mortgaged Properties;
(4) clear and terminate that account;
(5) pay interest and other amounts to borrowers on balances in the Escrow
Account, if required by the terms of the related Mortgage Loan
documents or by applicable law; and
(6) remove amounts not required to be deposited in the Escrow Account.
The applicable prospectus supplement may provide for other permitted
withdrawals from the Escrow Account. The Master Servicer will be entitled to
all income on the funds in the Escrow Account invested in Permitted
Investments not required to be paid to borrowers by the terms of the related
Mortgage Loan documents or by applicable law. The Master Servicer will be
responsible for the administration of the Escrow Account.
INSURANCE
The Master Servicer will use its reasonable efforts to require each
borrower to maintain insurance in accordance with the related Mortgage Loan
documents, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related Mortgage
Loan, the coverage of each standard hazard insurance policy will be in an
amount that is at least equal to the lesser of:
(1) the full replacement cost of the improvements and equipment securing
the Mortgage Loan; or
(2) the outstanding principal balance owing on the Mortgage Loan or the
amount necessary to prevent any reduction in the policy by reason of
the application of co-insurance and to prevent the Trustee under the
Mortgage Loan from being deemed to be a co-insurer, in each case with
a replacement cost rider.
The Master Servicer will also use reasonable efforts to require each borrower
to maintain the following insurance:
(1) insurance providing coverage against 12 months of rent interruptions;
and
(2) any other insurance required by the related Mortgage Loan documents.
Subject to the requirements for modification, waiver or amendment of a
Mortgage Loan (See "Modifications, Waivers and Amendments"), the Master
Servicer may in its reasonable discretion consistent with the servicing
standard set forth in the related Pooling and Servicing Agreement waive the
requirement of a Mortgage Loan that the related borrower maintain earthquake
insurance on the related Mortgaged Property.
If a Mortgaged Property is located at the time of origination of the
related Mortgage Loan in a federally designated special flood hazard area,
the Master Servicer will use reasonable efforts to require the related
borrower to maintain flood insurance in an amount equal to the lesser of the
unpaid principal balance of the related Mortgage
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Loan and the maximum amount obtainable for the Mortgage Loan. The related
Pooling and Servicing Agreement will provide that the Master Servicer will be
required to maintain the foregoing insurance if the related borrower fails to
maintain this insurance to the extent available at commercially reasonable
rates and to the extent the Trustee, as mortgagee, has an insurable interest.
The cost of insurance maintained by the Master Servicer will be advanced by
the Master Servicer.
The Master Servicer or the Special Servicer will cause to be maintained
fire and hazard insurance with extended coverage on each REO Property in an
amount that is at least equal to the full replacement cost of the
improvements and equipment on that REO Property. The cost of insurance with
respect to an REO Property will be payable out of amounts on deposit in the
related REO Account or will be advanced by the Master Servicer or the Special
Servicer. The Master Servicer or the Special Servicer will maintain flood
insurance providing substantially the same coverage as described above on any
REO Property that was located in a federally designated special flood hazard
area at the time the related Mortgage Loan was originated. The Master
Servicer or the Special Servicer will maintain for each REO Property:
(1) public liability insurance;
(2) loss of rent endorsements; and
(3) any other insurance required in the related Mortgage Loan documents.
Any insurance that is required to be maintained on any REO Property will
only be required to the extent available at commercially reasonable rates.
The related Pooling and Servicing Agreement will provide that the Master
Servicer or Special Servicer may satisfy its obligation to cause hazard
insurance policies to be maintained by maintaining a master force placed
insurance policy insuring against losses on the Mortgage Loans or REO
Properties, as the case may be. The incremental cost of hazard insurance
allocable to any particular Mortgage Loan or REO Property, if not borne by
the related borrower, will be an expense of the Trust Fund. Alternatively,
the Master Servicer or Special Servicer, if any, may satisfy its obligation
by maintaining, at its expense, a blanket policy (that is, not a master force
placed policy) insuring against losses on the Mortgage Loans or REO
Properties, as the case may be. If a blanket or master force placed policy
contains a deductible clause, the Master Servicer or the Special Servicer, if
any, will be obligated to deposit in the Collection Account all sums that
would have been deposited but for that clause to the extent any deductible
exceeds:
(1) the deductible limitation that pertained to the related Mortgage
Loan, or
(2) in the absence of any deductible limitation, the deductible
limitation that is consistent with the servicing standard under the
related Pooling and Servicing Agreement.
In general, the standard form of fire and hazard extended coverage
insurance policy will cover physical damage to, or destruction of, the
improvements on the Mortgaged Property caused by fire, lightning, explosion,
smoke, windstorm, hail, riot, strike and civil commotion, subject to the
conditions and exclusions particularized in each policy. Since the standard
hazard insurance policies relating to the Mortgage Loans will be
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underwritten by different insurers and will cover Mortgaged Properties
located in various states, they will not contain identical terms and
conditions. Their most significant terms, however, generally will be
determined by state law and conditions. Most standard hazard insurance
policies typically 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), nuclear
reaction, wet or dry rot, vermin, rodents, insects or domestic animals, theft
and, in some cases, vandalism. The foregoing list merely indicates some types
of uninsured risks and is not intended to be all-inclusive. Any losses
incurred with respect to Mortgage Loans due to uninsured risks (including
earthquakes, mudflows and floods) or insufficient hazard insurance proceeds
could affect distributions to the Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
typically will contain a "coinsurance" clause which, in effect, will require
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 Mortgaged Property to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, the "co-insurance"
clause will provide that the insurer's liability upon a partial loss will not
exceed the greater of:
(1) the actual cash value (the replacement cost less physical
depreciation) of the improvements damaged or destroyed; and
(2) the proportion of the loss, without deduction for depreciation, as
the amount of insurance carried bears to the specified percentage of
the full replacement cost of those improvements.
The prospectus supplement may describe other provisions concerning the
insurance policies required to be maintained under the related Pooling and
Servicing Agreement.
Unless otherwise specified in the applicable prospectus supplement, no
pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans nor will any Mortgage Loan be subject to FHA insurance.
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act of
1934, as amended, and the United States Housing Act of 1937, as amended. To
the extent specified in the applicable prospectus supplement, all or a
portion of the Mortgage Loans may be insured by the FHA. The Master Servicer
will be required to take those steps as are reasonably necessary to keep the
FHA insurance in full force and effect.
FIDELITY BONDS AND ERRORS AND OMISSIONS
The Master Servicer and the Special Servicer are generally required to
obtain and maintain in effect a fidelity bond or similar form of insurance
coverage (which may provide blanket coverage) insuring against loss by fraud,
theft or other intentional misconduct of the officers and employees of the
Master Servicer and the Special Servicer. The Master Servicer and the Special
Servicer may self-insure against loss occasioned by the errors and omissions
of the officers and employees of the Master Servicer and the Special Servicer
so long as the criteria set forth in the related Pooling and Servicing
Agreement are met.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under the
Pooling and Servicing Agreement for each series will be a "Servicing Fee" (as
defined in the applicable prospectus supplement) with respect to each
Mortgage Loan. The exact amount and calculation of the Servicing Fee will be
established in the prospectus supplement and Pooling and Servicing Agreement
for the related series. Because the aggregate unpaid principal balance of the
Mortgage Loans will generally decline over time, the Master Servicer's
servicing compensation will ordinarily decrease as the Mortgage Loans
amortize. In addition, the Master Servicer may be entitled to receive, as
additional compensation, (1) Prepayment Premiums, late fees and other fees
collected from borrowers and (2) all income earned on funds deposited in the
Collection Account and Distribution Account (as described under "Description
of the Certificates--Accounts") and, except to the extent the income on those
funds is required to be paid to the related borrowers, the Escrow Account.
The Master Servicer will generally pay the fees and expenses of the Trustee.
The amount and calculation of the Special Servicing Fee will be described in
the prospectus supplement and Pooling and Servicing Agreement for the related
series. In addition to the compensation described above, the Master Servicer
and the Special Servicer (or any other party specified in the applicable
prospectus supplement) may retain, or be entitled to the reimbursement of,
other amounts and expenses as described in the applicable prospectus
supplement.
ADVANCES
The applicable prospectus supplement will describe any obligations of the
Master Servicer and the Special Servicer to make any advances for delinquent
payments on Mortgage Loans, payments of taxes, assessments, insurance
premiums and Property Protection Expenses or otherwise. Any advances will be
made in the form and manner described in the prospectus supplement and
Pooling and Servicing Agreement for the related series.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Master Servicer or the Special Servicer will have the discretion to
modify, waive or amend a some of the terms of any Mortgage Loan without the
consent of the Trustee or any Certificateholder subject to conditions that
are listed in the Pooling and Servicing Agreement, including the condition
that any modification, waiver or amendment will not result in the Mortgage
Loan ceasing to be a "qualified mortgage" under the REMIC Regulations.
EVIDENCE OF COMPLIANCE
A firm of independent certified public accountants will provide the
related Trustee with a report, on or before a specified date of each year
beginning a specified time after the Cut-off Date, stating that:
(1) it has obtained a letter of representation from an officer of the
Master Servicer or Special Servicer, which includes an assertion that
the Master Servicer or Special Servicer has complied with the minimum
mortgage loan servicing standards (to the extent applicable to
commercial and multifamily mortgage loans) identified in the Uniform
Single Attestation Program for Mortgage
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Bankers established by the Mortgage Bankers Association of America,
with respect to the Master Servicer's or, if applicable, the Special
Servicer's servicing of commercial and multifamily mortgage loans
during the most recently completed calendar year; and
(2) on the basis of an examination conducted by that firm in accordance
with standards established by the American Institute of Certified
Public Accountants, the representation is fairly stated in all
material respects, subject only to exceptions and other
qualifications that, in its opinion, those standards require it to
report.
In rendering its report the accounting firm may rely, as to the matters
relating to the direct servicing of commercial and multifamily mortgage loans
by sub-servicers, upon comparable reports of firms of independent public
accountants rendered on the basis of examination of those sub-servicers
conducted in accordance with the same standards (rendered within one year of
its report). The prospectus supplement may provide that additional reports of
independent certified public accountants relating to the servicing of
mortgage loans may be required to be delivered to the Trustee.
In addition, the Master Servicer and the Special Servicer generally will
each deliver to the Trustee, the Depositor and each Rating Agency, annually
on or before a date specified in the Pooling and Servicing Agreement, a
statement signed by an officer of the Master Servicer or the Special
Servicer, as applicable, to the effect that, based on a review of its
activities during the preceding calendar year, to the best of that officer's
knowledge, the Master Servicer or the Special Servicer, as applicable, has
fulfilled in all material respects its obligations under the Pooling and
Servicing Agreement throughout that year or, if there has been a default in
the fulfillment of any its obligation, specifying each default known to that
officer.
MATERIAL MATTERS WITH RESPECT TO THE MASTER SERVICER, THE
SPECIAL SERVICER, THE TRUSTEE AND THE DEPOSITOR
The Pooling and Servicing Agreement for each series will also provide that
none of the Depositor, the Master Servicer, the Special Servicer, or any
general or limited partner, director, officer, employee or agent of the
Depositor, the Master Servicer or the Special Servicer, will be under any
liability to the Trust Fund or the Certificateholders for taking any action
or for refraining from taking any action in good faith pursuant to the
Pooling and Servicing Agreement, or for errors in judgment. However, neither
the Depositor, the Master Servicer, the Special Servicer nor any partner,
director, officer, employee or agent of any of them will be protected
against:
(1) any liability for a breach of any representations or warranties under
the Pooling and Servicing Agreement; and
(2) any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith, fraud or negligence (or, in the case of the
Master Servicer or Special Servicer, if any, a breach of the
servicing standards set forth in the Pooling and Servicing Agreement)
in the performance of its duties or by reason of negligent disregard
of its respective obligations and duties under the Pooling and
Servicing Agreement.
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The Pooling and Servicing Agreement will further provide that the
Depositor, the Master Servicer, the Special Servicer, and any limited or
general partner, director, officer, employee or agent of the Depositor, the
Master Servicer, the Special Servicer, will be indemnified 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 its
respective willful misfeasance, bad faith, fraud or negligence (or, in the
case of the Master Servicer or the Special Servicer, a breach of the
servicing standard set forth in the Pooling and Servicing Agreement) in the
performance of duties under the Pooling and Servicing Agreement or by reason
of negligent disregard of its respective obligations and duties under the
Pooling and Servicing Agreement. Any loss resulting from indemnification by
the Trust Fund will reduce amounts distributable to Certificateholders. The
prospectus supplement will specify any variations to the foregoing required
by the Rating Agencies rating a series of Certificates.
In addition, the Pooling and Servicing Agreement will generally provide
that none of the Depositor, the Special Servicer or the Master Servicer, or
any limited or general partner, director, officer, employee or agent of the
Depositor, the Master Servicer or the Special Servicer, will be under any
obligation to appear in, prosecute or defend any legal action that is not
related to its duties under the Pooling and Servicing Agreement and which, in
its opinion, may cause it to incur any expense or liability. The Master
Servicer or the Special Servicer may, in its discretion, undertake any action
that is related to its obligations under the Pooling and Servicing Agreement
and that it deems necessary or desirable. In that event, the legal expenses
of that action and any resulting liability (except any liability related to
the Master Servicer's or the Special Servicer's obligations to service the
Mortgage Loans in accordance with the servicing standard under the Pooling
and Servicing Agreement) will be expenses of the Trust Fund, and the Master
Servicer or Special Servicer will be entitled to be reimbursed therefor.
Under the Pooling and Servicing Agreement, there may be a successor to the
Master Servicer or the Special Servicer, subject to the following
restrictions:
(1) each of the Rating Agencies must confirm in writing that any merger
or consolidation and succession of the Master Servicer or the Special
Servicer will not result in a downgrading, withdrawal or
qualification of the rating then assigned by that Rating Agency to
any class of the Certificates; and
(2) any additional restrictions on merger or consolidation of the Master
Servicer or the Special Servicer described in the applicable
prospectus supplement must be satisfied.
A successor of the Master Servicer or the Special Servicer may be:
(1) any person into which the Master Servicer or the Special Servicer may
be merged or consolidated, or
(2) any person resulting from any merger or consolidation to which the
Master Servicer or the Special Servicer is a party, or
(3) any person succeeding to the business of the Master Servicer or the
Special Servicer.
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The successor will be deemed to have assumed all of the liabilities and
obligations of the Master Servicer or the Special Servicer under the Pooling
and Servicing Agreement.
Generally, the Master Servicer or the Special Servicer may assign its
rights and delegate its duties and obligations under the Pooling and
Servicing Agreement in connection with the sale or transfer of a substantial
portion of its mortgage servicing or asset management portfolio provided that
specified conditions are met, including the written consent of the Trustee
and written confirmation by each of the Rating Agencies that the assignment
and delegation by the Master Servicer or the Special Servicer will not, in
and of itself, result in a downgrading, withdrawal or qualification of the
rating then assigned by that Rating Agency to any class of Certificates. The
applicable prospectus supplement will describe any additional restrictions on
assignments of Master Servicer or the Special Servicer's obligations.
The Pooling and Servicing Agreement will provide that the Master Servicer
or the Special Servicer may not resign from its obligations and duties as
Master Servicer or Special Servicer under the Pooling and Servicing
Agreement, except upon the determination that performance of its duties is no
longer permissible under applicable law and provided that the determination
is evidenced by an opinion of counsel delivered to the Trustee. No
resignation or removal will become effective until the Trustee or a successor
Master Servicer or Special Servicer has assumed the obligations of the Master
Servicer or the Special Servicer under the Pooling and Servicing Agreement.
The Trustee for each Pooling and Servicing Agreement will be named in the
applicable prospectus supplement. The commercial bank or trust company
serving as Trustee may have normal banking relationships with the Depositor,
the Master Servicer, the Special Servicer and/or any of their respective
affiliates.
The Trustee can resign from its obligations under the Pooling and
Servicing Agreement at any time, in which event a successor Trustee will be
appointed. In addition, the Depositor may remove the Trustee if the Trustee
ceases to be eligible to act as Trustee under the Pooling and Servicing
Agreement or becomes insolvent, at which time the Depositor will appoint a
successor Trustee. The Trustee may also be removed at any time by the holders
of Certificates evidencing the percentage of Voting Rights specified in the
applicable prospectus supplement. Any resignation and removal of the Trustee,
and the appointment of a successor Trustee, will not become effective until
acceptance of the appointment by the successor Trustee.
The Depositor is not obligated to monitor or supervise the performance of
the Master Servicer, Special Servicer, if any, or the Trustee under the
Pooling and Servicing Agreement.
EVENTS OF DEFAULT
Events of Default with respect to the Master Servicer or the Special
Servicer under the Pooling and Servicing Agreement for each series will
consist of:
(1) any failure by the Master Servicer or the Special Servicer to remit
to the Collection Account or any failure by the Master Servicer to
remit to the Trustee for deposit into the Distribution Account any
amount required to be remitted pursuant to the Pooling and Servicing
Agreement;
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(2) any failure by the Master Servicer or Special Servicer to observe or
perform in any material respect any of its other covenants or
agreements or the breach of its representations or warranties (which
breach materially and adversely affects the interests of the
Certificateholders, the Trustee, the Master Servicer or the Special
Servicer with respect to any Mortgage Loan) which in each case
continues unremedied for 30 days after the giving of written notice
of that failure to the Master Servicer or the Special Servicer, as
applicable, by the Depositor or the Trustee, or to the Master
Servicer or Special Servicer, if any, by the Depositor and the
Trustee by the holders of Certificates evidencing Voting Rights of at
least 25% of any affected Class;
(3) confirmation in writing by any of the Rating Agencies that the then
current rating assigned to any class of Certificates would be
withdrawn, downgraded or qualified unless the Master Servicer or
Special Servicer, as applicable, is removed;
(4) events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings and actions by, on behalf of or
against the Master Servicer or Special Servicer indicating its
insolvency or inability to pay its obligations; or
(5) any failure by the Master Servicer to make a required advance.
The applicable prospectus supplement may provide for other Events of Default
to the extent required by the Rating Agencies rating a series of
Certificates.
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default remains unremedied, the Trustee may, and at
the written direction of the holders of Certificates representing 25% of the
aggregate Voting Rights of all Certificates will, terminate all the rights
and obligations of the Master Servicer or Special Servicer, as the case may
be. Upon any termination of the Master Servicer or the Special Servicer, as
applicable, under the Pooling and Servicing Agreement, the Master Servicer or
the Special Servicer, as applicable, will receive all accrued and unpaid
servicing compensation through the date of termination plus, in the case of
the Master Servicer, all advances (plus interest on advances) as provided in
the Pooling and Servicing Agreement.
The holders of Certificates representing at least 66 2/3% of the aggregate
Voting Rights of the Certificates may, on behalf of all holders of
Certificates, waive any default by the Master Servicer or Special Servicer,
if any, in the performance of its obligations under the Pooling and Servicing
Agreement and its consequences, except a default in making any required
deposits to (including advances) or payments from the Collection Account or
the Distribution Account or in remitting payments as received, in each case
in accordance with the Pooling and Servicing Agreement. Upon any waiver of a
past default, that default will cease to exist, and any Event of Default
arising from that default will be deemed to have been remedied for every
purpose of the Pooling and Servicing Agreement. No waiver will impair
Certificateholder's rights with respect to subsequent defaults.
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On and after the date of termination, the Trustee will succeed to all
authority and power of the Master Servicer or the Special Servicer, as
applicable, under the Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements to which the Master Servicer or the Special
Servicer, as applicable, would have been entitled. The Trustee must appoint,
or petition a court of competent jurisdiction for the appointment of, an
established mortgage loan servicing institution with a net worth of at least
$10,000,000 and that is either Fannie Mae or FHLMC approved (the appointment
of which will not result in the downgrading, withdrawal or qualification 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 Master Servicer
or the Special Servicer, as applicable, if:
(1) the Trustee is unwilling or unable to act in that capacity;
(2) the holders of Certificates representing a majority of the aggregate
Voting Rights request;
(3) the Trustee is not rated in one of its two highest long-term debt
rating categories by each of the Rating Agencies; or
(4) the Trustee is not approved as a servicer by the Rating Agencies.
The Trustee will be obligated to act as Master Servicer or Special
Servicer as applicable until a successor is appointed. The Trustee and any
successor may agree upon the servicing compensation to be paid, which cannot
be greater than the compensation payable to the Master Servicer or the
Special Servicer, as the case may be, under the Pooling and Servicing
Agreement.
No Certificateholder will have the right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and
Servicing Agreement or the Mortgage Loans, unless:
(1) the holder has given the Trustee a written notice of a default under
the Pooling and Servicing Agreement and of the continuance of the
default;
(2) the holders of Certificates representing a majority of the aggregate
Voting Rights allocated to each affected class have made written
request of the Trustee to institute the proceeding in its own name as
Trustee under the Pooling and Servicing Agreement and have offered to
the Trustee reasonable indemnity as it may require against the
related costs, expenses and liabilities; and
(3) the Trustee, for 30 days after its receipt of the notice, request and
offer of indemnity described above, has neglected or refused to
institute the requested proceeding.
The Trustee will have no obligation to institute, conduct or defend any
litigation under or related to the Pooling and Servicing Agreement at the
request, order or direction of any of the holders of Certificates, unless the
holders of Certificates have offered to the Trustee reasonable security or
indemnity against the related costs, expenses and liabilities which may be
incurred by the Trustee by taking those actions.
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CREDIT ENHANCEMENT
GENERAL
The amounts, types and provider of Credit Enhancement for one or more
classes of a series of Certificates or the related Mortgage Loans, if any,
will be specified in the applicable prospectus supplement. Credit Enhancement
may be in the form of a letter of credit, the subordination of one or more
classes of the Certificates of a series, the establishment of one or more
reserve funds, surety bonds, certificate guarantee insurance, the use of
cross-support features, limited guarantees or another method of Credit
Enhancement described in the applicable prospectus supplement, or any
combination of the foregoing.
It is unlikely that Credit Enhancement will provide protection against all
risks of loss or guarantee repayment of the entire principal balance of the
Certificates and interest on the Certificates. If losses occur that exceed
the amount covered by Credit Enhancement or that are not covered by Credit
Enhancement, Certificateholders will bear their allocable share of losses.
See "Risk Factors--Credit enhancement Limitations will not be provided for
all certificates; credit enhancement will not cover all losses so you may not
receive full payment even where there is credit enhancement."
ENHANCEMENT LIMITATION
If Credit Enhancement is provided with respect to a series or the related
Mortgage Loans, we will provide the following information prior to the date
of the applicable prospectus supplement:
(1) the amount payable under the Credit Enhancement;
(2) any conditions to payment of Credit Enhancement not described in this
prospectus;
(3) the conditions (if any) under which the amount payable under the
Credit Enhancement may be reduced and under which the Credit
Enhancement may be terminated or replaced; and
(4) the material provisions of any agreement relating to the Credit
Enhancement.
Additionally, prior to the date of the applicable prospectus supplement,
we will provide the information set forth below with respect to the issuer of
any third-party Credit Enhancement, including:
(1) a brief description of its principal business activities;
(2) its principal place of business, the jurisdiction of organization and
the jurisdictions under which it is chartered or licensed to do
business;
(3) if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business; and
(4) its total assets and stockholders' or policyholders' surplus, if
applicable, as of the date specified in that prospectus supplement.
If the holders of any Certificates of any series will be materially
dependent upon the issuer of any third party Credit Enhancement for timely
payment of interest and/or
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principal on their Certificates, the Depositor will file a current report on
Form 8-K on or prior to the date of the applicable prospectus supplement,
which will include any material information regarding the issuer of any third
party Credit Enhancement for those Certificates, including audited financial
statements to the extent required.
SUBORDINATE CERTIFICATES
If so specified in the applicable prospectus supplement, one or more
classes of a series may be Subordinate Certificates. The rights of the
holders of Subordinate Certificates to receive distributions of principal and
interest from the Distribution Account on any Distribution Date will be
subordinated to the rights of the holders of Senior Certificates to receive
distributions of principal and interest to the extent specified in the
applicable prospectus supplement. In addition, subordination may be affected
by the allocation of losses first to Subordinate Certificates in reduction of
the principal balance of those Certificates until the principal balance of
those Certificates is reduced to zero before any losses are allocated to
Senior Certificates. The Pooling and Servicing Agreement may require a
separate trustee other than the Trustee to be appointed to act on behalf of
holders of Subordinate Certificates.
A series may include one or more classes of Subordinate Certificates
entitled to receive cash flows remaining after distributions are made to all
other classes designated as being senior thereto. A series may also include
one or more classes of Subordinate Certificates that will be allocated losses
prior to any losses being allocated to other classes of Certificates
designated as being senior thereto. If so specified in the applicable
prospectus supplement, the subordination of a class may apply only in the
event of (or may be limited to) losses not covered by insurance policies or
other Credit Enhancement, such as losses arising from damage to property
securing a Mortgage Loan not covered by standard hazard insurance policies.
The applicable prospectus supplement will describe any subordination in
greater detail and provide, to the extent applicable, information concerning:
(1) the amount of subordination of a class or classes of Subordinate
Certificates in a series,
(2) the circumstances in which subordination will be applicable,
(3) the manner, if any, in which the amount of subordination will decrease
over time,
(4) the manner of funding any related reserve fund,
(5) the conditions under which amounts in any applicable reserve fund
will be used to make distributions to holders of Senior Certificates
and/or to holders of Subordinate Certificates or be released from the
applicable Trust Fund, and
(6) if one or more classes of Subordinate Certificates of a series are
Offered Certificates, the sensitivity of distributions on those
Certificates based on default assumptions described in the prospectus
supplement (see "Risk Factors--Subordinated Certificates may not
receive full payment if losses occur on the related mortgage loans"
in this prospectus).
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RESERVE FUNDS
If so specified in the applicable prospectus supplement, one or more
Reserve Funds may be established with respect to one or more classes of the
Certificates of a series, in which cash, a letter of credit, Permitted
Investments or a combination of any of the foregoing, in the amounts
specified in the applicable prospectus supplement will be deposited. The
Reserve Funds may also be funded over time by the deposit of a specified
amount of the distributions received on the applicable Mortgage Loans if
specified in the applicable prospectus supplement. The Depositor may pledge
the Reserve Funds to a separate collateral agent specified in the applicable
prospectus supplement.
Amounts on deposit in any Reserve Fund for one or more classes of
Certificates of a series will be applied by the Trustee for the purposes, in
the manner, and to the extent specified in the applicable prospectus
supplement. A Reserve Fund may be provided to increase the likelihood of
timely payments of principal of and interest on the Certificates, if required
as a condition to the rating of a series by any Rating Agency. Reserve Funds
may be established to provide limited protection, in an amount satisfactory
to a Rating Agency, against losses not covered by insurance policies or other
Credit Enhancement. Reserve Funds may also be established for other purposes
and in amounts as will be specified in the applicable prospectus supplement.
Following each Distribution Date amounts in any Reserve Fund in excess of any
amount required to be maintained in that account may be released from the
Reserve Fund under the conditions and to the extent specified in the
applicable prospectus supplement and will not be available for further
application by the Trustee.
Moneys deposited in any Reserve Fund generally will be invested in
Permitted Investments. Generally, any reinvestment income or other gain from
investments will be credited to the related Reserve Fund for a series, and
any loss resulting from investments will be charged to the Reserve Fund. If
specified in the applicable prospectus supplement, income or other gain from
investments made with the moneys in the Reserve Fund may be payable to the
Master Servicer or Special Servicer, as applicable, as additional servicing
compensation, and any loss resulting from those investments will be borne by
the Master Servicer or Special Servicer, as applicable. The Reserve Fund for
a series will be a part of the Trust Fund only if the applicable prospectus
supplement so specifies. If the Reserve Fund is not a part of the Trust Fund,
the right of the Trustee to make draws on the Reserve Fund will be an asset
of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the applicable prospectus supplement, including the initial balance of the
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which the required balance will decrease over time, the manner of
funding the Reserve Fund, the purpose for which funds in the Reserve Fund may
be applied to make distributions to Certificateholders and use of investment
earnings, if any, from the Reserve Fund.
CROSS-SUPPORT FEATURES
If the Mortgage Pool for a series is divided into separate Mortgage Loan
Groups, each securing a separate class or classes of a series, Credit
Enhancement may be
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provided by a cross-support feature that requires that distributions be made
on Senior Certificates secured by one Mortgage Loan Group prior to
distributions on Subordinate Certificates secured by another Mortgage Loan
Group within the Trust Fund. The applicable prospectus supplement for a
series that includes a cross-support feature will describe the manner and
conditions for applying the cross-support feature.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the applicable prospectus supplement, certificate
guarantee insurance with respect to a series of Certificates may be provided
by one or more insurance companies. 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 applicable prospectus
supplement. Certificate guarantee insurance may also guarantee against any
payment made to a Certificateholder that 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
SEC as an exhibit to the Form 8-K to be filed with the SEC within 15 days of
issuance of the Certificates of the applicable series.
LIMITED GUARANTEE
If so specified in the prospectus supplement with respect to a series of
Certificates, Credit Enhancement may be provided in the form of a limited
guarantee issued by a guarantor named in the Credit Enhancement.
LETTER OF CREDIT
If so specified in the prospectus supplement with respect to a series of a
Certificate, Credit Enhancement may be provided by a letter of credit issued
by a bank or financial institution named in the Credit Enhancement. The
coverage, amount and frequency of any reduction in coverage provided by a
letter of credit issued with respect to one or more classes of Certificates
of a series will be set forth in the applicable prospectus supplement.
POOL INSURANCE POLICIES; SPECIAL HAZARD INSURANCE POLICIES
If so specified in the prospectus supplement relating to a series of
Certificates, the Depositor will obtain a pool insurance policy for the
Mortgage Loans in the related Trust Fund. The pool insurance policy will
cover any loss (subject to the limitations described in a applicable
prospectus supplement) by reason of default to the extent a related Mortgage
Loan is not covered by any primary mortgage insurance policy. The amount and
terms of any coverage will be set forth in the prospectus supplement.
If so specified in the applicable prospectus supplement, the Depositor
will also obtain a special hazard insurance policy for the related Trust Fund
in the amount and with terms set forth in that prospectus supplement for each
series of Certificates as to which a pool insurance policy is provided. The
special hazard insurance policy will, subject to the limitations described in
the applicable prospectus supplement, protect
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against loss by reason of damage to Mortgaged Properties caused by those
types of hazards not insured against under the standard form of hazard
insurance policy for the respective states in which the Mortgaged Properties
are located.
SURETY BONDS
If so specified in the prospectus supplement relating to a series of
Certificates, Credit Enhancement with respect to one or more classes of
Certificates of a series may be provided by the issuance of a surety bond
issued by a financial guarantee insurance company named in the Credit
Enhancement. The coverage, amount and frequency or any reduction in coverage
provided by a surety bond will be set forth in the prospectus supplement
relating to that series.
FRAUD COVERAGE
If so specified in the applicable prospectus supplement, losses resulting
from fraud, dishonesty or misrepresentation in connection with the
origination or sale of the Mortgage Loans may be covered to a limited extent
by
(1) representations and warranties to the effect that no fraud,
dishonesty or misrepresentation in connection with the origination or
sale of the Mortgage Loans had occurred;
(2) a Reserve Fund;
(3) a letter of credit; or
(4) some other method.
The amount and terms of any fraud coverage will be set forth in the
applicable prospectus supplement.
BORROWER BANKRUPTCY BOND
If so specified in the applicable prospectus supplement, losses resulting
from a bankruptcy proceeding relating to a borrower or obligor affecting the
Mortgage Loans in a Trust Fund with respect to a series of Certificates may
be covered under a borrower bankruptcy bond (or any other instrument that
will not result in a withdrawal, downgrading or qualification of the rating
of the Certificates of a series by any of the Rating Agencies that rated any
Certificates of that series). Any borrower bankruptcy bond or other
instrument will provide for coverage in an amount and with terms meeting the
criteria of the Rating Agencies rating any Certificates of the related series
as described in the applicable prospectus supplement.
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MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains general summaries of the material legal
aspects of mortgage loans. Because many of the legal aspects of mortgage
loans are governed by applicable state laws (which may vary substantially),
the following summaries do not purport to be complete, to reflect the laws of
any particular state, to reflect all the laws applicable to any particular
Mortgage Loan or to encompass the laws of all states in which the properties
securing the Mortgage Loans are situated. The summaries are qualified in
their entirety by reference to the applicable federal and state laws
governing the Mortgage Loans.
GENERAL
All of the Mortgage Loans are loans evidenced by (or, in the case of
mortgage pass-through certificates, supported by) a note or bond that is
secured by a lien and security interest in property created under related
security instruments, 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. As used in this prospectus, unless
the context otherwise requires, the term "mortgage" includes mortgages, deeds
of trust and deeds to secure debt. Any of the foregoing mortgages will create
a lien upon, or grant a title interest in, the mortgaged property. The
priority of the lien or title interest created by each mortgage will depend
on:
(1) the terms of the mortgage;
(2) the existence of any separate contractual arrangements with others
holding interests in the mortgaged property;
(3) the order of recordation of the mortgage in the appropriate public
recording office; and
(4) the actual or constructive knowledge of the mortgagee as to any
unrecorded liens, leases or other interests affecting the mortgaged
property.
Mortgages typically do not possess priority over governmental claims for
real estate taxes, assessments and, in some states, for reimbursement of
remediation costs of environmental conditions identified by those states. See
"Environmental Risks." In addition, the Tax Code provides priority to some
tax liens over the lien of the mortgage. 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.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of an
interest in real property between two parties: a borrower (the borrower and
usually the owner of the subject property) and a mortgagee (the lender).
A deed of trust is a three-party instrument, wherein a trustor (the
equivalent of a borrower), grants the property to a trustee, in trust with a
power of sale, for the benefit of a beneficiary (the lender) as security for
the payment of the secured indebtedness.
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A deed to secure debt is a two party instrument in which the grantor (the
equivalent of a borrower) conveys title to, as opposed to merely creating a
lien upon, the subject property to the grantee (the lender) until the time
the underlying debt is repaid, generally with a power of sale as security for
the indebtedness evidenced by the related note.
As used in this prospectus, unless the context otherwise requires, the
term "borrower" includes a borrower under a mortgage, a trustor under a deed
of trust and a grantor under a deed to secure debt, and the term, "mortgagee"
includes a mortgagee under a mortgage, a beneficiary under a deed of trust
and a grantee under a deed to secure debt. The mortgagee's authority under a
mortgage, the beneficiary's and 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, federal laws and, in some cases, with respect to a
trustee in deed of trust transactions, the directions of the beneficiary. The
Mortgage Loans (other than Installment Contracts) will consist of (or, in the
case of mortgage pass-through certificates, be supported by) loans secured by
mortgages.
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in
real property such as a tenant's interest in a lease of land, leasehold
improvements or both, and the leasehold estate created by that lease. A
mortgage covering an interest in real property other than the fee estate
requires special provisions in the instrument creating that interest, in the
mortgage or in a separate agreement with the landlord or other party to that
instrument, to protect the mortgagee against termination of that interest
before the mortgage is paid.
PERSONALTY
Some types of mortgaged properties, such as nursing homes, hotels, motels
and industrial plants, are likely to derive a significant part of their value
from personal property that does not constitute "fixtures" under applicable
state real property law, and therefore, would not be subject to the lien of a
mortgage. Those types of properties are generally pledged or assigned as
security to the mortgagee under the UCC. To perfect its security interest in
those types of properties, the mortgagee generally must file UCC financing
statements and, to maintain perfection of the security interest, file
continuation statements generally every five years.
INSTALLMENT CONTRACTS
The Mortgage Loans may also consist of Installment Contracts (also
sometimes called contracts for deed). Under an Installment Contract, the
seller (the mortgagee) retains legal title to the property and enters into an
agreement with the purchaser (the borrower) for the payment of the purchase
price plus interest, over the term of that Installment Contract. Only after
full performance by the borrower of the Installment Contract is the mortgagee
obligated to convey title to the property 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.
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The method of enforcing the rights of the mortgagee under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing or able to enforce the Installment 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
borrower's equitable interest in the property is forfeited. The mortgagee in
that situation does not have to foreclose to obtain title to the property,
although in some cases both a quiet title action to clear title to the
property (if the borrower has recorded notice of the Installment Contract)
and an ejectment action to recover possession may be necessary.
In a few states, particularly in cases of a default during the early years
of an Installment Contract, ejectment of the borrower and a forfeiture of his
or her interest in the properly will be permitted. However, in most states,
laws (analogous to mortgage laws) have been enacted to protect borrowers
under Installment Contracts from the harsh consequences of forfeiture. These
laws may require the mortgagee to pursue a judicial or nonjudicial
foreclosure with respect to the property, give the borrower a notice of
default and some grace period during which the Installment Contract may be
reinstated upon full payment of the default amount. Additionally, the
borrower may have a post-foreclosure statutory redemption right, and, in some
states, a borrower with a significant equity investment in the property may
be permitted to share in the proceeds of any sale of the property after the
indebtedness is repaid or may otherwise be entitled to a prohibition of the
enforcement of the forfeiture clause.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
Some of the Mortgage Loans may be secured by junior mortgages that are
subordinate to senior mortgages held by other lenders or institutional
investors. In those cases, the rights of the Trust Fund (and therefore the
Certificateholders), as mortgagee under a junior mortgage, will be
subordinate to those of the mortgagee under the senior mortgage, including
the prior rights of the senior mortgagee to:
(1) receive rents, hazard insurance proceeds and condemnation proceeds;
and
(2) cause the property securing the Mortgage Loan to be sold upon the
occurrence of a default under the senior mortgage, which would
extinguish the lien of the junior mortgage, unless the Master
Servicer or Special Servicer, if applicable, either asserts the Trust
Fund's subordinate interest in the related property in the
foreclosure of the senior mortgage (to the extent permitted by state
law) or satisfies the defaulted senior loan.
As discussed more fully below, in many states a junior mortgagee may
satisfy a defaulted senior loan in full, or may cure the default and bring
the senior loan current, in either event adding the amounts expended to the
balance due on the junior loan. Absent a provision in the senior mortgage or
the existence of a recorded request for notice in compliance with applicable
state law (if any), no notice of default is typically required to be given to
the junior mortgagee.
The form of the mortgage used by many institutional lenders confers on the
mortgagee the right both to receive all proceeds collected under any hazard
insurance
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policy and all awards made in connection with any condemnation proceedings,
and to apply those proceeds and awards to any indebtedness secured by the
mortgage in the order the mortgagee may determine. Thus, if improvements on
the property are damaged or destroyed by fire or other casualty, or if the
property (or any part of the property) is taken by condemnation, the
mortgagee under the senior mortgage will have the prior right to collect any
applicable insurance proceeds and condemnation awards and to apply the same
to the indebtedness secured by the senior mortgage. However, the laws of some
states may provide that unless the security of the mortgagee has been
materially impaired, the borrower must be allowed to use any applicable
insurance proceeds or partial condemnation awards to restore the property.
The form of mortgage used by many institutional lenders typically contains
a "future advance" clause that provides that additional amounts advanced to
or on behalf of the borrower by the mortgagee are to be secured by the
mortgage. The "future advance" clause is valid under the laws of most states.
In some states, however, the priority of any advance made under the clause
depends upon whether the advance was an "obligatory" or "optional" advance.
If the mortgagee is obligated to advance the additional amounts, the advance
may be entitled to receive the same priority as amounts initially made under
the mortgage, notwithstanding that other junior mortgages or other liens may
have encumbered the property between the date of recording of the senior
mortgage and the date of the future advance and that the mortgagee had actual
knowledge of those intervening junior mortgages or other liens at the time of
the advance. If the mortgagee is not obligated to advance the additional
amounts and has actual knowledge of any intervening junior mortgages or other
liens, the advance may be subordinate to the intervening junior mortgages or
other liens. In many other states, all advances under a "future advance"
clause are given the same priority as amounts initially made under the
mortgage so long as advances do not exceed a specified "credit limit" amount
stated in the recorded mortgage.
Another provision typically found in the form of the mortgage used by many
institutional lenders obligates the borrower:
(1) to pay all taxes and assessments affecting the property before
delinquency;
(2) to pay, when due, all other encumbrances, charges and liens affecting
the property that may be prior to the lien of the mortgage;
(3) to provide and maintain hazard insurance on the property;
(4) to maintain and repair the property and not to commit or permit any
waste of the property; and
(5) to appear in and defend any action or proceeding purporting to affect
the property or the rights of the mortgagee under the mortgage.
Upon a failure of the borrower to perform any of these obligations, the
mortgage typically provides the mortgagee the option to perform the
obligation itself, with the borrower agreeing to reimburse the mortgagee for
any sums expended by the mortgagee in connection therewith (which typically
become part of the indebtedness secured by the mortgage).
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The form of mortgage used by many institutional lenders also typically
requires the borrower to obtain the consent of the mortgagee as to all
actions affecting the mortgaged property, including, among others:
(1) all leasing activities (including new leases and termination or
modification of existing leases),
(2) any alterations, modifications or improvements to the buildings and
other improvements forming a part of the mortgaged property, and
(3) all property management activities affecting the mortgaged property
(including new management or leasing agreements or any termination or
modification of existing management or leasing agreements).
Tenants will often refuse to execute a lease unless the mortgagee 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 may refuse to
consent to matters approved by a junior mortgagee with the result that the
value of the security for the junior mortgage is diminished. For example, a
senior mortgagee may decide not to approve a lease or refuse to grant to a
tenant a non-disturbance agreement and as a result the value of the mortgaged
property may be diminished.
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 borrower defaults in payment or performance of its
obligations under the note or mortgage and, by reason of any default, 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. Although there are other
foreclosure procedures available in some states that are either infrequently
used or available only in limited circumstances, the two primary methods of
foreclosing a mortgage are judicial foreclosure and non-judicial foreclosure
pursuant to a power of sale granted in the mortgage. In either case, the
actual foreclosure of the mortgage will be accomplished pursuant to a public
sale of the mortgaged property by a designated official or by the trustee
under a deed of trust. The purchaser at any foreclosure sale acquires only
the estate or interest in the mortgaged property encumbered by the mortgage.
For example, if the mortgage only encumbered a tenant's leasehold interest in
the property, the purchaser will only acquire that leasehold interest,
subject to the tenant's obligations under the lease to pay rent and perform
other covenants contained in the lease.
JUDICIAL FORECLOSURE
A judicial foreclosure of a mortgage is a judicial action initiated by the
service of legal pleadings upon all necessary parties having an interest in
the real property. Delays in completion of foreclosure may occasionally
result from difficulties in locating the necessary parties to the action.
Since a judicial foreclosure is a lawsuit, it is subject to all of the
procedures, delays and expenses attendant to litigation, sometimes requiring
up
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to several years to complete if contested. At the completion of a judicial
foreclosure, if the mortgagee prevails, the court ordinarily issues a
judgment of foreclosure and appoints a referee or other designated official
to conduct a public sale of the property. These sales are made in accordance
with procedures that vary from state to state.
NON-JUDICIAL FORECLOSURE
In the majority of cases, foreclosure of a deed of trust (and in some
instances, other types of mortgage instruments) is accomplished by a
non-judicial trustee's sale pursuant to a provision in the deed of trust that
authorizes the trustee, generally following a request from the beneficiary,
to sell the mortgaged property at public sale upon any default by the
borrower under the terms of the note or deed of trust. In addition to the
specific contractual requirements set forth in the deed of trust, a
non-judicial trustee's sale is also typically subject to any applicable
judicial or statutory requirements imposed in the state where the mortgaged
property is located. The specific requirements that must be satisfied by a
trustee prior to the trustee's sale vary from state to state. Examples of the
varied requirements imposed by some states are:
(1) that notices of both the borrower's default and the mortgagee's
acceleration of the debt be provided to the borrower;
(2) that the trustee record a notice of default and send a copy of the
notice to the borrower, any other person having an interest in the
real property, including any junior lienholders, any person who has
recorded a request for a copy of a notice of default and notice of
sale, any successor in interest to the borrower and to other persons
identified by those states;
(3) that the borrower, or any other person having a junior encumbrance on
the real estate, may, during a reinstatement period, cure the default
by paying the entire amount in arrears, plus, in some states, allowed
costs and expenses incurred by the mortgagee in connection with the
default; and
(4) the method (publication, posting, recording, etc.), timing, content,
location and other particulars as to any required public notices of
the trustee's sale.
Foreclosure of a deed to secure debt is generally accomplished by a
non-judicial sale similar to that required by a deed of trust, except that
the mortgagee 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 MORTGAGEE'S RIGHTS
Courts may apply general equitable principles in connection with
foreclosure proceedings to limit a mortgagee's remedies. These equitable
principles are generally designed to relieve the borrower from the legal
effect of his defaults under the loan documents to the extent the legal
effect is determined to be harsh or unfair. Examples of judicial remedies
that have been fashioned include requiring mortgagees to undertake
affirmative and expensive actions to determine the causes of the borrower's
default and the likelihood that the borrower will be able to reinstate the
loan, requiring the mortgagees to reinstate loans or recast payment schedules
to accommodate borrowers who are suffering from temporary financial
disability, and limiting the rights of
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mortgagees to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower's failing to maintain the property adequately
or executing a second mortgage affecting the property.
Even if a foreclosure is allowed, a third party may be unwilling to
purchase the property at the foreclosure sale for a variety of reasons,
including the difficulty of determining the exact status of title to the
mortgaged property, the potential existence of redemption rights (see "Rights
of Redemption" below) and because the physical condition and financial
performance of the mortgaged property may have deteriorated during the
foreclosure proceedings. Some states require the mortgagee to disclose all
known facts materially affecting the value of the mortgaged property to
potential bidders at a trustee's sale, which may have an adverse affect on
the trustee's ability to sell the mortgaged property or the sale price of the
mortgaged property. A 1980 decision of the United States Court of Appeals for
the Fifth Circuit (Durrett v. Washington National Insurance Company)
suggested that even a non-collusive, regularly conducted foreclosure sale
could be a fraudulent transfer under the Bankruptcy Code if (1) the
foreclosure sale was held while the debtor was insolvent and not more than
one year before the filing of the bankruptcy petition; and (2) the price paid
for the foreclosed property did not represent "fair consideration." In 1994,
the United States Supreme Court rejected that interpretation of the
Bankruptcy Code. However, the reasoning in the Durrett case could nonetheless
be persuasive to courts interpreting state fraudulent conveyance law with
provisions similar to the Bankruptcy Code provisions construed in Durrett.
For the reasons discussed in the prior paragraph, it is common for the
mortgagee to purchase the property from the trustee, referee or other
designated official for an amount equal to or less than the outstanding
principal amount of the secured indebtedness, together with accrued and
unpaid interest and the expenses of foreclosure to extinguish the secured
debt. A mortgagee commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. In addition, a mortgagee may be responsible under
federal or state law for the cost of cleaning up a mortgaged property that is
environmentally contaminated. See "Environmental Risks" below. The mortgagee
also assumes the burdens of ownership and management of the property
(frequently through the employment of a third party management company),
including third party liability, paying operating expenses and real estate
taxes and making repairs, until a sale of the property to a third party can
be arranged. The costs of operating and maintaining commercial property may
be significant and may be greater than the income derived from that property.
The costs of management and operation of mortgaged properties that are
hotels, motels 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 these operations and the effect that foreclosure and a change
in ownership may have on the public's and the industry's (including
franchisors') perception of the quality of those operations. The mortgagee
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
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mortgagee's investment in the property. As a result, a mortgagee could
realize an overall loss on a mortgage loan even if the related mortgaged
property is sold at foreclosure or resold after it is acquired through
foreclosure for an amount equal to the full outstanding principal amount of
the mortgage loan, plus accrued interest.
Under the REMIC Regulations and the related Pooling and Servicing
Agreement, the Master Servicer or Special Servicer, if any, may be permitted
(and in some cases may be required) to hire an independent contractor to
operate any REO Property which could result in significantly greater costs
than direct operation by the Master Servicer or Special Servicer, if any. See
"Servicing of the Mortgage Loans--Collections and Other Servicing
Procedures."
RIGHTS OF REDEMPTION
The purposes of a foreclosure are to enable the mortgagee to realize upon
its security and to bar the borrower, and all persons who have an interest in
the property that is subordinate to the mortgage being foreclosed, from any
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 sale, those having
an interest that 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 a specified portion of costs of
that action. Persons 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. Equity of redemption is generally a
common-law (non-statutory) right that only exists prior to completion of the
foreclosure sale and is not waivable by the borrower.
In contrast to the common law doctrine of equity of redemption, in some
states, the borrower and foreclosed junior lienors are given a statutory
period (1) prior to the foreclosure sale, in which to reinstate the mortgage
in good standing by paying past due amounts and a portion of costs of the
mortgage determined by those states and (2) after the completion of the
foreclosure sale, in which to redeem the property from the foreclosure sale
by payment of a redemption price. The required redemption price varies from
state to state. Some states require the payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure, others
require the payment of the foreclosure sale price, while other states require
the payment of only a portion of the sums due. The effect of a statutory
right of redemption is to diminish the ability of the mortgagee to sell the
foreclosed property (or to depress the price received by the mortgagee at the
foreclosure sale). The exercise of a statutory right of redemption may defeat
the title of any purchaser at a foreclosure sale or any purchaser from the
mortgagee after a foreclosure sale.
Consequently, the practical effect of the redemption right is often to
force the mortgagee to retain the property and pay the expenses of ownership
until the redemption period has run. Some states permit a mortgagee to
invalidate an attempted exercise of a statutory redemption right if the
mortgagee waives its right to any deficiency judgment. In some states, there
is no right to redeem property after a trustee's sale under a deed of trust.
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Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than three years. With
respect to a series of Certificates for which an election is made to qualify
the Trust Fund or a part of the Trust Fund as a REMIC, the Pooling and
Servicing Agreement will permit foreclosed property to be held for more than
three years if the Trustee receives (a) an extension from the IRS or (b) an
opinion of counsel to the effect that holding the property for that period is
permissible under the REMIC Regulations.
Borrowers under Installment Contracts generally do not have the benefits
of redemption periods such as those that exist in the same jurisdiction for
mortgage loans. If redemption statutes do exist under state laws for
Installment Contracts, the redemption period may be shorter than for
mortgages.
ANTI-DEFICIENCY LEGISLATION
Some of the Mortgage Loans will be nonrecourse loans where recourse may be
had only against the specific property pledged to secure the related Mortgage
Loan and not against the borrower's other assets in the event of default by a
borrower. Even if a mortgage by its terms provides for recourse against the
borrower, some states have imposed prohibitions against or limitations upon
exercising that recourse. For example, some state statutes limit the right of
the mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment is a
personal judgment against the borrower equal in most cases to the difference
between the net amount realized upon the public sale of the real property and
the amount due to the mortgagee. Other statutes require the mortgagee 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
borrower. In some states, the mortgagee has the option of bringing a personal
action against the borrower on the debt without first exhausting its
security, however, in some of these states, a mortgagee choosing to pursue
that kind of action may be deemed to have elected its remedy and may be
precluded from exercising any remedies with respect to the security.
Consequently, the practical effect of the election requirement, when
applicable, is that mortgagees will usually proceed first against the
security rather than bringing personal action against the borrower. Other
statutory provisions limit any deficiency judgment against the borrower
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 mortgagee from obtaining a large
deficiency judgment against the former borrower as a result of low bids, or
the absence of bids, at the judicial sale.
LEASEHOLD RISKS
Some of the Mortgage Loans may be secured by a mortgage encumbering the
borrower's leasehold interest under a ground lease. Leasehold mortgages are
subject to risks not associated with mortgages encumbering a fee ownership
interest in the mortgaged property. The most significant of these risks is
that the ground lease creating the leasehold estate could terminate,
depriving the leasehold mortgagee of 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.
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Examples of protective provisions that may be included in the related
ground lease, or a separate agreement between the ground lessee, the ground
lessor and the mortgagee, to minimize that risk are:
(1) the right of the mortgagee to receive notices from the ground lessor
of any defaults by the borrower;
(2) the right to cure any defaults, with adequate cure periods;
(3) if a default is not susceptible to cure by the mortgagee, the right
to acquire the leasehold estate through foreclosure or otherwise
prior to any termination of the ground lease;
(4) the ability of the ground lease to be assigned to and by the
mortgagee or a purchaser at a foreclosure sale and for a release of
the assigning ground lessee's liabilities under the ground lease;
(5) the right of the mortgagee to enter into a ground lease with the
ground lessor on the same terms and conditions as the old ground
lease upon a termination of the old ground lease; and
(6) provisions for disposition of any insurance proceeds or condemnation
awards payable upon a casualty to, or condemnation of, the mortgaged
property.
In addition to the foregoing protections, the leasehold mortgage may
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, and may assign to the mortgagee
the debtor-ground lessee's right to reject a lease pursuant to Section 365 of
the Bankruptcy Code, although the enforceability of this type of assignment
has not been established. An additional manner in which to obtain protection
against the termination of the ground lease is to have the ground lessor
enter into a mortgage encumbering the fee estate in addition to the mortgage
encumbering the leasehold interest under the ground lease, so if the ground
lease is terminated, the mortgagee may nonetheless possess rights contained
in the fee mortgage. Without the protections described in this paragraph, a
leasehold mortgagee may be more likely to lose the collateral securing its
leasehold mortgage. No assurance can be given that any or all of these
protective provisions will be obtained in connection with any particular
Mortgage Loan.
BANKRUPTCY LAWS
Borrowers often file bankruptcy to delay or prevent exercise of remedies
under loan documents. Numerous statutory and common law provisions, including
the Bankruptcy Code and state laws affording relief to debtors, may interfere
with and delay the ability of a mortgagee to obtain payment of the loan, 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 often no interest or principal
payments are made during the course of the bankruptcy proceeding (although
"adequate protection" payments for anticipated diminution, if any, in the
value of the mortgaged property may be made). The delay and consequences
caused by
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an automatic stay can be significant. A particular borrower may become
subject to the Bankruptcy Code either by voluntary or involuntary petition or
by virtue of the doctrine of "substantive consolidation" by an affiliate of
the borrower becoming a debtor under the Bankruptcy Code. Additionally, the
filing of a petition in bankruptcy by or on behalf of a junior lienor or
junior mortgagee may stay the senior mortgagee from taking action to
foreclose out the junior lien.
Under the Bankruptcy Code, provided substantive and procedural safeguards
for the mortgagee are met, the amount and terms of a mortgage or deed of
trust secured by property of the debtor may be modified under some
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 the mortgagee's security
interest), thus leaving the mortgagee a general unsecured creditor for the
difference between the then current value and the outstanding balance of the
loan. Other modifications may include the reduction in the amount of each
monthly 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
acceleration) of the final maturity date. Some bankruptcy courts have
approved plans, based on the particular facts of the reorganization case
before them, that affected the curing of a mortgage loan default by paying
arrearages over a number of years. A bankruptcy court may also permit a
debtor to de-accelerate a secured loan and to reinstate the loan even though
the mortgagee had accelerated the loan and final judgment of foreclosure had
been entered in state court (provided no sale of the property had yet
occurred) before the filing of the debtor's petition, even if the full amount
due under the original loan is never repaid. Other types of significant
modifications to the terms of the mortgage may be acceptable to the
bankruptcy court, often depending on the particular facts and circumstances
of the specific case.
Federal bankruptcy law may interfere with or affect the ability of a
mortgagee to enforce an assignment of rents and leases or a security interest
in hotel revenues related to the mortgaged property. In connection with a
bankruptcy proceeding involving a borrower, Section 362 of the Bankruptcy
Code automatically stays any attempts by the mortgagee to enforce any
assignment of rents and leases or security interest. The legal proceedings
necessary to resolve a situation like that can be time-consuming and may
result in significant delays in the receipt of the rents or hotel revenues.
Rents or hotel revenues may also be lost:
(1) if the assignment or security interest is not fully documented or
perfected under state law before commencement of the bankruptcy
proceeding;
(2) to the extent rents or hotel revenues are used by the borrower to
maintain the mortgaged property or for other court authorized
expenses;
(3) to the extent other collateral may be substituted for the rents or
hotel revenues; and
(4) if the bankruptcy court determines that it is necessary or
appropriate "based on the equities of the case."
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To the extent a borrower's ability to make payment on a mortgage loan is
dependent on payments under a lease of the related property, the borrower's
ability may be impaired by the commencement of a bankruptcy proceeding
relating to the lessee under the lease. Under the Bankruptcy Code, the filing
of a petition in bankruptcy by or on behalf of a lessee results in an
automatic stay barring the commencement or continuation of any state court
proceeding for past due rent, accelerated rent, damages or a summary eviction
order with respect to a default under the lease that occurred before the
filing of the lessee's petition.
In addition, the Bankruptcy Code generally provides that a bankruptcy
trustee or debtor in possession may, subject to approval of the bankruptcy
court, either (1) assume the lease and retain it or assign it to a third
party or (2) reject the lease. If the lease is assumed, the bankruptcy
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. Those 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. There may be a significant period of time between the
date that a lessee files a bankruptcy petition and the date that the lease is
assumed or rejected. Although the lessee is obligated to make all lease
payments currently with respect to the post-petition period, there is a risk
that payments will not be made due to the lessee's poor financial condition.
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, and the
lessor must relet the mortgaged property before the flow of lease payments
will recommence. In addition, pursuant to Section 502(b)(6) of the Bankruptcy
Code, a lessor's damages for lease rejection are limited.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery, as a preferential transfer, of some payments made by the borrower
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. If a Mortgage Loan includes any
guaranty, and the guaranty waives any rights of subrogation or contribution,
then some payments by the guarantor to the Trust Fund also may be avoided and
recovered as fraudulent conveyances.
A trustee in bankruptcy or a debtor in possession or various creditors who
extend credit after a case is filed may be entitled to collect costs and
expenses in preserving or selling the mortgaged property ahead of payment to
the mortgagee. In some circumstances, a trustee in bankruptcy or debtor in
possession may have the power to grant liens senior to or of equal priority
with the lien of a mortgage, and analogous state statutes and general
principles of equity may also provide a borrower with means to halt a
foreclosure proceeding or sale and enforce a restructuring of a mortgage loan
on terms a mortgagee would not otherwise accept.
A trustee in bankruptcy or a debtor in possession also may be entitled to
subordinate the lien created by the mortgage loan to other liens or the
claims of general unsecured creditors. Generally, this requires proof of
"unequitable conduct" by the
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mortgagee. However, various courts have expanded the grounds for equitable
subordination to apply to various non-pecuniary claims for items such as
penalties and fines. A court may find that any prepayment charge, various
late payment charges and other claims by mortgagees may be subject to
equitable subordination on these grounds.
A trustee in bankruptcy or a debtor in possession also may be entitled to
avoid all or part of any claim or lien by the mortgagee if and to the extent
a judgment creditor or a bona fide purchaser of real estate could have done
so outside of bankruptcy. Generally, in circumstances involving some defect
in the language, execution or recording of the mortgage loan documents.
BANKRUPTCY CONSIDERATIONS RELATING TO THE DEPOSITOR
The Depositor will warrant in the Pooling and Servicing Agreement that the
sale of the Mortgage Loans by it to the Trust Fund is a valid sale.
Notwithstanding the foregoing, if the Depositor were to become a debtor in a
bankruptcy case a court could take the position that the sale of the Mortgage
Loans to the Trust Fund should instead be treated as a pledge of the Mortgage
Loans to secure a borrowing of such debtor. If a court were to reach those
conclusions, or a filing were made under the United States Bankruptcy Code or
similar applicable state laws by or against the Depositor, or if an attempt
were made to litigate any of the foregoing issues, delays in payments on the
Certificates (and possible reductions in the amount of such payments) could
occur. In addition, if the transfer of the Mortgage Loans to the Trust Fund
is treated as a pledge instead of a sale, a tax or government lien on the
property of the Depositor arising before the transfer of any Mortgage Loan to
the Trust Fund may have priority over the Trust Fund's interest in that
Mortgage Loan.
In addition, cash collections on the Mortgage Loans may be commingled with
the funds of the Master Servicer and, in the event of the bankruptcy of the
Master Servicer, the Trust Fund may not have a perfected interest in those
cash collections.
ENVIRONMENTAL RISKS
Real property pledged as security to a mortgagee may be subject to
environmental risks arising from the presence of hazardous materials on,
under, adjacent to, or in that property. The environmental condition of
mortgaged properties may be affected by the actions and operations of tenants
and occupants of the properties. Mortgaged properties that are, or have been,
the site of manufacturing, industrial or disposal activity or have been built
with or contain asbestos-containing material or other indoor pollutants pose
particular concerns. In addition, current and future environmental laws,
ordinances or regulations, including new requirements developed by federal
agencies pursuant to the mandates of the Clean Air Act Amendments of 1990,
may impose additional compliance obligations on business operations that can
be met only by significant capital expenditures.
A mortgagee may be exposed to risks related to environmental conditions
including:
(1) a diminution in the value of a mortgaged property;
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(2) potential default on a mortgage loan due to the borrower's inability
to pay high remediation costs or difficulty in bringing its
operations into compliance with environmental laws;
(3) in some circumstances as more fully described below, liability for
clean-up costs or other remedial actions which could exceed the value
of the mortgaged property or the unpaid balance of the related
mortgage loan; or
(4) the inability to sell the related Mortgage Loan in the secondary
market. In some circumstances, a mortgagee may choose not to
foreclose on contaminated property rather than risk incurring
liability for remedial actions.
A mortgagee may be obligated to disclose environmental conditions on a
property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure), which may
decrease the amount that prospective buyers are willing to pay for the
affected property, sometimes substantially, and would as a result decrease
the ability of the mortgagee to recoup its investment in a loan upon
foreclosure.
In some states, transfers of some types of properties are conditioned upon
cleanup of contamination prior to transfer. In these cases, a mortgagee that
becomes the owner of a property through foreclosure, deed in lieu of
foreclosure or otherwise, may be required to clean up the contamination
before selling or otherwise transferring the property.
Under federal law and the laws of some states, the owner's failure to
perform remedial actions required under environmental laws may in some
circumstances give rise to a lien on the mortgaged property to ensure the
reimbursement of remedial costs incurred by federal and state regulatory
agencies. In several states this lien has priority over the lien of an
existing mortgage against the property. Since the costs of remedial action
could be substantial, the value of a mortgaged property as collateral for a
mortgage loan could be adversely affected by the existence of an
environmental condition giving rise to a lien.
CERCLA AND RELATED LAWS
Under some circumstances, it is possible that environmental cleanup costs,
or the obligation to take remedial actions, can be imposed on a mortgagee
such as the Trust Fund with respect to each series. Under the laws of some
states and under CERCLA, strict liability may be imposed on present and past
"owners" and "operators" of contaminated real property for the costs of
clean-up. Liability under many of these federal and state laws may exist even
if the mortgagee did not cause or contribute to the contamination and
regardless of whether the mortgagee has actually taken possession of a
mortgaged property through foreclosure, deed in lieu of foreclosure or
otherwise. Moreover, liability described above is not limited to the original
or unamortized principal balance of a loan or to the value of the property
securing a loan.
CERCLA's definition of "owner" or "operator" excludes persons "who without
participating in the management of the facility, holds indicia of ownership
primarily to protect his security interest". This is known as the "secured
creditor exemption." The Lender Liability Act clarifies CERCLA's secured
creditor exemption. Under the Lender
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Liability Act, a secured lender who is "participating in management" by
exercising control over operational aspects of the facility will be liable,
but a number of environmentally related activities before the loan is made
and during its pendency as well as "workout" steps to protect a security
interest are not construed as participating in management and will not
trigger liability. The Lender Liability Act also identifies the circumstances
in which foreclosure and post-closure activities will not trigger CERCLA
liability. The Lender Liability Act also amends the Solid Waste Disposal Act
to limit the liability of lenders holding a security interest for costs of
cleaning up contamination from underground storage tanks. However, the Lender
Liability Act has no effect on state environmental laws similar to CERCLA
that may not provide a secured creditor exemption.
CERCLA's "innocent landowner" defense to strict liability may be available
to a mortgagee that has taken title to a mortgaged property and has performed
an appropriate environmental site assessment that does not disclose existing
contamination and meets other requirements of the defense. However, it is
unclear whether the environmental site assessment must be conducted upon loan
origination, before foreclosure or both, and uncertainty exists as to what
kind of environmental site assessment must be performed to qualify for the
defense.
Beyond statute-based environmental liability, hazardous environmental
conditions on a property may also be subject to common law causes of action
(for example, causes of actions arising from death, personal injury or damage
to property). Although it may be more difficult to hold a mortgagee liable in
those cases, unanticipated or uninsured liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations. At the time
the Mortgage Loans were originated, it is possible that no environmental
assessment or a very limited environmental assessment of the Mortgaged
Properties was conducted.
The related Pooling and Servicing Agreement contains provisions
restricting the ability of the Master Servicer or the Special Servicer, if
any, to acquire title to any Mortgaged Property or take over its operation
unless a satisfactory phase I or other specified environmental assessment has
been obtained. Enforcement of the security for the related Note is precluded
until a satisfactory environmental assessment is obtained and/or any required
remedial action is taken. This requirement will reduce the likelihood that a
given Trust Fund will become liable for any environmental conditions
affecting a Mortgaged Property, but will make it more difficult to realize on
the security for the Mortgage Loan. There can be no assurance that any
environmental assessment obtained by the Master Servicer or the Special
Servicer, if any, will detect all possible environmental conditions or that
the other requirements of the Pooling and Servicing Agreement, even if fully
observed by the Master Servicer or the Special Servicer, if any, will in fact
insulate a given Trust Fund from liability for environmental conditions.
If a mortgagee is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners
or operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but those persons or entities may be
without substantial assets, bankrupt or otherwise judgment proof.
Furthermore, an action against the borrower may be adversely affected by the
limitations on recourse in the loan documents. Similarly, in
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some states anti-deficiency legislation and other statutes requiring the
mortgagee to exhaust its security before bringing a personal action against
the borrower (see "Anti-Deficiency Legislation" above) may curtail the
mortgagee's ability to recover from its borrower the environmental clean-up
and other related costs and liabilities incurred by the mortgagee.
Accordingly, it is possible that these costs could become a liability of the
Trust Fund and become a loss to the Certificateholders. Shortfalls occurring
as the result of imposition of any clean-up costs will be addressed in the
prospectus supplement and Pooling and Servicing Agreement for the related
series.
OTHER ENVIRONMENTAL RISKS
Other environmental laws may affect the value of a mortgaged property, or
impose cleanup costs or liabilities, including those related to asbestos,
radon, lead paint and underground storage tanks.
Some federal, state and local laws, regulations and ordinances govern the
handling of ACMs in the event of the remodeling, renovation or demolition of
a building. These laws, as well as common law standards, may impose liability
for releases of ACMs and may allow third parties to seek recovery from owners
or operators of real properties for personal injuries associated with those
releases. In addition, federal law requires that building owners inspect
their facilities for ACMs and presumed ACMs (consisting of thermal system
insulation, surfacing materials and asphalt and vinyl flooring in buildings
constructed before 1981) and transfer all information regarding ACMs and
presumed ACMs in their facilities to successive owners.
The EPA has concluded that radon gas, a naturally occurring substance, is
linked to increased risks of lung cancer. Although there are no current
federal or state requirements mandating radon gas testing, the EPA and the
United States Surgeon General recommend testing residences for the presence
of radon and that abatement measures be undertaken if radon concentrations in
indoor air meet or exceed specified limits.
The Lead Paint Act requires federal agencies to promulgate regulations
that will require owners of residential housing constructed before 1978 to
disclose to potential residents or purchasers any known lead-paint hazards.
The Lead Paint Act creates a private right of action with treble damages
available for any failure to so notify. Federal agencies have issued
regulations delineating the scope of this disclosure obligation which became
effective in September of 1996 for owners of more than four residential
dwellings and in December of 1996 for owners of one to four residential
dwellings. In addition, the ingestion of lead-based paint chips or dust
particles by children can result in lead poisoning, and the owner of a
property where those circumstances exist may be held liable for those
injuries. Finally, federal law mandates that detailed worker safety standards
must be complied with where construction, alteration, repair or renovation of
structures that contain lead, or materials that contain lead, is
contemplated.
Underground storage tanks are, and in the past have been, frequently
located at properties used for industrial, retail and other business
purposes. Federal law, as well as the laws of most states, currently require
underground storage tanks used for the storage of fuel or hazardous
substances and waste to meet standards designed to prevent releases from the
underground storage tanks into the environment. Underground
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storage tanks installed before the implementation of these standards, or that
otherwise do not meet these standards, are potential sources of contamination
to the soil and groundwater. Land owners may be liable for the costs of
investigating and remediating soil and groundwater contamination that may
emanate from leaking underground storage tanks.
ENFORCEABILITY OF MATERIAL PROVISIONS
Default Interest; Late Charges; and Prepayment Fees.
Some of the Mortgage Loans may contain provisions requiring the borrower
to pay late charges or additional interest if required payments are not made
on time. In some states there may be limitations upon the enforceability of
these provisions, and no assurance can be given that any of these provisions
in any Mortgage Loan will be enforceable. Some of the Mortgage Loans may also
contain provisions prohibiting any prepayment of the loan prior to maturity
or requiring the payment of a prepayment fee in connection with any
prepayment. Even if enforceable, a requirement for prepayment fees may not
deter borrowers from prepaying their Mortgage Loans. Although some states
will allow the enforcement of these provisions upon a voluntary prepayment of
a mortgage loan, other states may not allow these provisions after a mortgage
loan has been outstanding for a specified number of years or if enforcement
would be unconscionable, or the allowed amount of any prepayment fee may be
limited (that is, to a specified percentage of the original principal amount
of the mortgage loan, to a specified percentage of the outstanding principal
balance of a mortgage loan or to a fixed number of months' interest on the
prepaid amount). In some states there may be limitations upon the
enforceability of prepayment fee provisions applicable in connection with a
default by the borrower or an involuntary acceleration of the secured
indebtedness, and no assurance can be given that any of these provisions
related to a mortgage loan will be enforceable under those circumstances. The
applicable laws of some states may also treat some prepayment fees as
usurious if in excess of statutory limits. See "Applicability of Usury Laws."
Due-on-Sale Provisions.
The enforceability of due-on-sale provisions has been the subject of
legislation or litigation in many states, and their enforceability has been
limited or denied in some cases, usually involving single family residential
mortgage transactions. Due-on-sale provisions typically provide that: (1) the
mortgage loan will (or may at the mortgagee's option) become due and payable
upon the sale or other transfer of an interest in the related mortgaged
property or (2) the mortgage loan may not be assumed without the consent of
the related mortgagee in connection with any sale or other transfer. The
Garn-St. Germain Act preempts state constitutional, statutory and case law
that prohibits due-on-sale clauses. As a result, due-on-sale clauses have
become generally enforceable except in those states whose legislatures
exercised their right to regulate these clauses with respect to mortgage
loans that were: (1) originated or assumed during the "window period" under
the Garn-St. Germain Act, which ended in all cases not later than October 15,
1982; and (2) originated by lenders other than national banks, federal
savings institutions or federal credit unions.
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The Federal Home Loan Mortgage Corporation has taken the position in its
published mortgage servicing standards that, out of a total of eleven "window
period states," five states (Arizona, Michigan, Minnesota, New Mexico and
Utah) have enacted statutes extending, on various terms and for varying
periods, the prohibition of due-on-sale clauses with respect to one or more
categories of loans that were originated or assumed during the "window
period" applicable to that state. Also, the Garn-St. Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rates.
The Pooling and Servicing Agreement for each series generally will provide
that if any Mortgage Loan contains a provision in the nature of a
"Due-on-Sale" clause, then for so long as the Mortgage Loan is included in
the Trust Fund, the Master Servicer or the Special Servicer, if any, on
behalf of the Trustee, will take the actions it deems to be in the best
interest of the Trust Fund in accordance with the servicing standard set
forth in the Pooling and Servicing Agreement, and may waive or enforce any
due-on-sale clause contained in the related Note or Mortgage.
In addition, under the Bankruptcy Code, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under some circumstances, be
eliminated in any modified mortgage resulting from that bankruptcy
proceeding.
Acceleration on Default.
It is expected that the Mortgage Loans will include a "Debt-Acceleration"
clause, which permits the mortgagee to accelerate the full debt upon a
monetary or nonmonetary default of the borrower. The courts of all states
will enforce acceleration clauses in the event of a material payment default
if appropriate notices of default have been effectively given. However, the
equity courts of any state may refuse to foreclose a mortgage 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, in other states, the defaulted
amounts plus the costs and attorneys' fees incurred by the mortgagee in
collecting the defaulted payments.
State courts are also known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a mortgagee'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 Installment 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 Installment Contract or to permit the borrower to
share the proceeds upon a foreclosure sale of the property if the sale price
exceeds the debt.
SOLDIERS' AND SAILORS' RELIEF ACT
Under the terms of the Relief Act, unless a mortgagee obtains a court
order to the contrary, a borrower who enters military service after the
origination of the borrower's
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mortgage loan may not be charged interest (including fees and charges) above
an annual rate of 6% during the period of the borrower's active duty status.
For purposes of the Relief Act, persons entered into military service include
members of the Army, Navy, Air Force, Marines, Coast Guard, members of the
National Guard or any Reserves who are called to active duty status after the
origination of their mortgage loan, and officers of the U.S. Public Health
Service assigned to duty with the military. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent
not covered by any applicable Credit Enhancement, could result in losses to
the certificateholders. In addition, the Relief Act imposes limitations that
would impair the ability of the Master Servicer or the Special Servicer, if
any, to foreclose on an affected Mortgage Loan during the borrower's period
of active duty status and, under some circumstances, during an additional
three months thereafter. Thus, if the affected Mortgage Loan goes into
default, there may be delays and losses occasioned by the inability to
foreclose the Mortgaged Property in a timely fashion. Because the Relief Act
applies to borrowers who enter military service (including reservists who are
later called to active duty) after origination of their mortgage loan, no
information can be provided as to the number of Mortgage Loans that may be
affected by the Relief Act. The Relief Act may also be applicable if the
borrower is an entity owned or controlled by a person in a military service.
APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that mortgagees are
entitled to receive on a mortgage loan. In determining whether a given
transaction is usurious, courts may include charges in the form of "points"
and "fees" in the determination of the "interest" charged in connection with
a loan. If the amount charged for the use of the money loaned is found to
exceed a statutorily established maximum rate, the form employed and the
degree of overcharge are both immaterial.
Statutes differ in their provision as to the consequences of a usurious
loan. One type of statute requires the mortgagee to forfeit the interest
above the applicable limit or imposes a specified penalty. For example, the
borrower may have the recorded mortgage or deed of trust canceled upon paying
its debt with lawful interest, or the mortgagee may foreclose, but only for
the debt plus lawful interest, in either case, subject to any applicable
credit for excessive interest collected from the borrower and any penalty
owed by the mortgagee. A second, more severe type of statute results in the
invalidation of the transaction. Under this second type of statute, the
borrower may have the recorded mortgage or deed of trust canceled without any
payment and the mortgagee is prohibited from foreclosing.
Under Title V of the federal Depository Institutions Deregulation and
Monetary Control Act of 1980, as amended, some types of residential
(including multifamily, but not other commercial) first mortgage loans may be
exempted from state usury limitations. However, until April 1, 1983, states
were allowed to adopt laws or constitutional provisions expressly rejecting
Title V and even where Title V is not so rejected, any state is authorized to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V. Some states have rejected Title V and/or taken action to
limit discount points or other charges.
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ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by nonfederally chartered lenders have historically been
subjected to a variety of restrictions. These restrictions differed from
state to state, resulting in difficulties determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially with respect to residential (including multifamily, but not
other commercial) mortgage loans as a result of the enactment of Title VIII
of the Garn-St. Germain Act.
Title VIII provides that, notwithstanding any state law to the contrary:
(1) 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;
(2) state-chartered credit unions may originate alternative mortgage
instruments in accordance with regulations promulgated by the NCUA
with respect to origination of alternative mortgage instruments by
federal credit unions; and
(3) all other nonfederally 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 authorized any state to reject applicability of the provisions
of Title VIII by adopting, before October 15, 1985, a law or constitutional
provision expressly rejecting the applicability of those provisions. Some
states have taken that action. A mortgagee's failure to comply with the
applicable federal regulations in connection with the origination of an
alternative mortgage instrument could subject that mortgage loan to state
restrictions that would not otherwise be applicable.
LEASES AND RENTS
Some of the Mortgage Loans may be secured by an assignment of leases and
rents, either through assignment provisions incorporated in the mortgage,
through a separate assignment document or both. Under an assignment of leases
and rents, the borrower typically assigns to the mortgagee the borrower's
right, title and interest as landlord under each lease and the income derived
from that lease, while retaining a right to collect the rents for so long as
there is no default under the mortgage loan documentation. Upon a default,
the mortgagee may be entitled to collect rents. However, a mortgagee's
failure to take necessary steps to "perfect" its interest in rents may result
in the mortgagee's inability to collect all or a portion of the rents. In
order to "perfect" an interest in rents, some state laws require not only
proper recording of the assignment of leases and rents, but also require the
mortgagee to take possession of the property and/or obtain judicial
appointment of a receiver before the mortgagee is entitled to collect rents.
Mortgagees taking possession of property may incur potentially substantial
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risks attendant to that possession, including liability for environmental
clean-up costs and other risks inherent to property ownership and operation.
In addition, if a bankruptcy or similar proceeding is commenced by or in
respect of the borrower, the mortgagee's ability to collect the rents may
also be adversely affected.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
If a borrower encumbers a mortgaged property with one or more junior
liens, the senior mortgagee is subjected to additional risk, such as the
following:
(1) the borrower may have difficulty servicing and repaying multiple loans
and if the junior loan permits recourse to the borrower and the senior
loan does not, a borrower may be more likely to repay sums due on the
junior loan than those due on the senior loan;
(2) acts of the senior mortgagee that prejudice the junior mortgagee or
impair the junior mortgagee's security may create a superior equity in
favor of the junior mortgagee (for example, if the borrower and the
senior mortgagee agree to an increase in the principal amount of, or
the interest rate payable on, the senior loan, the senior mortgagee
may lose its priority to the extent an existing junior mortgagee is
prejudiced or the borrower is additionally burdened);
(3) if the borrower defaults on the senior loan and/or any junior loan or
loans, the existence of junior loans and actions taken by junior
mortgagees can impair the security available to the senior mortgagee
and can interfere with, delay and in some circumstances even prevent
the taking of action by the senior mortgagee; and
(4) the bankruptcy of a junior mortgagee may operate to stay foreclosure
or similar proceedings by the senior mortgagee.
Some of the Mortgage Loans may not restrict secondary financing,
permitting the borrower to use the Mortgaged Property as security for one or
more additional loans. Some of the Mortgage Loans may contain a
"Due-on-Encumbrance" clause which: (1) provides that the Mortgage Loan will
(or may at the mortgagee's option) become due and payable upon the creation
of any lien or other encumbrance on the related Mortgaged Property, or (2)
requires the consent of the related mortgagee to the creation of any the lien
or other encumbrance on the related Mortgaged Property. However, the
"Due-on-Encumbrance" clauses may be unenforceable in some jurisdictions under
some circumstances.
The Pooling and Servicing Agreement for each series will generally provide
that if any Mortgage Loan contains a "Due-on-Encumbrance" clause, then for so
long as the Mortgage Loan is included in a given Trust Fund, the Master
Servicer, or the Special Servicer (if the Mortgage Loan is a Specially
Serviced Mortgage Loan), will, in a manner consistent with the servicing
standard set forth in the Pooling and Servicing Agreement, exercise (or
decline to exercise) any right it may have as the mortgagee of record with
respect to the Mortgage Loan to (1) accelerate the payments on the Mortgage
Loan; or (2) withhold its consent to the creation of any lien or other
encumbrance.
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TYPE OF MORTGAGED PROPERTY
A mortgagee may be subject to additional risk depending upon the type and
use of the mortgaged property in question. For instance, mortgaged properties
that are hospitals, nursing homes or convalescent homes may present special
risks to mortgagees in large part due to significant governmental regulation
of the ownership, operation, maintenance, control and financing of health
care institutions. Mortgages encumbering mortgaged properties that 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 that are hotels or motels may present
additional risk to the mortgagee because (1) hotels and motels are typically
operated pursuant to franchise, management and operating agreements that may
be terminable by the operator, and (2) 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 that are multifamily
residential properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of
those properties.
CRIMINAL FORFEITURES
Various federal and state laws provide for the civil or criminal
forfeiture of property (including real estate) used or intended to be used to
commit or aid in the commission of illegal acts or property purchased with
the proceeds of those illegal acts. Even though these laws were originally
intended as tools to fight organized crime and drug related crimes, there is
a current trend toward expanding the scope of these laws. Some laws (such as
the Racketeer Influenced and Corrupt Organizations law and the Comprehensive
Crime Control Act of 1984) provide for notice, opportunity to be heard and
for defenses for "innocent lienholders." However, given the uncertain scope
of these laws and their relationship to existing constitutional protections
afforded property owners, no assurance can be made that enforcement of any
law of this type with respect to any Mortgaged Property would not deprive the
Trust Fund of its security for the related Mortgage Loan.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated under those laws, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove structural, architectural and communication
barriers from existing places of public accommodation so that those modified
accommodations are accessible and usable by disabled individuals.
Modifications must be undertaken to the extent "readily achievable." The
"readily achievable" standard takes into account 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, those laws may also impose these requirements on a foreclosing
mortgagee 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 mortgagee who
is financially more capable than the borrower of complying with the
requirements of those laws may be subject to more stringent requirements than
those to which the borrower is subject.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
Certificates. This summary is based on federal income tax law as currently in
effect, including the Internal Revenue Code of 1986 as amended (the "Tax
Code"), the legislative history thereof, and final and proposed regulations
promulgated by the Department of Treasury thereunder, including those in
effect and proposed under Sections 860A through 860G of the Tax Code (the
"REMIC Regulations"), administrative rulings and judicial decisions. This
discussion does not address every aspect of the federal income tax
consequences that may be applicable to particular categories of investors in
light of their personal investment circumstances or their special treatment
under the federal income tax rules. The authorities on which this discussion
is based are subject to change or differing interpretations, and such changes
may operate retroactively. This discussion reflects the applicable provisions
of the Code, as well as the REMIC Regulations promulgated by the Treasury.
Potential investors should consult their own tax advisors regarding the tax
treatment of their acquisition, ownership and disposition of Certificates.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
General. An election may be made with respect to a particular series of
Certificates, to treat the Trust Fund or one or more segregated pools of
assets in the Trust Fund as one or more REMICs within the meaning of Tax Code
Section 860D. A Trust Fund or portion of the Trust Fund as to which a REMIC
election is made is 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 with respect to a Trust Fund are referred to as "REMIC Certificates"
and will consist of one or more classes of "Regular Certificates" and one
class of "Residual Certificates" for each REMIC Pool. Qualification as a
REMIC requires ongoing compliance with conditions specified in the Tax Code.
With respect to each series of REMIC Certificates, O'Melveny & Myers LLP
or Latham & Watkins, counsel to the Depositor, has advised the Depositor that
in the firm's opinion, assuming:
(1) the making of the REMIC election;
(2) compliance with the Pooling and Servicing Agreement and any amendment
thereof;
(3) the accuracy of all representations made with respect to the Mortgage
Loans; and
(4) compliance with any changes in the law, including any amendments to
the Tax Code or applicable Treasury regulations,
each REMIC Pool will qualify as a REMIC. In that case, the Regular
Certificates will be considered to be "regular interests" in the related
REMIC Pool and generally will be treated for federal income tax purposes as
newly originated debt instruments, and the Residual Certificates will be
considered to be "residual interests" in the related REMIC Pool. The
prospectus supplement for each series of Certificates will indicate whether
any
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REMIC elections will be made with respect to the related Trust Fund, in which
event references to "REMIC" or "REMIC Pool" in this prospectus generally will
refer to each REMIC Pool specified in the applicable prospectus supplement.
For certain series of Certificates as to which two or more separate elections
will be made to treat designated portions of a Trust Fund as separate REMICs,
references to the "REMIC" or "REMIC Pool" may refer to the REMIC issuing the
offered Certificates of such series (which may be described in the Prospectus
Supplement as the "Master REMIC", the "Issuing REMIC" or the "Upper-Tier
REMIC"), or may refer to each REMIC comprising the Trust Fund, as
appropriate. If so specified in the applicable prospectus supplement, a Trust
Fund or a portion of a Trust Fund, if any, as to which a REMIC election is
not made may be treated as a grantor trust for federal income tax purposes.
See "Federal Income Tax Consequences for Certificates as to Which No REMIC
Election Is Made".
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 Tax Code Section 7701(a)(19)(C)(xi), but
only in the same proportion that the assets of the REMIC Pool would be
treated as "loanssecured by an interest in real property which isresidential
real property" (such as single family or multifamily properties, but not
commercial properties) within the meaning of Tax Code Section
7701(a)(19)(C)(v) or as other assets described in Tax 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 Tax Code Section 856(c)(4)(A), and
interest on the 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 Tax
Code Section 856(c)(3)(B) in the same proportion that 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 treatments, the REMIC
Certificates will qualify for the corresponding status in their entirety. For
purposes of Tax 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 REMIC treatment. Where two or more 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%. REMIC Certificates held by a regulated investment company will
not constitute "Government securities" within the meaning of Tax Code Section
851(b)(3)(A)(i). REMIC Certificates held by some financial institutions will
constitute an "evidence of indebtedness" within the meaning of Tax Code
Section 582(c)(1). The Small Business Job Protection Act of 1996 repealed the
reserve method for bad debts of domestic building and loan associations and
mutual savings banks, and eliminated the asset category of "qualifying real
property loans" in former Tax Code Section 593(d) for taxable years beginning
after December 31, 1995. The requirement in the Small Business Job Protection
Act of 1996 that those institutions must "recapture" a portion of their
existing bad debt reserves is suspended if a specified portion of their
assets are maintained in "residential loans" under Tax Code Section
7701(a)(19)(C)(v), but only if those loans were made to acquire, construct or
improve the related real property and not for the purpose of refinancing. 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. A REMIC Pool must satisfy certain requirements
of the Tax Code and the REMIC Regulations, including the making of an
election for such treatment, upon or shortly after the issuance of its
related Certificates, and thereafter must comply with ongoing requirements
set forth in the Tax Code in order for the REMIC Pool to qualify as a REMIC.
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 may consist of assets
other than "qualified mortgages" and "permitted investments", beginning the
close of the third calendar month after the "Startup Day" (which for purposes
of this discussion is the date of issuance of the REMIC Certificates) and at
all times thereafter. The REMIC Regulations provide a safe harbor for the
asset test 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. The Pooling and Servicing Agreement for each series will contain
provisions designed to meet these requirements. See "Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations".
A qualified mortgage is any obligation (including any certificate of
beneficial ownership therein) which is principally secured by an interest in
real property and either transferred to the REMIC Pool on the Startup Day in
exchange for Regular Certificates or Residual Certificates or 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, certificates of beneficial interest in a grantor trust
that holds mortgage loans, mortgage pass-thru certificates guaranteed by
GNMA, FNMA, FHLMC or CMHC, certain obligations secured by manufactured
housing treated as single family residences under Tax Code Section 25(e)(10),
loans secured by timeshare interests and loans secured by shares held by a
tenant stockholder in a cooperative housing corporation, provided that, in
general, (1) the fair market value of the real property securing the mortgage
(including buildings and structural components of buildings) is at least 80%
of the principal balance of the related Mortgage Loan or underlying mortgage
loan either at origination of the relevant loan or as of the Startup Day (an
original loan-to-value ratio of not more than 125% with respect to the real
property securing the mortgage loan, provided that the value of the real
property in such calculation must be first reduced by the amount of any lien
on the real property interest that is senior to the mortgage loan and must be
further reduced by a proportionate amount of any lien that is in parity with
the mortgage loan) or (2) 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 (1) of the preceding sentence as of the date of the
last modification or at closing. A qualified mortgage also includes a regular
interest in another REMIC which is transferred to a
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REMIC on its Startup Day in exchange for regular or residual interests, and 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 (a) in exchange for any qualified
mortgage within a three-month period thereafter or (b) in exchange for a
"defective obligation" within a two-year period thereafter.
A "defective obligation" is a mortgage subject to any of the following
defects:
(1) a mortgage in default or as to which default is reasonably
foreseeable;
(2) a mortgage that does not conform to a customary representation or
warranty given by the sponsor or prior owner of the mortgage made at
the time of transfer to the REMIC Pool regarding the characteristics
of the mortgage loan or the pool of mortgages of which it is a part;
(3) a mortgage that was fraudulently procured by the borrower; or
(4) a mortgage that was not in fact principally secured by an interest in
real property.
A Mortgage Loan that is "defective" as described in the last clause above
that is not cured, sold or, if within two years of the Startup Day, exchanged
for a qualified replacement mortgage, within 90 days of discovery, ceases to
be a qualified mortgage at the end of the 90-day period; if, however, the
defect is one that would not have affected the status of the mortgage as a
qualified mortgage on the Startup Day, the mortgage will remain a qualified
mortgage for purposes of the REMIC asset test regardless of whether such
defect is or can be cured.
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 distributed to holders of interests in the REMIC Pool. A
qualified reserve asset is any intangible property (other than a REMIC
residual interest) 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 other contingencies. The reserve fund will be disqualified if
more than 30% of the gross income from the assets in the reserve 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 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 may not be held beyond the close of the third taxable
year following the acquisition of the property by REMIC Pool, with possible
extensions granted by the Service of up to an additional three years.
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet other requirements. Each of the interests in a
REMIC Pool must be
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either: (1) a class of regular interests or (2) the single class of residual
interests, on which distributions 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, 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. The specified principal amount 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 that 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, in the REMIC Pool (or, unless otherwise specified in a related
Prospectus Supplement, in the Upper-Tier REMIC in a tiered REMIC structure).
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 the single class of residual interests in the REMIC Pool (or,
in the case of a tiered REMIC structure, there will be one class of residual
interests for each REMIC), on which distributions are made pro rata.
If a REMIC Pool fails to comply with one or more of the ongoing
requirements of the Tax Code for REMIC status during any taxable year, the
Tax Code provides that the entity will not be treated as a REMIC for that
year and thereafter. In this event, an entity that fails to qualify as a
REMIC and which has issued multiple maturity classes of debt instruments may
be treated as a separate association taxable as a corporation under Treasury
regulations, and one or more classes of Regular Certificates may be treated
as equity interests in such entity instead of as debt instruments issued by
such entity. The Tax 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 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 REGULAR CERTIFICATES
General
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a Regular
Certificateholder as they
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accrue, and principal payments on a Regular Certificate will be treated as a
return of capital to the extent of the Regular Certificateholder's basis in
the Regular Certificate. Regular Certificateholders must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by those Regular Certificateholders.
Original Issue Discount
Compound Interest Certificates will be, and other classes of Regular
Certificates may be, issued with "original issue discount" within the meaning
of Tax Code Section 1273(a). Holders of any class of 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
that income. The following discussion is based in part on the OID Regulations
under Tax Code Sections 1271 through 1273 and 1275 and in part on the
provisions of the 1986 Act. These rules require that the amount and rate of
OID accrual be calculated based on the Prepayment Assumption and the
anticipated reinvestment rate, if any, relating to the REMIC Regular
Certificates, and provide a methot for adjusting the accrual of such OID
where the actual rate of prepayment differs from the Prepayment Assumption.
Regular Certificateholders should be aware that the OID Regulations do not
adequately address some of the issues relevant to prepayable securities, such
as the Regular Certificates, and to the extent these issues are not addressed
in the 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 regarding
the appropriate method for reporting interest and original issue discount
with respect to the Regular Certificates.
Each Regular Certificate 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 Regular Certificate is the excess of the "stated redemption
price at maturity" of the Regular Certificate over its "issue price". The
issue price of a class of Regular Certificates offered pursuant to this
prospectus generally is the first price at which a substantial amount of
Regular Certificates of that class is sold to the public (excluding bond
houses, brokers and underwriters). 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, although the OID Regulations are unclear on this
point. The issue price of a 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 Regular Certificate, unless the
Regular Certificateholder elects on its federal income tax return to exclude
that amount from the issue price and to recover
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it on the first Distribution Date. The stated redemption price at maturity of
a Regular Certificate always includes the original principal amount of the
Regular Certificate, but generally will not include distributions of stated
interest if the 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 the interest payments are unconditionally
payable at intervals of one year or less during the entire term of the
Regular Certificate. It is possible that no interest on any class of Regular
Certificates will be treated as qualified stated interest, because there is
no penalty or default remedy in the case of nonpayment of interest with
respect to a Regular Certificate. However, except as provided below or in the
applicable prospectus supplement, because the underlying Mortgage Loans
provide for remedies in the event of default, the Depositor intends to treat
stated interest with respect to the Regular Certificates as qualified stated
interest if they bear stated interest at a single fixed rate or a qualifying
variable rate. Distributions of interest on a Compound Interest Certificate,
or on other 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 those Regular Certificates includes
all distributions of interest as well as principal on the Regular
Certificates. 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. In instances where the interval between the issue date and
the first Distribution Date on a Regular Certificate is shorter than the
interval between subsequent Distribution Dates, the interest due on the first
Distribution date in excess of the amount that accrued during the first short
accrual period 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 Regular Certificate
will be considered to be zero if the original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the weighted average maturity of the Regular Certificate. For
this purpose, the weighted average maturity of the 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 all
distributions in reduction of stated redemption price at maturity are
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
Regular Certificate and the denominator of which is the stated redemption
price at maturity of the Regular Certificate. The Conference Committee Report
to the 1986 Act provides that the schedule of those distributions should be
determined in accordance with the related Prepayment Assumption and the
anticipated reinvestment rate, if any, relating to the Regular Certificates.
The Prepayment Assumption with respect to a series of Regular Certificates
will be set forth in the applicable prospectus supplement. Holders generally
must report de minimis original issue discount pro rata as principal payments
are received, and that income will be capital gain if the 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
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market premium under the constant yield method. For more information, you
should refer to the section in this prospectus titled "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 Regular Certificate accrued during an accrual
period for each day on which it holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. Unless otherwise
indicated in the related Prospectus Supplement, the Depositor will treat the
period beginning on a Distribution Date ending on the day before each
Distribution Date (or the shorter or longer initial period beginning on the
issue date and ending on the day before the first Distribution Date) as an
accrual period. With respect to each 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 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. The original issue discount accruing in a full accrual
period would be the excess, if any, of (1) the sum of (a) the present value
of all of the remaining distributions to be made on the Regular Certificate
as of the end of that accrual period that are included in the Regular
Certificate's stated redemption price at maturity and (b) the distributions
made on the Regular Certificate during the accrual period that are included
in the Regular Certificate's stated redemption price at maturity, over (2)
the adjusted issue price of the 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 the following:
(1) the yield to maturity of the Regular Certificate at the issue date;
(2) events (including actual prepayments) that have occurred prior to the
end of the accrual period; and
(3) the Prepayment Assumption.
For these purposes, the adjusted issue price of a Regular Certificate at
the beginning of any accrual period equals the issue price of the Regular
Certificate, increased by the aggregate amount of OID with respect to the
Regular Certificate that accrued in all prior accrual periods and reduced by
the amount of distributions included in the Regular Certificate's stated
redemption price at maturity that were made on the Regular Certificate in
those prior periods. The OID 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 OID for each day in the period.
With respect to an initial accrual period shorter than a full accrual period,
the daily portions of OID must be determined according to an appropriate
allocation under any reasonable method.
Under the method described above, the daily portions of OID required to be
included in income by a Regular Certificateholder generally will increase to
take into account prepayments on the Regular Certificates as a result of
prepayments on the Mortgage Loans that exceed the Prepayment Assumption, and
generally will decrease
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(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 Regular Certificates can result in both a change in
the priority of principal payments with respect to some classes of Regular
Certificates and either an increase or decrease in the daily portions of OID
with respect to the Regular Certificates.
Acquisition Premium
A purchaser of a 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 Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over its 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 a subsequent purchaser may elect to treat all acquisition
premium under the constant yield method, as described below under the heading
"Election to Treat All Interest Under the Constant Yield Method".
Variable Rate Regular Certificates
Regular Certificates may provide for interest based on a qualifying
variable rate. Under the REMIC Regulations, a Regular Certificate qualifies
as a regular interest in a REMIC if: (1) it bears interest at a rate that is
a qualified floating rate under the OID Regulations and that is set at a
current value of such date (or the highest, lowest or average of two or more
qualified floating rates), including a rate based on the average cost of
funds of one or more financial institutions, or a positive or negative
multiple of that 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 which bear interest at a fixed rate or at a qualifying variable rate
under the REMIC Regulations, including a rate that is subject to one or more
caps or floors, or (2) it bears interest at one or more qualifying 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. Under
the OID Regulations, interest is treated as payable at a qualifying variable
rate if, generally, (1) the issue price does not exceed the original
principal balance by more than a specified de minimis amount; and (2) 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. Two or more qualified floating rates will be treated
as a single qualified floating rate if all the qualified floating rates can
reasonably be expected to have approximately the same values throughout the
terms of the instrument. This requirement will be conclusively presumed to be
satisfied if the values of the qualified floating rates are within 0.25% of
each other on the issue date. An objective rate (other than a qualified
floating rate) is a rate that is determined using a single fixed formula and
that is based on objective financial or economic information, provided that
the information is not (1) within the control of the issuer or a related
party or (2) unique to the circumstances of the issuer or a related party. A
qualified inverse floating rate is an objective rate that is equal to a fixed
rate
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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 floating rate may nevertheless be an objective rate. A
class of Regular Certificates may be issued that bears interest at a variable
rate but which is not a variable rate debt instrument under the OID
Regulations, for example, a class that bears different rates at different
times during the period it is outstanding to the extent that it is considered
significantly "front-loaded" or "back-loaded" within the meaning of the OID
Regulations, or at a rate based on a weighted average of interest rates on
some or all of the underlying Mortgage Loans. It is possible that that
particular 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, are by their terms not applicable to
Regular Certificates. However, if final regulations dealing with contingent
interest with respect to Regular Certificates apply the same principles as
the OID Regulations dealing with contingent interest, Regular
Certificateholders may be required to include OID in income at different
times tan would be the case under the OID Regulations applicable to variable
rate debt instruments. Furthermore, application of those principles could
lead to the characterization of gain on the sale of contingent interest
Regular Certificates as ordinary income. Accordingly, unless otherwise
indicated in the applicable prospectus supplement, the Depositor intends to
treat 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. Investors should consult their tax advisors
regarding the appropriate treatment of any Regular Certificate that does not
pay interest at a fixed rate or variable rate as described in this paragraph.
The amount of original issue discount with respect to a 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 the Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the 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 that 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, unless required otherwise by
applicable final regulations, the Depositor intends to treat 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, except to the extent
that initial "teaser" rates cause sufficiently "back-loaded" interest to
create more than de minimis original issue discount. The yield on those
Regular Certificates for purposes of accruing original issue discount will be
a hypothetical fixed rate based on the fixed rates, in the case of fixed rate
Mortgage Loans, and initial "teaser rates" followed by fully indexed rates,
in the case of adjustable rate
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Mortgage Loans. 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 of ordinary income reportable to
reflect the actual Pass-Through Rate on the Regular Certificates.
Deferred Interest
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be deferred interest is includible in the stated redemption
price at maturity of that Regular Certificate. Accordingly, any deferred
interest that accrues with respect to a class of Regular Certificates may
constitute income to the holders of those Regular Certificates prior to the
time distributions of cash for deferred interest are made.
Market Discount
A purchaser of a Regular Certificate may be subject to the market discount
rules of Tax Code Sections 1276 through 1278. Under these Tax 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 Regular Certificate (1) is exceeded by the then-current
principal amount of the Regular Certificate or (2) in the case of a Regular
Certificate having original issue discount, is exceeded by the adjusted issue
price of that Regular Certificate at the time of purchase. The purchaser
generally will be required to recognize ordinary income to the extent of
accrued market discount on the Regular Certificate as distributions
includible in the stated redemption price at maturity of the Regular
Certificate are received, in an amount not exceeding any distribution. The
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 regulations
are issued, market discount would accrue either (1) on the basis of a
constant interest rate or (2) in the ratio of stated interest allocable to
the relevant period to the sum of the interest for that period plus the
remaining interest as of the end of that period, or in the case of a 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 that period plus the remaining original issue
discount as of the end of that period. The purchaser generally will be
required to treat a portion of any gain on a sale or exchange of the 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. The 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 Regular Certificate over the interest distributable on
the Regular Certificate. The deferred portion of interest expense in any
taxable year generally will not exceed the accrued market discount on the
Regular Certificate for that year. Any 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 Regular Certificate is disposed
of. As an alternative to the inclusion
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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 that 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 that election may be deemed to be made.
Market discount with respect to a Regular Certificate will be considered
to be zero if the market discount is less than 0.25% of the stated redemption
price at maturity of the Regular Certificate multiplied by the weighted
average maturity of the Regular Certificate (determined as described above in
the third paragraph under "Original Issue Discount") remaining after the date
of purchase. De minimis market discount apparently should be reported in a
manner similar to de minimis original issue discount. 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 Regular Certificate purchased at a cost (not including amounts
attributable to accrued qualified stated interest greater than its remaining
stated redemption price at maturity generally is considered to be purchased
at a premium. If the Regular Certificateholder holds that Regular Certificate
as a "capital asset" within the meaning of Tax Code Section 1221, the Regular
Certificateholder may elect under Tax Code Section 171 to amortize the
premium under the constant yield method. A Certificateholder that makes this
election for a Certificate that is acquired at a premium will be deemed to
have made an election to amortize bond premium with respect to all debt
instruments having amotizable bond premium that such Certificateholder
acquired during the year of the election or thereafter. It is not clear
whether the Prepayment Assumption would be taken into account in determining
the life of the REMIC Regular Certificate for this purpose. However the
Conference Committee Report to the 86 Act states that the same rules that
apply to accrual of market discount (which rules require use of a Prepayment
Assumption in accruing market discount (which rules require use of a
Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have OIC)
will also apply in amortizing bond premium under Tax Code Section 171.
Amortizable bond premium will be treated as an offset to interest income on a
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 Tax 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 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 that election, (1) "interest" includes stated
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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 (2) 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 a constant yield method
election on an instrument by instrument basis or for a class or group of debt
instruments. However, if the holder makes that 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 that
election.
Sale or Exchange of Regular Certificates
If a Regular Certificateholder sells or exchanges a Regular Certificate,
or if such Regular Certificate is redeemed or retired, the Regular
Certificateholder will recognize gain or loss equal to the difference, if
any, between the amount received and its adjusted basis in the Regular
Certificate. The adjusted basis of a Regular Certificate generally will equal
the cost of the 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 Regular Certificate and reduced (but not below
zero) by amounts included in the stated redemption price at maturity of the
Regular Certificate that were previously received by the seller, by any
amortized premium and by previously recognized losses. Similarly, a holder
who receives a payment that is part of the started redemption price at
maturity of a REMIC Regular certificate will recognize gain equal to the
excess, if any, of the amount of the payment over an allocable portion of the
holder's adjusted basis in the REMIC Regular Certificate. A REMIC Regular
Certificateholder who receives a final payment that is less than the holder's
adjusted basis in the REMIC Regular Certificate will generally recognize a
loss.
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
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Regular Certificate has been held for the
long-term capital gain holding period (currently more than one year). Any
gain will be treated as ordinary income
(1) if a Regular Certificate is held as part of a "conversion
transaction" as defined in Tax 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 Tax 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 that transaction;
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(2) in the case of a non-corporate taxpayer, to the extent the taxpayer
has made an election under Tax Code Section 163(d)(4) to have net
capital gains taxed as investment income at ordinary rates; or
(3) to the extent that the 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 the 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 that
holder with respect to the Regular Certificate.
In addition, gain or loss recognized from the sale of a Regular
Certificate by some banks or thrift institutions will be treated as ordinary
income or loss pursuant to Tax Code Section 582(c). Capital gains of
specified non-corporate taxpayers are subject to a lower maximum tax rate
(20%) than ordinary income of those taxpayers (39.6%) 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 Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to
defaults or delinquencies on the Mortgage Loans allocable to a particular
class of Regular Certificates, except to the extent it can be established
that those losses are uncollectible. Accordingly, the holder of a 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. In this regard, investors are cautioned that while
they may generally cease to accrue interest income if it reasonably appears
that the interest will be uncollectible, the Internal Revenue Service may
take the position that original issue discount must continue to be accrued in
spite of its uncollectibility until the debt instrument is disposed of in a
taxable transaction or becomes worthless in accordance with the rules of Tax
Code Section 166. To the extent the rules of Tax Code Section 166 regarding
bad debts are applicable, it appears that holders of Regular Certificates
that are corporations or that otherwise hold the Regular Certificates in
connection with a trade or business should in general be allowed to deduct as
an ordinary loss any loss sustained during the taxable year on account of any
Regular Certificates becoming wholly or partially worthless, and that, in
general, holders of Regular Certificates that are not corporations and do not
hold the 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 the Regular Certificates becoming wholly worthless.
Although the matter is not free from doubt, non-corporate holders of Regular
Certificates should be allowed a bad debt deduction at the time the principal
balance of any class or subclass of the Regular Certificates is reduced to
reflect losses resulting from any liquidated Mortgage Loans. The Service,
however, could take the position that non-corporate holders would be allowed
a bad debt deduction to reflect losses only after all Mortgage Loans
remaining in the Trust Fund have been liquidated or the class of Regular
Certificates has been otherwise retired. The Service could also assert that
losses on the Regular Certificates are deductible based on some
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other method that may defer those 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 Regular Certificates are
urged to consult their own tax advisors regarding the appropriate timing,
amount and character of any loss sustained with respect to those 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 Internal Revenue Service may take the position
that losses attributable to accrued original issue discount may only be
deducted as short-term capital losses by non-corporate holders not engaged in
a trade or business. Special loss rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Investors are
advised to consult their tax advisors regarding the treatment of losses on
Regular Certificates.
Non-U.S. Persons
Generally, payments of interest (including any payment with respect to
accrued OID) on the REMIC Regular Certificates to a REMIC Regular
Certificateholder who is not a U.S. Person and is not engaged in a trade or
business within the United States will not be subject to federal withholding
tax if (i) such REMIC Regular Certificateholder does not actually or
constructively on 10 percent or more of the combined voting power of all
classes of equity in the issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the issuer; and (iii) such REMIC Regular Certificateholder
complies with certain identification requirements (including delivery of a
statement, signed by the REMIC Regular Certificateholder under penalties of
perjury, certifying that such REMIC Regular Certificateholder is a foreign
person and providing the name and address of such REMIC Regular
Certificateholder). If a REMIC Regular Certificateholder is not exempt from
withholding, distributions of interest to such holder, including
distributions in respect of accrued OID, may be subject to a 30% withholding
tax, subject to reduction under an applicable tax treaty. if the interest on
a REMIC Regular Certificate is effectively connected with the conduct by the
Non-U.S. REMIC regular Certificateholder of a trade or business within the
United States, then the Non-U.S. REMIC Regular Certificateholder will be
subject to U.S. income tax at regular graduated rates. Such a Non-U.S. REMIC
Regular Certificateholder also may be subject to the branch profits tax.
Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual that does not actually or constructively own
10% or more of the combined voting power of all classes of equity in the
Issuer and will not be subject to United States estate taxes. However,
Certificateholders who are non-resident alien individuals should consult
their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons related to such
holders should not acquire any REMIC Residual Certificates, and holder s of
REMIC Residual Certificates (the "REMIC Residual Certificateholders") and
persons related to REMIC Residual Certificateholders should not acquire any
REMIC Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences
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of doing so. In addition, the IRS may assert that non-U.S. Persons that own
directly or indirectly, a greater than 10% interest in any Mortgagor, and
foreign corporations that are "controlled foreign corporations" as to the
United States of which such a Mortgagor is a "United States shareholder"
within the meaning of Section 951 (B) of the Code, are subject to United
States withholding tax on interest distributed to them to the extent of
interest concurrently paid by the related Mortgagor.
For these purposes, a "U.S. Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or
organized in, or under the laws of, the United States in includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business or a trust as to which (i)
a court in the United States is able to exercise primary supervision over its
administration and (ii) one or more U.S. Persons have the right to control
all substantial decisions of the trust.
TAXATION OF RESIDUAL CERTIFICATES
Taxation of REMIC Income
Generally, the "daily portions" of REMIC taxable income or net loss will
be includible by Residual Certificateholders as ordinary income or loss in
determining the federal taxable income of Residual Certificateholders and,
except as described below under "Taxes That May Be Imposed on the REMIC
Pool," 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 that quarter and by allocating the
daily portion among the Residual Certificateholders in proportion to their
holdings of Residual Certificates in the REMIC Pool on that 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:
(1) the limitations on deductibility of investment interest expense and
expenses for the production of income do not apply;
(2) all bad loans will be deductible as business bad debts; and
(3) 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 income from
amortization of issue premium, if any, 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
Regular Certificates. The REMIC Pool's deductions include interest and
original issue discount expense on the 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.
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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 Regular Certificates or income
from amortization of issue premium on the Regular Certificates, on the other
hand. If an interest in the Mortgage Loans is acquired by the REMIC Pool at a
discount, and one or more of the Mortgage Loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to
receive a corresponding amount of cash because (1) the prepayment may be used
in whole or in part to make distributions in reduction of principal on the
Regular Certificates and (2) the discount on the Mortgage Loans which is
includible in income may exceed the deduction allowed upon distributions on
those Regular Certificates on account of any unaccrued original issue
discount relating to those Regular Certificates. When there is more than one
class of 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 Regular Certificates when distributions
in reduction of principal are being made in respect of earlier classes of
Regular Certificates to the extent that those earlier classes are not issued
with substantial discount. If taxable income attributable to that kind of
mismatching is realized, in general, losses would be allowed in later years
as distributions on the later classes of 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 the series of Regular
Certificates, may increase over time as distributions in reduction of
principal are made on the lower yielding classes of 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
this kind of mismatching or unrelated deductions against which to offset that
income, subject to the discussion of "excess inclusions" below under
"--Limitations on Offset or Exemption of REMIC Income." The timing of the
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 some periods
may exceed the income reflected by that Residual Certificateholder for those
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 the Residual
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Certificate. The 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 the loss was disallowed and may be
used by the 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, taxable income will not include
cash received by the REMIC Pool that represents a recovery of the REMIC
Pool's basis in its assets. A 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 the 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 a residual
interest as zero rather than a 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 that residual interest to
induce the transferee to acquire the interest, and Residual
Certificateholders should consult their own tax advisors in this regard.
To the extent 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 his basis until
termination of the REMIC Pool (unless future Treasury regulations are revised
to provide for periodic adjustments to the REMIC income otherwise reportable
by that holder). For more information, you should refer to the following
sections in this prospectus titled "Treatment of Material Items of REMIC
Income and Expense--Market Discount" regarding the basis of Mortgage Loans to
the REMIC Pool and "--Sale or Exchange of a Residual Certificate" regarding
possible treatment of a loss upon termination of the REMIC Pool as a capital
loss.
TREATMENT OF MATERIAL ITEMS OF REMIC INCOME AND EXPENSE
Although the Depositor intends to compute REMIC income and expense in
accordance with the Tax 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 it will use for reporting income with respect to
the Mortgage Loans and expenses with respect to the Regular Certificates, and
different methods could result in different timing of reporting of taxable
income or net loss to Residual Certificateholders or differences in character
income as capital gain versus ordinary income.
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Original Issue Discount and Premium. Generally, the REMIC Pool's
deductions for original issue discount and income from amortization of issue
premium will be determined in the same manner as original OID on Regular
Certificates as described above under "Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates," without regard to the de minimis rule described in those
sections, and "--Acquisition Premium."
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 Regular Certificates as described above
under "Taxation of 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 the Mortgage Loans is exceeded by their unpaid principal
balances. 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 of the Mortgage Loans to the
REMIC Pool. In respect of Mortgage Loans that have market discount to which
Tax Code Section 1276 applies, the accrued portion of market discount would
be recognized currently as an item of ordinary income in a manner similar to
OID. Market discount income generally should accrue in the manner described
above under "Taxation of Regular Certificates--Market Discount".
Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances of the Mortgage Loans, the REMIC Pool
will be considered to have acquired the Mortgage Loans at a premium equal to
the amount of any excess. In a manner analogous to the discussion above under
"Taxation of Regular Certificates--Premium", a REMIC Pool that holds a
Mortgage Loan as a capital asset under Tax Code Section 1221 may elect under
Tax Code Section 171 to amortize premium on whole mortgage loans or mortgage
loans underlying MBS that were originated after September 27, 1985 or MBS
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
borrowers with respect to these Mortgage Loans are individuals, Tax Code
Section 171 will not be available for premium on Mortgage Loans (including
underlying mortgage loans) originated on or before September 27, 1985.
Premium with respect to these Mortgage Loans may be deductible in accordance
with a reasonable method regularly employed by the holder of these loans. The
allocation of this premium pro rata among principal payments should be
considered a reasonable method; however, the Service may argue that the
premium should be allocated in a different manner, such as allocating it
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
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taxable income for the calendar quarter allocable to a Residual Certificate
over the daily accruals for that quarterly period of (1) 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 Tax Code
Section 1274(d), multiplied by (2) the adjusted issue price of that Residual
Certificate at the beginning of that 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 daily
accruals of REMIC income described in this paragraph for all prior quarters,
decreased by any distributions made with respect to the Residual Certificate
prior to the beginning of the 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 income as the adjusted issue price of the
Residual Certificates diminishes.
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 carry forwards, on the 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 Tax Code Section 511, the Residual
Certificateholder's excess inclusions will be treated as unrelated business
taxable income of the Residual Certificateholder for purposes of Tax Code
Section 511. In addition, REMIC taxable income is subject to 30% withholding
tax with respect to specified persons who are not U.S. Persons (as defined
below under "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors"), and the portion of the REMIC taxable
income attributable to excess inclusions generally is not eligible for any
reduction in the rate of withholding tax (by treaty or otherwise). See
"Taxation of Some 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 would be treated as excess inclusions income in
the hands of its shareholders, and therefore 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 income tax withholding to Shareholders who are not U.S. Persons.
Common trust funds and certain cooperatives are subject to similar rules. The
Small Business Job Protection Act of 1996 has eliminated the special rule
permitting 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 Small Business Job Protection Act of 1996 provides three
rules for determining the effect of excess inclusions on the alternative
minimum taxable income of a Residual Certificateholder. First, alternative
minimum taxable income for a Residual Certificateholder is determined without
regard to the special rule, discussed above, that taxable income cannot be
less than excess inclusions. Second, a Residual Certificateholder's
alternative minimum taxable income for a taxable year cannot be less
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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, 1996, unless a Residual Certificateholder elects to have
these 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) other than in connection with the formation of a REMIC Pool
and the Disqualified Organization sells the Residual Certificate within seven
days after the Startup Day pursuant to a binding contract, a tax would be
imposed in an amount equal to the product of (x) the present value of the
total anticipated excess inclusions with respect to the Residual Certificate
for periods after the transfer and (y) 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 discount rate for determining the present value of
anticipated excess inclusions is the applicable Federal rate under Tax Code
Section 1274(d) as of the date of the transfer for a term ending with the
last calendar quarter excess inclusions are expected to accrue. This tax
generally would be imposed on the transferor of the Residual Certificate,
except where the transfer is through an agent (including a broker, nominee or
other middleman) for a Disqualified Organization, the tax would instead be
imposed on the agent. However, a transferor of a Residual Certificate would
in no event be liable for 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 the 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" 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 the entity, then a
tax is imposed on the Pass-Through Entity equal to the product of (x) the
amount of excess inclusions on the Residual Certificate that are allocable to
the interest in the Pass-Through Entity during the period the interest is
held by the Disqualified Organization, and (y) the highest marginal federal
corporate income tax rate. This 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 this tax if it has received an
affidavit from the record holder that it is not a Disqualified Organization
or stating that holder's taxpayer identification number and, during the
period that person is the record holder of the Residual Certificate, the
Pass-Through Entity does not have actual knowledge that the affidavit is
false.
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 that interest, be
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treated as a Pass-Through Entity. An electing large partnership (generally, a
partnership, other than a service partnership, which has 100 or more members
and which has elected under the Tax Code for simplified information reporting
with respect to partnership income) will be taxable on excess inclusions
income as if all partners were Disqualified Organizations.
The Pooling and Servicing Agreement with respect to a series of
Certificates will provide that no legal or beneficial interest in a Residual
Certificate may be transferred unless (1) the proposed transferee provides to
the transferor and the Trustee an affidavit providing its taxpayer
identification number and stating that it is the beneficial owner of the
Residual Certificate, is not a Disqualified Organization and is not
purchasing the Residual Certificates on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman of the Disqualified Organization),
and (2) the transferor provides a statement in writing to the Depositor and
the Trustee that it has no actual knowledge that the affidavit is false.
Moreover, the Pooling and Servicing 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
these restrictions on transfer, and each Residual Certificateholder will be
deemed to have agreed, as a condition of ownership of the Residual
Certificate, to any amendments to the related Pooling and Servicing Agreement
required under the Tax 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 that information.
Noneconomic Residual Interests. Under the REMIC Regulations, a transfer of
a "noneconomic residual interest" to a Residual Certificateholder (other than
a Residual Certificateholder who is not a U.S. Person) is disregarded for all
federal income tax purposes if a significant purpose of the transferor is to
impede the assessment or collection of tax, and 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. 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, (1) 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 (2) 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 discussed 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 (1)
the transferor conducted, at the time of the transfer, a reasonable
investigation of the
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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 (2) 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. Recently
proposed Treasury Regulations would, if finalized in their present form,
provide that this safe harbor is unavailable unless the present value of the
anticipated tax liabilities associated with holding the residual interest
does not exceed the sum of (1) the present value of any consideration given
to the transferor to acquire the interest; (2) the present value of the
expected future distributions on the interest and (3) the present value of
the anticipated tax savings associated with holding the interest on the REMIC
generates losses. For purposes of making this calculation, the transferor is
assumed to pay tax at the highest corporate rate and present values are
computed using a discount rate equal to the applicable federal rate,
compounded semiannually, unless the transferor can demonstrate that it
regularly borrows substantial funds in the course of its business at a lower
rate. The proposed Treasury Regulations, if finalized in their present form,
would be effective as of February 4, 2000. The Pooling and Servicing
Agreement with respect to each series of Certificates will require the
transferee of a Residual Certificate to certify to the matters described
above as part of the affidavit described above under the heading
"Disqualified Organizations". The transferor must have no actual knowledge or
reason to know that those statements are false.
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", unless the transferee's
income is effectively connected with the conduct of a trade or business
within the United States or not otherwise subject to a withholding tax. A
Residual Certificate is deemed to have tax avoidance potential unless, at the
time of the transfer, (1) the future value of expected distributions equals
at least 30% of the anticipated excess inclusions after the transfer, and (2)
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 a transfer to a non-U.S. Person may be made.
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 difference, if
any, between the amount received
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and its adjusted basis in the Residual Certificate (as described above under
"Taxation of Residual Certificates--Basis and Losses") 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 its adjusted
basis on that Distribution Date. This 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 its Residual Certificate
remaining when its interest in the REMIC Pool terminates, and if the Residual
Certificateholder holds the Residual Certificate as a capital asset under Tax
Code Section 1221, then the Residual Certificateholder will recognize a
capital loss at that time in the amount of the remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as ordinary
income (1) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Tax 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 that
transaction or (2) in the case of a non-corporate taxpayer, to the extent the
taxpayer has made an election under Tax 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
some banks or thrift institutions will be treated as ordinary income or loss
pursuant to Tax 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 Tax
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 the 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. As a result of the application of these rules, any loss realized
by the seller of the Residual Certificate will not be deductible, but will
increase such Certificateholder's tax basis in the asset newly acquired by
such Certificatholder in the wash sale.
MARK TO MARKET REGULATIONS
The Service has issued Mark to Market Regulations relating to the
requirement that a securities dealer mark to market "securities" held for
sale to customers. The Mark to Market Regulations provide that, for purposes
of this mark-to-market requirement, a Residual Certificate is not treated as
a security and thus a securities dealer may not mark to market a Residual
Certificate. The Mark to Market Regulations apply to all Residual
Certificates acquired on or after January 4, 1995.
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TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
Prohibited Transactions
Income from prohibited transactions by the REMIC Pool 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
(1) the disposition of a qualified mortgage other than pursuant to a (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) qualified (complete) liquidation;
(2) the receipt of income from assets that are not the type of mortgages
or investments that the REMIC Pool is permitted to hold;
(3) the receipt of compensation for services; or
(4) the receipt of gain from disposition of cash flow investments other
than pursuant to a qualified liquidation.
Notwithstanding (1) and (4), it is not a prohibited transaction to sell
REMIC Pool property to prevent a default on 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 borrower 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:
(1) during the three months following the Startup Day;
(2) made to a qualified reserve fund by a Residual Certificateholder;
(3) in the nature of a guarantee;
(4) made to facilitate a qualified liquidation or clean-up call; and
(5) 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
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applicable to real estate investment trusts. Generally, property acquired by
deed in lieu of foreclosure would be treated as "foreclosure property" for a
period of from the date of acquisition until the close of the third calendar
year following the tax year of such acquisition, with possible extensions (in
the discretion of the Internal Revenue Service) of up to an additional three
years. 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 related to any Series of
Certificates will receive income or contributions subject to tax as described
in the applicable prospectus supplement may receive and be subject to tax on
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. Where any prohibited transaction tax, contributions tax, tax
on net income from foreclosure property or state or local income or franchise
tax that may be imposed on a REMIC relating to any series of Certificates
arises out of or results from (i) a breach of the related Servicer's
Trustee's or Deposition's obligations, as the case may be, under the related
Agreements for such series, such tax will be borne by the Servicer, Trustee
or Depositor, as the case requires, out of its own funds, or (ii) the
Depositor's obligations to repurchase a Mortgage Loan, such tax will be borne
by the Depositor. In the event that any such person fails to pay or is not
required to pay any such tax, the tax will be payable out of the Trust Fund
for such series and will result in a reduction in amounts available to be
distributed to the Certificateholder of such series.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Tax 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 the adoption
of a plan of complete liquidation 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
prohibited transaction tax 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 Regular
Certificates and Residual Certificateholders within the 90-day period.
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 on 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
Tax Code applicable to partnerships, including the determination by the
Service of any adjustments to, among other things, items of REMIC
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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. Unless otherwise provided in a related prospectus
supplement, the Pooling and Servicing Agreement for a Series of Certificates
will provide that each Residual Certificateholder will be deemed, by
acceptance of the Residual Certificates, to have agreed to the appointment of
the tax matters person as provided in the preceding sentence and to the
irrevocable designation of the Master Servicer as agent for performing the
functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF SOME EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to specified itemized deductions described in Tax
Code Section 67, to the extent that those itemized deductions, in the
aggregate, do not exceed 2% of the investor's adjusted gross income. In
addition, Tax Code Section 68 provides that itemized deductions otherwise
allowable for a taxable year of an individual taxpayer will be reduced by the
lesser of (1) 3% of the excess, if any, of adjusted gross income over
$126,600 for the taxable year beginning in 1999 ($63,300 in the case of a
married individual filing a separate return) (subject to adjustments for
inflation in subsequent years) or (2) 80% of the amount of itemized
deductions otherwise allowable for that year. In the case of a REMIC Pool,
itemized deductions may include deductions under Tax Code Section 212 for the
servicing fee and all administrative and other expenses relating to the REMIC
Pool, or any similar expenses allocated to the REMIC Pool with respect to a
regular interest it holds in another REMIC. Investors who hold REMIC
Certificates either directly or indirectly through some pass-through entities
may have their pro rata share of those expenses allocated to them as
additional gross income, but may be subject to a limitation on deductions. In
addition, those expenses are not deductible for purposes of computing the
alternative minimum tax, and may cause investors subject to the alternative
minimum tax 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, the additional gross income and limitation on deductions
will apply to the allocable portion of those expenses to holders of Regular
Certificates, as well as holders of Residual Certificates, where either (i)
in the absence of a REMIC election the REMIC Pool would qualify as a grantor
trust, or (ii) Regular Certificates are issued in a manner that is similar to
pass-through certificates in a fixed investment trust and is structured with
the principal purpose of avoiding these rules. In general, that 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 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 some other pass-through entities
described in the foregoing temporary Treasury regulations) may have taxable
income in excess of the interest
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income at the pass-through rate on 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, the expenses described in this paragraph will be allocable to the
Residual Certificates.
TAXATION OF SOME FOREIGN INVESTORS
Regular Certificates
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or
other Non-U.S. Persons, will be considered "portfolio interest" and generally
will not be subject to 30% United States withholding tax, provided that the
Non-U.S. Person (1) is not a "10-percent shareholder" within the meaning of
Tax Code Section 871(h)(3)(B) or a controlled foreign corporation described
in Tax Code Section 881(c)(3)(C) and (2) provides the Trustee, or the person
who would otherwise be required to withhold tax from those distributions
under Tax 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 Regular Certificate is a
Non-U.S. Person. If this 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 Regular Certificate is
effectively connected with the conduct of a trade or business within the
United States by the Non-U.S. Person. In the latter case, the 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 Regular
Certificate.
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 "Regular Certificates" above, but only to the
extent that (1) the Mortgage Loans (including mortgage loans underlying MBS)
were issued after July 18, 1984 and (2) the Trust Fund or segregated pool of
assets in the Trust Fund (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 Tax 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
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within the United States by those Non-U.S. Persons, 30% (or lower treaty
rate) withholding will not apply. Instead, the amounts paid to those 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, these 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 OID. See "Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors" above concerning the disregard of some
transfers having "tax avoidance potential". Investors who are Non-U.S.
Persons should consult their own tax advisors regarding this specific tax
consequences of owning Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through some brokers, may be subject to a
"backup" withholding tax under Tax Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under some circumstances, principal distributions) unless the Regular
Certificateholder complies with specified 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 Regular
Certificate, or the Certificateholder is otherwise an exempt recipient under
applicable provisions of the Tax Code. Any amounts to be withheld from
distribution on the Regular Certificates would be refunded by the Service or
allowed as a credit against the Regular Certificateholder's federal income
tax liability.
REPORTING REQUIREMENTS
Reports of accrued interest, OID and information necessary to compute the
accrual of any market discount on the 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
Regular Certificates or beneficial owners who own Regular Certificates
through a broker or middleman as nominee. All brokers, nominees and other
non-exempt holders of record of 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 these types of 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
Regular Certificates. Holders through nominees must request this 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
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annually, if applicable, to holders of Regular Certificates, and filed
annually with the Service concerning Tax Code Section 67 expenses (see
"Limitations on Deduction of Some Expenses" above) allocable to those
holders. Furthermore, under those regulations, information must be furnished
quarterly to Residual Certificateholders, furnished annually to holders of
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".
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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO WHICH NO REMIC
ELECTION IS MADE
STANDARD CERTIFICATES
General
If no election is made to treat a Trust Fund (or a segregated pool of
assets in the Trust Fund) with respect to a series of Certificates that are
not designated as "Stripped Certificates" ("Standard Certificates"), as a
REMIC, the Trust Fund will be classified as a grantor trust under subpart E,
Part 1 of subchapter J of the Tax Code and not as an association taxable as a
corporation or a "taxable mortgage pool" within the meaning of Tax Code
Section 7701(i). Where there is no fixed retained yield with respect to the
Mortgage Loans underlying these Standard Certificates, the Standard
Certificateholder in the 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 "Premium and
Discount-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 the Mortgage Loans, original issue discount (if any),
prepayment fees, assumption fees, and late payment charges received by the
Master Servicer, in accordance with the 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 the
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 some pass-through
entities, will be subject to limitation with respect to specified itemized
deductions described in Tax Code Section 67, including deductions under Tax
Code Section 212 for the servicing fee and all the administrative and other
expenses of the Trust Fund, to the extent that the deductions, in the
aggregate, do not exceed two percent of an investor's adjusted gross income.
In addition, Tax Code Section 68 provides that itemized deductions otherwise
allowable for a taxable year of an individual taxpayer will be reduced by the
lesser of (1) 3% of the excess, if any, of adjusted gross income over
$126,600 for the taxable year beginning in 1999 ($63,300 in the case of a
married individual filing a separate return) (subject to adjustments for
inflation in subsequent years), or (2) 80% of the amount of itemized
deductions otherwise allowable for that year. As a result, those 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 those Standard Certificates with respect to interest at
the pass-through rate on those Standard Certificates. In addition, these
expenses are not deductible at all for purposes of computing the alternative
minimum tax, and may cause investors subject to the alternative minimum tax
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
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servicing compensation, the transaction will be subject to the application of
the "stripped bond" and "stripped coupon" rules of the Tax Code, as described
below under "Stripped Certificates" and "Premium and
Discount-Recharacterization of Servicing Fees", respectively.
TAX STATUS
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 Tax Code Section 7701(a)(19) will
be considered to represent "loans . . . secured by an interest in
real property which is . . . residential real property" within the
meaning of Tax 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 that section of the
Tax Code.
(2) A Standard Certificate owned by a real estate investment trust will
be considered to represent "real estate assets" within the meaning
of Tax 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 those assets will be considered "interest on obligations
secured by mortgages on real property" within the meaning of Tax
Code Section 856(c)(3)(B) to the same extent.
(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 Tax 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 Tax Code
Section 860G(a)(3).
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 the section
in this prospectus titled "Taxation of Regular Certificates--Acquisition
Premium."
Original Issue Discount. The original issue discount ("OID") 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 OID income are applicable to mortgages
of corporations originated after May 27, 1969, mortgages of noncorporate
borrowers (other than individuals) originated after July 1, 1982, and
mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, 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 Tax Code provisions or, under some circumstances,
by the presence of "teaser rates" on the Mortgage Loans.
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OID 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 that income. Generally, the
owner of a Standard Certificate must include in gross income the sum of the
"daily portions," as defined below, of the OID on such standard Certificate
for each day on which it owns such Certificate, including the date of
purchase but excluding the date of disposition. In the case of any original
owner, the daily portions of OID with respect to each component generally
will be determined as set forth under the OID Regulations. A calculation will
be made by the Master Services of such other entity specified in the related
Prospectus Supplement of the portion of OID that accrues during each
successive accrual period (or shorter period from the date of original issue)
that ends on the day in the calendar year corresponding to each of the
Distribution Dates on the Standard certificates (or the day prior to each
such date). This will be determined by using as a discount factor the
original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and (b) any payments included in the
stated redemption price of the respective component at the beginning of the
first accrual period is its issue price; the adjusted issue price of a
Standard Certificate at the beginning of a subsequent accrual period is the
adjusted issue price at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period reduced by the
amount of any payment other than a payment of qualified stated interest made
at the end of or during that accrual period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions
of OID must be determined according to an appropriate allocation under any
reasonable method. However, Tax 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 the Mortgage Loans acquired by a Standard Certificateholder
are purchased at a price equal to the then unpaid principal amount of the
Mortgage Loans, no OID attributable to the difference between the issue price
and the original principal amount of the Mortgage Loans (i.e., points) will
be includible by that holder. Other OID (e.g., that arising from a "teaser
rate"), however, would have to be accrued.
Market Discount. Standard Certificateholders 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 "Material Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount", except that
the ratable accrual methods described in those sections will not apply and it
is unclear whether a Prepayment Assumption would 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, the same prepayment assumption applied
in calculating the accrual of OID will be assumed for purposes of that
accrual of market discount.
Recharacterization of Servicing Fees. If the servicing fee paid to the
Master Servicer were deemed to exceed reasonable servicing compensation, the
excess amount
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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 the servicing fee would exceed reasonable servicing compensation as to
some of the Mortgage Loans would be increased. Service guidance indicates
that excess servicing will cause the Mortgage Loans to be treated under the
"stripped bond" rules and provides safe harbors for servicing deemed to be
reasonable and requires taxpayers to demonstrate that the value of servicing
fees in excess of the safe harbor 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 reasonable servicing compensation would be
viewed as retaining an ownership interest in a portion of the interest
payments on the Mortgage Loans. Under the rules of Tax 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 the
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 OID rules of the Tax Code would apply to the holder of
the stripped bonds or stripped coupons. While Standard Certificateholders
would still be treated as owners of beneficial interests in a grantor trust
for federal income tax purposes, the corpus of the 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 that portion as a second
class of equitable interest. Applicable Treasury regulations treat that
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, this 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 received 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 on the Standard Certificate. Except as provided above with respect
to market discount on any Mortgage Loans, and except for financial
institutions
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subject to the provisions of Tax Code Section 582(c), any 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 (1) if a Standard Certificate is held as part of a
"conversion transaction" as defined in Tax 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 that transaction or (2) in the case of a non-corporate taxpayer, to
the extent that taxpayer has made an election under Tax Code Section
163(d)(4) to have net capital gains taxed as investment income at ordinary
income rates. Capital gains of specified non-corporate taxpayers are subject
to a lower maximum tax rate (20%) than ordinary income of those taxpayers
(39.6%) 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.
STRIPPED CERTIFICATES
General
Pursuant to Tax 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.
The Certificates will be subject to those rules if:
(1) 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;
(2) 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--Premium
and Discount--Recharacterization of Servicing Fees" above); and
(3) 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 those fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates--Premium and Discount--Recharacterization of
Servicing Fees". Although not free from doubt, for purposes of
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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 in that section.
Tax Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an OID on the date that the stripped interest is
purchased. Although the treatment of Stripped Certificates for federal income
tax purposes is not clear in some respects at this time, particularly where
the Stripped Certificates are issued with respect to a Mortgage Pool
containing variable-rate Mortgage Loans, the Depositor has been advised by
counsel that (1) the Trust Fund will be treated as a grantor trust under
subpart E, Part 1 of subchapter J of the Tax Code and not as an association
taxable as a corporation or a "taxable mortgage pool" within the meaning of
Tax Code Section 7701(i), and (2) 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 Tax Code Section 1286, Tax Code Sections 1272 through
1275, and the OID Regulations. While under Tax Code Section 1286 computations
with respect to Stripped Certificates could 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 OID
purposes. The Pooling and Servicing Agreement with respect to each Series of
Certificates will require 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 assume that a
Stripped Certificate will be treated as a single debt instrument issued on
the date it is purchased for purposes of calculating any OID and that the
interest component of a Stripped Certificate would be treated as qualified
stated interest under the OID Regulations. Pursuant to these final
regulations the purchaser of a Stripped Certificate will be required to
account for any discount as market discount rather than OID unless either (1)
the initial discount with respect to the Stripped Certificate was treated as
zero under the de minimis rule of Tax Code Section 1273(a)(3), or (2) no more
than 100 basis points in excess of reasonable servicing is stripped off the
related Mortgage Loans. Any market discount would be reportable as described
under "Material Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates--Market Discount," without regard to the de minimis rule
in those sections and assuming that a prepayment assumption is employed in the
computation in those sections.
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, unless
otherwise specified in a prospectus supplement with respect to a Series of
Stripped Certificates, counsel has
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advised the Depositor that Stripped Certificates owned by applicable holders
should be considered to represent "real estate assets" within the meaning of
Tax Code Section 856(c)(4)(A), "obligation[s] principally secured by an
interest in real property" within the meaning of Tax Code Section
860G(a)(3)(A), and "loans . . . secured by an interest in real property which
is . . . residential real property" within the meaning of Tax Code Section
7701(a)(19)(C)(v), and interest (including OID) income attributable to
Stripped Certificates should be considered to represent "interest on
obligations secured by mortgages on real property" within the meaning of Tax
Code Section 856(c)(3)(B), in each case to the extentthe Mortgage Loans and
interest on the Mortgage Loans qualify for that treatment.
TAXATION OF STRIPPED CERTIFICATES
Original Issue Discount. Except as described above under "General", each
Stripped Certificate will be considered to have been issued with OID for
federal income tax purposes. OID 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 that income. Based in
part on the OID Regulations and the amendments to the OID sections of the Tax
Code made by the 1986 Act, the amount of OID required to be included in the
income of a Stripped Certificateholder in any taxable year likely will be
computed generally as described above under "Federal Income Tax Consequences
for REMIC Certificates--Taxation of Regular Certificates--Original Issue
Discount" and "--Variable Rate Regular Certificates". However, with the
apparent exception of a Stripped Certificate qualifying as a market discount
obligation, as described above under "General", the issue price of a Stripped
Certificate will be the purchase price paid by each holder of the Stripped
Certificate, and the stated redemption price at maturity will include the
aggregate amount of the payments, other than qualified stated interest to be
made on the Stripped Certificate to that 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 original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each
Mortgage Loan represented by the 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 a Stripped Certificate to recognize an ordinary loss
equal to the 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 the 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
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dealing with contingent interest with respect to the Stripped Certificates
apply the same principles as the OID Regulations, the regulations may lead to
different timing of income inclusion that would be the case under the OID
Regulations. Furthermore, application of those 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 the Stripped Certificate, as described
above under "Material Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Sale or Exchange of Regular
Certificates". To the extent that a subsequent purchaser's purchase price is
exceeded by the remaining payments on the Stripped Certificates, the
subsequent purchaser will be required for federal income tax purposes to
accrue and report any excess as if it were OID in the manner described above.
It is not clear 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.
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 the 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 Tax Code provisions. For example, the
Stripped Certificateholder may be treated as the owner of
(1) one installment obligation consisting of the Stripped Certificate's
pro rata share of the payments attributable to principal on each
Mortgage Loan and a second installment obligation consisting of the
Stripped Certificate's pro rata share of the payments attributable
to interest on each Mortgage Loan;
(2) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each Mortgage Loan; or
(3) 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 the Stripped Certificate, or classes of
Stripped Certificates in the aggregate, represent the same pro rata portion
of principal and interest on each 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 OID on stripped obligations make the foregoing
interpretations less likely to be applicable. The preamble to those
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regulations states that they are premised on the assumption that an
aggregation approach is appropriate for determining whether OID on a stripped
bond or stripped coupon is de minimis, and solicits comments on appropriate
rules for aggregating stripped bonds and stripped coupons under Tax 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 to each Standard Certificateholder, within a
reasonable time after the end of each calendar year, or Stripped
Certificateholder, at any time during that year, information (prepared on the
basis described above) as the Trustee deems to be necessary or desirable to
enable the Certificateholders to prepare their federal income tax returns.
The information will include the amount of OID 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 OID 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, reporting will be based upon a representative initial offering
price of each class of Stripped Certificates. The Trustee will also file this
OID 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 "Material Federal Income Tax Consequences for REMIC
Certificates--Backup Withholding".
TAXATION OF SOME FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or OID paid by the
person required to withhold tax under Tax 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 a lower rate as may
be provided for interest by an applicable tax treaty. Accrued OID recognized
by the Standard Certificateholder or Stripped Certificateholder on OID
recognized by the Standard Certificateholder or Stripped Certificateholders
on the sale or exchange of that Certificate also will be subject to federal
income tax at the same rate.
Treasury regulations provide that interest or OID 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 those persons will be subject to the same
certification requirements, described above under "Material Federal Income
Tax Consequences for REMIC
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Certificates--Taxation of Some Foreign Investors--Regular Certificates",
provided that the underlying mortgage loans are in "registered form".
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Material
Federal Income Tax Consequences", potential investors should consider the
state and local tax consequences of the acquisition, ownership, and
disposition of the Offered Certificates. State tax law may differ
substantially from the corresponding federal law, and the discussion above
does not describe the tax laws of any state or other jurisdiction.
Prospective investors should consult their own tax advisors with respect to
the various state tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
ERISA imposes various requirements on ERISA Plans and prohibits some
transactions between ERISA Plans and persons who are "parties in interest"
(as defined under ERISA) with respect to assets of those Plans. Section 4975
of the Tax Code prohibits a similar set of transactions between Tax Code
Plans and persons who are "disqualified persons" (as defined in the Tax Code)
with respect to Tax Code Plans. Some employee benefit plans, such as
governmental plans and church plans (if no election has been made under
Section 410(d) of the Tax Code) are not subject to the requirements of ERISA
or Section 4975 of the Tax Code, and assets of those plans may be invested in
Certificates, subject to the provisions of other applicable federal and state
law. However, any governmental or church plan which is qualified under
Section 401 (a) of the Tax Code and exempt from taxation under Section 501(a)
of the Tax Code is subject to the prohibited transaction rules set forth in
Section 503 of the Tax Code. Investments by ERISA Plans are subject to
ERISA's general fiduciary requirements, including the requirement of
investment prudence and diversification and the requirement that investments
be made in accordance with the documents governing the ERISA Plan. Before
investing in a Certificate, an ERISA Plan fiduciary should consider, among
other factors, whether to do so is appropriate in view of the overall
investment policy and liquidity needs of the ERISA Plan. ERISA Plan fiduciary
should especially consider the sensitivity of the investments to the rate of
principal payments (including prepayments) on the Mortgage Loans, as
discussed in the prospectus supplement related to a series.
PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Tax Code prohibit parties in
interest with respect to ERISA Plans and disqualified persons with respect to
the Tax Code Plans from engaging in specified transactions involving the
Plans or "plan assets" of those Plans, unless a statutory or administrative
exemption applies to the transaction. Section 4975 of the Tax Code and
Sections 502(i) and 502(l) of ERISA provide for the imposition of excise
taxes and civil penalties on some persons that engage or participate in those
prohibited transactions. The Depositor, the Underwriter, the Master Servicer,
the Special Servicer, if any, or the Trustee or any of their affiliates may
be considered or may become parties in interest or disqualified persons with
respect to a Plan. If so, the
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acquisition or holding of Certificates by, on behalf of or with "plan assets"
of the Plan may be considered to give rise to a "prohibited transaction"
within the meaning of ERISA and/or Section 4975 of the Tax Code, unless an
exemption is available. Further, if the underlying assets included in a Trust
Fund were deemed to constitute "plan assets," some transactions involved in
the operation of the Trust Fund may be deemed to constitute prohibited
transactions under ERISA and/or the Tax Code. Neither ERISA nor Section 4975
of the Tax Code defines the term "plan assets."
Special caution should be exercised before assets of a Plan are used to
purchase a Certificate if, with respect to those assets, the Depositor, the
Underwriter, the Master Servicer, the Special Servicer, if any, or the
Trustee or any of their affiliates either (a) has discretionary authority or
control with respect to the investment or management of those assets,
including the purchasing or sale of securities or other property, or (b) has
authority or responsibility to give, or regularly gives, investment advice
with respect to those assets pursuant to an agreement or understanding that
that advice will serve as a primary basis for investment decisions with
respect to those assets and that that advice will be based on the particular
needs of the Plan.
The Department has issued Plan Asset Regulations concerning whether a
Plan's assets will be considered to include an undivided interest in each of
the underlying assets of an entity (such as the Trust Fund) for purposes of
the general fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and Section 4975 of the Tax Code, if the Plan
acquires an "equity interest" (such as a Certificate) in an entity.
Some exceptions are provided in the Plan Asset Regulations pursuant to
which an investing Plan's assets would be considered merely to include its
interest in the Certificates instead of being deemed to include an undivided
interest in each of the underlying assets of the Trust Fund. However, it
cannot be predicted in advance, nor can there be a continuing assurance that
the exceptions may be applicable, because of the factual nature of some of
the rules set forth in the Regulations. For example, one of the exceptions in
the Plan Asset Regulations states that the underlying assets of an entity
will not be considered "plan assets" if less than 25% of the value of each
class of equity interests is held by "Benefit Plan Investors," which are
defined as ERISA Plans, Tax Code Plans, individual retirement accounts and
employee benefit plans not subject to ERISA (for example, governmental
plans). This exemption is tested immediately after each acquisition of an
equity interest in the entity whether upon initial issuance or in the
secondary market. Absent any restrictions on purchase or transfer, it cannot
be assured that benefit plan investors will own less than 25% of each class
of Certificates.
Pursuant to the Plan Asset Regulations, if the assets of the Trust Fund
were deemed to be "plan assets" by reason of the investment of assets of a
Plan in any Certificates, the "plan assets" of that Plan would include an
undivided interest in the Mortgage Loans, the mortgages underlying the
Mortgage Loans and any other assets held in the Trust Fund. Therefore,
because the Mortgage Loans and other assets held in the Trust Fund may be
deemed to be "plan assets" of each Plan that purchases Certificates, in the
absence of an exemption, the purchase, sale or holding of Certificates of any
series or class by or with the assets of a Plan could result in a prohibited
transaction and the imposition of civil penalties or excise taxes. Depending
on the relevant facts and
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circumstances, some prohibited transaction exemptions may apply to the
purchase, sale or holding of Certificates of any series or class by a
Plan-for example, PTCE 95-60, which exempts some transactions between
insurance company general accounts and parties in interest; PTCE 91-38, which
exempts some transactions between bank collective investment funds and
parties in interest; PTCE 90-1, which exempts some transactions between
insurance company pooled separate accounts and parties in interest; or PTCE
84-14, which exempts some transactions effected on behalf of a Plan by a
"qualified professional asset manager."
There can be no assurance that any of these exemptions will apply with
respect to any Plan's investment in any Certificates or, even if an exemption
were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with that investment. Also, the
Department has issued Underwriter's Exemptions. An Underwriter's Exemption
can only apply to mortgage-backed securities which, among other conditions,
are sold in an offering with respect to which underwriter serves as the sole
or a managing underwriter, or as a selling or placement agent. If an
Underwriter's Exemption might be applicable to a series of Certificates, the
applicable prospectus supplement will refer to the possibility. Further, the
applicable prospectus supplement may provide that one or more classes or
series of Certificates may not be purchased by, or transferred to, Plans or
may only be purchased by, or transferred to, an insurance company for its
general account under circumstances that would not result in a prohibited
transaction.
Any fiduciary or other Plan investor who proposes to invest "plan assets"
of a Plan in Certificates of any series or Class should consult with its
counsel with respect to the potential consequences under ERISA and Section
4975 of the Tax Code of any acquisition and ownership of those Certificates.
UNRELATED BUSINESS TAXABLE INCOME-RESIDUAL INTERESTS
The purchase of a Certificate evidencing an interest in the Residual
Interest in a series that is treated as a REMIC by any employee benefit or
other plan that is exempt from taxation under Tax Code Section 501(a),
including most varieties of Plans, may give rise to "unrelated business
taxable income" as described in Tax Code Sections 511-515 and 860E. Further,
prior to the purchase of an interest in a Residual Interest, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing an interest in a Residual Interest on behalf of, a
"Disqualified Organization," which term as defined above includes some
tax-exempt entities not subject to Tax Code Section 511, such as some
governmental plans, as discussed above under "Material Federal Income Tax
Consequences--Taxation of Holders of Residual Certificates" and
"--Restrictions on Ownership and Transfer of Residual Certificates."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important
that individuals responsible for investment decisions with respect to ERISA
Plans and Tax Code Plans consult with their counsel regarding the
consequences under ERISA and/or the Tax Code of their acquisition and
ownership of Certificates. The sale of Certificates to a Plan is in no
respect a representation by the Depositor, the applicable underwriter or any
other service provider with respect to the Certificates, such as the Trustee,
the Master Servicer
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and the Special Servicer, if any, 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
SECONDARY MORTGAGE ENHANCEMENT ACT OF 1984
The applicable prospectus supplement specifies the Offered Certificates
that are "mortgage related securities" for purposes of SMMEA. Non-SMMEA
Certificates are subject to various legal investment restrictions which
prohibit some investors from purchasing the Non-SMMEA Certificates.
Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and
to what extent the Non-SMMEA Certificates constitute legal investments for
them.
Generally, the only classes of Offered Certificates that will be "mortgage
related securities" for purposes of SMMEA are as follows:
(1) Certificates rated in one of the two highest rating categories by one
or more Rating Agencies;
(2) Certificates that are part of a series evidencing interests in a
Trust Fund consisting of loans originated by various types of
Originators as specified in SMMEA; and
(3) Certificates that are part of a series evidencing interests in a
Trust Fund consisting of mortgage loans each of which is secured by a
first lien on either:
(a) a single parcel of real estate with a residential and/or
mixed residential and commercial structure, or
(b) one or more parcels of real estate with one or more
commercial structures.
Under SMMEA, a number of states enacted legislation on or before October
3, 1991 limiting to various extents the ability of some 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, states may
enact legislation, on or before September 23, 2001, prohibiting or
restricting the purchase, holding or investment by state regulated entities
in 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.
Accordingly, the investors affected by this legislation will be authorized to
invest in Offered Certificates qualifying as "mortgage related securities"
only to the extent provided in this legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows (subject in each case to regulations the
applicable federal regulatory authority may prescribe):
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(1) 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
by those securities;
(2) federal credit unions may invest in mortgage related securities; and
(3) national banks may purchase mortgage related 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).
Effective December 31, 1996, the OCC 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 various general standards in 12 C.F.R. Section 1.5 concerning
"safety and soundness" and retention of credit information), various "Type IV
securities," (defined in 12 C.F.R. Section 1.2 (1) to include various
"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 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.
Federal credit unions should review NCUA Letter to Credit Unions No. 96,
as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage
related securities. The NCUA has adopted rules, codified as 12 C.F.R. Section
703.5 (f)-(k), which prohibit federal credit unions from investing in various
mortgage related securities (including securities such as some classes of the
Offered Certificates), except under limited circumstances. Effective January
1, 1998, the NCUA has amended its rules governing investments by federal
credit unions at 12 C.F.R. Part 703; the revised rules will permit
investments in "mortgage related securities" under some limited
circumstances, but will prohibit investments in 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.
OTHER RESTRICTIONS
All depository institutions considering an investment in the Offered
Certificates should review the "Policy Statement of the FFEIC. The Policy
Statement, which has been adopted by the Board of Governors of the Federal
Reserve System, the OCC, the Federal Depository Insurance Company and the
Office of Thrift Supervision, and by the NCUA (with some modifications),
prohibits depository institutions from investing in some "high-risk mortgage
securities" (including securities such as some classes of the
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Offered Certificates), except under limited circumstances, and sets forth
various investment practices deemed to be unsuitable for regulated
institutions. On September 29, 1997, the FFEIC released for public comment a
proposed 1997 Statement which would replace the Policy Statement. As
proposed, the 1997 Statement would delete the specific "high-risk mortgage
securities" tests, and substitute general guidelines which depository
institutions should follow in managing risks (including market, credit,
liquidity, operational (transactional), and legal risks) applicable to all
securities (including mortgage pass-through securities and
mortgage-derivative products) used for investment purposes.
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 federal or state authorities before purchasing
any class of the Offered Certificates, as some classes may be deemed
unsuitable investments, or may otherwise be restricted, under those rules,
policies or guidelines (in some 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 class of
the Offered Certificates issued in book-entry form, provisions which may
restrict or prohibit investments in securities which are issued in book-entry
form.
Other than specifying which Offered Certificates are "mortgage related
securities," we make no representations as to the proper characterization of
any class of Offered Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase any class of Offered Certificates under
applicable legal investment restrictions. These uncertainties (and any
unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) may
adversely affect the liquidity of any class of Offered 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 own legal advisors
in determining whether and to what extent the Offered Certificates of any
class constitute legal investments or are subject to investment, capital or
other restrictions.
PLAN OF DISTRIBUTION
We may sell the Certificates in series either directly or through
underwriters or dealers. The applicable prospectus supplement or prospectus
supplements for each series will describe the terms of the offering for that
series and will state the public offering or purchase price of each class of
Certificates of that series, or the method by which the price of each class
of Certificates of that series is to be determined, and the net proceeds to
the Depositor from the sale.
If we use underwriters in the sale of any Certificates the underwriters
will acquire the Certificates for their own account and may resell the
Certificates in one or more
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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. The obligations of the underwriters to purchase
the Certificates will be subject to conditions set forth in the relevant
agreement. The underwriters generally will be obligated to purchase all of
the Certificates of a series offered by a prospectus supplement if any of
those Certificates are purchased. The underwriters may sell debt securities
to or through dealers, and those dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters. The
underwriters may change from time to time any initial public offering price
and any discounts, concessions or commissions allowed or re-allowed or paid
to dealers.
The specific managing underwriter or underwriters, if any, with respect to
the offer and sale of a particular series of Certificates will be set forth
on the cover of the applicable prospectus supplement and the members of the
underwriting syndicate, if any, will be named in the prospectus supplement.
We will identify any underwriters and describe their compensation in a
prospectus supplement.
We also may sell Certificates directly to purchasers without the
involvement of underwriters in which case the applicable prospectus
supplement will contain information regarding the terms of that offering and
any agreements entered into in connection with that offering.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of those purchases, be deemed to be "underwriters" within
the meaning of the 1933 Act in connection with reoffers and sales by them of
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any reoffer and sale of the Certificates.
LEGAL MATTERS
Legal matters relating to the Certificates will be passed upon for the
Depositor by O'Melveny & Myers LLP, New York, New York, or Latham & Watkins,
New York, New York and for the Underwriters as specified in the applicable
prospectus supplement.
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 applicable prospectus
supplement.
RATING
It is a condition of issuance that a Rating Agency rate the Offered
Certificates as investment grade, that is, in one of the four highest rating
categories.
Ratings on the Offered Certificates address the likelihood of all payments
to certificateholders pursuant to the terms of the Certificates. The ratings
of the Offered Certificates will be based on the structural, legal and
issuer-related aspects associated with those Certificates, the nature of the
underlying mortgage loans and the credit
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quality of the guarantor, if any. Ratings do not represent any assessment of
the likelihood of principal prepayments by borrowers of the loans underlying
the Offered Certificates and ratings do not represent the degree by which any
actual prepayments might differ from anticipated prepayments. As a result,
holders of the Certificates may suffer a lower than anticipated yield.
A rating is not a recommendation to buy, sell or hold the related Offering
Certificates. There is no assurance that a rating of the Offered Certificates
will not be lowered or withdrawn by the assigning Rating Agency if, in its
judgment, circumstances so warrant. The ratings of the Offered Certificates
should be evaluated independently from similar ratings on other types of
securities.
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GLOSSARY
"1986 Act" means the Tax Reform Act of 1986.
"1997 Statement" means the FFEIC proposed "Supervisory Policy Statement on
Investment Securities and End-User Derivatives Activities", which would
replace the Policy Statement.
"ACMS" means asbestos-containing materials.
"ADA" means Under Title III of the Americans with Disabilities Act of 1990
and rules promulgated thereunder.
"Bankruptcy Code" means the federal Bankruptcy Code, as amended from time
to time (11 U.S.C.).
"Benefit Plan Investors" which are defined as ERISA Plans, Tax Code Plans,
individual retirement accounts and employee benefit plans not subject to
ERISA.
"Certificateholders" means registered holders of Certificates.
"Closing Date" means the date of the initial issuance of each series of
Certificates.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the master servicer will establish and maintain
a collection account on behalf of the certificateholders. Generally, payments
received on the mortgage loans will be deposited into the collection account.
"Compound Interest Certificates" means Certificates on which interest is
not currently paid.
"Credit Enhancement" means certain classes of a series of certificates may
have the benefit of credit enhancement intended to increase the likelihood of
payments on those certificates. Credit enhancement may be in the form of a
letter of credit, a liquidity facility, the subordination of one or more
other classes of a series of certificates, reserve funds,
overcollateralization, surety bonds, certificate guarantee insurance, or
other types of credit support. It is unlikely that credit enhancement will
protect against all risks of loss. Credit enhancement cannot guarantee that
losses will not be incurred on the certificates. The applicable prospectus
supplement will describe the amount and types of credit enhancement, the
identity of any entity providing credit enhancement, the limitations of
credit enhancement and other information relating to any credit enhancement.
"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).
"Department" means the U.S. Department of Labor.
"Depositor" means Prudential Securities Financing Corp.
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"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 (not
including an instrumentality if all of its activities are subject to tax and,
except in the case of the Federal Home Loan Mortgage Corporation, 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 Tax Code Section
1381(a)(2)(C), and any organization (other than a farmers' cooperative
described in Tax Code Section 521) that is exempt from taxation under the Tax
Code unless such organization is subject to the tax on unrelated business
income imposed by Tax Code Section 511.
"Distribution Account" means the trustee will establish and maintain a
distribution account on behalf of the certificateholders. The master servicer
generally will deposit into the distribution account amounts held in the
collection account to pay principal and interest on the certificates in the
manner described in the related prospectus supplement.
"Distribution Date" means a day specified in a prospectus supplement upon
which distributions are to be made to the related Certificateholders.
"Equity of Redemption" refers to a doctrine that provides that until the
property covered by a mortgage has been sold in accordance with a properly
conducted foreclosure sale, those having an interest that 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.
"ERISA Plans" means employee benefit plans subject to ERISA.
"Escrow Account" means an escrow account established and maintained by the
Master Servicer in which the Master Servicer must deposit amounts received
from each mortgagor, if required by the terms of the related Mortgage Loan
documents, for the payment of taxes, assessments, certain mortgage and hazard
insurance premiums and other comparable items ("Escrow Payments").
"Escrow Payments" shall have the meaning ascribed to that term in the
definition of Escrow Account.
"Event of Default" means an event of default with respect to the Master
Servicer or the Special Servicer under the Pooling and Servicing Agreement
for each series.
"Excess Servicing" means payment of a servicing fee to the Master Servicer
which is in excess of reasonable compensation.
"FFEIC" means Federal Financial Institutions Examination Council.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Forfeiture Laws" means the various federal and state laws, collectively,
which provide for the civil or criminal forfeiture of property (including
real estate) used or intended to be used to commit or aid in the commission
of illegal acts or property purchased with the proceeds of such illegal acts.
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"Form 8-K" means the Securities and Exchange Commission Form 8-K pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934.
"Garn-St. Germain Act" means the Garn-St. Germain Depository Institutions
Act of 1982.
"Hazardous Materials" are generally defined as any dangerous, toxic or
hazardous pollutants, chemicals, wastes or substances, including, among
others, those so identified in CERCLA or any other environmental laws now
existing, including, among others, asbestos and asbestos-containing
materials, polychlorinated biphenyls, radon gas, petroleum and petroleum
products, urea formaldehyde and any substances classified as being "in
inventory," "usable work in process" or a similar classification that would,
if classified as unusable, be included in the foregoing definition.
"Installment Contracts" means installment contracts for the sale of, fee
simple or leasehold interests in properties improved by office buildings,
health-care related properties, congregate care facilities, hotels and
motels, industrial properties, warehouse, mini-warehouse, and self-storage
facilities, mobile home parks, multifamily properties, cooperative apartment
buildings, nursing homes, office/retail properties, anchored retail
properties, single-tenant retail properties, unanchored retail properties and
other commercial real estate properties, multifamily residential properties
and/or mixed residential commercial properties (each, a "Mortgaged
Property").
"Lead Paint Act" means the Residential Lead-Based Paint Hazard Reduction
Act of 1992.
"Lender Liability Act" means the Asset Conservation, Lender Liability, and
Deposit Insurance Protection Act of 1996.
"MBS" means mortgage backed securities.
"Mark to Market Regulations" means regulations issued by the Service under
Tax Code Section 475 relating to the requirement that a securities dealer
mark to market securities held for sale to customers.
"Master Servicer" has the meaning assigned to that term in the definition
of "Pooling and Servicing Agreement". The servicer of the Mortgage Loans (the
"Master Servicer") will be specified in the applicable prospectus supplement
and may be an affiliate of the Depositor.
"Master Servicer Remittance Date" means the business day before a
Distribution Date upon which the Master Servicer is required to remit to the
Distribution Account amounts on deposit in the Collection Account that are
required for distribution to Certificateholders.
"Mortgage" means a mortgage loan secured by first or junior mortgages,
deeds of trust or similar instruments.
"Mortgage Loan" means each mortgage loan, Installment Contract,
certificate, or collateralized mortgage obligation in a Mortgage Pool.
"Mortgage Loan Groups" means groups of Mortgage Loans segregated by the
Depositor as more fully described in the related prospectus supplement.
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"Mortgage Loan Schedule" means a schedule appearing as an exhibit to a
Pooling and Servicing Agreement and listing the Mortgage Loans for the
related series.
"Mortgage Loan Seller" means the seller of a Mortgage Loan to the
Depositor.
"Mortgage Pool" means a pool of mortgage loans, mortgage pass-through or
collateralized mortgage obligation certificates not issued by the Depositor,
installment contracts and certificates issued or guaranteed by certain United
States governmental agencies. Each mortgage loan will constitute the
obligation of one or more persons to repay a specified sum with interest and
will be secured by first or junior mortgages, deed of trust or similar
security instruments on, or installment contracts for the sale of, commercial
or multifamily residential property. Commercial or multifamily residential
property may include fee simple or leasehold interests in property improved
by office buildings, health-care related properties, congregate care
facilities, hotels and motels, industrial properties, warehouse,
mini-warehouse, and self-storage facilities, mobile home parks, multifamily
properties, cooperative apartment buildings, nursing homes, office/retail
properties, anchored retail properties, single-tenant properties, unanchored
retail properties and other commercial real estate properties, multifamily
residential properties, each of which may be located in any or all states and
the U.S. Virgin Islands. The mortgage loans will not be guaranteed or insured
by the depositor or any of its affiliates. The prospectus supplement will
indicate whether the mortgage loans will be guaranteed or insured by any
governmental agency or instrumentality or other person. All mortgage loans
will have been purchased, either directly or indirectly, by the depositor on
or before the initial issuance date of the related series of certificates.
"Mortgaged Property" shall have the meaning assigned to such term in the
definition of "Installment Contracts".
"Mortgagee" unless the context otherwise requires, includes a mortgagee
under a mortgage, a beneficiary under a deed of trust, and a grantee under a
deed to secure debt seller under an Installment Contract.
"Mortgagor" unless the context otherwise requires, includes a mortgagor
under a mortgage, a trustor under a deed of trust and a grantor under a deed
to secure debt purchaser under an Installment Contract.
"NCUN" means the National Credit Union Administration.
"Noneconomic Residual Interest" means a residual interest in a REMIC
(including a residual interest with a positive value at issuance) unless, at
the time of the transfer of such residual interest, (1) 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 (2) the transferor reasonably expects that the
transferee will receive distributions from the REMIC at or after he time at
which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes.
"Non-SMMEA Certificates" means Certificates not qualifying as "mortgage
related securities" under SMMEA.
"Non-U.S. Person" means any person who is not a U.S. Person.
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"Note" means the promissory note, bond, mortgage consolidation agreement,
installment contract or other similar instrument related to an assignment of
leases and rents.
"OCC" means Office of the Comptroller of the Currency.
"Offered Certificates" means certificates offered by this prospectus and
the accompanying prospectus supplement.
"OID Regulations" means the temporary and final Treasury regulations
issued on February 2, 1994, as amended on June 14, 1996 under Tax Code
Sections 1271 through 1273 and 1275.
"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. 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 that interest, be treated as a
Pass-Through Entity.
"Permitted Investments" will generally consist of one or more of the
following, unless the Rating Agencies rating Certificates of a series require
other or additional investments:
(1) direct obligations of, or guarantees as to timely payment of
principal and interest by, the United States or any agency or
instrumentality thereof, provided that those obligations are
backed by the full faith and credit of the United States of
America;
(2) direct obligations of the FHLMC (debt obligations only),
Fannie Mae (debt obligations only), the Federal Farm Credit
System (consolidated system-wide bonds and notes only), the
Federal Home Loan Banks (consolidated debt obligations only),
the Student Loan Marketing Association (debt obligations
only), the Financing Corp. (consolidated debt obligations
only) and the Resolution Funding Corp. (debt obligations
only);
(3) federal funds time deposits in, or certificates of deposit of,
or bankers' acceptances or repurchase obligations issued by,
any bank or trust company, savings and loan association or
savings bank, depositing institution or trust company having
the highest short-term debt obligation from Standard & Poor's
Rating Services, a division of the McGraw-Hill Companies, Inc.
("S&P") or such lower rating as will not result in the
downgrade or withdrawal of the rating or ratings then assigned
to the Certificates by any Rating Agency rating the
Certificates, provided, in each case, the maturity is not more
than 365 days;
(4) commercial paper having a maturity of 365 days or less
(including both non-interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of
issuance thereof and demand notes that constitute vehicles for
investment in commercial paper) that is rated by each Rating
Agency rating the Certificates in its highest short-term
unsecured rating category;
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(5) units of taxable money market funds or mutual funds that seek
to maintain a constant asset value and have been rated by each
Rating Agency rating the Certificates as Permitted
Investments;
(6) if previously confirmed in writing to the Trustee, any other
demand, money market or time deposit, or any other obligation,
security or investment as may be acceptable to each Rating
Agency rating the Certificates as a permitted investment of
funds backing securities having ratings equivalent to each
Rating Agency's highest initial rating of the Certificates;
and
(7) such other obligations as are acceptable as Permitted
Investments to each Rating Agency rating the Certificates;
provided, however, that (a) if S&P is rating the Certificates,
none of the obligations or securities listed above may have an
"r" highlighter affixed to its rating if rated by S&P; (b)
except for units of money market funds pursuant to clause (5)
above, each obligation or security will have a fixed dollar
amount of principal due at maturity which cannot vary or
change; (c) except for units of money market funds pursuant to
clause (5) above, if any obligation or security provides for a
variable rate of interest, interest will be tied to a single
interest rate index plus a single fixed spread (if any) and
move proportionately with that index; and (d) if any of the
obligations or securities listed in paragraphs (3)-(6) above
are not rated by each Rating Agency rating the Certificates,
such investment will nonetheless qualify as a Permitted
Investment if it is rated by one of the Rating Agencies rating
the Certificates and one other nationally recognized
statistical rating organization; and provided, further, that
such instrument continues to qualify as a "cash flow
investment" pursuant to Tax Code Section 860G(a)(6) earning a
passive return in the nature of interest and that no
instrument or security will be a Permitted Investment if (a)
such instrument or security evidences a right to receive only
interest payments or (b) the right to receive principal and
interest payments derived from the underlying investment
provides a yield to maturity in excess of 120% of the yield to
maturity at par of the underlying investment as of the date of
its acquisition.
"Plans" means Tax Code Plans together with ERISA Plans.
"Plan Asset Regulations" means regulations issued by the Department
concerning whether a Plan's assets will be considered to include an undivided
interest in each of the underlying assets of an entity for purposes of the
general fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and Section 4975 of the Tax Code, if the Plan
acquires an "equity interest" in an entity.
"Policy Statement" means the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994, of the FFIEC.
"Pooling and Servicing Agreement" means an agreement pursuant to which a
series of Certificates is issued and which is entered into among the
Depositor, the master servicer (the "Master Servicer"), the special servicer
(the "Special Servicer"),if any, and the Trustee for that series of
Certificates and any other parties described in the related prospectus
supplement.
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"Prepayment Assumption" means the assumed rate of prepayment of the
Mortgage Loans.
"PTCE" means Prohibited Transaction Class Exemption.
"Property Protection Expenses" means certain costs and expenses incurred
in connection with defaulted Mortgage Loans, the acquisition of title to, or
management of, REO Property, or the sale of defaulted Mortgage Loans or REO
Properties. The applicable prospectus supplement may provide for additional
circumstances in which the Master Servicer will be entitled to make
withdrawals from the Collection Account.
"Rating Agency" means each nationally recognized statistical rating
organization specified in a prospectus supplement as rating Offered
Certificates.
"REMIC Certificates" means Certificates of a series as to which one or
more REMIC elections are made.
"REMIC Pool" means a Trust Fund or portion thereof as to which a REMIC
election is made.
"REMIC Regulations" mean regulations promulgated by the U.S. Department of
Treasury (regarding REMICs).
"REO Account" means an account established and maintained by the Master
Servicer or Special Servicer to be used in connection with REO Properties and
any other Mortgaged Properties specified in the related prospectus
supplement.
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Regular Certificateholder" means the holder of a Regular Certificate.
"Reserve Account" means any reserve or escrow account established pursuant
to any of the Mortgage Loan documents.
"Reserve Fund" means each of one or more reserve funds which may be
established with respect to one or more classes of the Certificates of a
series if so specified in the related prospectus supplement, in which cash, a
letter of credit, Permitted Investments or a combination thereof, in the
amounts specified in the related prospectus supplement will be deposited.
"Residual Certificateholders" means holders of Residual Certificates.
"SBJPA of 1996" means the Small Business Job Protection Act of 1996.
"SMMEA means the Secondary Mortgage Market Enhancement Act of 1984, as
amended.
"Senior Certificates" means the senior Certificates in any series which
includes Subordinate Certificates.
"Service" means the Internal Revenue Service.
"Servicing Fee" means the Master Servicer's principal compensation for its
activities under the Pooling and Servicing Agreement for each series; the
exact amount and calculation of which is established in the prospectus
supplement and Pooling and Servicing Agreement for the related series.
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"Special Servicing Fee" means the fee for the servicing of Specially
Serviced Mortgage Loans.
"Specially Serviced Mortgage Loans" means defaulted Mortgage Loans or
those Mortgage Loans that otherwise require special servicing.
"Special Servicer" has the meaning assigned to that term in the definition
of "Pooling and Servicing Agreement".
"Standard Certificates" means any series of Certificates that is not
designated as Stripped Certificates.
"Standard Certificateholder" means the holder of a Standard Certificate.
"Startup Day" means the date of issuance of the REMIC Certificates.
"Stripped Certificate" means Certificates subject to Tax Code Section
1286, which provides that 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"; Stripped Certificates include "Stripped Interest Certificates" and
"Stripped Principal Certificates" as to which no REMIC election is made.
"Stripped Certificateholder" means a holder of a Stripped Certificate.
"Subordinate Certificates" means one or more subordinate classes of a
series if so specified in the related prospectus supplement.
"Tax Code Plans" means employee benefit plans subject to Section 4975 of
the Tax Code.
"Title V" means Title V of the federal Depository Institutions
Deregulation and Monetary Control Act of 1980, as amended.
"Title VIII" means Title VIII of the Garn-St. Germain Act.
"Treasury" means the U.S. Department of Treasury.
"Trust Fund" for a series means the trust fund created pursuant that
series' Pooling and Servicing Agreement.
"Trustee" means the bank or trust company which the Depositor selects to
act as trustee under a given Pooling and Servicing Agreement.
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any State, an estate that is subject to United
States federal income tax regardless of the source of its income or a trust
if (a) for taxable years beginning after December 31, 1996 (or for taxable
years ending after August 20, 1996, if the trustee has made an applicable
election), a court within the United States is able to exercise primary
supervision over the administration of such trust, and one or more United
States persons have the authority to control all substantial decisions of
such trust, or (b) for all other taxable years, such trust is subject to
United States federal income tax regardless of the
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source of its income (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).
"USTS" means Underground storage tanks.
"Underwriter's Exemption" means an individual administrative exemption
from application of certain prohibited transaction restrictions of ERISA and
the Tax Code, issued by the Department to an underwriters of mortgage-backed
securities.
"Voting Rights" means the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or any similar means of allocating decision-making
under the related Pooling and Servicing Agreement specified in the related
prospectus supplement.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, THAT INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HERE IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE THOSE OFFERS IN THAT JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE UNDER THE
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
DEPOSITOR SINCE DATE HEREOF.
TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying
Prospectus ............................................. i
Where You Can Find More Information ...................... ii
Summary .................................................. S-1
Risk Factors ............................................. S-15
Description of the Mortgage Pool ......................... S-49
Prudential Securities Secured Financing Corporation S-78
Mortgage Loan Sellers .................................... S-78
Description of the Certificates .......................... S-83
Yield and Maturity Considerations ........................ S-94
Master Servicer and Special Servicer ..................... S-103
The Pooling and Servicing Agreement ...................... S-104
Certain Legal Aspects of the Mortgage Loans .............. S-128
Material Federal Income Tax Consequences ................. S-131
ERISA Considerations ..................................... S-132
Legal Investment ......................................... S-136
Plan of Distribution ..................................... S-137
Use of Proceeds .......................................... S-137
Legal Matters ............................................ S-137
Ratings .................................................. S-138
Index of Terms for Prospectus Supplement ................. S-139
Annex A--Mortgage Loan Characteristics ................... A-1
Annex B--Additional Multifamily Loan Characteristics B-1
Annex C--Additional Step Loan and Interest-Only
Loan Characteristics ................................... C-1
Annex D--Affiliated Borrowers ............................ D-1
Annex E--Form of Statement to Certificateholders ......... E-1
Annex F--Structural and Collateral Term Sheet and
Top Ten Loan Descriptions .............................. F-1
PROSPECTUS
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus
Supplement ............................................. 3
Where You Can Find More Information ...................... 4
Reports .................................................. 4
Summary of Prospectus .................................... 6
Risk Factors ............................................. 7
The Depositor ............................................ 23
Use of Proceeds .......................................... 24
Description of the Certificates .......................... 24
The Mortgage Pools ....................................... 30
Servicing of the Mortgage Loans .......................... 35
Credit Enhancement ....................................... 45
Material Legal Aspects of the Mortgage Loans ............. 50
Material Federal Income Tax Consequences ................. 72
State and Other Considerations ........................... 111
ERISA Considerations ..................................... 111
Legal Investment ......................................... 114
Plan of Distribution ..................................... 116
Legal Matters ............................................ 117
Financial Information .................................... 117
Rating ................................................... 117
Glossary ................................................. 119
</TABLE>
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<PAGE>
================================================================================
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 2000-KEY1
$734,519,000
PRUDENTIAL SECURITIES
SECURED FINANCING
CORPORATION
--------------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------------
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
MCDONALD INVESTMENTS
June , 2000
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