PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 10, 1995
$199,201,194 (Approximate)
The CIT Group Securitization Corporation II, Seller
Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates
Series 1995-2
$36,263,000(Approximate)5.90% Class A-1 $65,200,000(Approximate)7.00% Class A-4
$35,456,000(Approximate)6.00% Class A-2 $15,936,000(Approximate)6.95% Class A-5
$24,434,000(Approximate)6.25% Class A-3 $21,912,194(Approximate)7.65% Class B
(The CIT Group/Sales Financing, Inc., Servicer)
-----------------
The Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates,
Series 1995-2, will represent interests in a trust (the "Trust") consisting of,
among other things, a pool of manufactured housing installment sales contracts
and installment loan agreements conveyed to the Trust by The CIT Group
Securitization Corporation II (the "Company") on or prior to the date of
issuance of the Certificates (the "Contracts"). The Company will purchase the
Contracts from The CIT Group/Sales Financing, Inc. ("CITSF") concurrently with
their conveyance to the Trust. In each case, the Contracts will be originated or
acquired from dealers by CITSF and The CIT Group Consumer Finance, Inc. (NY), a
wholly-owned subsidiary of The CIT Group Holdings, Inc. ("CIT"), in each case in
the ordinary course of business. CITSF will act as Servicer of the Contracts (in
such capacity, referred to herein as the "Servicer"). The term "Approximate",
with respect to the aggregate principal amount of the Certificates, means
subject to a permitted variance of plus or minus 5%.
The Certificates will consist of four classes of Senior Certificates (the Class
A-1 Certificates, the Class A-2 Certificates, the Class A-3 Certificates and the
Class A-4 Certificates) (collectively, the "Senior Certificates") and three
classes of Subordinated Certificates (the Class A-5 Certificates, the Class B
Certificates and the Class R Certificates) (collectively, the "Subordinated
Certificates"). Only the Senior Certificates, the Class A-5 Certificates and the
Class B Certificates are being offered hereby (collectively, the "Offered
Certificates"). Principal and interest are payable on the 15th day of each month
(or, if the 15th day is not a business day, the next business day thereafter) (a
"Remittance Date") beginning on December 15, 1995. The Senior Certificates will
evidence in the aggregate an initial 81% (approximate) undivided interest in the
Trust, the Class A-5 Certificates will evidence in the aggregate an initial 8%
(approximate) undivided interest in the Trust, the Class B Certificates will
evidence an initial 11% (approximate) undivided interest in the Trust, and the
Class R Certificates will evidence the residual interest in the Trust. The Trust
will be created in November, 1995, pursuant to a Pooling and Servicing Agreement
among the Company, CITSF and Harris Trust and Savings Bank, as trustee (the
"Trustee"). The Trust property will include all rights to payments received on
each Contract on and after November 1, 1995, security interests in the
Manufactured Homes securing the Contracts, mortgages, deeds of trust or similar
instruments securing some of the Contracts, all rights under certain hazard
insurance policies with respect to the Manufactured Homes, and rights to amounts
in the Certificate Account referred to below. The obligations of the Servicer
with respect to the Certificates are limited to its contractual servicing
obligations. CITSF will make certain representations and warranties relating to
the Contracts. In the event of an uncured breach of any representation or
warranty that materially adversely affects the Trust's interest in a Contract,
CITSF will be obligated to repurchase such Contract or substitute another
contract therefor. (Continued on following page)
-----------------
A discussion of certain risk factors that should be considered by prospective
purchasers of the securities offered hereby can be found on page S-22 herein and
on page 10 in the Prospectus.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions Company(1)(2)
--------- ------------- -----------
Per Class A-1 Certificate ... 99.968750% 0.2250% 99.743750%
Per Class A-2 Certificate ... 99.953125% 0.3000% 99.653125%
Per Class A-3 Certificate ... 99.984375% 0.3250% 99.659375%
Per Class A-4 Certificate ... 99.640625% 0.4500% 99.190625%
Per Class A-5 Certificate ... 99.906250% 0.3750% 99.531250%
Per Class B Certificate ..... 99.781250% 0.5000% 99.281250%
Total ....................... $198,872,238.58 $730,091.22 $198,142,147.36
-----------------
(1) Plus accrued interest, if any, at the applicable rate from
November 21, 1995.
(2) Before deducting expenses estimated to be $550,000.
-----------------
The Offered Certificates are offered by the several Underwriters when, as
and if issued by the Trust, delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Offered Certificates in book-entry form will be made through the
facilities of The Depository Trust Company on or about November 21, 1995,
against payment in immediately available Funds.
CS First Boston Morgan Stanley & Co.
Incorporated
The date of this Prospectus Supplement is November 14, 1995.
<PAGE>
(Continued from previous page)
On each Remittance Date, the Certificateholders will be entitled to receive
distributions, from and to the extent of funds available in the Certificate
Account, in the amounts and priorities calculated as set forth herein. The
rights of the Holders of the Subordinated Certificates to receive distributions
with respect to the Contracts are subordinated to the rights of the Senior
Certificateholders, the rights of the Holders of Class B and Class R
Certificates to receive distributions with respect to the Contracts are
subordinated to the rights of the Senior Certificateholders and the Class A-5
Certificateholders, and the rights of the Holders of the Class R Certificates to
receive distributions with respect to the Contracts are subordinated to the
rights of the holders of the Offered Certificates, in each case as and to the
extent described herein.
The Class B Certificateholders will have the benefit of a limited guarantee
(the "Limited Guarantee") of CIT to protect against losses that would otherwise
be absorbed by the Class B Certificateholders. To the extent that funds in the
Certificate Account available therefor are insufficient to distribute to the
holders of the Class B Certificates the amounts to which the holders of the
Class B Certificates are entitled, CIT will be obligated to pay the Guarantee
Payment (as defined herein) provided that the amount of the Guarantee Payment in
respect of principal of the Class B Certificates (including amounts in respect
of the Principal Liquidation Loss Amount, as described herein) will not exceed
the Guarantee Payment Limit (as defined herein). The Guarantee Payment Limit
will reduce from time to time and will not reinstate. If the Guarantee Payment
Limit is reduced to zero, no further Guarantee Payments will be made by CIT.
An election will be made to treat the Trust as a real estate mortgage
investment conduit (a "REMIC") for federal income tax purposes. As described
more fully herein, the Offered Certificates will constitute "regular interests"
in the REMIC and the Class R Certificates will constitute "residual interests"
in the REMIC. See "Certain Federal Income Tax Consequences" herein and in the
Prospectus.
The Offered Certificates will not be insured or guaranteed by any
governmental agency or instrumentality, by the Underwriters or any of their
affiliates or by the Company, the Servicer, CIT or any of their affiliates,
except for the Limited Guarantee provided by CIT in favor of the Class B
Certificateholders. Except with respect to the Guarantee Payments, payments will
be made on such Certificates only from the funds in the Certificate Account
available therefor as described herein. See "Risk Factors" herein and "Special
Considerations" in the Prospectus.
CS First Boston Corporation and Morgan Stanley & Co. Incorporated (the
"Underwriters") intend to make a secondary market in the Offered Certificates,
but have no obligation to do so. There can be no assurance that a secondary
market in the Offered Certificates will develop, or if it does develop, that it
will continue.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. Additional information is contained in the
Prospectus attached hereto; purchasers are urged to read both this Prospectus
Supplement and the Prospectus attached hereto in full. Sales of the Offered
Certificates may not be consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus. To the extent, if any, that any
statement in this Prospectus Supplement is inconsistent with statements
contained in the Prospectus, the statements in this Prospectus Supplement shall
control.
-----------------
S-2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by CIT are incorporated
by reference in this Prospectus Supplement:
(a) CIT's Annual Report on Form 10-K for the year ended December 31,
1994 together with the report of KPMG Peat Marwick LLP, independent
certified public accountants;
(b) CIT's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1995 and September 30, 1995; and
(c) CIT's Current Reports on Form 8-K dated April 11, 1995, July 13,
1995 and October 12, 1995.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus Supplement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus
Supplement.
CIT will provide without charge to each person to whom this Prospectus
Supplement is delivered, upon request, a copy of any or all of the foregoing
documents described above which have been or may be incorporated by reference in
this Prospectus Supplement other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents). Such
request should be directed to:
Corporate Secretary
The CIT Group Holdings, Inc.
1211 Avenue of the Americas
New York, New York 10036
(212) 536-1950
S-3
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Glossary contained in the
Prospectus for the location of certain defined terms used herein.
Securities Offered .................... The Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3
Certificates and the Class A-4
Certificates (collectively, the
"Senior Certificates"), the Class
A-5 Certificates and the Class B
Certificates of the Manufactured
Housing Contract Senior/Subordinate
Pass-Through Certificates, Series
1995-2 (collectively, the "Offered
Certificates"). The Certificates
also include the Class R
Certificates, which are not being
offered hereby. The Class A-5, Class
B and Class R Certificates may
herein collectively be referred to
as the "Subordinated Certificates".
Seller ................................ The CIT Group Securitization Corporation
II (the "Company"), a wholly-owned,
limited purpose subsidiary of The
CIT Group Holdings, Inc. ("CIT").
Neither CIT nor any of its
affiliates, including the Company
and The CIT Group/Sales Financing,
Inc. ("CITSF"), has guaranteed,
insured or is otherwise obligated
with respect to the Certificates
except for the Limited Guarantee
provided by CIT in favor of the
Class B Certificateholders (the
"Limited Guarantee"). See "Risk
Factors" herein and "Special
Considerations" in the Prospectus.
Servicer .............................. The CIT Group/Sales Financing, Inc.
(the "Servicer"), a wholly-owned
subsidiary of CIT.
Trustee ............................... Harris Trust and Savings Bank (the
"Trustee").
Cut-off Date Pool Principal Balance ... $199,201,195 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class A-1 Principal Balance... $36,263,000 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class A-2 Principal Balance... $35,456,000 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class A-3 Principal Balance .. $24,434,000 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class A-4 Principal Balance .. $65,200,000 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class A-5 Principal Balance .. $15,936,000 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Original Class B Principal Balance .... $21,912,194 (Approximate. Subject to a
permitted variance of plus or minus
5%).
Class A-1 Remittance Rate ............. 5.90% per annum.
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
Class A-2 Remittance Rate ............. 6.00% per annum.
Class A-3 Remittance Rate ............. 6.25% per annum, subject to a maximum
rate equal to the weighted average
of the Net Contract Rates of each
Contract (as defined below) in the
Contract Pool as of the first day of
the related Due Period, computed on
the basis of a 360-day year of
twelve 30-day months. The "Net
Contract Rate" is the contractual
rate of interest payable under a
Contract (the "Contract Rate"), less
the Monthly Servicing Fee allocable
to such Contract for such Due
Period. The weighted average of the
Net Contract Rates on the Contracts
in the Contract Pool as of the
Cut-off Date was approximately
9.17%.
Class A-4 Remittance Rate ............. 7.00% per annum, subject to a maximum
rate equal to the weighted average
of the Net Contract Rates of each
Contract in the Contract Pool as of
the first day of the related Due
Period, computed on the basis of a
360-day year of twelve 30-day
months.
Class A-5 Remittance Rate ............. 6.95% per annum, subject to a maximum
rate equal to the weighted average
of the Net Contract Rates of each
Contract in the Contract Pool as of
the first day of the related Due
Period, computed on the basis of a
360-day year of twelve 30-day
months.
Class B Remittance Rate ............... 7.65% per annum, subject to a maximum
rate equal to the weighted average
of the Net Contract Rates of each
Contract in the Contract Pool as of
the first day of the related Due
Period, computed on the basis of a
360-day year of twelve 30-day
months.
Interest Accrual Period ............... The period for which interest on the
outstanding Principal Balance of
each Class of Offered Certificates
is payable shall be the one-month
period from the most recent
Remittance Date on which interest
has been paid to but excluding the
following Remittance Date (or, in
the case of the initial Remittance
Date, from November 21, 1995 to but
excluding such initial Remittance
Date) (each, an "Interest Accrual
Period"). The "Principal Balance" of
a Class of Certificates as of any
Remittance Date is the Original
Principal Balance of such Class of
Certificates less all amounts
previously distributed to such Class
in respect of principal.
Remittance Date........................ The 15th day of each calendar month
(or, if such day is not a business
day, the next succeeding business
day), commencing on December 15,
1995.
Record Date ........................... The last business day of the month prior
to the month of the related
Remittance Date.
Cut-off Date .......................... November 1, 1995.
Closing Date .......................... November 21, 1995.
Agreement ............................. The Pooling and Servicing Agreement,
dated as of November 1, 1995 (the
"Agreement"), among the Company,
CITSF, as Servicer, and the Trustee.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
Description of Certificates ........... The Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3
Certificates and the Class A-4
Certificates are Senior Certificates
and the Class A-5 Certificates, the
Class B Certificates and the Class R
Certificates are Subordinated
Certificates, all as described
herein. The Class R Certificates are
not being offered hereby. The
undivided percentage interest (the
"Percentage Interest") of any
Offered Certificate in the
distributions on the Offered
Certificates of its Class will be
equal to the percentage obtained
from dividing the denomination
specified on such Certificate by the
Original Principal Balance of the
Class of which such Certificate
comprises a part. The Offered
Certificates will be offered in
book-entry form, in denominations of
$1,000 and integral multiples of
$1,000 in excess thereof. See
"Registration of the Offered
Certificates".
Due Period ............................ For each Remittance Date, the calendar
month preceding the month of such
Remittance Date.
Final Remittance Date ................. The final Remittance Date for each Class
of the Certificates will be the May
2026 Remittance Date. The final
Remittance Date has been determined
by adding six months to the maturity
date of the Contract with the latest
stated maturity. Because the rate of
distributions in reduction of the
Principal Balances of the Offered
Certificates will depend on the rate
of amortization of the Contracts
(including amortization due to
prepayments and defaults), the
actual final distribution on any
Class of Offered Certificates could
occur significantly earlier than
such final Remittance Date. The rate
of payments on the Contracts will
depend on their particular
characteristics, as well as on
interest rates prevailing from time
to time and other economic factors,
and no assurance can be given as to
the actual payment or default
experience of the Contracts. See
"Yield and Prepayment
Considerations" herein and "Maturity
and Prepayment Considerations" in
the Prospectus.
Distributions ......................... On each Remittance Date, distributions
on the Offered Certificates will be
made first on account of interest
and then principal in the following
order of priority: first to the
Holders of Senior Certificates, then
to the Holders of Class A-5
Certificates, and then to the
Holders of Class B Certificates,
in each case in the amounts
and according to the priorities,
as set forth in subsections A.
through F. below. See "Description
of the Certificates--Distributions".
Distributions will be made on each
Remittance Date to Holders of record
of the Certificates on the preceding
Record Date, except that the final
distribution in respect of the
Offered Certificates will only be
made upon presentation and surrender
of the Offered Certificates at the
office or agency appointed by the
Trustee for that purpose in New York
City.
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
Following the Remittance Date on which
the Principal Balance of a Class of
Offered Certificates has been
reduced to zero, no further
distributions will be made to the
Holders of such Class.
A. Interest on Senior Certificates ... Interest accruing during the related
Interest Accrual Period (computed on
the basis of a 360-day year of
twelve 30-day months) will be paid
concurrently on each outstanding
Class of Senior Certificates on each
Remittance Date, to the extent of
the amount of funds available
(including any Monthly Advances) for
distribution in the Certificate
Account (the "Amount Available") on
such Remittance Date (i) in an
amount equal to one-twelfth of the
product of the Remittance Rate
applicable to each Class and the
Class A-1 Principal Balance, Class
A-2 Principal Balance, Class A-3
Principal Balance or Class A-4
Principal Balance, as the case may
be, as of the preceding Remittance
Date (after giving effect to
distributions of principal and
interest to be made on such
Remittance Date) or (ii) in the case
of the first Remittance Date, in an
amount equal to interest accruing
from the Closing Date to but
excluding the first Remittance Date,
at the applicable Remittance Rate,
on the Original Class A-1 Principal
Balance, the Original Class A-2
Principal Balance, the Original
Class A-3 Principal Balance or the
Original Class A-4 Principal
Balance, as appropriate.
See "Description of the Certificates"
for a detailed description of the
amounts on deposit in the
Certificate Account that will
constitute the Amount Available on
each Remittance Date. The Amount
Available will include amounts
otherwise payable therefrom on such
Remittance Date to Holders of the
Class A-5 Certificates, the Class B
Certificates, the Class R
Certificates and to the Servicer for
the Monthly Servicing Fee (as long
as CITSF is the Servicer) and to CIT
for the fee payable to CIT in
consideration for providing the
Limited Guarantee described herein
(the "Guarantee Fee").
In the event that, on a particular
Remittance Date, the Amount
Available (including any Monthly
Advances) in the Certificate Account
is not sufficient to make a full
distribution of interest to the
Holders of the outstanding Senior
Certificates, the amount of the
shortfall will be allocated
among the outstanding Classes
of Senior Certificates pro rata
based on the aggregate amount of
interest due on each such Class. The
portion of the shortfall allocated
to each such Class will be carried
forward and added to the amount the
Holders of such Class will be
entitled to receive (to the extent
of funds available for the payment
thereof) on the next Remittance Date
and every Remittance Date thereafter
until paid. Any such amount so
carried forward will bear interest
at the applicable Remittance Rate,
to the extent legally permissible.
See "Description of the
Certificates".
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
B. Principal on Senior Certificates ... Commencing on the first Remittance
Date and on each Remittance
Date thereafter, Senior
Certificateholders will be entitled
to receive as payments of principal,
to the extent of the Amount
Available after payment of all
interest payable on each Class of
Senior Certificates, the Senior
Percentage of the Formula Principal
Distribution Amount.
The "Formula Principal Distribution
Amount" is equal to the sum of (i)
all payments of principal received
in respect of each outstanding
Contract during such Due Period,
(ii) the Stated Principal Balance of
each Contract which, during the
related Due Period, was purchased by
CITSF pursuant to the Agreement on
account of certain breaches of its
representations and warranties,
(iii) all partial principal
prepayments applied and all
principal prepayments in full
received during such Due Period,
(iv) the Stated Principal Balance of
each Contract that became a
Liquidated Contract during such Due
Period, (v) the aggregate amount of
Cram Down Losses (as defined below)
during such Due Period, and (vi) any
Formula Principal Distribution
Amount for any prior Remittance Date
which was not distributed on a prior
Remittance Date.
The "Stated Principal Balance" of a
Contract as of any Remittance Date
is its unpaid principal balance at
the end of the related Due Period.
The "Due Date" for a Contract is its
scheduled payment date. The "Pool
Stated Principal Balance" is the
aggregate of the Stated Principal
Balances of all Contracts
outstanding at the end of a Due
Period. The Pool Stated Principal
Balance excludes any Liquidated
Contract and Contracts purchased by
CITSF pursuant to the Agreement. A
"Liquidated Contract" is a defaulted
Contract as to which all amounts
that the Servicer expects to recover
through the date of disposition of
the Manufactured Home and the real
estate, if any, securing such
Contract have been recovered.
The Senior Percentage will equal 100%
for any Remittance Date prior to the
Class A-5 Cross-over Date (as
defined below), and for any
Remittance Date on or after the
Class A-5 Cross-over Date on which
any Class A-5 Principal Distribution
Test (as defined below) has not
been satisfied (or, if the
Class A-5 Certificate Balance has
been reduced to zero, if any
Class B Principal Distribution
Test has not been satisfied
on such Remittance Date). On each
Remittance Date on or after the
Class A-5 Cross-over Date, if each
Class A-5 Principal Distribution
Test has been satisfied on such
Remittance Date (or, if the Class
A-5 Certificate Balance has been
reduced to zero, if each Class B
Principal Distribution Test has been
satisfied on such Remittance Date),
the Senior Percentage will equal a
fraction, expressed as a percentage,
the numerator of which is the sum of
the Class A-1 Principal Balance, the
Class A-2 Principal Balance, the
Class A-3 Principal Balance and the
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
Class A-4 Principal Balance for such
Remittance Date and the denominator
of which is the Pool Stated
Principal Balance for the
immediately preceding Remittance
Date.
The Senior Percentage of the Formula
Principal Distribution Amount will
be distributed sequentially (to the
extent of the Amount Available after
payment of interest on the Senior
Certificates), first, to the Class
A-1 Certificateholders until the
Class A-1 Principal Balance has been
reduced to zero, then to the Class
A-2 Certificateholders until the
Class A-2 Principal Balance has been
reduced to zero, then to the Class
A-3 Certificateholders until the
Class A-3 Principal Balance has been
reduced to zero and then to the
Class A-4 Certificateholders until
the Class A-4 Principal Balance has
been reduced to zero (the "Class A-4
Cross-over Date").
If, on any Remittance Date prior to the
Class A-4 Cross-over Date, the Pool
Stated Principal Balance at the
close of business on the last day of
the related Due Period would be less
than the sum of the Class A-1
Principal Balance, the Class A-2
Principal Balance, the Class A-3
Principal Balance and the Class A-4
Principal Balance on such Remittance
Date after giving effect to
distributions of principal to be
made on such date (the "Senior
Principal Balance"), then the Amount
Available remaining after
distribution of interest on the
Senior Certificates will be
distributed to the Classes of Senior
Certificates on a pro rata basis as
a distribution of the Senior
Percentage of the Formula Principal
Distribution Amount, and the amount
of the shortfall will be allocated
pro rata among the outstanding
Classes of Senior Certificates,
based upon their respective
outstanding Principal Balances. On
any Remittance Date on which there
exists any previously undistributed
shortfalls in the Senior Percentage
of the Formula Principal
Distribution Amounts which have been
allocated among the outstanding
Classes of Senior Certificates, the
aggregate amount of such shortfalls
will be distributed to the extent of
the Amount Available remaining after
distribution of interest on the
Senior Certificates, pro rata, among
such Classes of Senior Certificates
based upon their respective
unreimbursed shortfalls. Such
distributions in respect of
previously allocated shortfalls with
respect to the Senior Percentage of
the Formula Principal Distribution
Amounts will be made prior to
any distribution being made
on a Remittance Date to the Class of
Senior Certificates then entitled to
receive the Senior Percentage of the
Formula Principal Distribution
Amount.
C. Interest on Class A-5 Certificates.. Following the payment to the Senior
Certificateholders of all amounts
described under "A. Interest on
Senior Certificates" and "B.
Principal on Senior Certificates"
above, interest accruing during the
related Interest Accrual Period
(computed on the basis of a 360-day
year of twelve 30-day months) will
be paid to the Class A-5
Certificateholders on each
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
Remittance Date, to the extent of
the remaining Amount Available on
such Remittance Date (i) in an
amount equal to one-twelfth of the
product of the Class A-5 Remittance
Rate and the Class A-5 Principal
Balance, as of the preceding
Remittance Date (after giving effect
to distributions of principal and
interest to be made on such
Remittance Date) or (ii) in the case
of the first Remittance Date, in an
amount equal to interest accruing
from the Closing Date to but
excluding the first Remittance Date,
at the Class A-5 Remittance Rate, on
the Original Class A-5 Principal
Balance.
In the event that, on a particular
Remittance Date, the Amount
Available after payment of interest
and principal on the Senior
Certificates is not sufficient to
make a full distribution of interest
to the Class A-5 Certificateholders,
(i) the Trustee will withdraw the
amount of such deficiency from the
Certificate Account (as defined
below) from the funds, if any, which
would otherwise constitute part of
the Amount Available for the
following Remittance Date, and (ii)
the amount of any remaining
deficiency will be carried forward
as an amount that the Class A-5
Certificateholders are entitled to
receive (to the extent of funds
available for the payment thereof)
on the next Remittance Date and
every Remittance Date thereafter
until paid. Any amount so carried
forward will bear interest at the
Class A-5 Remittance Rate, to the
extent legally permissible. See
"Description of the Certificates".
D. Principal on Class A-5 Certificates.. Payments of principal on the Class A-5
Certificates will not commence until
the Class A-5 Cross-over Date
(unless the Class A-4 Principal
Balance has been reduced to zero),
and will be made on that Remittance
Date and each Remittance Date
thereafter only if each Class A-5
Principal Distribution Test is
satisfied on such Remittance Date
(unless the Class A-4 Principal
Balance has been reduced to zero).
The "Class A-5 Cross-over Date" will
be the later of (i) the Remittance
Date occurring in June 2000 and (ii)
the Remittance Date on which the
ratio of the principal balance of
the Senior Certificates to the Pool
Stated Principal Balance (each, as
of the immediately preceding
Remittance Date) is less than
66.75%. The Class A-5 Principal
Distribution Tests on each
Remittance Date relate to losses and
delinquencies on the Contracts, and
are described under "Description of
the Certificates--Principal on Class
A-5 Certificates".
On each Remittance Date on or after the
Class A-5 Cross-over Date on which
each Class A-5 Principal
Distribution Test has been
satisfied, the Class A-5 Percentage
of the Formula Principal
Distribution Amount will be paid to
the Class A-5 Certificateholders to
the extent of the Amount Available
after payment of interest on the
Class A-5 Certificates until the
Class A-5 Principal Balance has been
reduced to zero.
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
The Class A-5 Percentage for any
Remittance Date on or after the
Class A-5 Cross-over Date on which
each Class A-5 Principal
Distribution Test has been satisfied
will be equal to 100% minus the
Senior Percentage. The Class A-5
Percentage for each Remittance Date,
if any, after the Class A-1
Principal Balance, the Class A-2
Principal Balance, the Class A-3
Principal Balance and the Class A-4
Principal Balance, have each been
reduced to zero will be equal to
100%.
E. Interest on Class B Certificates .. Following (i) the payment to the Senior
Certificateholders of all amounts
described under "A. Interest on
Senior Certificates" and "B.
Principal on Senior Certificates"
above, and (ii) the payment to the
Class A-5 Certificateholders of all
amounts described under "C. Interest
on Class A-5 Certificates" and "D.
Principal on Class A-5 Certificates"
above, interest accruing during the
related Interest Accrual Period
(computed on the basis of a 360-day
year of twelve 30-day months), will
be paid to the Class B
Certificateholders on each
Remittance Date, to the extent of
the remaining Amount Available and
the Guarantee Payment, if any
(unless the Guarantee Payment Limit
has been reduced to zero), (i) in an
amount equal to one-twelfth of the
product of the Class B Remittance
Rate and the Class B Principal
Balance, as of the preceding
Remittance Date (after giving effect
to distributions of principal and
interest to be made on such
Remittance Date) or (ii) in the case
of the first Remittance Date, in an
amount equal to interest accruing
from the Closing Date to but
excluding the first Remittance Date,
at the Class B Remittance Rate, on
the Original Class B Principal
Balance.
In the event that, on a particular
Remittance Date, the Amount
Available after payment of interest
and principal on the Senior
Certificates and the Class A-5
Certificates is not sufficient to
make a full distribution of interest
to the Class B Certificateholders,
(i) CIT will be required to pay the
amount of such deficiency under the
Limited Guarantee (unless the
Guarantee Payment Limit has been
reduced to zero), and (ii) the
amount of any remaining deficiency
will be carried forward as an amount
that the Class B Certificateholders
are entitled to receive (to the
extent of funds available for the
payment thereof) on the next
Remittance Date and every Remittance
Date thereafter until paid. Any
amount so carried forward will bear
interest at the Class B Remittance
Rate, to the extent legally
permissible. See "Description of the
Certificates".
F. Principal on Class B Certificates.. Payments of principal on the Class B
Certificates, except payments of the
Principal Liquidation Loss Amount
(as described below), will not
commence until the Remittance Date
on which the Class A-5 Principal
Balance has been reduced to zero
(the "Class B Cross-over Date").
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
On each Remittance Date on or after the
Class B Cross-over Date on which
each Class B Principal Distribution
Test is satisfied (or on which the
Class A-4 Principal Balance has been
reduced to zero), the Class B
Percentage of the Formula Principal
Distribution Amount will be paid to
the Class B Certificateholders to
the extent of the Amount Available
(after payment of interest on the
Class B Certificates) and the
Guarantee Payment Limit until the
Class B Principal Balance has been
reduced to zero.
The Class B Percentage for any
Remittance Date on or after the
Class B Cross-over Date on which
each Class B Principal Distribution
Test has been satisfied will be
equal to 100% minus the Senior
Percentage. The Class B Percentage
for each Remittance Date, if any,
after the Class A-1 Principal
Balance, Class A-2 Principal
Balance, Class A-3 Principal
Balance, the Class A-4 Principal
Balance and the Class A-5 Principal
Balance have each been reduced to
zero will be equal to 100%. The
Class B Principal Distribution Tests
on each Remittance Date relate to
losses and delinquencies on the
Contracts, and are described under
"Description of the
Certificates--Principal on Class B
Certificates".
The Class B Certificateholders will be
entitled to receive a payment,
pursuant to the Limited Guarantee,
in the amount of the Principal
Liquidation Loss Amount (if any) for
each Remittance Date prior to the
Class B Cross-over Date and each
Remittance Date on and after the
Class B Cross-over Date on which any
Class B Principal Distribution Test
has not been satisfied. The
"Principal Liquidation Loss Amount"
for any Remittance Date will equal
the amount, if any, by which the sum
of the Senior Principal Balance (as
defined herein), the Class A-5
Principal Balance and the Class B
Principal Balance for such
Remittance Date (after giving effect
to all distributions of principal on
such Remittance Date and all
distributions of principal made or
required to be made on any prior
Remittance Date) exceeds the Pool
Stated Principal Balance at the
close of business on the last day of
the related Due Period. The
Principal Liquidation Loss Amount
represents future principal payments
on the Contracts that, because of
the subordination of the Class B
Certificates and liquidation losses
on the Contracts, will not be paid
to the Class B Certificateholders.
Subordination of the Subordinated
Certificates ........................ The rights of Holders of the
Subordinated Certificates to receive
distributions with respect to the
Contracts in the Trust will be
subordinated, to the extent
described herein, to such
rights of the Holders of
the Senior Certificates. This
subordination is intended to enhance
the likelihood of regular receipt by
the Holders of the Senior
Certificates of the full amount of
principal and interest which they
- --------------------------------------------------------------------------------
S-12
<PAGE>
- --------------------------------------------------------------------------------
are entitled to receive on any
Remittance Date and to afford such
Holders protection against losses on
Liquidated Contracts.
The protection afforded to the Holders
of Senior Certificates by means of
the subordination of the
Subordinated Certificates will be
accomplished by the preferential
right of the Senior
Certificateholders to receive, prior
to any distribution being made on a
Remittance Date in respect of the
Subordinated Certificates, the
amounts of principal and interest
due to them on each Remittance Date
out of the Amount Available on such
date and, if necessary, by the right
of such Senior Certificateholders to
receive future distributions of
Amounts Available that would
otherwise be payable to the Holders
of the Subordinated Certificates.
See "Risk Factors--1. General"
herein.
In addition, the rights of Holders of
the Class B Certificates and the
Class R Certificates to receive
distributions with respect to the
Contracts in the Trust will be
subordinated, to the extent
described herein, to such rights of
the Holders of the Class A-5
Certificates. This subordination is
intended to enhance the likelihood
of regular receipt by the Holders of
the Class A-5 Certificates of the
full amount of principal and
interest which they are entitled to
receive on any Remittance Date and
to afford such Holders protection
against losses on Liquidated
Contracts.
The protection afforded to the Holders
of the Class A-5 Certificates by
means of the subordination of the
Class B and Class R Certificates
will be accomplished by the
preferential right of the Class A-5
Certificateholders to receive, prior
to any distribution being made on a
Remittance Date in respect of the
Class B Certificates and Class R
Certificates, the amounts of
principal and interest due them on
each Remittance Date out of the
Amount Available on such date and,
if necessary, by the right of such
Class A-5 Certificateholders to
receive future distributions of
Amounts Available that would
otherwise be payable to the Holders
of the Class B and Class R
Certificates. The Class B
Certificateholders may incur losses
on their investment in the Class B
Certificates if CIT fails to make a
Guarantee Payment, or if the
Guarantee Payment Limit has been
reduced to zero, to the extent such
losses are not made up from future
payments on the Contracts. See "Risk
Factors--1. General" herein.
The rights of the Holders of the
Class R Certificates to receive
distributions with respect to the
Contracts on each Remittance Date
will be subordinated to the
rights of the Holders of the
Offered Certificates. See
"Description of the
Certificates--Subordination of the
Subordinated Certificates".
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------------------------------------------------------------------------------
Guarantee Payments to Class B
Certificateholders under the
Limited Guarantee of CIT ............ In order to mitigate the effect of the
subordination of the Class B
Certificates, the Class B
Certificateholders are entitled to
receive on each Remittance Date the
Guarantee Payment, if any, under the
Limited Guarantee of CIT. On each
Remittance Date prior to the Class B
Cross-over Date and each Remittance
Date on and after the Class B
Cross-over Date on which any Class B
Principal Distributution Test has
not been satisfied, the "Guarantee
Payment" will equal the amount, if
any, by which (a) the sum of (x) the
amount of interest payable to the
Class B Certificateholders for such
Remittance Date, and (y) the
Principal Liquidation Loss Amount,
if any, for such Remittance Rate,
exceeds (b) the Amount Available
remaining for distribution to the
Class B Certificateholders after
distributions of interest and
principal have been paid to the
holders of the Senior Certificates
and the Class A-5 Certificates on
such Remittance Date. On each
Remittance Date on and after the
Class B Cross-over Date on which
each Class B Principal Distribution
Test has been satisfied, the
"Guarantee Payment" will equal the
amount, if any, by which (a) the sum
of the amount of interest and
principal payable to the Class B
Certificateholders on a Remittance
Date exceeds (b) the Amount
Available remaining after
distributions of interest and
principal, if any, have been paid to
the holders of the Senior
Certificates on such Remittance
Date. In no event shall the amount
payable on any Remittance Date under
the Limited Guarantee in respect of
the principal on the Class B
Certificates exceed the Guarantee
Payment Limit in effect on such
Remittance Date.
The aggregate amount of Guarantee
Payments made under the Limited
Guarantee in respect of the
principal on the Class B
Certificates (including Guarantee
Payments in respect of the Principal
Liquidation Loss Amount) will not
exceed $5,976,036 (the "Initial
Guarantee Payment Limit"). The
"Guarantee Payment Limit" will equal
the lesser of (i) the Initial
Guarantee Payment Limit reduced by
the aggregate amount of all
Guarantee Payments made under the
Limited Guarantee in respect of
principal (including Guarantee
Payments in respect of the Principal
Liquidation Loss Amount), and (ii)
the Guarantee Formula Amount. Once
the Guarantee Payment Limit has been
reduced, it will not be reinstated.
At any time that the Guarantee Payment
Limit has been reduced to zero, no
further Guarantee Payments will be
made in respect of principal or
interest on the Class B
Certificates, and the holders of the
Class B Certificates will bear the
risk of all liquidation losses on
the defaulted Contracts and may
suffer a loss.
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
The "Guarantee Formula Amount" will be
equal, on each Remittance Date, to
the greater of (i) 3% of the Pool
Stated Principal Balance as of the
last day of the Due Period ending
immediately before the Remittance
Date and (ii) the lesser of (a)
$996,006 and (b) the Class B
Principal Balance as of such
Remittance Date (before giving
effect to any distributions on such
Remittance Date). Once the Guarantee
Formula Amount has been reduced, it
will not be reinstated.
The Limited Guarantee will be an
unsecured general obligation of CIT
and will not be supported by any
collateral, letter of credit or
other credit enhancement
arrangement. As compensation for
providing the Limited Guarantee, CIT
will be entitled to receive a
Guarantee Fee (the "Guarantee Fee")
on each Remittance Date equal to
one-twelfth of the product of 0.25%
and the aggregate outstanding
principal balance of the Contracts
as of the end of the second Due
Period preceding such Remittance
Date (or, in the case of the first
Remittance Date, the Cut-off Date).
The right of CIT to receive payment
of the Guarantee Fee on a Remittance
Date will be subordinated to the
rights of the Certificateholders to
receive payments of interest and
principal on such Remittance Date to
the extent described herein.
Alternate Credit Enhancement .......... In the event that, at the Company's
option, Alternate Credit Enhancement
(as defined herein) is provided and,
upon prior written notice to the
Rating Agencies (as defined herein)
such Rating Agencies shall have
notified the Company, the Servicer
and the Trust in writing that
substitution of such Alternate
Credit Enhancement for the Limited
Guarantee will not result in the
downgrade or withdrawal of the then
current rating of any class of the
Certificates, and upon the delivery
by the Company to the Trustee of an
opinion of counsel, acceptable to
the Trustee, that such action would
not cause the Trust to fail to
qualify as a REMIC, the Limited
Guarantee shall be released and
shall terminate. The Alternate
Credit Enhancement may consist of
cash or securities deposited by CIT
or any other Person in a segregated
escrow, trust or collateral account
(an "Alternate Credit Enhancement").
On each Remittance Date after
delivery of the Alternate Credit
Enhancement, an amount, equal to the
lesser of the amount which would
have been payable under the Limited
Guarantee and the amount on deposit
in such account, shall be
transferred from such account to the
Certificate Account to make payments
to the Class B Certificateholders.
CIT shall have no obligation to
replenish the funds on deposit in
any such account once they have been
exhausted.
Losses on Liquidated Contracts ........ As described above, the distribution of
principal to the Holders
of the Offered Certificates
is intended to include the
Stated Principal Balance of each
Contract that became a Liquidated
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
Contract during the Due Period
preceding the Remittance Date. If
the Net Liquidation Proceeds from
such Liquidated Contract are less
than the Stated Principal Balance of
such Liquidated Contract, the
deficiency will, in effect, be
absorbed by the Class R
Certificateholders, then CIT to the
extent of the Guarantee Fee, then
the Servicer to the extent of the
Monthly Servicing Fee (so long as
CITSF is the Servicer), then the
Class B Certificateholders and then
the Class A-5 Certificateholders,
since a portion of the Amount
Available equal to such deficiency
and otherwise distributable to them
will be paid to the Senior
Certificateholders.
If the Amount Available is not
sufficient to cover the entire
amount distributable to the holders
of the Senior Certificates on a
particular Remittance Date, then the
Senior Percentage on future
Remittance Dates will be increased
and the Class A-5 Percentage or the
Class B Percentage, as appropriate,
will be reduced on future Remittance
Dates as a result of such
deficiency. If the Amount Available
is sufficient to cover the entire
amount distributable to the Senior
Certificateholders on a particular
Remittance Date but is not
sufficient to cover the entire
amount distributable to the Class
A-5 Certificateholders, the amount
of the deficiency will be carried
forward as an amount that the Class
A-5 Certificateholders are entitled
to receive on the next Remittance
Date. Any amount so carried forward
will, to the extent legally
permissible, bear interest at the
Class A-5 Remittance Rate.
But for the effect of the payments
under the Limited Guarantee, the
subordination of the Class R
Certificates, the Guarantee Fee and
the Monthly Servicing Fee (as long
as CITSF is the Servicer) and future
collections on the Contracts, the
Class B Certificateholders would
absorb all losses on each Liquidated
Contract in the amount by which its
Net Liquidation Proceeds are less
than its unpaid principal balance
plus accrued and unpaid interest
thereon. See "Description of the
Certificates--Subordination of the
Subordinated Certificates" and
"Yield and Prepayment
Considerations".
But for the effect of the subordination
of the Class B Certificates, the
Class R Certificates, the Guarantee
Fee and the Monthly Servicing Fee
(as long as CITSF is the Servicer)
and future collections on the
Contracts, the Class A-5
Certificateholders would absorb all
losses on each Liquidated Contract
in the amount by which its Net
Liquidation Proceeds are less than
its unpaid principal balance plus
accrued and unpaid interest thereon.
See "Description of the
Certificates--Subordination of the
Subordinated Certificates" and
"Yield and Prepayment
Considerations".
If further liquidation losses were to
continue to decrease the Pool Stated
Principal Balance (which is reduced
by all collections of principal on
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
the Contracts and the Stated
Principal Balance of all Contracts
that become Liquidated Contracts or
were repurchased by CITSF and by
Cram Down Losses) faster than
distributions of principal to the
Senior Certificateholders reduce the
Senior Principal Balance, then the
amount of the Pool Stated Principal
Balance available to the Class A-5
Certificates and the Class B
Certificates, and therefore the
level of protection afforded by the
subordination of the Class A-5
Certificates and the Class B
Certificates for the benefit of the
Senior Certificates, would be
reduced. In the event that the Pool
Stated Principal Balance is reduced
by liquidation losses to an amount
less than or equal to the Senior
Principal Balance, all additional
losses on Liquidated Contracts, to
the extent not covered by future
collections on the Contracts, will
be absorbed by the Senior
Certificates.
Optional Repurchase of the Contracts
by the Servicer or the Company ..... At its option, either the Servicer or
the Company may repurchase from the
Trust all remaining Contracts, and
thereby effect early retirement of
the Certificates, on any Remittance
Date when, among other things, the
Pool Stated Principal Balance is
less than 10% of the Cut-off Date
Pool Principal Balance. See
"Description of the Certificates--
Repurchase Option".
Auction Sale .......................... Ninety days following a Remittance Date
as of which the Pool Stated
Principal Balance is less than 10%
of the Cut-off Date Pool Principal
Balance (and only if the Servicer
and the Company have not exercised
the repurchase option described
above), the Trustee shall solicit
bids for the purchase of the
Contracts remaining in the Trust. In
the event that satisfactory bids are
received as described in the
Agreement, the net sale proceeds
will be distributed to
Certificateholders, in the same
order of priority as collections
received in respect of the
Contracts. If satisfactory bids are
not received, the Trustee shall
decline to sell the Contracts and
shall not be under any obligation to
solicit any further bids or
otherwise negotiate any further sale
of the Contracts. Such sale and
consequent termination of the Trust
must constitute a "qualified
liquidation" of the Trust under
Section 860F of the Internal Revenue
Code of 1986, as amended, including,
without limitation, the requirement
that the qualified liquidation takes
place over a period not to exceed 90
days. See "Description of the
Certificates--Auction Sale".
The Contracts ......................... On or about the Closing Date, the
Company will sell to the Trust
manufactured housing installment
sales contracts and installment loan
contracts originated or acquired
from dealers by CITSF and CITCF-NY
(as defined below) in the ordinary
course of business, having a Cut-off
Date Pool Principal Balance of
approximately $199,201,195 (the
"Contracts"). The Contracts
shall consist of conventional
fixed-rate manufactured housing
installment sales contracts and
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
installment loan agreements,
including any and all rights to
payments received thereunder on and
after the Cut-off Date and (i)
security interests in Manufactured
Homes purchased with the proceeds of
such Contracts and/or (ii) with
respect to certain of the Contracts,
liens on the real estate to which
the related Manufactured Homes are
located ("Land-Secured Contracts").
The Contracts are secured by
Manufactured Homes and/or real
estate with Obligors having mailing
addresses located in 46 states and
have been selected by CITSF from its
portfolio of manufactured housing
contracts based on the criteria
specified in the Agreement. All of
the Contracts bear interest
calculated based on the simple
interest method. All of the
Contracts are conventional contracts
(i.e., not insured or guaranteed by
any governmental agency). The
Contract Rate on the Contracts
ranges from 7.22% to 15.99% with a
weighted average of approximately
10.17% as of the Cut-off Date. The
Contracts had a weighted average
term to stated maturity, as of
origination, of 256 months, and a
weighted average remaining term to
stated maturity, as of the Cut-off
Date, of 254 months. As of the
Cut-off Date, 26.50% of the
Contracts (by aggregate unpaid
principal balance) had Obligors with
mailing addresses in Texas. The
final scheduled payment date on the
Contract with the latest maturity is
in November 2025. The Contracts were
originated between February 1995 and
October 1995. As of the Cut-off
Date, approximately 2.14% of the
Contracts by Stated Principal
Balance have a first scheduled
payment date after November 1995.
For each such Contract, the
Agreement will require that there be
deposited in the Certificate Account
on the Closing Date an amount equal
to a portion of the interest which
will accrue prior to the first Due
Date (as defined below) for such
Contract, at the applicable Contract
Rate. See "The Contract Pool".
Monthly Advances ...................... For each Remittance Date, the Servicer
will be obligated to make advances
("Monthly Advances") by depositing
into the Certificate Account cash
for distribution to the Holders of
the Offered Certificates equal to
the difference between the interest
due on the Contracts at the Contract
Rate on the Due Date during the
related Due Period and the interest
received on the Contracts during
such Due Period, but only to the
extent that the Servicer determines
that the payments of interest not
received during the related Due
Period would be recoverable from
future payments and collections on
the Contracts as described
under "Description of
Certificates--Advances".
Security Interests and Certain Other
Aspects of the Contracts; Repurchase
or Substitution Obligations ......... In connection with the sale of the
Contracts to the Trustee, CITSF has
assigned the security interests in
the Manufactured Homes and/or the
liens on the underlying real
property, as appropriate, to the
Company and the Company has assigned
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
such security interests and liens to
the Trust. Because of the expense
and administrative inconvenience
involved, CITSF will not amend the
certificates of title to name CITSF
as the lienholder where CITSF is not
the originator of the Contract and
CITSF will not amend any certificate
of title to name the Company or the
Trustee as the lienholder and the
Company will not deliver any
certificate of title to the Trustee
or note thereon the Trustee's
interest. Consequently, in some
states, in the absence of such an
amendment to the certificate of
title, the successive assignments
from CITCF-NY to CITSF (in some
cases), from CITSF to the Company
and from the Company to the Trust of
the security interest in the
Manufactured Home may not be
effective or such security interest
may not be perfected and, in the
absence of such notation or delivery
to the Trustee, the assignment of
the security interest in the
Manufactured Home to the Trustee may
not be effective against other
creditors or a trustee in
bankruptcy. Because of the expense
and administrative inconvenience
involved, CITSF will not record the
successive assignments to CITSF, the
Company and the Trustee of the
mortgage, deed of trust, or similar
instrument securing each
Land-Secured Contract. Consequently,
in many states, in the absence of
such recordation, the assignment to
the Trustee of the mortgage, deed of
trust, or similar instrument
securing a Land-Secured Contract
will not be effective and, in the
absence of such recordation, the
assignment of the mortgage, deed of
trust, or similar instrument to the
Trustee will not be effective
against other creditors or a trustee
in bankruptcy.
Assignments in recordable form for the
mortgages, deeds of trust or similar
instruments (each, a "Mortgage")
evidencing the liens on real
property that secure the
Land-Secured Contracts will not be
delivered by CITSF to the Company or
by the Company to the Trustee.
However, CITSF will deliver to the
Trustee a power of attorney
authorizing the Trustee to prepare,
execute and record such assignments
of the Mortgages securing the
Land-Secured Contracts (as defined
below), in the event that the
recordation of such assignments
becomes necessary to foreclose upon
the related real property. However,
there can be no assurance that the
appropriate officials in each
jurisdiction in which there is
property securing a Land-Secured
Contract will permit the Trustee to
record an assignment of Mortgage
pursuant to such a power of
attorney, or that such recordation
will not be prevented as a result of
the occurrence prior thereto of the
insolvency of CITSF, the Company or
the Obligor.
CITSF has agreed to repurchase, or, at
its option, substitute another
contract which is an "Eligible
Contract" (as defined in the
Agreement) for, any Contract as to
which the Trustee does not have a
valid and perfected security
interest in the Manufactured Home
securing such Contract, if such
failure materially adversely affects
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
the Trust's interest in the Contract
unless such failure has been cured
within 85 days of CITSF receiving
notice of such failure or within 90
days after CITSF otherwise becomes
aware of such failure.
Subject to the foregoing, the Servicer
has agreed to maintain the Trustee's
perfected first priority security
interest in each Manufactured Home
and first or second lien on each
mortgaged property securing a
Contract so long as the related
Contract is the property of the
Trust. See "Risk Factors--8.
Security Interests and Certain Other
Aspects of the Contracts" and
"Certain Legal Aspects of the
Contracts--The Contracts (Other than
Land-Secured Contracts)" and
"--Land-Secured Contracts" in the
Prospectus.
Certain Federal Income Tax
Consequences ........................ For federal income tax purposes, an
election will be made to treat the
Trust as a real estate mortgage
investment conduit ("REMIC"). The
Offered Certificates will constitute
"regular interests" in the REMIC and
generally will be treated as debt
instruments of the Trust for federal
income tax purposes with payment
terms equivalent to the terms of
such Certificates. The Class R
Certificates will constitute
"residual interests" in the REMIC.
The Holders of the Offered
Certificates will be required to
include in income interest on such
Certificates (including any original
issue discount) in accordance with
the accrual method of accounting.
See "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
ERISA Considerations .................. Subject to the conditions described
herein, the Senior Certificates may
be purchased by employee benefit
plans that are subject to the
Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
See "ERISA Considerations" herein
and in the Prospectus.
Employee benefit plans subject to ERISA
will not be eligible to purchase the
Class A-5 or Class B Certificates
(other than an insurance company
purchasing such Certificates for its
general accounts). Any benefit plan
fiduciary considering the purchase
of the Class A-5 or Class B
Certificates should, among other
things, consult with its counsel in
determining whether all required
conditions have been satisfied. See
"ERISA Considerations" herein and in
the Prospectus.
Legal Investment Considerations ....... The Senior Certificates and Class A-5
Certificates offered hereby will
constitute "mortgage related
securities" under the Secondary
Mortgage Market Enhancement Act of
1984 ("SMMEA"). However, the Class B
Certificates offered hereby will not
constitute "mortgage related
securities" under SMMEA.
Accordingly, many institutions with
legal authority to invest in
comparably rated securities may not
be legally authorized to invest in
the Class B Certificates. See "Legal
Investment Considerations" herein
and in the Prospectus. No
- --------------------------------------------------------------------------------
S-20
<PAGE>
- --------------------------------------------------------------------------------
representations are made as to any
regulatory requirements or
considerations (including without
limitation regulatory capital
requirements) applicable to the
purchase of any of the Certificates
by banks, savings and loan
associations or other financial
institutions, which institutions
should consult their own counsel as
to such matters.
Rating ................................ It is a condition to the issuance of
the Certificates on the Closing Date
that the Senior Certificates be
rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA"
by Standard and Poor's Structured
Ratings Group, a division of
The McGraw-Hill Companies, Inc.
("Standard & Poor's"), the Class A-5
Certificates be rated at least "Aa3"
by Moody's and "AA-" by Standard &
Poor's and the Class B Certificates
be rated at least "Baa2" by Moody's
and "BBB-" by Standard & Poor's. A
rating of a security is not a
recommendation to buy, sell or hold
securities and may be subject to
revision or withdrawal at any time
by the rating agency. The rating of
the Class B Certificates is based in
part on the rating of CIT's
long-term senior unsecured debt
securities. As a result, any
reduction in the rating of such CIT
debt securities, by Moody's or
Standard & Poor's, below the
applicable rating of the Class B
Certificates on the Closing Date
could result in a reduction of the
rating of the Class B Certificates.
Registration of the Offered
Certificates ........................ Each Class of the Offered Certificates
initially will be represented by one
or more certificates registered in
the name of Cede & Co., as the
nominee of The Depository Trust
Company ("DTC"), and will only be
available in the form of
book-entries on the records of DTC
and its participants. Certificates
representing the Offered
Certificates will be issued in
definitive form only under the
limited circumstances described
herein. Accordingly, references
herein to "Holders" or
"Certificateholders" reflect the
rights of Certificate Owners only to
the extent that, in accordance with
the rules of DTC, they may
indirectly exercise such rights
through DTC and its participants.
Certificate Owners will not be
Certificateholders as that term is
used in the Agreement and will not
receive reports or payments directly
from the Trustee or the Servicer.
See "Registration of the Offered
Certificates" herein and
"Description of the
Certificates--Global Certificates"
in the Prospectus.
- --------------------------------------------------------------------------------
S-21
<PAGE>
RISK FACTORS
Prospective Certificateholders should consider, in addition to the risk
factors described under "Special Considerations" in the Prospectus, the
following risk factors in connection with the purchase of the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates and the
Class A-4 Certificates (collectively, the "Senior Certificates"), the Class A-5
Certificates or the Class B Certificates (collectively, the "Offered
Certificates"):
1. General. An investment in the Offered Certificates may be affected by,
among other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and repossession experience of pools of
manufactured housing installment sales contracts. CITSF's nonrecourse
conventional manufactured housing portfolio has experienced rapid growth over
the past two years, and the credit criteria and underwriting guidelines under
which CITSF originates manufactured housing installment sales contracts and
loans were changed in 1994. The deliquency and loan loss experience for CITSF's
portfolio will be affected by this rapid growth and the change in credit
criteria. See "The Contract Pool--Delinquency, Loan Loss and Liquidation
Experience." In the event of defaults by the Obligors under the Contracts, the
Trust will have to look primarily to the value of the Manufactured Homes for
recovery of the outstanding principal and unpaid interest of the defaulted
contracts. Regardless of its location, manufactured housing generally
depreciates in value. See "The Contract Pool--Delinquency and Loan Loss
Experience" herein and "The Trust--The Contract Pools" in the Prospectus.
Consequently, it is possible that the market value of certain Manufactured Homes
could be or become lower than the outstanding principal balances of the
Contracts that they secure. Sufficiently high liquidation losses on the
Contracts will have the effect of reducing, and could eliminate (a) the
protection against loss afforded to the Senior Certificates by the subordination
of the Class A-5 Certificates, the Class B Certificates and the Class R
Certificates (collectively, the "Subordinated Certificates"), (b) the protection
against loss afforded to the Class A-5 Certificates by the subordination of the
Class B and the Class R Certificates, and (c) the protection against loss
afforded to the Class B Certificates by the subordination of the Class R
Certificates. If the protection under clause (a) above is eliminated, the Senior
Certificateholders will bear the risk of loss on the Contracts. If the
protection under clause (b) above is eliminated, the Class A-5
Certificateholders will bear the risk of losses on the Contracts. If the
protection under clause (c) above is eliminated and The CIT Group Holdings, Inc.
("CIT") fails to make payments as required under the Limited Guarantee, or if
the Guarantee Payment Limit has been reduced to zero, the Class B
Certificateholders will bear the risk of losses on the Contracts.
2. Limited Obligations. The Offered Certificates will not represent an
interest in or an obligation of CIT, the Company or any Servicer (including
CITSF). Except to the extent of the Limited Guarantee provided by CIT in favor
of the Class B Certificates, the Offered Certificates will not be insured or
guaranteed by any government agency or instrumentality, CIT or any of its
affiliates, including the Company and CITSF, the Underwriters or any of their
affiliates, or any other Servicer or any of its affiliates.
3. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Offered Certificates or, if it does develop, that it will
provide the Holders of the Offered Certificates with liquidity of investment or
that it will remain for the term of the Offered Certificates. In addition, only
the Senior Certificates and Class A-5 Certificates will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). Accordingly, many institutions with legal authority to
invest in SMMEA securities will not be able to invest in the Class B
Certificates, limiting the market for such securities. See "Legal Investment
Considerations" herein and in the Prospectus.
4. Insurance. The insurance policies on the Contracts (and the Manufactured
Homes) will not cover all contingencies and will cover certain contingencies
only to a limited extent. See "Description of the
Certificates--Servicing--Hazard Insurance" in the Prospectus. The Company and
CITSF have not verified the extent to which the Manufactured Homes are covered
by flood insurance, but CITSF believes that Manufactured Homes in manufactured
housing parks, and Land-Secured Contracts which, at the time of origination
were, and continue to be, located within a federally designated special flood
hazard area, are covered by flood insurance, although the amount of such
coverage may be less than the principal balance due from the Obligor under the
S-22
<PAGE>
related Contract. For all other Contracts, the Company and CITSF can give no
assurance that flood insurance coverage has been obtained with respect to the
related Manufactured Home.
5. Prepayment Considerations. The prepayment experience on the Contracts
may affect the average life of the Offered Certificates. Prepayments on the
Contracts (which include both voluntary prepayments and liquidations following
default) may be influenced by a variety of economic, geographic, social and
other factors, including repossessions, aging, seasonality, market interest
rates, changes in housing needs, job transfers, casualty losses and
unemployment. In the event a Contract is prepaid in full, interest on such
Contract will accrue only to the date of prepayment. If Offered Certificates are
purchased at a discount and the purchaser calculates its anticipated yield to
maturity based on an assumed rate of payment of principal on such Certificates
that is faster than the rate actually realized, such purchaser's actual yield to
maturity will be lower than the yield so calculated by such purchaser. See
"Yield and Prepayment Considerations" herein and "Maturity and Prepayment
Considerations" in the Prospectus.
In the event that, with respect to a particular Class of Certificates, a
large number of Contracts having Contract Rates equal to or higher than the
applicable stated Remittance Rate (without giving effect to the maximum rate)
were to prepay while the Contracts having Contract Rates lower than such
Remittance Rate did not prepay, with the result that the interest collections on
the remaining Contracts were not sufficient to support such Remittance Rate,
then the Remittance Rate for such Class of Certificates would be equal to the
weighted average of the Net Contract Rates (as defined hereafter) on each
Contract in the Contract Pool.
6. Distributions of Principal. The yield to maturity on the Class A-5 and
Class B Certificates will be affected by the rate at which Contracts become
Liquidated Contracts and the severity of ensuing losses on such Liquidated
Contracts and the timing thereof. Prior to the Class A-5 Cross-over Date, and on
any Remittance Date on or after the Class A-5 Cross-over Date on which each
Class A-5 Principal Distribution Test is not satisfied (or, after the Class A-5
Principal Balance has been reduced to zero, on which each Class B Principal
Distribution Test is not satisfied), the holders of the Senior Certificates will
receive all payments of principal that are made on the Contracts. It is not
possible to predict the timing of the occurrence of the Class A-5 Cross-over
Date or of the Remittance Dates, if any, on which the Class A-1 Principal
Balance, the Class A-2 Principal Balance, the Class A-3 Principal Balance, and
the Class A-4 Principal Balance are reduced to zero, which occurrences will be
affected by the rate of voluntary principal prepayments in addition to
prepayments due to default and subsequent liquidation. Prepayments on Contracts
may be influenced by a variety of economic, geographic, social and other
factors, including repossessions, aging, seasonality, market interest rates,
changes in housing needs, job transfers and unemployment. See "Yield and
Prepayment Considerations" herein and "Maturity and Prepayment Considerations"
in the Prospectus. In addition, the timing of distributions of principal on the
Class A-5 and Class B Certificates will be dependent on the satisfaction of
Class A-5 Principal Distribution Tests and the Class B Principal Distribution
Tests, respectively, relating to losses and delinquencies on the Contracts.
7. Security Interests and Certain Other Aspects of the Contracts. A variety
of factors may limit the ability of the Certificateholders to realize upon the
Manufactured Homes securing the Contracts or may limit the amount realized to
less than the amount due. See "Special Considerations" and "Certain Legal
Aspects of the Contracts" in the Prospectus.
Each Contract is secured by a separately evidenced security interest in a
Manufactured Home. Perfection of such security interests in the Manufactured
Homes and enforcement of rights to realize upon the value of the Manufactured
Homes as collateral for the Contracts are subject to a number of federal and
state laws, including the Uniform Commercial Code (the "UCC") as adopted in each
state and each state's certificate of title statutes, and, in the case of
Land-Secured Contracts, its real estate laws. The steps necessary to perfect the
security interest in a Manufactured Home will vary from state to state.
Because of the expense and administrative inconvenience involved, CITSF and
the Company will not amend any certificates of title to change the lienholder
specified therein to the Trustee or file any assignments and will not deliver
any certificates of title to the Trustee or note thereon the Trustee's interest.
Consequently, in some states, in the absence of such an amendment to a
S-23
<PAGE>
certificate of title or the filing of an assignment, the assignment to the
Trustee of the security interest created by a Contract in the related
Manufactured Home may not be effective or such security interest may not be
perfected and, in the absence of such notation or filing or delivery of the
related certificate of title to the Trustee, the assignment of the security
interest in the Manufactured Home may not be effective against creditors of
CITSF and the Company or a trustee in bankruptcy of CITSF and the Company.
Because of the expense and administrative inconvenience involved, CITSF and
the Company will not deliver to the Trustee assignments in recordable form of
the Mortgage securing each Land-Secured Contract. In the absence of the
recordation of such an assignment to the Trustee of the Mortgage securing a
Land-Secured Contract, the assignment of the Mortgage to the Trustee may not be
effective against creditors of or purchasers from CITSF, the Company or a
trustee in the bankruptcy of CITSF or the Company.
In addition, numerous federal and state consumer protection laws impose
requirements on lending under installment sales contracts such as the Contracts,
and the failure by the lender or seller of goods to comply with such
requirements could give rise to liabilities on the part of the assignees of such
Contracts for amounts due under such Contracts and create in favor of Obligors,
defenses, rescission rights, counterclaims, or the right of set-off against such
assignees. From time to time CITSF is involved in litigation under consumer
protection laws. These laws would apply to the Trust as assignee of the
Contracts.
8. Certain Matters Relating to Insolvency. CITSF and the Company intend
that each transfer of Contracts from The CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY") to CITSF and from CITSF to the Company and from the Company to the
Trust constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a debtor
under Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. (the
"Bankruptcy Code"), it is possible that a creditor, receiver, other party in
interest or trustee in bankruptcy of CITCF-NY, CITSF or the Company, or
CITCF-NY, CITSF or the Company as debtor-in-possession, may argue that the sale
of the Contracts by CITCF-NY to CITSF or by CITSF to the Company, or by the
Company to the Trust, respectively, was a pledge of the Contracts rather than a
sale and that, accordingly, such Contracts should be part of such entity's
bankruptcy estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Certificateholders.
The Company has taken steps in structuring the transactions contemplated
hereby that are intended to increase the likelihood that the voluntary
application for relief by the Company under the United States Bankruptcy Code
("Insolvency Laws") will not result in consolidation of the assets and
liabilities of the Company with those of CITSF or its affiliates. These steps
include the creation of the Company as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Company's business and a
restriction on the Company's ability to commence a voluntary case or proceeding
under any Insolvency Law without the prior unanimous affirmative vote of all its
directors). However, there can be no assurance that the activities of the
Company would not result in a court concluding that the assets and liabilities
of the Company should be consolidated with those of CITSF or its affiliates in a
proceeding under any Insolvency Law.
9 Subordination. While the subordination feature is intended to enhance the
likelihood that the Senior Certificateholders will receive the maximum amount of
interest and principal to which they are entitled to receive on each Remittance
Date, shortfalls on the Senior Certificates could occur if the Pool Stated
Principal Balance is less than the Senior Principal Balance and losses on
Liquidated Contracts are not covered by future collections on the Contracts.
10. Geographic Concentration of Manufactured Homes. A significant
concentration of the Manufactured Homes and, in certain instances the underlying
real property, securing the Contracts (based, in most cases, on the mailing
addresses of the Obligors) is located in the state of Texas. As of the Cut-off
Date, 26.50% of the Contracts (by aggregate unpaid principal balance) had
Obligors with mailing addresses in Texas. Because of the relative lack of
geographic diversity, losses on the related Contracts may be higher than would
be the case if there were more diversification. Certain of such Manufactured
Homes and real estate may be more susceptible to certain types of special
hazards not covered by insurance (such as earthquakes or floods) and other
S-24
<PAGE>
hazards that may be covered in whole or in part by insurance (such as
hurricanes) than residential properties located in other parts of the country.
The economies of such states may be adversely affected to a greater degree than
that of other areas of the country by certain regional economic conditions. In
particular, historically the Texas economy has been dependent on the oil and gas
industry which has been volatile. An economic downturn in Texas may have an
adverse effect on the ability of Obligors in such states to meet their payment
obligations under the Contracts.
11. Litigation. In June, 1995, a suit, Harvey Travis et al. v. The CIT
Group Sales Financing, Inc., et al., Civil Action No. CV-95-P-1544-S, was filed
in the United States District Court for the Northern District of Alabama,
against CITSF, its force-placed insurance carrier and another lender. Plaintiffs
in this action allege primarily that force-placed insurance coverage on
manufactured homes was placed by defendants in a manner which caused plaintiffs
and other borrowers to be charged or assessed for excessive premiums and that
there was inadequate disclosure regarding certain fees charged and commissions
earned in connection therewith. In their complaint, plaintiffs ask that a class
action be certified, with the class to be comprised of individuals against whom
monetary charges alleged to be excessive have been assessed and/or collected by
CITSF and/or the other defendants for the purchase of force-placed insurance in
connection with consumer installment transactions with CITSF and/or the other
defendants. It cannot at this time be determined whether there is any basis for
a class action. The allegations of the complaint are very general and discovery
has only recently commenced. However, based on what it knows at this time, the
management of CITSF has no reason to believe that this case will have a material
effect upon CITSF's financial condition or results of operations.
As of the Cut-off Date, force-placed insurance has not been obtained on any
of the Contracts. CITSF has force-placed insurance on a significant portion of
its currently owned retail installment sales contracts relating to manufactured
housing. The Servicer may force-place insurance on the Contracts once they are
owned by the Trust, as described under "Description of Certificates--Physical
Damage Insurance" and there can be no assurance as to the number or principal
balance of the Contracts that may become subject to force-placed insurance.
12. Limited Guarantee. The aggregate amount of Guarantee Payments made in
respect of principal (including payments made in respect of the Principal
Liquidation Loss Amount) under the Limited Guarantee will not exceed $5,976,036
(the "Initial Guarantee Payment Limit"). The amount payable on any Remittance
Date under the Limited Guarantee in respect of the principal of the Class B
Certificates shall not exceed the Guarantee Payment Limit in effect on such
Remittance Date. The "Guarantee Payment Limit" will equal the lesser of (i) the
Initial Guarantee Payment Limit reduced by the aggregate amount of all Guarantee
Payments made under the Limited Guarantee in respect of principal (including
Guarantee Payments in respect of the Principal Liquidation Loss Amount) and (ii)
the Guarantee Formula Amount. Once the Guarantee Payment Limit has been reduced,
it will not be reinstated. At any time that the Guarantee Payment Limit has been
reduced to zero, no further Guarantee Payments will be made in respect of the
principal or interest on the Class B Certificates, and the holders of the Class
B Certificates will bear the risk of all liquidation losses on the defaulted
Contracts and may suffer a loss. The Limited Guarantee will terminate if an
Alternate Credit Enhancement is delivered to the Trustee.
S-25
<PAGE>
STRUCTURE OF THE TRANSACTION
The Company will establish the Trust and transfer the Contracts and related
rights to the Trust pursuant to the Agreement. The Certificates represent
fractional undivided interests in the Trust, the corpus of which will consist of
all right, title and interest of the Company in and to the Contracts (including,
without limitation, the security interests in the Manufactured Homes securing
such Contracts and any related mortgages, deeds of trust or similar
instruments), all rights to payments received on such Contracts on and after
November 1, 1995 (the "Cut-off Date"), rights under certain hazard insurance
policies with respect to the Manufactured Homes, proceeds from the errors and
omissions protection policy and any blanket hazard insurance policies maintained
pursuant to the Agreement, to the extent such proceeds relate to the Contracts
or the Manufactured Homes, all documents contained in the Contract files,
amounts held for the Trust in the Certificate Account and all proceeds in any
way derived from any of the foregoing. CITSF will service the Contracts for the
Trust. The Contracts will be held by CITSF on behalf of the Trustee.
Payments by Obligors under the Contracts generally will be deposited in a
separate account maintained at an Eligible Institution in the name of the
Trustee (the "Certificate Account") no later than two business days after
receipt. However, subject to the terms of the Agreement, as long as CITSF
remains the Servicer under the Agreement and is a direct or indirect subsidiary
of CIT, if CIT maintains a short-term debt rating of P-1 or higher, or a
long-term debt rating of A2 or higher by Moody's Investors Service, Inc.
("Moody's") and a short-term debt rating of at least A-1 by Standard & Poor's
Structured Ratings Group, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's"), and the Trustee shall have received an opinion of counsel
that any action taken pursuant to this sentence shall not adversely affect the
status of the Trust as a REMIC or result in the imposition of a tax on the
Trust, the Servicer will not be required to deposit payments by Obligors on the
Contracts in the Certificate Account within two business days of the date of
processing. In such an event, the Servicer may make such deposits on the
business day immediately preceding the next Remittance Date in an amount equal
to the net amount of such deposits and payments which would have been made had
the conditions of the preceding sentence not applied. Certain payments deposited
in the Certificate Account in respect of each Due Period (and, in certain
limited circumstances for the next Due Period to the extent necessary to pay
interest on the Class A-5 Certificates) will be applied on the 15th day of the
next month (or, if such day is not a business day, the next succeeding business
day) (a "Remittance Date") to make the distributions to Certificateholders
described under "Description of the Certificates-Distributions" and, to the
extent not netted from deposits to the Certificate Account, to reimburse the
Servicer for unreimbursed Monthly Advances, to pay certain monthly fees to the
Servicer as compensation for servicing the Contracts and to pay CIT the
Guarentee Fee (as defined below). CITSF, in its capacity as Servicer of the
Contracts, and any successor servicer are referred to herein as the "Servicer".
For each Remittance Date, the "Due Period" is the calendar month preceding
the month of such Remittance Date. For each Remittance Date, the "Determination
Date" is the third business day prior to such Remittance Date.
CITSF's transfer of the Contracts to the Company and the Company's
conveyance of the Contracts to the Trust is without recourse, except for certain
representations and warranties made by CITSF in the Agreement and certain
indemnities by the Servicer described under "Description of the
Certificates--Indemnification".
THE CONTRACT POOL
On the Closing Date, the Company will sell to the Trust approximately 4,772
conventional fixed-rate manufactured housing installment sales contracts and
installment loan agreements (the "Contracts") having an aggregate principal
balance as of the Cut-off Date of $199,201,195 (the "Cut-off Date Pool Principal
Balance"). For the purposes of the discussion of the characteristics of the
Contracts on the Cut-off Date contained herein, the principal balance of each
Contract is the unpaid principal balance as of the Cut-off Date.
All of the Contracts will be simple interest Contracts. A "simple interest
Contract" is a Contract as to which interest is calculated each day on the basis
of the actual principal balance outstanding on such day.
19.95% (by aggregate unpaid principal balance) of the Contracts as of the
Cut-off Date are Land-Secured Contracts with respect to which either (i) the
Obligor finances both the purchase of the Manufactured Home and the real estate
on which such Manufactured Home is located, (ii) such Contract is secured by a
mortgage, deed of trust or similar instrument provided by the Obligor in lieu of
S-26
<PAGE>
a cash down payment or (iii) in addition to a down payment and a lien on the
Manufactured Home, the Obligor provides a mortgage, deed of trust or similar
instrument as additional collateral to secure such Contract. See "The Trust--The
Contract Pools" in the Prospectus for a description of Land-Secured Contracts.
The Contracts were originated between February 1995 and October 1995. As of
the Cut-Off Date, approximately 2.14% of the Contracts by Stated Principal
Balance have a first scheduled payment date after November 1995. For each such
Contract, the Agreement will require that there be deposited in the Certificate
Account on the Closing Date an amount equal to a portion of the interest which
will accrue prior to the first Due Date (as defined below) for such Contract, at
the applicable Contract Rate. All of the Contracts are manufactured housing
installment sales contracts originated by a manufactured housing dealer in the
ordinary course of its business and purchased by CITSF or CITCF-NY in the
ordinary course of business, or manufactured housing installment loan agreements
originated by CITSF or CITCF-NY in the ordinary course of business.
All of the Contracts are conventional contracts, meaning that they are not
insured or guaranteed by any governmental agency.
Each Contract (a) is secured by a Manufactured Home and in some instances
also by a lien on the real estate on which the Manufactured Home is located, (b)
is fully amortizing with a fixed Contract Rate and provides for level payments
over the term of such Contract and (c) was originated in or after February 1995.
A detailed description of the Contracts is included in the Agreement.
Approximately 91.15% of the Cut-off Date Pool Principal Balance is attributable
to loans to purchase Manufactured Homes which were new and approximately 8.85%
is attributable to loans to purchase Manufactured Homes which were used at the
time the related Contract was originated. Approximately 73.20% of the Cut-off
Date Pool Principal Balance is attributable to loans to purchase multi-wide
Manufactured Homes. All of the Contracts have a Contract Rate of at least 7.22%
and not more than 15.99%. The weighted average Contract Rate of the Contracts as
of the Cut-off Date was approximately 10.17%. The Contracts have remaining
maturities, as of the Cut-off Date, of at least 22 months but not more than 360
months, original maturities of at least 24 months but not more than 360 months,
and a weighted average remaining term and original term to stated maturity, as
of the Cut-off Date, of 254 months and 256 months, respectively. The average
remaining principal balance per Contract, as of the Cut-off Date, was $41,744
and the outstanding principal balances of the Contracts, as of the Cut-off Date,
ranged from $5,538 to $224,680. $192,547,913, or 96.66% by Cut-off Date Pool
Principal Balance, of the Contracts had Loan-to-Value Ratios at the time of
origination of less than 96%. Value in such calculation is equal to (i) in the
case of a new Manufactured Home, the total delivered sales price for such
Manufactured Home plus taxes, fees and insurance, (ii) in the case of a used
Manufactured Home, the lesser of the total delivered sales price for such
Manufactured Home, or its appraised value, plus in either case, taxes, fees and
insurance, and (iii) in the case of a Land-Secured Contract, the total appraised
value of the real estate and the Manufactured Home, if available, or the total
delivered sales price of such Manufactured Home, plus the appraised value of the
real estate if available, plus in either case taxes, fees and insurance.
Manufactured Homes, unlike site-built homes, generally depreciate in value.
Consequently, at any time after origination it is possible, especially in the
case of Contracts with high loan-to-value ratios at origination, that the market
value of a Manufactured Home may be lower than the principal amount outstanding
under the related Contract.
The Contracts are secured by Manufactured Homes with Obligors having
mailing addresses in 46 states, of which as of the Cut-off Date approximately
26.50% of the Contracts (by aggregate unpaid principal balance) had Obligors
with mailing addresses in Texas. No other state represented more than 7.33% of
the Contracts of the remaining principal balance as of the Cut-off Date.
Set forth below is a description of certain characteristics of the
Contracts as of the Cut-off Date. All dollar amounts are rounded to the nearest
dollar.
S-27
<PAGE>
<TABLE>
<CAPTION>
Geographical Distribution of Manufactured Homes (1)
% of Contract
Aggregate Stated Pool by Aggregate
Principal Balance Stated Principal
Number of Outstanding of Balance Outstanding
Contracts Contracts of Contracts
State As of Cut-off Date As of Cut-off Date As of Cut-off Date
----- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Alabama ......................... 43 $ 1,511,647 0.76%
Arizona ......................... 327 14,610,161 7.33
Arkansas ........................ 31 1,041,290 0.52
California ...................... 326 12,530,762 6.29
Colorado ........................ 65 2,910,640 1.46
Connecticut ..................... 1 60,782 0.03
Delaware ........................ 17 618,260 0.31
Florida ......................... 40 1,530,906 0.77
Georgia ......................... 166 7,069,974 3.55
Idaho ........................... 44 2,384,480 1.20
Illinois ........................ 26 1,248,419 0.63
Indiana ......................... 53 2,036,108 1.02
Iowa ............................ 32 1,384,037 0.69
Kansas .......................... 96 3,836,482 1.93
Kentucky ........................ 13 409,284 0.21
Louisiana ....................... 78 2,921,368 1.47
Maine ........................... 35 1,248,515 0.63
Maryland ........................ 21 903,586 0.45
Massachusetts ................... 1 35,213 0.02
Michigan ........................ 160 6,178,225 3.10
Minnesota ....................... 54 1,933,661 0.97
Mississippi ..................... 92 3,435,259 1.72
Missouri ........................ 150 6,088,872 3.06
Montana ......................... 27 1,260,709 0.63
Nebraska ........................ 19 798,483 0.40
Nevada .......................... 88 4,645,675 2.33
New Hampshire ................... 20 854,291 0.43
New Jersey ...................... 5 238,969 0.12
New Mexico ...................... 194 7,208,906 3.62
New York ........................ 181 7,601,628 3.82
North Carolina .................. 133 6,477,763 3.25
Ohio ............................ 64 2,501,615 1.26
Oklahoma ........................ 116 4,388,725 2.20
Oregon .......................... 94 6,397,538 3.21
Pennsylvania .................... 203 7,482,285 3.76
South Carolina .................. 154 6,835,233 3.43
South Dakota .................... 1 17,390 0.01
Tennessee ....................... 26 900,442 0.45
Texas ........................... 1,291 52,793,671 26.50
Utah ............................ 23 1,133,558 0.57
Vermont ......................... 18 817,192 0.41
Virginia ........................ 50 1,858,035 0.93
Washington ...................... 105 5,700,125 2.86
West Virginia ................... 26 754,606 0.38
Wisconsin ....................... 19 607,922 0.31
Wyoming ......................... 44 1,998,503 1.00
----- ------------ ------
Total ......................... 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
- -----------
(1) In most cases, based on the mailing address of the Obligors as of the
Cut-off Date.
S-28
<PAGE>
Distribution of Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
% of Contract Pool
Aggregate Stated By Aggregate Stated
Principal Balance Principal Balance
Loan-to- Number of Outstanding of Outstanding of
Value Contracts Contracts Contracts
Ratio(1) As of Cut-off Date As of Cut-off Date As of Cut-off Date
-------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
0 - 60% ................. 138 $ 3,683,248 1.85%
60.01 - 70% ................. 121 4,535,095 2.28
70.01 - 80% ................. 341 14,671,255 7.37
80.01 - 90% ................. 1,764 72,117,404 36.20
90.01 - 93% ................. 736 32,078,595 16.10
93.01 - 95% ................. 816 34,263,862 17.20
95.01 - 96% ................. 721 31,198,454 15.66
96.01 - 100% ................ 135 6,653,282 3.34
----- ------------ ------
Total ..................... 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
- ----------
(1) The term "Value" as used in this table is defined above. As of the Cut-off
Date, the weighted average original Loan-to-Value Ratio of the Contracts
was 88.44%.
Contract Rates
<TABLE>
<CAPTION>
% of Contract Pool
Aggregate Stated By Aggregate Stated
Principal Balance Principal Balance
Number of Outstanding of Outstanding of
Contract Contracts Contracts Contracts
Rate As of Cut-off Date As of Cut-off Date As of Cut-off Date
-------- ----------------- ----------------- ------------------
<S> <C> <C> <C>
7.00 - 7.99% .............. 147 $ 7,772,175 3.90%
8.00 - 8.99% .............. 213 10,687,961 5.37
9.00 - 9.99% .............. 1,980 86,423,214 43.38
10.00 - 10.99% .............. 1,270 52,818,834 26.52
11.00 - 11.99% .............. 735 27,274,936 13.69
12.00 - 12.99% .............. 326 10,948,895 5.50
13.00 - 13.99% .............. 86 2,777,883 1.39
14.00 - 14.99% .............. 14 485,869 0.24
15.00% or greater ........... 1 11,428 0.01
----- ------------ ------
Total .................. 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
The weighted average Contract Rate of the Contracts as of the Cut-off Date
was approximately 10.17%.
S-29
<PAGE>
Original Term to Maturity
<TABLE>
<CAPTION>
% of Contract Pool
Aggregate Stated By Aggregate Stated
Principal Balance Principal Balance
Number of Outstanding of Outstanding of
Contracts Contracts Contracts
Original Term (Months) As of Cut-off Date As of Cut-off Date As of Cut-off Date
- --------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C>
1 - 60 ..................... 28 $ 346,216 0.17%
61 - 84 ..................... 49 906,548 0.46
85 - 120 ..................... 175 3,787,140 1.90
121 - 180 ..................... 790 23,283,965 11.69
181 - 240 ..................... 2,518 102,522,542 51.47
241 - 300 ..................... 922 47,075,459 23.63
301 - 360 ..................... 290 21,279,325 10.68
----- ------------ ------
Total ....................... 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
The weighted average original term to maturity of the Contracts as of the
Cut-off Date was approximately 256 months.
Distribution of Remaining Contract Amounts
<TABLE>
<CAPTION>
% of Contract Pool
Aggregate Stated By Aggregate Stated
Principal Balance Principal Balance
Number of Outstanding of Outstanding of
Remaining Contract Contracts Contracts Contracts
Amount (in Dollars)(1) As of Cut-off Date As of Cut-off Date As of Cut-off Date
- --------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
$ 0 - $ 9,999 ............ 36 $ 288,550 0.15%
10,000 - $19,999 ............ 280 4,578,355 2.30
20,000 - $29,999 ............ 1,028 26,447,894 13.28
30,000 - $39,999 ............ 1,185 41,170,216 20.67
40,000 - $49,999 ............ 921 41,241,358 20.70
50,000 - $59,999 ............ 646 35,184,347 17.66
60,000 - $69,999 ............ 369 23,748,052 11.92
70,000 - $79,999 ............ 141 10,505,245 5.27
80,000 - $89,999 ............ 75 6,261,083 3.14
90,000 - $99,999 ............ 42 3,985,461 2.00
100,000 or greater ............ 49 5,790,634 2.91
----- ------------ ------
Total ....................... 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
- ----------
(1) The largest remaining principal balance of any Contract as of the Cut-off
Date is $224,680, which represents 0.11% of the Cut-off Date Pool Principal
Balance.
S-30
<PAGE>
Remaining Months to Maturity
<TABLE>
<CAPTION>
Aggregate Stated % of Contract Pool
Principal Balance By Principal Balance
Remaining Number of Outstanding of Outstanding of
Months to Contracts Contracts Contracts
Maturity As of Cut-off Date As of Cut-off Date As of Cut-off Date
---------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
1 - 60 ..................... 28 $ 346,216 0.17%
61 - 84 ..................... 49 906,548 0.46
85 - 120 ..................... 175 3,787,140 1.90
121 - 180 ..................... 790 23,283,965 11.69
181 - 240 ..................... 2,518 102,522,542 51.47
241 - 300 ..................... 922 47,075,459 23.63
301 - 360 ..................... 290 21,279,325 10.68
----- ------------ ------
Total ....................... 4,772 $199,201,195 100.00%
===== ============ ======
</TABLE>
The weighted average remaining term to maturity of the Contracts as of the
Cut-off Date was approximately 254 months.
Delinquency, Loan Loss and Liquidation Experience
The following Delinquency Experience and Loan Loss/Liquidation Experience
tables set forth data for CITSF's and CITCF-NY's non-recourse conventional
manufactured housing portfolio originated and serviced by CITSF and CITCF-NY
(including contracts acquired from dealers which originated the contracts
pursuant to CITSF's underwriting criteria). The following table sets forth the
delinquency experience for the four years ended December 31, 1994 and the nine
months ended September 30, 1995 of such portfolio, excluding contracts which are
already in repossession, contracts which are subject to dealer recourse
arrangements, contracts acquired by CITSF through portfolio purchases and,
except as provided below, contracts which are serviced for others. All of the
Contracts in the Trust will be conventional Contracts, not subject to dealer
recourse arrangements and not acquired by CITSF in portfolio purchases.
Delinquency Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
--------------------------------------------------- September 30,
1991 1992 1993(3) 1994(3) 1995(3)
------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Number of Contracts
Serviced ......................... 4,348 5,590 9,021 14,503 21,029
Principal Balance of Contracts
Serviced ......................... $137,669 $186,476 $289,001 $507,388 $765,439
Principal Balance of Delinquent
Contracts(1):
30-59 Days ....................... $ 720 $ 1,043 $ 1,678 $ 4,223 $ 12,837
60-89 Days ....................... 294 428 189 1,290 4,670
90 Days or More .................. 486 647 991 1,443 4,477
Principal Balance of Delinquent
Contracts ........................ $ 1,500 $ 2,118 $ 2,858 $ 6,956 $ 21,984
======== ======== ======== ======== ========
Delinquencies as a Percent of
Principal Balances Serviced(2) ... 1.09% 1.14% 0.99% 1.37% 2.87%
</TABLE>
- ----------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(2) Based on outstanding principal balance of delinquent contracts.
(3) Includes manufactured housing contracts sold by CITSF in connection with
other securitizations which CITSF is servicing.
S-31
<PAGE>
The following table sets forth the loan loss and liquidation experience for
the four years ended December 31, 1994 and the nine months ended September 30,
1995, of the portfolio of conventional manufactured housing contracts originated
and serviced by CITSF, excluding contracts which are subject to dealer recourse
arrangements, contracts acquired by CITSF through portfolio purchases and,
except as provided below, contracts which are serviced for others.
Loan Loss/Liquidation Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
----------------------------------------------------- September 30,
1991 1992 1993(6) 1994(6) 1995(6)
-------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Number of Contracts(1) .......... 4,348 5,590 9,021 14,503 21,029
Principal Balance of
Contracts Serviced(1) ......... $137,669 $186,746 $289,001 $507,388 $765,439
Contract Liquidations(2) ........ 0.37% 0.39% 0.57% 0.79% 0.54%(5)
Net Losses:
Dollars(3) .................... $ 206 $ 547 $ 1,310 $ 2,085 $ 2,049
Percentage(4) ................. 0.15% 0.29% 0.45% 0.41% 0.36%(5)
</TABLE>
- ----------
(1) As of period end.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts as of period end.
(5) This ratio has been annualized, and may not reflect the actual loan loss
experience for the year.
(6) Includes manufactured housing contracts sold by CITSF in connection with
other securitizations which CITSF is servicing.
The data presented in the foregoing tables is for illustrative purposes
only. CITSF's nonrecourse conventional manufactured housing portfolio has
experienced rapid growth over the past two years. The delinquency and loss
percentages will be affected by the rapid growth, size and relative lack of
seasoning of CITSF's portfolio, as well as general and regional economic
conditions. In addition, such data relates to the performance of CITSF's entire
nonrecourse manufactured housing portfolio, and is not historical data regarding
solely the portion of CITSF's portfolio constituting the Contracts. Most of
CITSF's manufactured housing portfolio was originated under the underwriting
guidelines described under "The CIT Group/Sales Financing, Inc.,
Servicer--CITSF's Underwriting Guidelines" in the Prospectus. However, in July
1994 CITSF adopted a risk-adjusted pricing policy and changed its credit
criteria and underwriting guidelines to permit (i) financing of manufactured
housing units located on land leased by the Obligor from a third party, (ii)
lower downpayments (reduced from at least 15% to not less than 5% for qualified
borrowers) and (iii) greater reliance on credit scores and overall evaluation
instead of using specific disqualifying criteria (e.g., a minimum of five years
of employment). In connection with this change, the minimum credit score for
approval of a new credit was reduced, in order to permit credit to be extended
to less creditworthy borrowers than under the credit criteria previously in
effect. The interest rates charged on manufactured housing contracts originated
since July 1994 reflect CITSF's evaluation of the relative risk associated with
an individual's application. It is expected that, in addition to the effects of
seasoning, the changes in CITSF's underwriting standards will result in higher
delinquency and loan loss experience than is shown in the above tables since
most of the manufactured housing contracts included in such tables were
originated using CITSF's former underwriting guidelines. All of the Contracts
were originated under these new credit criteria adopted by CITSF in July 1994.
Accordingly, the data presented in the foregoing tables should not necessarily
be considered as a basis for assessing the likelihood, amount or severity of
delinquency or losses on the Contracts, and no assurance can be given that the
delinquency and loan loss experience presented in the preceding tables will be
indicative of the experience on the Contracts. The foregoing discussion
supplements and, in part, supersedes the additional discussion of CITSF's
underwriting guidelines under the caption, "The CIT Group/Sales Financing, Inc.,
Servicer--CITSF's Underwriting Guidelines" in the Prospectus.
S-32
<PAGE>
In February 1995, CITSF transferred a pool of manufactured housing
installment sales contracts (the "1995-1 Pool") to a trust which issued
Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates
Series 1995-1. The 1995-1 Pool was originated by CITSF under underwriting
guidelines adopted in July 1994. As of September 30, 1995, the delinquency rate
(more than 30 days past due after contractual due date) for the 1995-1 Pool was
approximately 4.9% of the principal balance of the 1995-1 Pool (which excludes
Contracts which are in repossession of approximately 0.5% of the principal
balance of the 1995-1 Pool). For the nine-month period ended September 30, 1995,
the net charge-off rate (annualized) for the 1995-1 Pool was approximately 0.05%
of the 1995-1 Pool balance as of September 30, 1995. No assurance can be given
that the delinquency and loan loss experience of the 1995-1 Pool will be
indicative of the experience on the Contracts.
The delinquency and loan loss experience of manufactured housing contracts
historically has been sharply affected by a downturn in regional or local
economic conditions. In recent years, such a downturn and higher levels of
delinquency, loan loss and repossession were experienced in many areas of the
country in which the Manufactured Homes are located, including New England and
areas dependent on the oil and gas industry, notably certain areas of Texas,
Oklahoma and Louisiana. These regional or local economic conditions are often
volatile, and no predictions can be made regarding future economic conditions in
any of the regions in which the Manufactured Homes are located. These downturns
have tended to increase the severity of loss on repossession because of the
increased supply of used units, which in turn may affect the supply in other
regions. In order to achieve geographic dispersion and to limit the effect of
regional and local economic conditions on the Contract Pool, Contracts with
Obligors with mailing addresses in any one state (except with respect to
Contracts with Obligors with mailing addresses in Texas) do not exceed 7.33% of
the Cut-off Date Pool Principal Balance.
Servicing
CITSF services, through its Asset Service Center, manufactured housing,
home equity, recreational vehicle, marine and other consumer loans. CITSF
services all of the manufactured housing contracts it purchases or originates,
whether on an individual basis or in bulk. CITSF is actively seeking
arrangements pursuant to which it will service manufactured housing contracts
held by other entities. Such contracts would not be purchased by CITSF or sold
to such other entities by CITSF. Generally, such servicing responsibilities are,
and would be, also carried out through CITSF's Asset Service Center. Servicing
responsibilities include collecting principal and interest payments, taxes,
insurance premiums, where applicable, and other payments from obligors and,
where such contracts have been sold, remitting principal and interest payments
to the holders thereof, to the extent such holders are entitled thereto.
Collection procedures include repossession and resale of manufactured homes
securing defaulted contracts and, if deemed advisable by CITSF, entering into
workout arrangements with obligors under certain defaulted contracts. Although
decisions as to whether to repossess any manufactured home are made on an
individual basis, CITSF's general policy is to institute repossession procedures
promptly after Asset Service Center personnel determine that it is unlikely that
a defaulted contract will be brought current, and thereafter to diligently
pursue the resale of such manufactured homes if the market is favorable.
S-33
<PAGE>
The following table shows the composition of the CITSF portfolio, including
conventional manufactured housing contracts serviced by CITSF on the dates
indicated:
THE CIT GROUP/SALES FINANCING, INC
<TABLE>
<CAPTION>
At December 31, At September 30,
---------------------------------------------------------------------------------- ------------------
1991 1992 1993 1994 1995
------------------ ------------------- ------------------- ------------------- ------------------
(Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unpaid principal balance
of contracts being
serviced
MH - Non-Recourse . 11,397 $ 275,999 9,282 $ 281,838 9,959 $ 251,371 17,314 $ 498,296 21,711 $ 657,034
MH - Recourse ..... 19,739 215,568 17,081 183,129 14,031 142,246 0 0 0 0
MH - Service
Retained(1) ..... 0 0 3,328 43,831 6,983 175,554 8,118 188,381 10,350 283,630
MH - Serviced
For Others ...... 675 17,833 19,949 296,547 16,925 240,499 14,167 191,475 37,991 364,732
------ ---------- ------ ---------- ------ ---------- ------- ---------- ------- ----------
Total MH. ......... 31,811 $ 509,400 49,640 $ 805,345 47,898 $ 809,670 39,599 $ 878,152 70,052 $1,305,396
RV-Owned .......... 39,648 845,601 43,309 930,326 46,861 1,021,768 42,976 898,024 31,686 662,878
RV-Service
Retained(1) ..... 0 0 0 0 0 0 4,827 118,267 20,214 468,142
------ ---------- ------ ---------- ------ ---------- ------- ---------- ------- ----------
Total RV .......... 39,648 $ 845,601 43,309 $ 930,326 46,861 $1,021,768 47,803 $1,016,291 51,900 $1,131,020
Home Equity. ...... 0 0 0 0 3,545 131,322 13,545 570,772 23,839 930,558
Other ............. 6,942 101,022 1,126 19,485 1,572 41,944 1,310 74,823 5,689 145,476
------ ---------- ------ ---------- ------ ---------- ------- ---------- ------- ----------
Total Contracts
Serviced ........... 78,401 $1,456,023 94,075 $1,755,156 99,876 $2,004,704 102,257 $2,540,038 151,480 $3,512,450
====== ========== ====== ========== ====== ========== ======= ========== ======= ==========
</TABLE>
- ----------
MH = Manufactured Housing
RV = Recreation Vehicle
(1) Represents Contracts securitized with servicing retained.
S-34
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under the heading "Yield
Considerations".
The Contracts have maturities at origination ranging from 2 years to 30
years, but may be prepaid in full or in part at any time. The prepayment
experience of the Contracts (including prepayments due to liquidations of
defaulted Contracts) will affect the average life of the Offered Certificates.
Based on CITSF's experience with the portfolio of manufactured housing contracts
serviced by it, CITSF anticipates that a number of the Contracts will be prepaid
prior to their maturity. A number of factors, including homeowner mobility,
general and regional economic conditions and prevailing interest rates, may
influence prepayments. Natural disasters may also influence prepayments. In
addition, repurchases of Contracts by CITSF on account of certain breaches of
representations and warranties have the effect of prepaying such Contracts and
therefore would affect the average life of the Offered Certificates. The
prepayment experience on manufactured housing contracts varies greatly. Although
most of the Contracts contain a "due-on-sale" clause that would permit the
Servicer to accelerate the maturity of a Contract upon the sale of the related
Manufactured Home, CITSF currently expects to permit assumptions of Contracts if
the purchaser of the related Manufactured Home satisfies CITSF's then-current
underwriting standards.
The allocation of distributions of principal to the Senior
Certificateholders on each Remittance Date prior to the Class A-5 Cross-over
Date, and on any Remittance Date on or after the Class A-5 Cross-over Date on
which a Class A-5 Principal Distribution Test or on or after the Class B
Class-over Date on which a Class B Principal Distribution Test, as applicable,
is not satisfied, will have the effect of accelerating the amortization of the
Senior Certificates from the amortization that would be applicable if the
principal were distributed pro rata according to the Principal Balance of each
Class. In addition, the sequential allocation of distributions of principal
among the Senior Certificates will have the effect of accelerating the
amortization first of the Class A-1 Certificates, then the Class A-2
Certificates, then the Class A-3 Certificates and then the Class A-4
Certificates from the amortization that would be applicable if the principal
were distributed pro rata according to their respective principal balance. If a
Class of Offered Certificates is purchased at a discount and the purchaser
calculates its anticipated yield to maturity based on an assumed rate of payment
of principal on such Class of Offered Certificates that is faster than the rate
actually realized, such purchaser's actual yield to maturity will be lower than
the yield so calculated by such purchaser.
Until the Class A-5 Cross-over Date, and on any Remittance Date on or after
the Class A-5 Cross-over Date on which a Class A-5 Principal Distribution Test
or a Class B Principal Distribution Test, as applicable, is not satisfied, the
Senior Certificateholders will receive all payments of principal which are made
on the Contracts except for payment of the Principal Liquidation Loss Amount to
the Class B Certificateholders pursuant to the Limited Guarantee. The rate of
principal payments on the Class A-5 and Class B Certificates and the aggregate
amount of distributions on the Class A-5 and Class B Certificates will be
affected by the rate of Obligor defaults resulting in losses on Liquidated
Contracts, by the severity of those losses and by the timing of those losses.
See "Description of the Certificates--Subordination of the Subordinated
Certificates".
There can be no assurance that the delinquency or repossession experience
set forth under "The Contract Pool--Delinquency, Loan Loss and Liquidation
Experience" will be representative of the results that may be experienced with
respect to the Contracts.
Each of the Company and the Servicer has the option to purchase from the
Trust all remaining Contracts, and thereby effect early retirement of the
Certificates, on any Remittance Date when the Pool Stated Principal Balance is
less than 10% of the Cut-off Date Pool Principal Balance. See "Description of
the Certificates--Repurchase Option". In addition, ninety days following a
Remittance Date as of which the Pool Stated Principal Balance is less than 10%
of the Cut-off Date Pool Principal Balance (and only if the Servicer and the
Company have not exercised the repurchase option described above), the Trustee
shall solicit bids for the purchase of the Contracts remaining in the Trust. See
"Description of the Certificates--Auction Sale".
Although Contract Rates on the Contracts vary, in the event that, with
respect to the Class A-3, Class A-4, Class A-5 and Class B Certificates, a large
number of Contracts having Net Contract Rates equal to or higher than the
applicable Remittance Rate (without giving effect to the maximum rate) were to
S-35
<PAGE>
prepay while Contracts having Net Contract Rates lower than such Remittance Rate
did not prepay, with the result that the interest collections on the remaining
Contracts were not sufficient to support such Remittance Rate, then the
Remittance Rate for such Class of Certificates would be equal to the weighted
average of the Net Contract Rates on each Contract remaining in the Contract
Pool. A reduction in the Contract Rate as a result of a bankruptcy of an Obligor
would have a similar effect. The "Net Contract Rate" is the contractual rate of
interest payable under a Contract (the "Contract Rate"), less the Monthly
Servicing Fee allocable to such Contract for such Due Period. The weighted
average Net Contract Rate of all Contracts in the Contract Pool as of the
Cut-off Date was approximately 9.17%. Principal prepayments received from
Obligors on the Contracts will be applied by the Servicer on the date received
to reduce the principal balance of the related Contract in such Due Period.
Obligors are not required to pay interest on Contracts after the date of a full
prepayment of principal. As a result, prepayments on Contracts in advance of the
scheduled payment dates for such Contracts in any Due Period will reduce the
amount of interest received from Obligors during such Due Period and available
to be passed through to Holders of Certificates on the following Remittance
Date. Subject to the availability of the subordination provided by the Class A-5
Certificates, the Class B Certificates and the Class R Certificates, such
subordination would apply to the net shortfall of interest received on account
of prepayments in full in any Due Period so that the amount of interest paid on
each Class of Senior Certificates on the following Remittance Date would not be
affected by such shortfall.
To the extent that the Amount Available is not sufficient to pay to the
holders of the Class A-5 Certificates all payments of interest to which such
Certificateholders are entitled on such Remittance Date, as described above
under "Description of the Certificates--Interest on Class A-5 Certificates", the
Trustee will withdraw the amount of such deficiency from the Certificate Account
from funds which would otherwise constitute part of the Amount Available for the
following Remittance Date, to the extent sufficient funds are available
therefor, and distribute such amount to the Class A-5 Certificateholders. In
such event, the Amount Available to be distributed to all Certificateholders,
including the Senior Certificates, on the next Remittance Date will be reduced
by such amount.
The final scheduled payment date on the Contract with the latest maturity
is in November 2025.
Certain statistical information relating to the payment behavior of
nonrecourse manufactured housing contracts originated by CITSF and CITCF-NY
(including contracts acquired from dealers which originated the contracts in
accordance with CITSF's underwriting criteria) is set forth below. In evaluating
the information contained in this table and its relationship to the expected
prepayment behavior of the Contracts, prospective Certificateholders should
consider that the Company has performed no statistical analysis to determine
whether the contracts to which the table relates constitute a statistically
significant sample of nonrecourse manufactured housing contracts for purposes of
determining expected prepayment behavior. Furthermore, no assurance can be given
that the prepayment experience of the Contracts will exhibit prepayment behavior
similar to the behavior summarized in the following table. In addition to the
foregoing, prospective Certificateholders should consider that the table set
forth below is limited to the period covered therein and thus cannot reflect the
effects, if any, of aging on the prepayment behavior of manufactured housing
contracts beyond such periods.
The following table sets forth, with respect to all of the nonrecourse
manufactured housing contracts originated by CITSF and CITCF-NY (including
contracts acquired from dealers which originated the contracts in accordance
with CITSF's underwriting criteria) in each year since 1990, the aggregate
initial principal balance of the contracts originated in such year, the
approximate aggregate principal balance outstanding on the contracts originated
in such year as of the last day of such year and the approximate aggregate
principal balance outstanding on the contracts originated in such year as of the
end of each subsequent fiscal quarter.
S-36
<PAGE>
Information Regarding Principal Reduction on Nonrecourse Manufactured
Housing Contracts Originated by CITSF and CITCF-NY
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year of Origination ............ 1990(3) 1991(3) 1992(3) 1993(3) 1994(3)
Volume (1) ..................... $69,611 $74,262 $70,109 $139,200 $262,522
Aggregate Principal Balance (2):
12/31/90 ....................... $62,800
03/31/91 ....................... 61,900
06/30/91 ....................... 61,000
09/30/91 ....................... 59,900
12/31/91 ....................... 59,100 $65,700
03/31/92 ....................... 56,700 63,400
06/30/92 ....................... 54,000 61,500
09/30/92 ....................... 52,100 59,700
12/31/92 ....................... 50,400 57,900 $67,200
03/31/93 ....................... 48,700 56,700 65,200
06/30/93 ....................... 47,100 54,900 61,900
09/30/93 ....................... 44,600 53,000 59,900
12/31/93 ....................... 41,200 49,800 56,700 $134,400
03/31/94 ....................... 38,900 47,300 53,600 130,500
06/30/94 ....................... 37,000 44,700 51,100 127,000
09/30/94 ....................... 35,400 42,800 49,400 124,400
12/31/94 ....................... 33,500 40,500 47,900 121,100 $255,900
03/31/95 ....................... 32,000 38,700 46,700 119,000 252,900
06/30/95 ....................... 30,800 37,600 45,200 116,400 248,400
09/30/95 ....................... 29,500 35,800 43,700 113,000 241,900
</TABLE>
- ----------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year.
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding on each contract
originated in a particular year.
(3) Includes manufactured housing contracts sold by CITSF in connection with
other securitizations which CITSF is servicing.
Weighted Average Life of the Offered Certificates
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average life of the Offered
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of each Class of Offered
Certificates will be influenced by the rate at which principal on the Contracts
is paid. Principal payments on Contracts may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
repayments and liquidations due to default or other dispositions of Contracts).
Prepayments on Contracts may be measured by a prepayment standard or model. The
model used in this Prospectus ("MH Prepayment Model") is based on an assumed
rate of prepayment each month of the then unpaid principal balance of a pool of
new Contracts.
As used in the following tables, a prepayment assumption of "100% of the MH
Prepayment Model" assumes constant prepayment rates of 3.7% per annum of the
then unpaid principal balance of such Contracts in the first month of the life
of the Contracts and an additional 0.1% per annum in each month thereafter until
S-37
<PAGE>
the 24th month. Beginning in the 24th month and in each month thereafter during
the life of all of the Contracts, 100% of the MH Prepayment Model assumes a
constant prepayment rate of 6.0% per annum each month. As used in the following
table "0% of the MH Prepayment Model" assumes no prepayments on the Contracts;
"150% of the MH Prepayment Model" assumes the Contracts will prepay at rates
equal to 150% of the MH Prepayment Model assumed prepayment rates; "200% of the
MH Prepayment Model" assumes the Contracts will prepay at rates equal to 200% of
the MH Prepayment Model assumed prepayment rates; and "300% of the MH Prepayment
Model" assumes the Contracts will prepay at rates equal to 300% of the MH
Prepayment Model assumed prepayment rates.
There is no assurance, however, that prepayment of the Contracts will
conform to any level of the MH Prepayment Model, and no representation is made
that the Contracts will prepay at the prepayment rates shown or any other
prepayment rate. The rate of principal payments on pools of manufactured housing
contracts is influenced by a variety of economic, geographic, social and other
factors, including the level of interest rates and the rate at which
manufactured homeowners sell their manufactured homes or default on their
contracts. Other factors affecting prepayment of contracts include changes in
obligors' housing needs, job transfers, unemployment and obligors' net equity in
the manufactured homes. In the case of mortgage loans secured by site-built
homes, in general, if prevailing interest rates fall significantly below the
interest rates on such mortgage loans, the mortgage loans are likely to be
subject to higher prepayment rates than if prevailing interest rates remained at
or above the rates borne by such mortgage loans. Conversely, if prevailing
interest rates rise above the interest rates on such mortgage loans, the rate of
prepayment would be expected to decrease. In the case of manufactured housing
contracts, however, because the outstanding principal balances are, in general,
much smaller than mortgage loan balances and the original term to maturity of
each such contract is generally shorter, the reduction or increase in the size
of the monthly payment on a contract arising from a change in the interest rate
thereon is generally much smaller. Consequently, changes in prevailing interest
rates may not have a similar effect, or may have a similar effect, but to a
smaller degree, on the prepayment rates on manufactured housing contracts.
Except for payment of the Principal Liquidation Loss Amount to the Class B
Certificateholders pursuant to the Limited Guarantee, payments of principal on
the Class A-5 and Class B Certificates will not commence (i) in the case of the
Class A-5 Certificates, until the Class A-5 Cross-over Date, and will not be
made on that Remittance Date, or any subsequent Remittance Date, on which a
Class A-5 Principal Distribution Test is not satisfied (unless the Class A-1
Principal Balance, Class A-2 Principal Balance, Class A-3 Principal Balance and
the Class A-4 Principal Balance have been reduced to zero) or, (ii) in the case
of the Class B Certificates, until the Class B Cross-over Date, and will not be
made on that Remittance Date or on any subsequent Remittance Date on which a
Class B Principal Distribution Test is not satisfied (unless the Class A-4
Principal Balance has been reduced to zero). This will have the effect of
accelerating the amortization of the Senior Certificates while increasing the
respective interest in the Trust of the Class A-5 and Class B Certificates.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the MH Prepayment Model set forth in the table; (ii)
either the Servicer or the Company exercises its right of optional termination
described above; (iii) the Contracts have been grouped into 7 pools having the
characteristics as of the Cut-off Date set forth in the table entitled "Assumed
Contract Characteristics" below; (iv) the Class A-1 Certificates initially
represent $36,263,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-1 Remittance Rate of 5.90%, the Class A-2 Certificates initially
represent $35,456,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-2 Remittance Rate of 6.00%, the Class A-3 Certificates initially
represent $24,434,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-3 Remittance Rate of 6.25%, the Class A-4 Certificates initially
represent $65,200,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-4 Remittance Rate of 7.00%, the Class A-5 Certificates initially
represent $15,936,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-5 Remittance Rate of 6.95% and the Class B Certificates initially
represent $21,912,194 of the Cut-off Date Pool Principal Balance and will have a
Class B Remittance Rate of 7.65%; (v) no interest shortfalls will arise in
connection with prepayment in full of the Contracts; (vi) no delinquencies or
losses are experienced on the Contracts; (vii) distributions are made on the
Offered Certificates on the 15th day of each month (or, if the 15th day is not a
business day, the next business day thereafter), commencing on December 15,
1995; and (viii) the Offered Certificates are issued on November 21, 1995.
S-38
<PAGE>
No representation is made that the Contracts will not experience
delinquencies, or that losses will not be experienced at the rates assumed above
or at any other rate and in fact historically there have been delinquencies and
losses.
Assumed Contract Characteristics
<TABLE>
<CAPTION>
Original Term Remaining Term
Current to Maturity to Maturity
Pool Principal Balance Contract Rate (Months) (Months)
---- ----------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
1..................... $ 346,216 10.84% 58 55
2..................... 906,548 9.62 84 82
3..................... 3,787,140 10.55 119 117
4..................... 23,283,965 10.60 178 176
5..................... 102,522,542 10.36 240 238
6..................... 47,075,459 9.83 300 298
7..................... 21,279,325 9.49 360 358
------------ ----- --- ---
Total .............. $199,201,195 10.17% 256 254
============ ===== === ===
</TABLE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the characteristics of the
actual Contracts and the characteristics of the Contracts assumed in preparing
the tables. Any such discrepancy may have an effect upon the percentages of the
Original Principal Balances outstanding and the weighted average life of each
Class of the Offered Certificates set forth in the tables. In addition, since
the actual Contracts and the Trust have characteristics which differ from those
assumed in preparing the tables set forth below, the distributions of principal
on each of the Offered Certificates may be made earlier or later than as
indicated in the tables.
It is not likely that Contracts will prepay at any constant percentage of
the MH Prepayment Model to maturity or that all Contracts will prepay at the
same rate. In addition, the diverse remaining terms to maturity of the Contracts
(which include recently originated Contracts) could produce slower distributions
of principal than as indicated in the tables at the various percentages of the
MH Prepayment Model specified even if the weighted average remaining term to
maturity of the Contracts is 254 months.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
projected weighted average life of the Offered Certificates and set forth the
percentages of the Original Class A-1 Principal Balance, the Original Class A-2
Principal Balance, the Original Class A-3 Principal Balance, the Original Class
A-4 Principal Balance, the Original Class A-5 Principal Balance and the Original
Class B Principal Balance that would be outstanding after each of the dates
shown at the indicated percentages of the MH Prepayment Model.
S-39
<PAGE>
Percentage of the Original Principal
Balance of the Class A-1 Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 91 73 67 55 43 19
November 15, 1997 ...................... 81 41 28 3 0 0
November 15, 1998 ...................... 69 9 0 0 0 0
November 15, 1999 ...................... 57 0 0 0 0 0
November 15, 2000 ...................... 43 0 0 0 0 0
November 15, 2001 ...................... 28 0 0 0 0 0
November 15, 2002 ...................... 11 0 0 0 0 0
November 15, 2003 ...................... 0 0 0 0 0 0
November 15, 2004 ...................... 0 0 0 0 0 0
November 15, 2005 ...................... 0 0 0 0 0 0
November 15, 2006 ...................... 0 0 0 0 0 0
November 15, 2007 ...................... 0 0 0 0 0 0
November 15, 2008 ...................... 0 0 0 0 0 0
November 15, 2009 ...................... 0 0 0 0 0 0
November 15, 2010 ...................... 0 0 0 0 0 0
November 15, 2011 ...................... 0 0 0 0 0 0
November 15, 2012 ...................... 0 0 0 0 0 0
November 15, 2013 ...................... 0 0 0 0 0 0
November 15, 2014 ...................... 0 0 0 0 0 0
November 15, 2015 ...................... 0 0 0 0 0 0
November 15, 2016 ...................... 0 0 0 0 0 0
November 15, 2017 ...................... 0 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 4.3 1.7 1.4 1.1 0.9 0.6
</TABLE>
- ----------
(1) The weighted average life of a Class A-1 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-1 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-1 Certificate.
Percentage of the Original Principal
Balance of the Class A-2 Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 100 100 100 100 100 100
November 15, 1997 ...................... 100 100 100 100 79 31
November 15, 1998 ...................... 100 100 90 53 18 0
November 15, 1999 ...................... 100 77 53 7 0 0
November 15, 2000 ...................... 100 46 17 0 0 0
November 15, 2001 ...................... 100 16 0 0 0 0
November 15, 2002 ...................... 100 0 0 0 0 0
November 15, 2003 ...................... 93 0 0 0 0 0
November 15, 2004 ...................... 72 0 0 0 0 0
November 15, 2005 ...................... 50 0 0 0 0 0
November 15, 2006 ...................... 27 0 0 0 0 0
November 15, 2007 ...................... 1 0 0 0 0 0
November 15, 2008 ...................... 0 0 0 0 0 0
November 15, 2009 ...................... 0 0 0 0 0 0
November 15, 2010 ...................... 0 0 0 0 0 0
November 15, 2011 ...................... 0 0 0 0 0 0
November 15, 2012 ...................... 0 0 0 0 0 0
November 15, 2013 ...................... 0 0 0 0 0 0
November 15, 2014 ...................... 0 0 0 0 0 0
November 15, 2015 ...................... 0 0 0 0 0 0
November 15, 2016 ...................... 0 0 0 0 0 0
November 15, 2017 ...................... 0 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 10.0 4.9 4.1 3.1 2.5 1.8
</TABLE>
- ----------
(1) The weighted average life of a Class A-2 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-2 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-2 Certificate.
S-40
<PAGE>
Percentage of the Original Principal
Balance of the Class A-3 Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 100 100 100 100 100 100
November 15, 1997 ...................... 100 100 100 100 100 100
November 15, 1998 ...................... 100 100 100 100 100 33
November 15, 1999 ...................... 100 100 100 100 48 0
November 15, 2000 ...................... 100 100 100 49 0 0
November 15, 2001 ...................... 100 100 77 10 0 0
November 15, 2002 ...................... 100 81 34 0 0 0
November 15, 2003 ...................... 100 40 5 0 0 0
November 15, 2004 ...................... 100 13 0 0 0 0
November 15, 2005 ...................... 100 0 0 0 0 0
November 15, 2006 ...................... 100 0 0 0 0 0
November 15, 2007 ...................... 100 0 0 0 0 0
November 15, 2008 ...................... 60 0 0 0 0 0
November 15, 2009 ...................... 23 0 0 0 0 0
November 15, 2010 ...................... 0 0 0 0 0 0
November 15, 2011 ...................... 0 0 0 0 0 0
November 15, 2012 ...................... 0 0 0 0 0 0
November 15, 2013 ...................... 0 0 0 0 0 0
November 15, 2014 ...................... 0 0 0 0 0 0
November 15, 2015 ...................... 0 0 0 0 0 0
November 15, 2016 ...................... 0 0 0 0 0 0
November 15, 2017 ...................... 0 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 13.3 7.9 6.7 5.1 4.0 2.9
</TABLE>
- ----------
(1) The weighted average life of a Class A-3 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-3 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-3 Certificate.
Percentage of the Original Principal
Balance of the Class A-4 Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 100 100 100 100 100 100
November 15, 1997 ...................... 100 100 100 100 100 100
November 15, 1998 ...................... 100 100 100 100 100 100
November 15, 1999 ...................... 100 100 100 100 100 78
November 15, 2000 ...................... 100 100 100 100 97 57
November 15, 2001 ...................... 100 100 100 100 83 45
November 15, 2002 ...................... 100 100 100 91 70 36
November 15, 2003 ...................... 100 100 100 80 59 28
November 15, 2004 ...................... 100 100 91 69 50 22
November 15, 2005 ...................... 100 95 82 60 42 17
November 15, 2006 ...................... 100 86 72 51 35 0
November 15, 2007 ...................... 100 76 63 44 28 0
November 15, 2008 ...................... 100 67 55 36 23 0
November 15, 2009 ...................... 100 58 47 30 0 0
November 15, 2010 ...................... 97 50 39 24 0 0
November 15, 2011 ...................... 87 42 33 0 0 0
November 15, 2012 ...................... 75 35 27 0 0 0
November 15, 2013 ...................... 62 27 21 0 0 0
November 15, 2014 ...................... 48 0 0 0 0 0
November 15, 2015 ...................... 34 0 0 0 0 0
November 15, 2016 ...................... 30 0 0 0 0 0
November 15, 2017 ...................... 25 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 19.2 15.0 13.7 11.5 9.4 6.3
</TABLE>
- ----------
(1) The weighted average life of a Class A-4 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-4 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-4 Certificate.
S-41
<PAGE>
Percentage of the Original Principal
Balance of the Class A-5 Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 100 100 100 100 100 100
November 15, 1997 ...................... 100 100 100 100 100 100
November 15, 1998 ...................... 100 100 100 100 100 100
November 15, 1999 ...................... 100 100 100 100 100 100
November 15, 2000 ...................... 100 100 100 100 82 75
November 15, 2001 ...................... 100 100 100 74 50 31
November 15, 2002 ...................... 100 100 94 48 22 0
November 15, 2003 ...................... 100 98 72 25 0 0
November 15, 2004 ...................... 100 77 50 4 0 0
November 15, 2005 ...................... 100 57 30 0 0 0
November 15, 2006 ...................... 100 38 11 0 0 0
November 15, 2007 ...................... 100 19 0 0 0 0
November 15, 2008 ...................... 100 * 0 0 0 0
November 15, 2009 ...................... 86 0 0 0 0 0
November 15, 2010 ...................... 62 0 0 0 0 0
November 15, 2011 ...................... 40 0 0 0 0 0
November 15, 2012 ...................... 16 0 0 0 0 0
November 15, 2013 ...................... 0 0 0 0 0 0
November 15, 2014 ...................... 0 0 0 0 0 0
November 15, 2015 ...................... 0 0 0 0 0 0
November 15, 2016 ...................... 0 0 0 0 0 0
November 15, 2017 ...................... 0 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 15.6 10.4 9.1 7.0 6.1 5.6
</TABLE>
- ----------
(1) The weighted average life of a Class A-5 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-5 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-5 Certificate.
* Indicates a number which is greater than zero but is less than 0.5%
S-42
<PAGE>
Percentage of the Original Principal
Balance of the Class B Certificates at the Respective
Percentages of the MH Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 0% 75% 100% 150% 200% 300%
- ----- ---- ----- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100 100
November 15, 1996 ...................... 100 100 100 100 100 100
November 15, 1997 ...................... 100 100 100 100 100 100
November 15, 1998 ...................... 100 100 100 100 100 100
November 15, 1999 ...................... 100 100 100 100 100 100
November 15, 2000 ...................... 100 100 100 100 100 100
November 15, 2001 ...................... 100 100 100 100 100 100
November 15, 2002 ...................... 100 100 100 100 100 97
November 15, 2003 ...................... 100 100 100 100 98 76
November 15, 2004 ...................... 100 100 100 100 82 60
November 15, 2005 ...................... 100 100 100 89 69 47
November 15, 2006 ...................... 100 100 100 76 57 0
November 15, 2007 ...................... 100 100 95 65 47 0
November 15, 2008 ...................... 100 100 82 54 38 0
November 15, 2009 ...................... 100 86 70 45 0 0
November 15, 2010 ...................... 100 74 59 36 0 0
November 15, 2011 ...................... 100 63 49 0 0 0
November 15, 2012 ...................... 100 52 40 0 0 0
November 15, 2013 ...................... 93 41 31 0 0 0
November 15, 2014 ...................... 71 0 0 0 0 0
November 15, 2015 ...................... 51 0 0 0 0 0
November 15, 2016 ...................... 44 0 0 0 0 0
November 15, 2017 ...................... 37 0 0 0 0 0
November 15, 2018 ...................... 0 0 0 0 0 0
November 15, 2019 ...................... 0 0 0 0 0 0
November 15, 2020 ...................... 0 0 0 0 0 0
November 15, 2021 ...................... 0 0 0 0 0 0
November 15, 2022 ...................... 0 0 0 0 0 0
November 15, 2023 ...................... 0 0 0 0 0 0
November 15, 2024 ...................... 0 0 0 0 0 0
November 15, 2025 ...................... 0 0 0 0 0 0
Weighted Average Life
(1) (years) .......................... 20.6 16.8 15.6 13.3 11.5 9.2
</TABLE>
- ----------
(1) The weighted average life of a Class B Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class B Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class B Certificate.
Attached hereto as Annex A are tables which set forth the weighted average
life, first principal payment date, last principal payment date and the yield at
various assumed offering prices of each Class of Offered Certificates under
various prepayment scenarios.
S-43
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "Description of
the Certificates".
The Certificates will be issued pursuant to the Agreement between the
Company, CITSF, as Servicer, and the Trustee. A copy of the execution form of
the Agreement will be filed in a Current Report on Form 8-K with the Securities
and Exchange Commission after the initial issuance of the Certificates. The
following summary describes certain terms of the Agreement, does not purport to
be complete and is qualified in its entirety by the Agreement, which is
incorporated herein by reference. Wherever provisions of the Agreement are
referred to, such provisions are incorporated herein by reference.
General
The Offered Certificates will be issued in book-entry form only in
denominations equal to $1,000 or any integral multiple of $1,000 in excess
thereof, except for one Certificate of each Class with a denomination
representing any remainder of the Original Principal Balance of such Class. The
percentage interest (the "Percentage Interest") of an Offered Certificate will
be equal to the percentage obtained from dividing its denomination by the
Original Class A-1 Principal Balance, the Original Class A-2 Principal Balance,
the Original Class A-3 Principal Balance, the Original Class A-4 Principal
Balance, the Original Class A-5 Principal Balance and the Original Class B
Principal Balance, as appropriate.
The Senior Certificates in the aggregate will represent an initial 81%
(approximate) undivided interest in the Trust. The Class A-5 Certificates will
represent an initial 8% (approximate) undivided interest in the Trust. The
Class B Certificates will represent an initial 11% (approximate) undivided
interest in the Trust. The Trust will consist of all right, title and interest
of the Company in and to the Contracts, including, without limitation, the
security interests in the Manufactured Homes securing such Contracts and any
related mortgages, deeds of trust or similar instruments, all rights to payments
received by the Company on or with respect to the Contracts on and after the
Cut-off Date, all rights under certain hazard insurance policies on individual
Manufactured Homes, proceeds from the errors and omissions protection policy and
any blanket hazard insurance policies maintained pursuant to the Agreement, to
the extent such proceeds relate to the Contracts or the Manufactured Homes, all
documents contained in the Contract files, amounts held for the Trust in the
Certificate Account and all proceeds in any way derived from any of the
foregoing. (Section 2.01.)
Distributions on the Certificates will be made by the paying agent as
specified in the Agreement, which shall be an Eligible Institution (the "Paying
Agent"), on each Remittance Date to persons in whose names the Certificates are
registered as of the preceding Record Date. The Remittance Date for the
Certificates will be the 15th day of each calendar month (or if such day is not
a business day, the next succeeding business day) commencing on December 15,
1995. Payments will be made by check mailed to such Certificateholder at the
address appearing on the Certificate Register, provided that a Certificateholder
who holds an aggregate Percentage Interest of at least 5% of a Class of
Certificates may request payment by wire transfer or immediately available funds
pursuant to written instructions delivered to the Trustee at least 10 days prior
to such Remittance Date. Final payments will be made only upon tender of the
Certificates to the Paying Agent for cancellation. (Articles I and VIII.) See
"Registration of the Offered Certificates" below.
Conveyance of Contracts
Pursuant to the Agreement, on the Closing Date the Company will sell
without recourse, except for certain representations and warranties made by
CITSF in the Agreement and certain indemnities by the Servicer, to the Trustee
in trust all right, title and interest of the Company in each Contract and all
its right, title and interest in all principal and interest received on each
such Contract on and after the Cut-off Date; provided, however, that the Company
will reserve and retain all its right, title and interest in principal and
interest collected (including Prepayments) on each Contract prior to the Cut-off
Date.
CITSF will make certain representations and warranties described in the
Prospectus under "Description of the Certificates--Conveyance of Contracts",
with respect to each Contract as of the Closing Date. In addition to the
representations and warranties described in the Prospectus under "Description of
the Certificates--Conveyance of Contracts", CITSF will make certain warranties
with respect to the Contracts in the aggregate, including that (i) the aggregate
principal amount payable by the Obligors on the Contracts as of the Cut-off Date
S-44
<PAGE>
equals the Cut-off Date Pool Principal Balance; (ii) as of the Cut-off Date no
more than 7.33% of the Contracts by Cut-off Date Pool Principal Balance are
secured by Manufactured Homes with Obligors having mailing addresses in any one
state (except with respect to Contracts secured by Manufactured Homes with
Obligors having mailing addresses in Texas) and no more than 1.24% of the
Contracts by Cut-off Date Pool Principal Balance are secured by Manufactured
Homes located in an area with the same zip code; (iii) no more than 8.85% of the
Cut-off Date Pool Principal Balance is attributable to loans to purchase used
Manufactured Homes; (iv) as of the Cut-off Date, no Contract has a remaining
term to stated maturity of less than 22 or more than 360 months; (v) the first
payment date of each Contract is in or after April 1995; (vi) except for the
effect of the representations and warranties of CITSF, no adverse selection
procedures were employed in selecting the Contracts; (vii) at the time of
origination (a) no more than 3.34% of the Contracts by Cut-off Date Pool
Principal Balance had loan-to-value ratios of greater than 96% and (b) each of
the Contracts had a loan-to-value ratio not greater than 101%. (Article III).
Payments on Contracts; Distributions on Certificates
The Trustee, on behalf of the Trust, will establish and maintain the
Certificate Account at a depository institution or trust company (which may be
the Trustee or an affiliate of the Trustee) organized under the laws of the
United States or any state, the deposits of which are insured to the full extent
permitted by law by the Bank Insurance Fund (currently administered by the
Federal Deposit Insurance Corporation), which is subject to supervision and
examination by federal or state authorities and (unless the Certificate Account
is a trust account maintained in the corporate trust department of such
depository institution) whose short-term deposits have been rated P-1 by Moody's
or A-1 by Standard & Poor's, or in one of the two highest rating categories by
Moody's and Standard & Poor's in the case of unsecured long-term debt(an
"Eligible Institution"). (Section 1.02.) The Servicer may (except in certain
instances specified in the Agreement) authorize the Trustee to invest the funds
in the Certificate Account in Eligible Investments (as defined in the Agreement)
that will mature not later than the business day preceding the applicable
monthly Remittance Date. Eligible Investments include, among other investments,
obligations of the United States or of any agency thereof backed by the full
faith and credit of the United States; federal funds, certificates of deposit,
time deposits and bankers' acceptances sold by eligible financial institutions;
certain repurchase agreements with eligible institutions; corporate securities
assigned at least a Aa rating by Moody's or the highest rating by Standard &
Poor's; commercial paper assigned a P-1 rating by Moody's or A-1 by Standard &
Poor's at the time of such investment; and other investments as approved by
Moody's and Standard & Poor's (which may include money market or other funds
including such money market and other funds for which the Trustee or any
affiliate of the Trustee serves as an investment advisor, administrator,
shareholder, servicing agent and/or custodian or subcustodian and collects
certain fees and expenses in connection therewith). (Section 5.05.)
Except as set forth in the succeeding sentence, all payments from or on
behalf of Obligors on the Contracts received by the Servicer, including
principal prepayments and advance payments by Obligors not constituting
principal prepayments ("Advance Payments"), shall be paid into the Certificate
Account no later than two business days following receipt thereof, except
amounts received as late payment fees, extension fees, assumption fees or
similar fees, which fees, together with any net income and gain from investments
of funds in the Certificate Account, are included as part of the Servicer's
servicing fees; provided, however, that, subject to compliance with the
Agreement, for as long as CITSF remains the Servicer under the Agreement and
CITSF remains a direct or indirect subsidiary of CIT, and if CIT has and
maintains a short-term debt rating of at least A-1 by Standard & Poor's and
either a short-term debt rating of P-1 or higher or a long-term debt rating of
at least A2 by Moody's, and the Trustee shall have received an opinion of
counsel that any action taken pursuant to this sentence shall not adversely
affect the status of the Trust as a REMIC or result in the imposition of a tax
on the Trust, the Servicer will not be required to make such deposits into the
Certificate Account (the "Delayed Deposits") until the business day immediately
preceding the Remittance Date following the last day of the Due Period within
which such payments were processed by the Servicer. In addition, (i) amounts
paid by CITSF for Contracts repurchased as a result of breach of warranties
under the Agreement, and amounts required to be deposited upon substitution of a
Contract because of breach of warranties, as described under "Description of the
Certificates--Conveyance of Contracts" in the Prospectus and (ii) Monthly
Advances shall be paid into the Certificate Account. The Servicer will not be
required to deposit in the Certificate Account amounts relating to the Contracts
S-45
<PAGE>
attributable to the following: (a) amounts received with respect to each
Contract (or property acquired in respect thereof) that has been purchased by
CITSF pursuant to the Agreement and that are not required to be distributed to
Certificateholders, (b) Liquidation Expenses to the extent permitted by the
Agreement, (c) the payment of certain taxes that are reimbursable under the
Agreement, (d) net investment earnings on funds deposited in the Certificate
Account, (e) amounts to be reimbursed to the Servicer in respect of
unrecoverable Monthly Advances and (f) amounts received in respect of the
amounts, if any, of insurance premiums added to the principal balance of a
Contract after the Cut-off Date for each such Contract to the extent permitted
by the Agreement. See "Description of the Certificates--Servicing--Servicing
Compensation and Payment of Expenses" in the Prospectus. "Liquidation Expenses"
are out-of-pocket expenses (exclusive of any overhead expenses) incurred by the
Servicer in connection with the liquidation of a defaulted Contract, including,
without limitation, legal fees and expenses and any related and unreimbursed
expenditures for property taxes, property preservation or restoration of the
property to marketable condition. (Section 1.02.) Except with respect to Monthly
Advances as set forth below, the Servicer will not make any advances with
respect to delinquent payments on the Contracts.
On the Determination Date the Servicer will determine the Amount Available
and the amounts to be distributed on the Certificates for such Remittance Date.
The "Amount Available" on any Remittance Date is equal to all amounts on deposit
in the Certificate Account attributable to collections or deposits made in
respect of such Contracts in the related Due Period, together with the purchase
price for any Contract repurchased by CITSF resulting from breaches of certain
representations or warranties or repurchased by the Servicer resulting from
breaches of certain covenants, in each case as set forth in the Agreement, paid
on or prior to the last day of the related Due Period (or the Delayed Deposit,
if applicable) less the following amounts: any repossession profits on defaulted
Contracts; Advance Payments in respect of the Due Period just ended; amounts
payable to the Servicer to reimburse it for any REMIC "prohibited transaction"
tax imposed on the Trust and paid by the Servicer; Liquidation Expenses incurred
and taxes advanced by the Servicer in respect of Manufactured Homes that are
reimbursable to the Servicer under the Agreement; any amounts incorrectly
deposited in the Certificate Account; amounts used to pay interest on the Class
A-5 Certificates on the Remittance Date occurring in such Due Period from such
Amount Available; and net investment earnings on the funds in the Certificate
Account due to the Servicer pursuant to the Agreement and any other amounts
permitted to be withdrawn from the Certificate Account by the Servicer pursuant
to the Agreement. (Sections 1.02 and 8.02.) Under the Agreement, if on the
Determination Date the Servicer determines that the Amount Available is
otherwise sufficient to make all required distributions to the Holders of the
Offered Certificates on the next succeeding Remittance Date, the Servicer
(provided CITSF is the Servicer) shall not be obligated to deposit into the
Certificate Account the amount of the Monthly Servicing Fee due and owing to the
Servicer on such Remittance Date. The Servicer shall not be permitted to
withhold the amount of its Monthly Servicing Fee, however, if, on such
Determination Date, the Amount Available at such time is not sufficient to make
the required distributions to the Holders of the Offered Certificates.
The Trustee will withdraw funds from the Certificate Account to make
payments to Certificateholders at the direction of the Servicer. From time to
time, as provided in the Agreement, the Trustee will also withdraw funds from
the Certificate Account to make payments to the Servicer and to make payments to
CIT of the Guarantee Fee. In the event CITSF is no longer the Servicer, the
Monthly Servicing Fee will be paid to the successor Servicer prior to any
distributions to Certificateholders. (Sections 1.02 and 8.02.)
Distributions
Distributions of interest and principal on each Remittance Date to Holders
of each Class of the Offered Certificates will be made first on account of
interest and then principal in the following order of priority: first to the
Senior Certificateholders, then to the Class A-5 Certificateholders, and then to
the Class B Certificateholders, in each case in the amounts and according to the
priority described below.
S-46
<PAGE>
The Record Date is the last business day of the month prior to the month of
the related Remittance Date. The period for which interest on the outstanding
Principal Balance of each Class of Offered Certificates is payable shall be the
period from the most recent Remittance Date on which interest has been paid to
but excluding the following Remittance Date (or, in the case of the initial
Remittance Date, from November 21, 1995 to but excluding such initial Remittance
Date) (the "Interest Accrual Period").
The Remittance Rate for the Class A-1 and Class A-2 Certificates on each
Remittance Date will be 5.90% and 6.00%, respectively. The Remittance Rate for
Class A-3, Class A-4, Class A-5 and Class B Certificates on each Remittance Date
will be 6.25%, 7.00%, 6.95% and 7.65%, respectively, and, in each case, will be
subject to a maximum rate equal to the weighted average of the Net Contract
Rates on each Contract in the Contract Pool, computed on the basis of a 360-day
year of twelve 30-day months. In the event that, with respect to the Class A-3,
Class A-4, Class A-5 and Class B Certificates, a large number of Contracts
having Net Contract Rates equal to or higher than the applicable stated
Remittance Rate were to prepay while the Contracts having Net Contract Rates
lower than such Remittance Rate (without giving effect to the maximum rate) did
not prepay, with the result that the interest collections on the remaining
Contracts were not sufficient to support such Remittance Rate, then the
Remittance Rate for such Class of Certificates would be equal to the weighted
average of the Net Contract Rates on each Contract remaining in the Contract
Pool as of the first day of the related Due Period.
Each Class of the Offered Certificates initially will be represented by one
or more Certificates registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC") and will only be available in the form of
book-entries on the records of DTC and its Participants (as hereafter defined).
Each distribution with respect to a Book-Entry Certificate will be paid to DTC,
which will credit the amount of such distribution to the accounts of its
Participants in accordance with its normal procedures. Each Participant will be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm will be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by DTC and the Participants in accordance with DTC's
rules.
The Servicer will furnish to the Trustee, and the Trustee, so long as it
has received such statement or statements, will send with each distribution on a
Remittance Date to each Holder of Offered Certificates (or to DTC), a statement
or statements setting forth, among other things, (i) the amount of such
distribution allocable to principal (including principal prepayments, if any)
and (ii) the amount of such distribution allocable to interest. (Section 6.05.)
Interest on Senior Certificates
Interest accruing during the related Interest Accrual Period (computed on
the basis of a 360-day year of twelve 30-day months) will be paid concurrently
on each outstanding Class of Senior Certificates on each Remittance Date, to the
extent of the Amount Available (including any Monthly Advances) on such date,
(i) in an amount equal to one-twelfth of the product of the Remittance Rates
applicable to each Class (subject in each case, to a maximum rate equal to the
weighted average of the Net Contract Rate on each Contract in the Contract Pool)
and the Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class
A-3 Principal Balance or the Class A-4 Principal Balance, as appropriate, as of
the preceding Remittance Date (after giving effect to distributions of principal
and interest to be made on such Remittance Date) or (ii) in the case of the
first Remittance Date, in an amount equal to interest accruing from the Closing
Date to but excluding the first Remittance Date, at the applicable Remittance
Rate, on the Original Class A-1 Principal Balance, the Original Class A-2
Principal Balance, the Original Class A-3 Principal Balance, or the Original
Class A-4 Principal Balance, as appropriate. (Sections 1.02 and 8.01.) The Class
A-1 Principal Balance as of any Remittance Date is the Original Class A-1
Principal Balance less all amounts previously distributed to holders of Class
A-1 Certificates on account of principal; the Class A-2 Principal Balance as of
any Remittance Date is the Original Class A-2 Principal Balance less all amounts
previously distributed to holders of Class A-2 Certificates on account of
principal; the Class A-3 Principal Balance as of any Remittance Date is the
Original Class A-3 Principal Balance less all amounts previously distributed to
holders of Class A-3 Certificates on account of principal; and the Class A-4
Principal Balance as of any Remittance Date is the Original Class A-4 Principal
Balance less all amounts previously distributed to holders of Class A-4
Certificates on account of principal. (Section 1.02.) In the event that, on a
particular Remittance Date, the Amount Available (including any Monthly
S-47
<PAGE>
Advances) in the Certificate Account is not sufficient to make a full
distribution of the amount of interest to which the Holders of each Class of
Senior Certificates are entitled, the Amount Available will be distributed among
the outstanding Classes of Senior Certificateholders pro rata based on the
aggregate amount of interest due on each such Class of Senior Certificates, and
the amount of the shortfall will be allocated among each outstanding Class of
Senior Certificates pro rata based on the aggregate amount of interest due on
each such Class. The portion of the shortfall allocated to each such Class will
be carried forward and added to the amount the Holders of such Class will be
entitled to receive on the next Remittance Date and every succeeding Remittance
Date thereafter until paid. (Section 1.02.) Such a shortfall could occur, for
example, if losses realized on the Contracts were exceptionally high and were
concentrated in a particular Due Period. Any such amount so carried forward will
bear interest at the Class A-1 Remittance Rate, the Class A-2 Remittance Rate,
the Class A-3 Remittance Rate and the Class A-4 Remittance Rate, as applicable,
to the extent permitted by law.
The aggregate amount, as of any Remittance Date, to be distributed to all
Classes of Senior Certificateholders in respect of interest is hereinafter
referred to as the "Senior Interest Distribution Amount".
Principal on Senior Certificates
Commencing on the first Remittance Date and on each Remittance Date
thereafter, Holders of the Senior Certificates will be entitled to receive on
each Remittance Date as payment of principal, to the extent of the Amount
Available in the Certificate Account on such date after the payment of the
Senior Interest Distribution Amount, the Senior Percentage of the Formula
Principal Distribution Amount.
The "Formula Principal Distribution Amount" will equal the sum of (i) all
payments of principal received in respect of each outstanding Contract during
such Due Period, (ii) the Stated Principal Balance of each Contract which,
during the related Due Period, was purchased by CITSF pursuant to the Agreement
on account of certain breaches of its representations and warranties, (iii) all
partial principal prepayments applied and all principal prepayments in full
received during such Due Period, (iv) the Stated Principal Balance of each
Contract that became a Liquidated Contract during such Due Period, (v) the
aggregate amount of Cram Down Losses during such Due Period, and (vi) any
Formula Principal Distribution Amount for any prior Remittance Date which was
not distributed on a prior Remittance Date.
The "Stated Principal Balance" of a Contract as of any Remittance Date is
its unpaid principal balance at the end of the related Due Period. The "Due
Date" for a Contract is its scheduled payment date. The "Pool Stated Principal
Balance" is the aggregate of the Stated Principal Balances of all of the
Contracts outstanding at the end of a Due Period (other than Liquidated
Contracts and Contracts purchased by CITSF pursuant to the Agreement). A
"Liquidated Contract" is a defaulted Contract as to which all amounts that the
Servicer expects to recover through the date of disposition of the Manufactured
Home and the real estate, if any, securing such Contract have been recovered.
(Section 1.02.) "Cram Down Loss" means, with respect to a Contract, if a United
States Bankruptcy court, or any other court having jurisdiction, shall have
issued an order determining that the allowed amount of the secured claim with
respect to such Contract is less than the outstanding amount owed on such
Contract, and/or otherwise modified or restructured the payments on such
Contract, an amount equal to, the excess of the principal balance of such
Contract immediately prior to such order over the allowed amount of the secured
claim. A Cram Down Loss shall be deemed to have occurred on the date of issuance
of such order.
The Senior Percentage will equal 100% for any Remittance Date prior to the
Class A-5 Cross-over Date (as defined below), and for any Remittance Date on or
after the Class A-5 Cross-over Date on which any Class A-5 Principal
Distribution Test (as defined below) has not been satisfied (or, if the Class
A-5 Certificate Balance has been reduced to zero, if any Class B Principal
Distribution Test has not been satisfied on such Remittance Date). On each
Remittance Date on or after the Class A-5 Cross-over Date, if each Class A-5
Principal Distribution Test has been satisfied on such Remittance Date (or, if
the Class A-5 Certificate Balance has been reduced to zero, if each Class B
Principal Distribution Test has been satisfied on such Remittance Date), the
Senior Percentage will equal a fraction, expressed as a percentage, the
numerator of which is the sum of the Class A-1 Principal Balance, the Class A-2
Principal Balance, the Class A-3 Principal Balance and the Class A-4 Principal
Balance for such Remittance Date and the denominator of which is the Pool Stated
Principal Balance for the immediately preceding Remittance Date.
The Senior Percentage of the Formula Principal Distribution Amount will be
distributed sequentially, to the extent of the Amount Available after payment of
the Senior Interest Distribution Amount, first to the Class A-1
S-48
<PAGE>
Certificateholders until the Class A-1 Principal Balance has been reduced to
zero, then to the Class A-2 Certificateholders until the Class A-2 Principal
Balance has been reduced to zero, then to the Class A-3 Certificateholders until
the Class A-3 Principal Balance has been reduced to zero and then to the Class
A-4 Certificateholders until the Class A-4 Principal Balance has been reduced to
zero (the "Class A-4 Cross-over Date"). When the Principal Balance of a Class of
Senior Certificates is reduced to zero, no further distributions will be made to
the Holders of such Class.
In the event that, on any Remittance Date prior to the Class A-4 Cross-over
Date, the Pool Stated Principal Balance at the close of business on the last day
of the related Due Period would be less than the sum of the Class A-1 Principal
Balance, the Class A-2 Principal Balance, the Class A-3 Principal Balance and
the Class A-4 Principal Balance on such Remittance Date after giving effect to
distributions of principal to be made on such date (the "Senior Principal
Balance"), then the Amount Available remaining after distribution of the Senior
Interest Distribution Amount will be distributed to the Classes of Senior
Certificates on a pro rata basis as a distribution of the Senior Percentage of
the Formula Principal Distribution Amount, and the amount of the shortfall will
be allocated pro rata among the outstanding Classes of Senior Certificates,
based upon their respective outstanding Principal Balances. On any Remittance
Date on which there exists any previously undistributed shortfalls in the Senior
Percentage of the Formula Principal Distribution Amounts which have been
allocated among the outstanding Classes of Senior Certificates, the aggregate
amount of such shortfalls will be distributed to the extent of the Amount
Available remaining after distribution of the Senior Interest Distribution
Amount, pro rata among such Classes of Senior Certificates based upon their
respective unreimbursed shortfalls. Such distributions in respect of previously
allocated shortfalls with respect to the Senior Percentage of the Formula
Principal Distribution Amounts will be made prior to any distribution being made
on a Remittance Date to the Class of Senior Certificates then entitled to
receive the Senior Percentage of the Formula Principal Distribution Amount.
Interest on Class A-5 Certificates
Following the payment to the Senior Certificateholders of the Senior
Interest Distribution Amount and the Formula Principal Distribution Amount
payable to the Senior Certificateholders, interest accruing during the related
Interest Accrual Period (computed on the basis of a 360-day year of twelve
30-day months), will be paid to the Class A-5 Certificateholders on each
Remittance Date, to the extent of the remaining Amount Available on such
Remittance Date, (i) in an amount equal to one-twelfth of the product of the
Class A-5 Remittance Rate and the Class A-5 Principal Balance as of the
preceding Remittance Date (after giving effect to distributions of principal and
interest to be made on such Remittance Date), or (ii) in the case of the first
Remittance Date in an amount equal to interest accruing from the Closing Date to
but excluding the first Remittance Date, at the Class A-5 Remittance Rate, on
the Original Class A-5 Principal Balance . The Class A-5 Remittance Rate is
subject to a maximum rate equal to the weighted average of the Net Contract
Rates on each Contract in the Contract Pool. The Class A-5 Principal Balance is
the Original Class A-5 Principal Balance less the sum of all amounts previously
distributed to Class A-5 Certificateholders in respect of principal. In the
event that, on a particular Remittance Date, the Amount Available, after payment
of the Senior Interest Distribution Amount and the Formula Principal
Distribution Amount payable to the Senior Certificateholders is not sufficient
to make a full distribution of interest to the Class A-5 Certificateholders, (i)
the Trustee will withdraw the amount of such deficiency from the Certificate
Account from the funds, if any, which would otherwise constitute part of the
Amount Available for the following Remittance Date, and (ii) the amount of any
remaining deficiency will be carried forward and added to the amount such
Holders will be entitled to receive on the next Remittance Date, and every
Remittance Date thereafter until paid. Any such amount so carried forward will
bear interest at the Class A-5 Remittance Rate, to the extent permitted by law.
The amount, as of any Remittance Date, to be distributed to Class A-5
Certificateholders in respect of interest is hereinafter referred to as the
"Class A-5 Interest Distribution Amount".
Principal on Class A-5 Certificates
Payments of principal on the Class A-5 Certificates will not commence until
the Class A-5 Cross-over Date (unless the Class A-4 Principal Balance has been
reduced to zero), and will be made on that Remittance Date and each Remittance
Date thereafter only if each of the following tests (each a "Class A-5 Principal
S-49
<PAGE>
Distribution Test") is satisfied on such Remittance Date (unless the Class A-4
Principal Balance has been reduced to zero): (i) the Average Sixty-Day
Delinquency Ratio (as defined below) as of such Remittance Date must not exceed
5%; (ii) the Average Thirty-Day Delinquency Ratio (as defined below) as of such
Remittance Date must not exceed 7%; (iii) the Current Realized Loss Ratio (as
defined below) as of such Remittance Date must not exceed 2.75%; (iv) the
Cumulative Realized Losses (as defined below) as of such Remittance Date must
not exceed a certain percentage of the Cut-off Date Pool Principal Balance
specified in the Agreement, depending on the year in which such Remittance Date
occurs; and (v) the ratio of the principal balance of the Senior Certificates to
the Pool Stated Principal Balance (each, as of the immediately preceding
Remittance Date) is less than 66.75%
The "Class A-5 Cross-over Date" will be the later of (i) the Remittance
Date occurring in June 2000 and (ii) the Remittance Date on which the ratio of
the principal balance of the Senior Certificates to the Pool Stated Principal
Balance (each, as of the immediately preceding Remittance Date) is less than
66.75%.
On or after the Class A-5 Cross-over Date, on each Remittance Date on which
each Class A-5 Principal Distribution Test has been satisfied, or if the Class
A-4 Principal Balance has been reduced to zero, the Class A-5 Percentage of the
Formula Principal Distribution Amount will be paid to the Class A-5
Certificateholders to the extent of the Amount Available after payment of
interest on the Class A-5 Certificates until the Class A-5 Principal Balance has
been reduced to zero.
The "Class A-5 Percentage" for any Remittance Date will be equal to 100%
minus the Senior Percentage. The Class A-5 Percentage for each Remittance Date,
if any, after the Class A-1 Principal Balance, the Class A-2 Principal Balance,
the Class A-3 Principal Balance and the Class A-4 Principal Balance, have each
been reduced to zero will be equal to 100%. The "Average Sixty-Day Delinquency
Ratio" for any Remittance Date will be equal to the arithmetic average, for such
Remittance Date and for the two immediately preceding Remittance Dates, of a
fraction, expressed as a percentage, the numerator of which is the aggregate of
the outstanding balances of all Contracts (including Contracts in repossession)
that were delinquent 60 days or more as of the end of the Due Period preceding
such Remittance Date, and the denominator of which is the Pool Stated Principal
Balance as of such Remittance Date. The "Average Thirty-Day Delinquency Ratio"
for any Remittance Date will be equal to the arithmetic average, for such
Remittance Date and for the two immediately preceding Remittance Dates, of a
fraction, expressed as a percentage, the numerator of which is the aggregate of
the outstanding balances of all Contracts (including Contracts in repossession)
that were delinquent 30 days or more as of the end of the Due Period preceding
such Remittance Date, and the denominator of which is the Pool Stated Principal
Balance as of such Remittance Date. The "Current Realized Loss Ratio" for any
Remittance Date will be equal to a fraction, expressed as a percentage, the
numerator of which is the aggregate liquidation losses of all Contracts that
became Liquidated Contracts during the three immediately preceding Due Periods,
multiplied by four, and the denominator of which is the arithmetic average of
the Pool Stated Principal Balance as of the third preceding Remittance Date and
the Pool Stated Principal Balance as of such Remittance Date. The "Cumulative
Realized Losses" for any Remittance Date will be equal to the sum of all
liquidation losses of all Contracts that became Liquidated Contracts since the
Cut-off Date.
Interest on Class B Certificates
Following the payment to the Senior Certificateholders of the Senior
Interest Distribution Amount and the Formula Principal Distribution Amount
payable to the Senior Certificateholders and the payment to the Class A-5
Certificateholders of the Class A-5 Interest Distribution Amount and the Formula
Principal Distribution Amount payable to the Class A-5 Certificateholders,
interest accruing during the related Interest Accrual Period (computed on the
basis of a 360-day year of twelve 30-day months) will be paid to the Class B
Certificateholders on each Remittance Date, to the extent of the remaining
Amount Available on such Remittance Date and the Guarantee Payment, if any
(unless the Guarantee Payment Limit has been reduced to zero), (i) in an amount
equal to one-twelfth of the product of the Class B Remittance Rate and the then
outstanding Class B Principal Balance as of the preceding Remittance Date (after
giving effect to distributions of principal and interest to be made on such
Remittance Date) or (ii) in the case of the first Remittance Date in an amount
equal to interest accruing from the Closing Date to but excluding the first
Remittance Date, at the Class B Remittance Rate, on the Original Class B
Principal Balance. The Class B Remittance Rate is subject to a maximum rate
equal to the weighted average of the Net Contract Rates on each Contract in the
Contract Pool. The Class B Principal Balance is the Original Class B Principal
S-50
<PAGE>
Balance less the sum of all amounts previously distributed to Class B
Certificateholders in respect of principal. In the event that, on a particular
Remittance Date, the Amount Available, after payment of the Senior Interest
Distribution Amount and the Formula Principal Distribution Amount payable to the
Senior Certificateholders and the payment of the Class A-5 Interest Distribution
Amount and the Formula Principal Distribution Amount payable to the Class A-5
Certificateholders, is not sufficient to make a full distribution of interest to
the Class B Certificateholders, (i) CIT will be required to pay the amount of
such deficiency under the Limited Guarantee (unless and until the Guarantee
Payment Limit has been reduced to zero), and (ii) the amount of any remaining
deficiency will be carried forward and added to the amount such Holders will be
entitled to receive on the next Remittance Date, and every Remittance Date
thereafter until paid. Any such amount so carried forward will bear interest at
the Class B Remittance Rate, to the extent permitted by law.
The amount, as of any Remittance Date, to be distributed to Class B
Certificateholders in respect of interest is hereinafter referred to as the
"Class B Interest Distribution Amount".
Principal on Class B Certificates
Prior to the Remittance Date on which the Class A-5 Principal Balance has
been reduced to zero (the "Class B Cross-over Date"), the only payments of
principal on the Class B Certificates will be payments of the Principal
Liquidation Loss Amount (as described below) pursuant to the Limited Guarantee.
The Class B Percentage of the Formula Principal Distribution Amount will be
paid to the Class B Certificateholders, to the extent of the Amount Available
(after payment of interest on the Class B Certificates) and the Guarantee
Payment Limit, until the Class B Principal Balance has been reduced to zero, on
each Remittance Date on or after the Class B Cross-over Date, on which each of
the following tests (each a "Class B Principal Distribution Test") is satisfied
on such Remittance Date (or if the Class A-4 Principal Balance has been reduced
to zero): (i) the Average Sixty-Day Delinquency Ratio as of such Remittance Date
must not exceed 5%; (ii) the Average Thirty-Day Delinquency Ratio as of such
Remittance Date must not exceed 7%; (iii) the Current Realized Loss Ratio as of
such Remittance Date must not exceed 2.75%; (iv) the Cumulative Realized Losses
as of such Remittance Date must not exceed a certain percentage of the Cut-off
Date Pool Principal Balance specified in the Agreement, depending on the year in
which such Remittance Date occurs; (v) the ratio of the principal balance of the
Senior Certificates to the Pool Stated Principal Balance (each, as of the
immediately preceding Remittance Date) is less than 66.75% and (vi) the Class B
Principal Balance must not be less than $3,984,024.
The Class B Percentage for any Remittance Date on or after the Class B
Cross-over Date on which each Class B Principal Distribution Test has been
satisfied will be equal to 100% minus the Senior Percentage. The Class B
Percentage for each Remittance Date, if any, after the Class A-1 Principal
Balance, Class A-2 Principal Balance, Class A-3 Principal Balance, the Class A-4
Principal Balance and the Class A-5 Principal Balance have each been reduced to
zero will be equal to 100% and the Class B Principal Distribution Tests need not
be satisfied.
The Class B Certificateholders will be entitled to receive a payment,
pursuant to the Limited Guarantee, in the amount of the Principal Liquidation
Loss Amount (if any) for each Remittance Date prior to the Class B Cross-over
Date and each Remittance Date on and after the Class B Cross-over Date on which
any Class B Principal Distribution Test has not been satisfied. The "Principal
Liquidation Loss Amount" for any Remittance Date will equal the amount, if any,
by which the sum of the Senior Principal Balance, the Class A-5 Principal
Balance and the Class B Principal Balance for such Remittance Date (after giving
effect to all distributions of principal on such Remittance Date and all
distributions of principal made or required to be made on any prior Remittance
Date) exceeds the Pool Stated Principal Balance at the close of business on the
last day of the related Due Period. The Principal Liquidation Loss Amount
represents future principal payments on the Contracts that, because of the
subordination of the Class B Certificates and liquidation losses on the
Contracts, will not be paid to the Class B Certificateholders.
Notwithstanding the distributions to Certificateholders described above,
amounts otherwise distributable to Certificateholders pursuant to the Agreement
which are required to be withheld and remitted to a taxing authority shall be
withheld and remitted to such taxing authority and such amounts shall be treated
as actually distributed to such Certificateholders for all purposes of the
Agreement.
S-51
<PAGE>
Subordination of the Subordinated Certificates
The rights of the Holders of the Subordinated Certificates to receive
distributions with respect to the Contracts in the Trust will be subordinated to
such rights of the Senior Certificates, to the extent described herein. The
protection afforded to each Class of Senior Certificates by means of the
subordination feature will be accomplished by the preferential right of the
Senior Certificateholders to receive, prior to any distribution being made on a
Remittance Date in respect of the Subordinated Certificates, the amounts of
principal and interest due such Classes on each Remittance Date out of the
Amount Available in the Certificate Account on such date and, to the extent
described below, by the right of the Senior Certificateholders to receive future
distributions on the Contracts that would otherwise be payable to the
Subordinated Certificates. This subordination is intended to enhance the
likelihood of regular receipt by the Senior Certificateholders of the full
amount of principal and interest which they are entitled to receive and to
afford such Holders protection against losses on Liquidated Contracts. On each
Remittance Date, the Class A-5 Certificateholders will be entitled to receive
only distributions from the Certificate Account described under "--Interest on
Class A-5 Certificates" and "--Principal on Class A-5 Certificates" and the
Class B Certificateholders will be entitled to receive only distributions from
the Certificate Account described above under "--Interest on Class B
Certificates" and "--Principal on Class B Certificates".
The right of the Holders of the Class B Certificates and the Class R
Certificates to receive distributions will be subordinated to such rights of the
Class A-5 Certificateholders. This subordination is intended to enhance the
likelihood of regular receipt by the Holders of the Class A-5 Certificates of
the full amount of principal and interest which they are entitled to receive and
to afford such Holders protection against losses on Liquidated Contracts. The
protection afforded to the Class A-5 Certificateholders will be accomplished by
the preferential right of the Class A-5 Certificateholders to receive, prior to
any principal distribution being made on a Remittance Date in respect of the
Class B Certificates and prior to any distribution being made in respect of the
Class R Certificates, the amount of principal and interest due them on each
Remittance Date out of the remaining Amount Available in the Certificate Account
on such date and, to the extent described below, by the right of the Class A-5
Certificateholders to receive future distributions on the Contracts that would
otherwise be payable to the Holders of Class B and Class R Certificates.
In addition, the rights of the Class R Certificateholders to receive
distributions with respect to the Contracts in the Trust will be subordinated to
the rights of the Senior Certificateholders, the Class A-5 Certificateholders
and the Class B Certificateholders. On each Remittance Date the Class R
Certificateholders will receive the remaining Amount Available, if any, after
payment of the amount distributed to the Senior Certificateholders, Class A-5
Certificateholders and the Class B Certificateholders as described above (less
the Monthly Servicing Fee, amounts retained by the Servicer to reimburse itself
for taxes paid in respect to prohibited transactions and less the Guarantee Fee
paid to CIT) plus aggregate Repossession Profits (as defined in the Agreement)
and all other amounts which the Servicer is entitled to withdraw from or not
deposit into the Certificate Account pursuant to the Agreement.
In addition to the credit enhancement provided by the subordination of the
Class R Certificates, the Guarantee Fee and the Monthly Servicing Fee, the Class
B Certificateholders will have the benefit of the Limited Guarantee or, if
Alternate Credit Enhancement has been delivered, such Alternate Credit
Enhancement. The aggregate amount of Guarantee Payments made on account of
principal of the Class B Certificates (including payments made in respect of the
Principal Liquidation Loss Amount) will not exceed the Initial Guarantee Payment
Limit. Once the Guarantee Payment Limit has been reduced, it will not be
reinstated. At any time that the Guarantee Payment Limit (or the amount
available under any Alternate Credit Enhancement) has been reduced to zero, the
only credit enhancement for the Class B Certificates will be the subordination
of the Class R Certificates and the Monthly Servicing Fee.
As described above, prior to the time that the Senior Principal Balance is
reduced to zero, the distribution of principal to the Senior Certificateholders
is intended to include the Stated Principal Balance of each Contract that became
a Liquidated Contract during the Due Period next preceding the Remittance Date.
If the Liquidation Proceeds, net of related Liquidation Expenses, from such
Liquidated Contract are less than its Stated Principal Balance plus accrued
interest thereon, the deficiency will, in effect, be absorbed by the Class R
Certificateholders, then CIT to the extent of the Guarantee Fee, then the
Servicer to the extent of the Monthly Servicing Fee (so long as CITSF remains
Servicer), then the Class B Certificateholders and then the Class A-5
S-52
<PAGE>
Certificateholders. If the Amount Available is not sufficient to cover the
amounts distributable to the Senior Certificateholders on a particular
Remittance Date, then the amount of the Pool Stated Principal Balance available
to the Class A-5 Certificateholders and Class B Certificateholders on future
Remittance Dates (i.e., such Pool Stated Principal Balance less the Senior
Principal Balance) will not be available to the extent of such deficiency. If
the Amount Available is sufficient to cover the amounts distributable in respect
of principal to the Senior Certificateholders but is not sufficient to cover the
amounts distributable in respect of principal to the Class A-5
Certificateholders or the Class B Certificateholders (except to the extent of
the amounts payable under the Limited Guarantee to the Class B
Certificateholders), if any, on a particular Remittance Date, then the amount of
the deficiency will be carried forward as an amount that the Class A-5
Certificateholders and Class B Certificateholders are entitled to receive on the
next Remittance Date. Consequently, but for the effect of the relative
subordination of the Guarantee Fee, the Monthly Servicing Fee (so long as CITSF
remains Servicer) and amounts otherwise distributable to the Class B and Class R
Certificateholders on each Remittance Date, the Class A-5 Certificateholders
will absorb all losses on each Liquidated Contract in the amount by which its
Liquidation Proceeds, net of the related Liquidation Expenses are less than its
unpaid principal balance plus accrued and unpaid interest thereon. But for the
effect of the relative subordination of the Guarantee Fee, the Monthly Servicing
Fee (so long as CITSF remains Servicer) and amounts otherwise distributable to
the Class R Certificateholders on each Remittance Date, the Class B
Certificateholders (if the Guarantee Payment Limit has been reduced to zero)
will absorb all losses on each Liquidated Contract in the amount by which its
Liquidation Proceeds, net of the related Liquidation Expenses are less than its
unpaid principal balance plus accrued and unpaid interest thereon.
If further liquidation losses were to continue to decrease the Pool Stated
Principal Balance (which is reduced by all collections of principal on the
Contracts and by the Stated Principal Balances of all Contracts that become
Liquidated Contracts or were repurchased by CITSF pursuant to the Agreement,
including Contracts repurchased as a result of certain breaches of
representations and warranties and by Cram Down Losses) faster than
distributions of principal to the Senior Certificateholders reduce the Senior
Principal Balance, then the amount of the Pool Stated Principal Balance
available to the Class A-5 Certificates and the Class B Certificates, and
therefore the level of protection afforded by the subordination of the Class A-5
Certificates and the Class B Certificates for the benefit of the Senior
Certificates, would be reduced. In the event that the Pool Stated Principal
Balance is reduced by liquidation losses to an amount less than or equal to the
Senior Principal Balance, all additional losses on Liquidated Contracts, to the
extent not covered by future collections on the Contracts, will be absorbed by
the Senior Certificates.
Limited Guarantee
In order to mitigate the effect of the subordination of the Class B
Certificates, the Class B Certificateholders are entitled to receive on each
Remittance Date the Guarantee Payment, if any, under the Limited Guarantee of
CIT. On each Remittance Date prior to the Class B Cross-over Date and each
Remittance Date on and after the Class B Cross-over Date on which any Class B
Principal Distribution Test has not been satisfied, the "Guarantee Payment" will
equal the amount, if any, by which (a) the sum of (x) the amount of interest
payable to the Class B Certificateholders for such Remittance Date, and (y) the
Principal Liquidation Loss Amount, if any, for such Remittance Rate, exceeds (b)
the Amount Available remaining after distributions of interest and principal
have been paid to the holders of the Senior Certificates and the Class A-5
Certificates on such Remittance Date. On each Remittance Date on and after the
Class B Cross-over Date on which each Class B Principal Distribution Test has
been satisfied or the Class A-4 Principal Balance has been reduced to zero, the
"Guarantee Payment" will equal the amount, if any, by which (a) the sum of the
amount of interest and principal payable to the Class B Certificateholders on a
Remittance Date exceeds (b) the Amount Available remaining after distributions
of interest and principal, if any, have been paid to the holders of the Senior
Certificates on such Remittance Date. In no event shall the amount payable on
any Remittance Date under the Limited Guarantee in respect of principal on the
Class B Certificates exceed the Guarantee Payment Limit in effect on such
Remittance Date.
The aggregate amount of Guarantee Payments made under the Limited Guarantee
in respect of the principal on the Class B Certificates (including Guarantee
Payments in respect of the Principal Liquidation Loss Amount) will not exceed
$5,976,036 (the "Initial Guarantee Payment Limit"). The "Guarantee Payment
Limit" will equal the lesser of (i) the Initial Guarantee Payment Limit reduced
by the aggregate amount of all Guarantee Payments made under the Limited
S-53
<PAGE>
Guarantee in respect of principal (including Guarantee Payments in respect of
the Principal Liquidation Loss Amount), and (ii) the Guarantee Formula Amount.
Once the Guarantee Payment Limit has been reduced, it will not be reinstated.
At any time that the Guarantee Payment Limit has been reduced to zero, no
further Guarantee Payments will be made in respect of principal or interest on
the Class B Certificates, and the holders of the Class B Certificates will bear
the risk of all liquidation losses on the defaulted Contracts and may suffer a
loss.
The "Guarantee Formula Amount" will be equal, on each Remittance Date, to
the greater of (i) 3% of the Pool Stated Principal Balance as of the last day of
the Due Period ending immediately before the Remittance Date, and (ii) the
lesser of (a) $996,006 and (b) the Class B Principal Balance as of such
Remittance Date (before giving effect to any distributions on such Remittance
Date). Once the Guarantee Formula Amount has been reduced, it will not be
reinstated.
The Limited Guarantee will be an unsecured general obligation of CIT and
will not be supported by any collateral, letter of credit or other credit
enhancement arrangement. The Agreement will specify the circumstances under
which distributions that would otherwise be paid to the holder of the Class R
Certificates will instead (i) be paid to CIT to reimburse it for Guarantee
Payments and interest thereon, or (ii) be paid to the Alternate Credit Enhancer.
As compensation for providing the Limited Guarantee (or the Alternate Credit
Enhancement), CIT (or the Alternate Credit Enhancer) will be entitled to receive
a Guarantee Fee on each Remittance Date equal to one-twelfth of the product of
0.25% and the aggregate outstanding principal balance of the Contracts as of the
end of the second Due Period preceding such Remittance Date (or, in the case of
the first Remittance Date, the Cut-off Date) (the "Guarantee Fee"), or such
other fee as the Alternate Credit Enhancer, CIT and the Servicer shall determine
in the case of fees payable to the Alternate Credit Enhancer.
The Limited Guarantee may be amended from time to time by CIT, the Servicer
and the Trustee, without the consent of any of the Certificateholders, (i) to
correct manifest error, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
(ii) to add any other provisions with respect to matters or questions arising
under the Limited Guarantee which shall not be inconsistent with the provisions
of the Limited Guarantee, and (iii) to add or amend any provisions as requested
by Moody's, Standard & Poor's or another national statistical rating
organization in order to maintain or improve the rating of the Class B
Certificates (it being understood that, after the rating required by the
Agreement has been obtained, neither the Trustee, the Company, CITSF or CIT is
obligated to maintain or improve such rating); provided, however, that such
action in clause (iii) shall not, as evidenced by an opinion of counsel for CIT,
adversely affect in any material respect the interests of any Certificateholder.
The Limited Guarantee may also be amended from time to time by CIT, the
Servicer and the Trustee, with the consent of Holders of the Class B
Certificates aggregating 51% or more of the Class B Principal Balance as of the
preceding Remittance Date, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Limited
Guarantee or of modifying in any manner the rights of the Class B
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, any Guarantee Payment or
(ii) grant by contract or operation of law any defense to the payment of any
Guarantee Payment without the consent of the Holder of each Certificate affected
thereby.
Alternate Credit Enhancement
In the event that, at the Company's option, Alternate Credit Enhancement
(as defined herein) is provided and, upon prior written notice to the Rating
Agencies (as defined herein) such Rating Agencies shall have notified the
Company, the Servicer and the Trust in writing that the substitution of such
Alternate Credit Enhancement for the Limited Guarantee will not result in the
downgrade or withdrawal of the then current rating of the Offered Certificates,
and upon the delivery by the Company to the Trustee of an opinion of counsel,
acceptable to the Trustee, that such action would not cause the Trust to fail to
qualify as a REMIC, the Limited Guarantee shall be released and shall terminate.
The Alternate Credit Enhancement may consist of cash or securities deposited by
CIT or another Person (the "Alternate Credit Enhancer") in a segregated trust,
escrow or collateral account (an "Alternate Credit Enhancement"). On each
Remittance Date after delivery of the Alternate Credit Enhancement, an amount,
equal to the lesser of the amount which would have been payable under the
Limited Guarantee and the amount on deposit in such account, shall be
transferred from such account to the Certificate Account to make payments to the
S-54
<PAGE>
Class B Certificateholders. CIT shall have no obligation to replenish the funds
on deposit in any such account once they have been exhausted.
In connection with the delivery of such Alternate Credit Enhancement, the
Company, the Trustee, and the Servicer may execute supplements to the Agreement
to add provisions to, change or eliminate provisions of the Agreement, establish
accounts for the benefit of the Alternate Credit Enhancer, grant security
interests therein and provide for the investment of funds in any such account,
and grant other rights to such Alternate Credit Enhancer incidental thereto,
without the consent of the Certificateholders.
Distributions from the Certificate Account
On or before the Determination Date preceding a Remittance Date, the
Servicer will make a determination and inform the Trustee of the following
amounts with respect to the preceding Due Period: (i) the aggregate amount of
collections on the Contracts; (ii) the aggregate amount of Monthly Advances to
be remitted by the Servicer; (iii) the aggregate purchase price of Contracts to
be purchased by CITSF or the Servicer pursuant to the Agreement; (iv) the
aggregate amount to be distributed as principal and interest on the Certificates
on the related Remittance Date; (v) the Monthly Servicing Fee; and (vi) the
Guarantee Fee.
On each Remittance Date, after reimbursement to the Servicer of any
previously unreimbursed Monthly Advances as provided in the Agreement, the
Trustee will withdraw and apply amounts on deposit in the Certificate Account,
to the extent of the Amount Available, to make the following payments in the
following order:
(a) Distributions on account of interest and principal to the Holders
of the Offered Certificates in the amount and priority set forth herein,
including any overdue interest distributions and principal distributions
with respect to each such Class of Certificates, and, to the extent
permitted by applicable law, interest thereon at the applicable Remittance
Rate;
(b) The Monthly Servicing Fee, including any overdue Monthly
Servicing Fee will (to the extent not previously retained by the Servicer)
be paid to the Servicer;
(c) The Guarantee Fee, including any overdue Guarantee Fees, to be
paid to CIT (or the fees due to any Alternate Credit Enhancer will be paid
to it); and
(d) Distribution of the balance, constituting the remaining Amount
Available, to the Holders of the Class R Certificates (provided that, if
any amounts are due to CIT in reimbursement for Guarantee Payments or
interest thereon or are due to the Alternate Credit Enhancer or are to be
transferred to any account for the benefit of the Alternate Credit
Enhancer, such amounts shall be so deposited or so paid prior to any
distribution to the holders of the Class R Certificates).
In the event CITSF is not the Servicer, the Monthly Servicing Fee will be
paid to the Servicer prior to any distributions on the Certificates.
To the extent that the Amount Available is not sufficient to pay to the
holders of the Class A-5 Certificates all payments of interest to which such
Certificateholders are entitled on such Remittance Date, as described above
under "--Interest on Class A-5 Certificates", the Trustee will withdraw the
amount of such deficiency from the Certificate Account from the funds, if any,
which would otherwise constitute part of the Amount Available for the following
Remittance Date, and distribute such amounts to the Class A-5
Certificateholders.
Servicing Compensation and Payment of Expenses
The Servicer will be entitled to receive on each Remittance Date a Monthly
Servicing Fee equal to one-twelfth of the product of 1.00% and the Pool Stated
Principal Balance as of the end of the Due Period second preceding such
Remittance Date (or, in the case of the first Remittance Date, the Cut-off
Date).
The Servicer is obligated to pay certain on-going expenses associated with
the Contract Pool and incurred by the Servicer in connection with its
responsibilities under the Agreement. See "Description of the
Certificates--Servicing--Servicing Compensation and Payment of Expenses" in the
Prospectus for information regarding other possible compensation to the Servicer
and for information regarding expenses payable by the Servicer.
S-55
<PAGE>
Advances
On or prior to each Determination Date, the Servicer is obligated to make
Monthly Advances by depositing into the Certificate Account cash for
distribution to the Holders of the Offered Certificates equal to the difference
between the interest due on the Contracts at the Contract Rate on the Due Date
during the related Due Period and the interest received on the Contracts during
such Due Period, but only to the extent that the Servicer determines that the
payments of interest not received during the related Due Period will be
recoverable from future payments and collections on the Contracts. Monthly
Advances are intended to maintain a regular flow of interest to the
Certificateholders, not to guarantee or insure against losses. Accordingly, any
funds so advanced are recoverable by the Servicer out of amounts received on the
related Contracts which represent late collections respecting which any such
Monthly Advance is made. Additionally, Monthly Advances which become
nonrecoverable (as described in the Agreement) will be reimbursed to the
Servicer out of any funds to be deposited in the Certificate Account. Such
reimbursement will be made by the Servicer deducting such amounts due to it from
any payments on the Contracts which would otherwise have been deposited in the
Certificate Account. Therefore, such reimbursements to the Servicer will reduce
the Amount Available for distribution to Certificateholders.
Physical Damage Insurance
The Agreement will provide that the Servicer, in accordance with its
customary servicing procedures, shall require that each Obligor shall have
obtained and shall maintain physical damage insurance covering the Manufactured
Home, provided that such insurance shall be in an amount no greater than the
outstanding principal balance of the related Contract or, if such insurance
covers the interest of the related Obligor in the Manufactured Home, no greater
than the greater of the outstanding principal balance of the related Contract
and the value of the Manufactured Home, or such lesser amount permitted by
applicable law. The Servicer shall enforce its rights under the Contracts to
require the Obligors to maintain physical damage insurance, in accordance with
the Servicer's customary practices and procedures with respect to comparable
contracts that it services for itself or others. If an Obligor fails to maintain
such insurance, the Servicer shall obtain and advance on behalf of such Obligor,
as required under the terms of the applicable Contract and the Agreement, the
premiums for such insurance, with uninsured physical damage loan insurance
endorsements, each insurance policy naming the Servicer as an additional insured
and loss payee and issued by an insurer having a rating of "A" or better by A.M.
Best (such insurance being referred to herein as "Force-Placed Insurance"). Such
Force-Placed Insurance and any commissions or finance charges collected by the
Servicer in connection therewith shall be, to the extent permitted by law, in an
amount in accordance with customary servicing procedures, but in no event in an
amount greater than the outstanding principal balance of the related Contract
or, if such insurance covers the interest of the related Obligor in the
Manufactured Home, no greater than the greater of the outstanding principal
balance of the related Contract and the value of the Manufactured Home, or such
lesser amount permitted by applicable law. The Servicer shall be required to
disclose to the related Obligor all information with respect to such
Force-Placed Insurance, commissions and finance charges as required by
applicable law. The Servicer does not, under its customary servicing procedures,
require Force-Placed Insurance when the principal balance of the related
Contract falls below the level or levels periodically established in accordance
with such customary servicing procedures. In accordance with such customary
servicing procedures, the Servicer may periodically readjust such levels,
suspend Force-Placed Insurance or arrange other methods of protection of the
Manufactured Homes that it deems necessary or advisable, provided that the
Servicer determines that such actions do not materially and adversely affect the
interest of the holders of the Offered Certificates or are required by
applicable law. Any portion of the principal balance of a Contract consisting of
Force-Placed Insurance acquired after the Cut-off Date will not be owned by the
Trust, and amounts allocable thereto will not be available for distributions to
holders of the Offered Certificates. Unless otherwise designated by the Obligor,
the Servicer will not allocate payments on the Contracts to Force-Placed
Insurance premiums if any amount of principal or interest is due but unpaid on
the Contracts. The Servicer shall not deposit payments posted with respect to
such Force-Placed Insurance in the Certificate Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for that
purpose. In the event that an Obligor under a Contract with respect to which the
Servicer has advanced funds to obtain Force-Placed Insurance makes scheduled
payments under the Contract, but has failed to make scheduled payments of such
Force-Placed Insurance as due, and the Servicer has determined that eventual
payment of such amount is unlikely, the Servicer may, but shall not be required
to, take any action available to it, including determining that the related
S-56
<PAGE>
Contract is a Defaulted Contract; provided however, that any Net Liquidation
Proceeds (as defined herein) with respect to such Contract shall be applied
first to the accrued and unpaid interest at the Contract Rate, then to the
principal amount outstanding, and the remainder, if any, to such Force-Placed
Insurance.
Servicing--Hazard Insurance
The Agreement will permit the Servicer or any affiliate of the Servicer, to
the extent permitted by law, to (a) enter into agreements with one or more
insurers or other Persons pursuant to which the Servicer or such affiliate will
earn commissions and fees in connection with any insurance policy purchased by
an Obligor including, without limitation, any hazard insurance policy (whether
or not such hazard insurance policy is force-placed pursuant to the provisions
of any Contract), or any other insurance policy whatsoever and (b) in connection
with the foregoing, to solicit, or permit and assist any insurer or any agent
thereof to solicit (including, without limitation, providing such insurer or
agent a list of Obligors including name, address or other information) any
Obligor. For more information relating to the requirements of the Servicer to
obtain hazard insurance see "Description of the Certificates--Servicing-Hazard
Insurance" in the Prospectus.
Indemnification
The Agreement provides that the Servicer will pay, and shall indemnify,
defend and hold harmless the Trustee, the Trust, and the Certificateholders from
and against, any taxes that may at any time be asserted with respect to, and as
of the date of, the transfer of the Contracts to the Trust, including, without
limitation, any sales, gross receipts, personal or real property, privilege or
license taxes (but not including any federal, state or other taxes arising out
of the creation of the Trust and the issuance of the Certificates or
distributions with respect thereto) and costs, expenses and reasonable counsel
fees in defending against the same. (Article X.)
The Agreement further provides that the Servicer will indemnify, defend,
and hold harmless the Trustee, the Trust, and the Certificateholders from and
against any and all costs, expenses, losses, claims damages, and liabilities to
the extent that such cost, expense, loss, claim, damage, or liability arose out
of, or was imposed upon such Persons, through the willful misfeasance,
negligence, or bad faith of the Servicer in the performance of its duties under
the Agreement or by reason of reckless disregard of its obligations and duties
under the Agreement. (Article X.)
The Agreement further provides that the Servicer will indemnify, defend and
hold harmless from and against, and pay to the Trustee all costs, expenses,
losses, claims, damages, and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties contained
in the Agreement in accordance with the terms and conditions therein, except to
the extent that such cost, expense, loss, claim, damage or liability: (a) shall
be due to the willful misfeasance, gross negligence or bad faith of such the
Trustee; (b) relates to any tax other than the taxes with respect to which the
Servicer shall be required to indemnify the Trustee pursuant to the Agreement;
(c) shall arise from the Trustee's breach of any of its representations or
warranties set forth in the Agreement; (d) shall be one as to which the Company
is required to indemnify the Trustee or (e) shall arise out of or be incurred in
connection with the acceptance or performance by the Trustee of the duties of
the successor Servicer hereunder. (Article X.)
The indemnification provided under the Agreement shall include reasonable
fees and expenses of counsel in any litigation appointed by the Servicer and
reasonably satisfactory to the indemnitee, provided that the Servicer shall only
be required to pay the fees and expenses of one counsel in any single litigation
(or related proceedings) for all indemnities; provided, however, if in the
written opinion of counsel reasonably satisfactory to the Servicer, the
interests of the Servicer and the Trustee conflict such that the Servicer and
the Trustee may not both be represented by such counsel, upon ten days prior
written notice to the Servicer, the Trustee may hire one other counsel, and the
indemnification under the Agreement shall also include the reasonable fees and
expenses of such other counsel. If the Servicer or the Company shall have made
any indemnity payments pursuant to the Agreement and the recipient thereafter
collects any of such amounts from others, the recipient will promptly repay such
amounts to the Servicer and/or the Company, without interest. The indemnities
under the Agreement shall survive the resignation or removal of the Trustee, or
the termination of the Agreement. (Article X.)
S-57
<PAGE>
Reports to Offered Certificateholders
The Servicer will furnish to the Trustee, and the Trustee will include with
each distribution to a Certificateholder, a statement in respect of the related
Remittance Date setting forth, among other things:
(a) the amount of such distribution to Holders of each Class of
Certificates allocable to interest (including interest shortfall, if any);
(b) the amount of such distribution to Holders of each Class of
Certificates allocable to principal, separately identifying the aggregate
amount of any principal prepayments included therein;
(c) the amount of any shortfall in the Formula Principal Distribution
Amount allocated to each Class of Certificateholders for such Remittance
Date, as applicable;
(d) the Principal Balance of each Class of Certificates after giving
effect to the distribution of principal on such Remittance Date, as
applicable;
(e) the Pool Stated Principal Balance of the Contracts for the
following Remittance Date;
(f) the Pool Factor (a percentage derived from a fraction the
numerator of which is the amount specified in (e) and the denominator of
which is the Initial Pool Principal Balance);
(g) the number and aggregate principal balance of Contracts delinquent
(i) 30-59 days and (ii) 60 or more days;
(h) the number of Manufactured Homes that were repossessed during the
Due Period ending immediately prior to such Remittance Date;
(i) the number of Manufactured Homes that were repossessed but remain
in inventory as of the last day of the Due Period ending immediately prior
to such Remittance Date;
(j) the amount of any Guarantee Payment made by CIT to holders of the
Class B Certificates, identifying the amounts allocable to interest and
principal (including all amounts distributable in respect of the Principal
Liquidation Loss Amount);
(k) the Guarantee Payment Limit after giving effect to any Guarantee
Payments made on such Remittance Date;
(l) the weighted average Contract Rate of all outstanding Contracts;
and
(m) the aggregate amount of Cram Down Losses for such Due Period.
Information furnished pursuant to clauses (a) through (d) will be expressed as
dollar amounts for a Certificate with a 1% Percentage Interest or per $1,000
denomination of Certificate. (Section 6.05.) In addition, within a reasonable
period of time after the end of each calendar year, the Servicer will furnish a
report to each Certificateholder of record at any time during such calendar year
as to the aggregate of amounts reported pursuant to (a) and (b) above for such
calendar year.
Repurchase Option
The Agreement provides that on any Remittance Date on which the Pool Stated
Principal Balance is less than 10% of the Cut-off Date Pool Principal Balance,
the Company or the Servicer will have the option to repurchase for cash, upon
the Company or the Servicer giving notice mailed to the Certificateholders no
earlier than the 15th day and no later than the 25th day of the month next
preceding the month of such final distribution, all outstanding Contracts at a
price equal to the greater of (i) the sum of (A) 100% of the Stated Principal
Balance of each Contract (other than any Contract as to which title to the
underlying property has been acquired and whose fair market value is included
pursuant to clause (B) below as of the final Remittance Date), and (B) the fair
market value of such acquired property (as determined by the Servicer on the
third business day next preceding the date upon which notice of such termination
is furnished to Certificateholders pursuant to the Agreement), and (ii) the
aggregate fair market value (as determined by the Servicer as of the close of
business on such third business day) of all of the assets of the Trust, and
(iii) the remaining Pool Stated Principal Balance as of the close of business on
S-58
<PAGE>
such third business day, plus, in each case, any unpaid interest on the Senior
Certificates, any unpaid interest on the Class A-5 Certificates, and any unpaid
interest on the Class B Certificates, as well as one month's interest at the
applicable Contract Rate on the Stated Principal Balance of each Contract
(including any Contract as to which the related Manufactured Home has been
repossessed). (Section 8.03.)
Auction Sale
Ninety days following a Remittance Date as of which the Pool Stated
Principal Balance is less than 10% of the Cut-off Date Pool Principal Balance
(and only if the Servicer and the Company have not exercised the repurchase
option described above), the Trustee shall solicit bids for the purchase of the
Contracts remaining in the Trust. In the event that satisfactory bids are
received as described in the Agreement, the net sale proceeds will be
distributed to Certificateholders, in the same order of priority as collections
received in respect of the Contracts. The Trustee, however, will not accept bids
for the Contracts unless certain minimum requirements are met, including that
the proceeds distributable as a result of such sale would be at least equal to
100% of the then outstanding aggregate principal balance of each class of the
Offered Certificates, plus accrued interest thereon through the applicable
Interest Accrual Period, plus the fair market value of the Class R Certificates.
The sale of the Contracts must be for an amount no less than fair market value.
If satisfactory bids are not received, the Trustee shall decline to sell the
Contracts and shall not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the Contracts. Such sale and consequent
termination of the Trust must constitute a "qualified liquidation" of the Trust
under Section 860F of the Internal Revenue Code of 1986, as amended, including,
without limitation, the requirement that the qualified liquidation takes place
over a period not to exceed 90 days.
Termination of the Agreement
The Agreement will terminate upon the earlier of (i) the purchase by the
Company or the Servicer of all Contracts and all property acquired in respect of
any Contract remaining in the Trust as described under "Repurchase Option"
above, (ii) the sale of the Contracts as described under "--Auction Sale" above,
or (iii) the final payment or other liquidation of the last Contract remaining
in the Trust or the disposition of all property acquired upon repossession of
any Manufactured Home.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed, in the following order of priority, to
Certificateholders on the final Remittance Date in proportion to their
respective Percentage Interests an amount equal to (i) as to the Senior
Certificates, the Senior Principal Balance, together with any unpaid interest at
the related Remittance Rate and interest for the related Interest Accrual Period
at the related Remittance Rate on the Class A-1 Principal Balance, the Class A-2
Principal Balance, the Class A-3 Principal Balance and the Class A-4 Principal
Balance, as appropriate, (ii) as to the Class A-5 Certificates, the Class A-5
Principal Balance, together with any unpaid interest thereon at the Class A-5
Remittance Rate and interest for the related Interest Accrual Period at the
Class A-5 Remittance Rate on the Class A-5 Principal Balance, (iii) as to the
Class B Certificates, the Class B Principal Balance, together with any unpaid
interest thereon at the Class B Remittance Rate and interest for the related
Interest Accrual Period at the Class B Remittance Rate on the Class B Principal
Balance, and (iv) as to the Class R Certificates, the amount which remains on
deposit in the Certificate Account (other than amounts retained to meet claims)
after application pursuant to clauses (i)-(iv) above. (Section 12.03.)
Amendment
The Agreement may be amended by agreement of the Trustee, the Company and
the Servicer at any time, without the consent of the Certificateholders, to
correct manifest error, to cure any ambiguity, to correct or supplement any
provision which may be inconsistent with any other provision, to make such
changes as are necessary to maintain the status of the Trust as a REMIC, to add
or amend any provision as required by Moody's, Standard & Poor's or any other
nationally recognized statistical rating organization to maintain the rating of
any of the Offered Certificates, to add such provisions or change in any manner
or eliminate any provisions of the Agreement in connection with the delivery of
Alternate Credit Enhancement, establish accounts for the benefit of the
Alternate Credit Enhancer, grant security interests therein and provide for the
investment of funds in any such account, and grant other rights to such
Alternate Credit Enhancer incidental thereto, or to add other provisions not
S-59
<PAGE>
inconsistent with the Agreement upon receipt of an Opinion of Counsel to the
Servicer that such amendment will not adversely affect in any material respect
the interests of any Certificateholder. Neither the Company nor the Servicer is
obligated to take any action to maintain or improve the rating given to any of
the Offered Certificates. (Section 12.07.)
The Agreement may also be amended from time to time by the Trustee, the
Company and the Servicer, with the consent of the holders of Certificates of
each Class affected thereby evidencing, as to each such Class, Percentage
Interests aggregating at least 51%, provided that no such amendment shall (i)
increase or reduce in any manner the amount of, or delay the timing of,
collections of payments on Contracts or distributions which are required to be
made on any Certificate without the consent of the holder of each Certificate
affected thereby, (ii) reduce the aforesaid percentages of Certificateholders
required for any amendment of the Agreement, without the unanimous consent of
the Certificateholders, (iii) result in the disqualification of the Trust as a
REMIC under the Code or adversely affect the status of the Trust as a REMIC or
the status of the Certificates as "regular interests" therein, or cause any tax
to be imposed on the Trust or (iv) adversely affect in any material respect the
interest of the Class R Certificateholders without the unanimous written consent
of the Class R Certificateholders. (Section 12.07.)
The Agreement may also be amended from time to time, without the consent of
any Certificateholders, by the Company, the Trustee and the Servicer to modify,
eliminate or add to the provisions of the Agreement to maintain the
qualification of the Trust as a REMIC under the Code and under relevant state
and local law or avoid, or reduce the risk of, the imposition of any tax on the
Trust under the Code that would be a claim against the Trust assets, provided
that (A) an Opinion of Counsel is delivered to the Trustee to the effect that
such action is necessary to maintain such qualification or avoid any such tax or
reduce the risk of its imposition and (B) such amendment shall not materially
adversely affect the interests of any Certificateholder or prevent the Trust
from entering into any "prohibited transaction" as defined in Section 860F of
the Code.
The Trustee is required under the Agreement to furnish Certificateholders
affected thereby with notice promptly upon execution of any amendment to the
Agreement pursuant to the second preceding paragraph. (Section 12.07.)
The Trustee
Harris Trust and Savings Bank (the "Trustee") has its corporate trust
offices at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in New York where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee and the certificate registrar and transfer agent in respect of the
Certificates pursuant to the Agreement may be served. On the date hereof, the
Trustee's offices for such purposes are located at 430 Park Avenue, 14th Floor,
New York, New York 10022. The Trustee will promptly give written notice to the
Certificateholders of any change thereof. (Section 12.02.)
S-60
<PAGE>
REGISTRATION OF THE OFFERED CERTIFICATES
The Offered Certificates will be registered in the name of Cede & Co., the
nominee of DTC. DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants").
Certificate Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of the Offered Certificates may do so only through
Participants (unless and until Definitive Senior Certificates, Definitive Class
A-5 Certificates, or Definitive Class B Certificates, as defined below, are
issued). In addition, Certificate Owners will receive all distributions of
principal of, and interest on, the Offered Certificates from the Trustee through
DTC and Participants. Certificate Owners will not receive or be entitled to
receive certificates representing their respective interests in the Offered
Certificates, as the case may be, except under the limited circumstances
described below.
Unless and until Definitive Senior Certificates, Definitive Class A-5
Certificates, or Definitive Class B Certificates are issued, it is anticipated
that the only "Certificateholder" of the Offered Certificates will be Cede &
Co., as nominee of DTC. Certificate Owners will not be Certificateholders as
that term is used in the Agreement and will not receive reports or payments
directly from the Trustee or the Servicer. Certificate Owners are only permitted
to exercise the rights of Certificateholders indirectly through Participants and
DTC.
While the Offered Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "DTC Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Participants with whom Certificate Owners have accounts with respect to the
Offered Certificates are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Certificate Owners. Accordingly, although Certificate Owners will not possess
Certificates, the DTC Rules provide a mechanism by which Certificate Owners will
receive distributions and will be able to transfer their interests.
Senior Certificates, Class A-5 Certificates, and Class B Certificates will
be issued in registered form to Certificate Owners, or their nominees, rather
than to DTC (such Certificates being referred to herein as "Definitive Senior
Certificates", "Definitive Class A-5 Certificates", and "Definitive Class B
Certificates"), respectively, only if (i) DTC or the Company advises the Trustee
in writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the Offered Certificates,
respectively, and the Company or the Trustee is unable to locate a qualified
successor or (ii) the Company at its sole option advises the Trustee in writing
that it elects to terminate the book-entry system through DTC. Upon issuance of
Definitive Senior Certificates, Definitive Class A-5 Certificates, or Definitive
Class B Certificates to Certificate Owners, such Certificates will be
transferable directly (and not exclusively on a book-entry basis) and registered
Holders will deal directly with the Trustee with respect to transfers, notices
and distributions.
DTC has advised the Company and the Trustee that, unless and until
Definitive Senior Certificates, Definitive Class A-5 Certificates, and
Definitive Class B Certificates are issued, DTC will take any action permitted
to be taken by a Certificateholder under the Agreement only at the direction of
one or more Participants to whose DTC accounts the Offered Certificates,
respectively, are credited. DTC has advised the Company that DTC will take such
action with respect to any Percentage Interests of the Offered Certificates only
at the direction of and on behalf of such Participants with respect to such
Percentage Interests of the Offered Certificates. DTC may take actions, at the
direction of the related Participants, with respect to some Offered Certificates
which conflict with actions taken with respect to other Offered Certificates,
respectively.
S-61
<PAGE>
Issuance of the Offered Certificates in book-entry form rather than as
physical certificates may adversely affect the liquidity of Offered Certificates
in the secondary market and the ability of Certificate Owners to pledge them. In
addition, since distributions on the Offered Certificates will be made by the
Trustee to DTC and DTC will credit such distributions to the accounts of its
Participants, which will further credit them to the accounts of indirect
participants of Certificate Owners, Certificate Owners may experience delays in
the receipt of such distributions. Furthermore, if the Certificates are in
book-entry form, the statements furnished by the Servicer with each distribution
to the Certificateholders as described herein will be delivered to DTC as
opposed to the Certificate Owners.
USE OF PROCEEDS
The Company will sell the Contracts to the Trust concurrently with the sale
of the Offered Certificates and the net proceeds from the sale of the Offered
Certificates will be applied by the Trustee to the purchase of the Contracts, to
the payment of certain expenses connected with pooling the Contracts and issuing
the Certificates. Such net proceeds less the payment of such expenses will
(together with the Class R Certificates retained by the Company or its
affiliates) represent the purchase price paid by the Trust to the Company for
the sale of the Contracts to the Trust. Such amount will be determined as a
result of the pricing of the Offered Certificates, through the offering
described in this Prospectus Supplement. The net proceeds to be received from
the sale of the Contracts will be added to the Company's general funds and will
be available for general corporate purposes, including the purchase of new
manufactured housing installment sales contracts and installment loan
agreements.
ERISA CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "ERISA
Considerations".
Senior Certificates
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans that are subject to ERISA
("Plans") and on persons who are fiduciaries with respect to such Plans.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are
not subject to ERISA requirements. Accordingly, assets of such plans may be
invested in the Senior Certificates without regard to the ERISA restrictions,
subject to applicable provisions of other federal and state laws. However, any
such governmental or church plan which is qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
The U.S. Department of Labor ("DOL") has granted an administrative
exemption to CS First Boston Corporation (formerly First Boston Corporation)
(Prohibited Transaction Exemption 89-90; Exemption Application No. D-6555, 54
Fed. Reg. 42,597 (1989)) and any member of CS First Boston Corporation's
underwriting syndicate (the "Exemption") from certain of the prohibited
transaction rules of ERISA and the Code with respect to the initial purchase,
the holding, and the subsequent resale by Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
manufactured housing installment sales contracts and installment loan agreements
such as the Contracts. The Exemption will apply to the acquisition, holding, and
resale of the Senior Certificates by a Plan, provided that specified conditions
(certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction with
an unrelated party;
S-62
<PAGE>
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's, Moody's, Duff &
Phelps Inc. or Fitch Investors Service, L.P.;
(4) The Trustee is not an affiliate of any member of the Restricted
Group (as defined below);
(5) The sum of all payments made to the Underwriters in connection
with the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates. The sum
of all payments made to and retained by the Company pursuant to the sale of
the Contracts to the Trust represents not more than the fair market value
of such Contracts. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
Moreover, the Exemption would provide relief from certain
self-dealing/conflict of interest prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the Senior
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Plan's investment in Senior Certificates does not
exceed twenty-five (25) percent of all of the Senior Certificates outstanding at
the time of the acquisition and (iii) immediately after the acquisition, no more
than twenty-five (25) percent of the assets of the Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Company, the Underwriters, the Trustee, the Servicer, any
obligor with respect to Contracts included in the Trust constituting more than
five percent of the aggregate unamortized principal balance of the assets in the
Trust, or any affiliate of such parties (the "Restricted Group").
The Company believes that the Exemption will apply to the acquisition and
holding of Senior Certificates sold by the Underwriter and by Plans and that all
conditions of the Exemption other than those within the control of the investors
have been met. In addition, as of the date hereof, no obligor with respect to
Contracts included in the Trust constitutes more than five percent of the
aggregate unamortized principal balance of the assets of the Trust.
Any Plan fiduciary who proposes to cause a Plan to purchase Senior
Certificates should consult with its own counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership of
the Senior Certificates. Assets of a Plan or individual retirement account
should not be invested in the Senior Certificates unless it is clear that the
assets of the Trust will not be plan assets or unless it is clear that the
Exemption or a prohibited transaction class exemption will apply and exempt all
potential prohibited transactions. See "ERISA Considerations" in the Prospectus.
Class A-5 and Class B Certificates
An interest in the Class A-5 or Class B Certificates may not be acquired by
(a) an employee benefit plan (as defined in Section 3(3) of ERISA) that is
subject to the provisions of Title I of ERISA, (b) a plan described in Section
4975(e)(1) of the Code, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (other than an insurance
company purchasing such certificates for its general accounts). By its
acceptance of a Class A-5 or Class B Certificate or its acquisition of an
interest in a Class A-5 or Class B Certificate through a Participant or DTC,
each Class A-5 or Class B Certificateholder or Class A-5 or Class B
Certificateowner will be deemed to have represented and warranted that it is not
subject to the foregoing limitation.
S-63
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "Certain Federal
Income Tax Considerations".
Original Issue Discount
The Offered Certificates bear interest at the Remittance Rate, which is the
lower of a specified fixed rate for each class of Certificates and the Net
Contract Rate. It is generally anticipated that the Remittance Rate for each
class of Offered Certificates will be determined based upon the fixed rate
specified herein.
In the absence of authority to the contrary, the Company intends to treat
payments of interest at the Remittance Rate as payments of qualified stated
interest for purposes of determining whether the Offered Certificates are issued
with original issue discount. Treasury Regulations were proposed on December 16,
1994 which address the treatment of debt instruments with contingent payments
(the "Proposed Contingent Payment Regulations") and which supersede the
previously proposed regulations dealing with contingent payments described in
the Prospectus under "Certain Federal Income Tax Consequences -- REMIC Series --
Variable Rate Regular Certificates". The Proposed Contingent Payment Regulations
state that they do not apply to REMIC regular interests. Thus, there is
currently no guidance under the Code or Treasury Regulations with respect to the
treatment of contingent payments on REMIC regular interests for purposes of
applying the original issue discount rules.
If payments of interest at the Remittance Rate were not treated as payments
of qualified stated interest, such interest would be treated as issued with
original issue discount on the Offered Certificates. As a result, a holder of an
Offered Certificate, instead of including in income interest on an accrual
basis, would be required to a account for all interest on the Offered
Certificates, including any amounts that would otherwise be treated as a de
minimis original issue discount, as original issue discount, which generally
accrues on a daily basis under a constant yield method that takes into account
the compounding of interest, prepayments and a prepayment assumption.
The Company intends to treat the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates and Class A-4 Certificates as issued with
de minimis original issue discount. The Company intends to treat the Class A-5
Certificates and Class B Certificates as issued with no original issue discount.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount for federal income tax purposes is 150% of the MH
Prepayment Model.
LEGAL INVESTMENT CONSIDERATIONS
The Senior Certificates and the Class A-5 Certificates will constitute
"mortgage related securities" under the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") and, as such, will be "legal investments" for certain
types of institutional investors to the extent provided in that Act. However,
the Class B Certificates will not constitute "mortgage related securities" under
SMMEA and, as such, will not be "legal investments" for certain types of
institutional investors to the extent provided in that Act. 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. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Offered Certificates will constitute legal investments for
them.
The Company makes no representation as to the proper characterization of
the Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase the
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment or financial institution regulatory characteristics of the
Certificates) may adversely affect the liquidity of the Certificates. See "Legal
Investment Considerations" in the Prospectus.
S-64
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated November 14, 1995 (the "Underwriting Agreement"), among CIT,
CITSF, the Company and the Underwriters, the Company has agreed to sell and the
Underwriters have agreed to purchase the respective principal amounts of Offered
Certificates upon issuance, as set forth opposite their names below:
Class A-1 Class A-2 Class A-3
Underwriter Certificates Certificates Certificates
----------- ------------ ------------ ------------
CS First Boston Corporation ........ $18,132,000 $17,728,000 $12,217,000
Morgan Stanley & Co. Incorporated .. 18,131,000 17,728,000 12,217,000
----------- ----------- ------------
Total ......................... $36,263,000 $35,456,000 $24,434,000
=========== =========== ============
Class A-4 Class A-5 Class B
Underwriter Certificates Certificates Certificates
----------- ------------ ------------ ------------
CS First Boston Corporation ........ $32,600,000 $ 7,968,000 $10,956,194
Morgan Stanley & Co. Incorporated .. 32,600,000 7,968,000 10,956,000
----------- ----------- ------------
Total ......................... $65,200,000 $15,936,000 $21,912,194
=========== =========== ============
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all such Offered Certificates if any
are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Offered Certificates to the public initially at the public
offering price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not to exceed 0.135% of the
Original Class A-1 Principal Balance, 0.180% of the Original Class A-2 Principal
Balance, 0.195% of the Original Class A-3 Principal Balance, 0.270% of the
Original Class A-4 Principal Balance, 0.225% of the Original Class A-5 Principal
Balance and 0.300% of the Original Class B Principal Balance; that the
Underwriters and such dealers may allow a discount of 0.100% of the Original
Class A-1 Principal Balance, 0.125% of the Original Class A-2 Principal Balance,
0.125% of the Original Class A-3 Principal Balance, 0.125% of the Original Class
A-4 Principal Balance, 0.125% of the Original Class A-5 Principal Balance and
0.150% of the Original Class B Principal Balance on sales to certain other
dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the Underwriters.
The Certificates have no established trading market. The Underwriters have
advised the Company that they intend to act as market makers for the
Certificates. However, the Underwriters are not obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Offered Certificates.
CITSF and CIT have jointly and severally agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or to contribute to payments which the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel, New York, New York, and for the Underwriters by Stroock & Stroock &
Lavan, New York, New York. The material federal income tax consequences of the
Offered Certificates will be passed upon for the Company by Schulte Roth &
Zabel. Paul N. Roth, a director of CIT, is a partner of Schulte Roth & Zabel.
S-65
<PAGE>
ANNEX A
PRICE/YIELD TABLES
The tables set forth below show the weighted average life, first principal
payment date, last principal payment date and the yield at various assumed
offering prices of each Class of Offered Certificates under various prepayment
scenarios. The yields set forth in the following tables were calculated by
determining the monthly discount rates which, when applied to the assumed stream
of cash flows to be paid on each Class of Offered Certificates, would cause the
discounted present value of such assumed stream of cash flows as of November 21,
1995 to equal the assumed purchase prices and converting such monthly rates to
corporate bond equivalent rates. Such calculation does not take into account
variations that may occur in the interest rates at which Certificateholders may
be able to reinvest funds received by them as reductions of the Principal
Balance on such Classes of Certificates and consequently does not purport to
reflect the return on any investment in such Classes of Certificates when such
reinvestment rates are considered. None of the prices in the tables take into
account any accrued interest that may be payable in excess of the stated
offering or purchase prices. The tables below indicate the weighted average
life, first principal payment date, last principal payment date and yield to
maturity of Class A-1, Class A-2, Class A-3 and Class A-5 and yield to the
Repurchase Option of Class A-4 and Class B assuming that the Contracts prepay at
the percentage indicated therein.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the MH Prepayment Model set forth in the table; (ii)
either the Servicer or the Company exercises the Repurchase Option described
above; (iii) the Contracts have been grouped into 7 pools having the
characteristics as of the Cut-off Date set forth in the table entitled "Assumed
Contract Characteristics" below; (iv) the Class A-1 Certificates initially
represent $36,263,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-1 Remittance Rate of 5.50%, the Class A-2 Certificates initially
represent $35,456,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-2 Remittance Rate of 6.00%, the Class A-3 Certificates initially
represent $24,434,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-3 Remittance Rate of 6.25%, the Class A-4 Certificates initially
represent $65,200,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-4 Remittance Rate of 7.00%, and the Class A-5 Certificates initially
represent $15,936,000 of the Cut-off Date Pool Principal Balance and will have a
Class A-5 Remittance Rate of 6.90%; the Class B Certificates initially
represents $21,912,194 of the Cut-off Date Pool Principal Balance and will have
a Class B Remittance Rate of 7.30%; (v) no interest shortfalls will arise in
connection with prepayment in full of the Contracts; (vi) no delinquencies or
losses are experienced on the Contracts; (vii) distributions are made on the
Offered Certificates on the 15th day of each month (or, if the 15th day is not a
business day, the next business day thereafter), commencing on December 15,
1995; (viii) the Offered Certificates are issued on November 21, 1995.
Assumed Contract Characteristics
<TABLE>
<CAPTION>
Original Remaining Term
Current Term to to Maturity
Pool Principal Balance Contract Rate Maturity (Months) (Months)
- ---- ----------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
1 .......... $ 346,216 10.84% 58 55
2 .......... 906,548 9.62 84 82
3 .......... 3,787,140 10.55 119 117
4 .......... 23,283,965 10.60 178 176
5 .......... 102,522,542 10.36 240 238
6 .......... 47,075,459 9.83 300 298
7 .......... 21,279,325 9.49 360 358
------------ ----- --- ---
Total .... $199,201,195 10.17% 256 254
============ ===== === ===
</TABLE>
A-1
<PAGE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the characteristics of the
actual Contracts and the characteristics of the Contracts assumed in preparing
the tables. Any such discrepancy may have an effect upon the percentages of the
Original Principal Balances outstanding and the weighted average life of each
Class of the Offered Certificates set forth in the tables. In addition, since
the actual Contracts and the Trust have characteristics which differ from those
assumed in preparing the tables set forth below, the distributions of principal
on each of the Offered Certificates may be made earlier or later than as
indicated in the tables.
The following information is given solely to illustrate the yield to
maturity for each Class of the Offered Certificates at various assumed offering
prices with respect to each such Class of Certificates under the stated
assumptions and is not a prediction of the actual yield to maturity or yield to
the Repurchase Option of any Class of the Offered Certificates.
No representation is made that the Contracts will not experience
delinquencies, or that losses will not be experienced at the rate assumed herein
or at any other rate and in fact historically there have been delinquencies and
losses. This Annex A should be read in conjunction with the information set
forth in "Yield and Prepayment Considerations" in the Prospectus Supplement and
"Yield Considerations" in the Prospectus.
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Maturity of Class A-1 Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
1.73 1.45 1.10 0.89 0.65 Weighted Average Life (years)
12/95 12/95 12/95 12/95 12/95 First Principal Payment Date
3/99 8/98 12/97 8/97 2/97 Last Principal Payment Date
99.00 6.25 6.37 6.59 6.81 7.26 Yield to Maturity(%)
99.25 6.09 6.18 6.35 6.51 6.84 Yield to Maturity(%)
99.50 5.93 5.99 6.10 6.21 6.43 Yield to Maturity(%)
99.75 5.77 5.80 5.86 5.91 6.02 Yield to Maturity(%)
100.00 5.61 5.61 5.61 5.61 5.61 Yield to Maturity(%)
100.25 5.46 5.43 5.37 5.32 5.21 Yield to Maturity(%)
100.50 5.30 5.24 5.13 5.02 4.81 Yield to Maturity(%)
100.75 5.14 5.06 4.89 4.73 4.41 Yield to Maturity(%)
101.00 4.99 4.88 4.65 4.44 4.01 Yield to Maturity(%)
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Maturity of Class A-2 Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
4.92 4.12 3.10 2.49 1.81 Weighted Average Life (years)
3/99 8/98 12/97 8/97 2/97 First Principal Payment Date
6/02 6/01 1/00 3/99 4/98 Last Principal Payment Date
99.00 6.32 6.36 6.44 6.52 6.68 Yield to Maturity(%)
99.25 6.26 6.29 6.35 6.41 6.53 Yield to Maturity(%)
99.50 6.20 6.22 6.26 6.30 6.38 Yield to Maturity(%)
99.75 6.14 6.15 6.17 6.19 6.23 Yield to Maturity(%)
100.00 6.08 6.08 6.08 6.08 6.08 Yield to Maturity(%)
100.25 6.02 6.00 5.98 5.96 5.93 Yield to Maturity(%)
100.50 5.95 5.93 5.89 5.85 5.78 Yield to Maturity(%)
100.75 5.89 5.86 5.80 5.74 5.63 Yield to Maturity(%)
101.00 5.83 5.79 5.71 5.63 5.48 Yield to Maturity(%)
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Maturity of Class A-3 Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
7.88 6.70 5.10 4.02 2.86 Weighted Average Life (years)
6/02 6/01 1/00 3/99 4/98 First Principal Payment Date
5/05 2/04 3/02 9/00 4/99 Last Principal Payment Date
99.00 6.50 6.52 6.57 6.62 6.73 Yield to Maturity(%)
99.25 6.46 6.47 6.51 6.55 6.63 Yield to Maturity(%)
99.50 6.42 6.43 6.45 6.48 6.53 Yield to Maturity(%)
99.75 6.37 6.38 6.39 6.40 6.43 Yield to Maturity(%)
100.00 6.33 6.33 6.33 6.33 6.33 Yield to Maturity(%)
100.25 6.29 6.29 6.27 6.26 6.23 Yield to Maturity(%)
100.50 6.25 6.24 6.21 6.19 6.14 Yield to Maturity(%)
100.75 6.21 6.19 6.16 6.12 6.04 Yield to Maturity(%)
101.00 6.17 6.14 6.10 6.04 5.94 Yield to Maturity(%)
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Repurchase Option of Class A-4 Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
14.99 13.73 11.46 9.44 6.33 Weighted Average Life (years)
5/05 2/04 3/02 9/00 4/99 First Principal Payment Date
11/14 12/13 10/11 8/09 3/06 Last Principal Payment Date
99.00 7.22 7.22 7.24 7.26 7.31 Yield to Repurchase Option(%)
99.25 7.19 7.19 7.20 7.22 7.26 Yield to Repurchase Option(%)
99.50 7.16 7.16 7.17 7.18 7.21 Yield to Repurchase Option(%)
99.75 7.13 7.13 7.14 7.14 7.15 Yield to Repurchase Option(%)
100.00 7.10 7.10 7.10 7.10 7.10 Yield to Repurchase Option(%)
100.25 7.07 7.07 7.07 7.06 7.05 Yield to Repurchase Option(%)
100.50 7.05 7.04 7.04 7.03 7.00 Yield to Repurchase Option(%)
100.75 7.02 7.01 7.00 6.99 6.95 Yield to Repurchase Option(%)
101.00 6.99 6.98 6.97 6.95 6.90 Yield to Repurchase Option(%)
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Maturity of Class A-5 Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
10.43 9.09 7.03 6.08 5.61 Weighted Average Life (years)
11/03 9/02 1/01 6/00 6/00 First Principal Payment Date
12/08 7/07 2/05 10/03 10/02 Last Principal Payment Date
99.00 7.14 7.15 7.19 7.21 7.22 Yield to Maturity(%)
99.25 7.11 7.12 7.14 7.16 7.17 Yield to Maturity(%)
99.50 7.07 7.08 7.09 7.10 7.11 Yield to Maturity(%)
99.75 7.03 7.04 7.05 7.05 7.06 Yield to Maturity(%)
100.00 7.00 7.00 7.00 7.00 7.00 Yield to Maturity(%)
100.25 6.97 6.96 6.95 6.95 6.94 Yield to Maturity(%)
100.50 6.93 6.92 6.91 6.90 6.89 Yield to Maturity(%)
100.75 6.90 6.89 6.86 6.84 6.83 Yield to Maturity(%)
101.00 6.86 6.85 6.81 6.79 6.78 Yield to Maturity(%)
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
Weighted Average Life, First Principal Payment Date, Last Principal Payment Date
and Yield to Repurchase Option of Class B Certificates
at Various Assumed Prices and Percentages of MHP
MHP Prepayment Assumption
--------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Price (%) 75% 100% 150% 200% 300%
- --------- --- ---- ---- ---- ----
16.82 15.65 13.28 11.49 9.22 Weighted Average Life (years)
12/08 7/07 2/05 10/03 10/02 First Principal Payment Date
11/14 12/13 10/11 8/09 3/06 Last Principal Payment Date
99.00 7.52 7.52 7.54 7.55 7.57 Yield to Repurchase Option(%)
99.25 7.49 7.50 7.50 7.51 7.53 Yield to Repurchase Option(%)
99.50 7.47 7.47 7.47 7.48 7.49 Yield to Repurchase Option(%)
99.75 7.44 7.44 7.44 7.45 7.45 Yield to Repurchase Option(%)
100.00 7.41 7.41 7.41 7.41 7.41 Yield to Repurchase Option(%)
100.25 7.39 7.38 7.38 7.38 7.37 Yield to Repurchase Option(%)
100.50 7.36 7.36 7.35 7.35 7.33 Yield to Repurchase Option(%)
100.75 7.33 7.33 7.32 7.31 7.30 Yield to Repurchase Option(%)
101.00 7.31 7.30 7.29 7.28 7.26 Yield to Repurchase Option(%)
</TABLE>
A-4
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or make any representations not contained in this Prospectus
Supplement or the Prospectus and if given or made, such information or
representation may not be relied upon as having been authorized by the Company,
CITSF or any Underwriter. This Prospectus Supplement and the Prospectus do not
constitute an offer to sell, or a solicitation of an offer to buy the Senior
Certificates, the Class A-4 Certificates, the Class A-5 Certificates or the
Class B Certificates in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement or the Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication the information herein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Summary of Terms ..................................................... S-4
Risk Factors ......................................................... S-22
Structure of the Transaction ......................................... S-26
The Contract Pool .................................................... S-26
Yield and Prepayment Considerations .................................. S-35
Description of the Certificates ...................................... S-44
Registration of the Offered Certificates ............................. S-61
Use of Proceeds ...................................................... S-62
ERISA Considerations ................................................. S-62
Certain Federal Income Tax Considerations ............................ S-64
Legal Investment Considerations ...................................... S-64
Underwriting ......................................................... S-65
Legal Matters ........................................................ S-65
Annex A .............................................................. A-1
PROSPECTUS
Reports to Certificateholders ........................................ 2
Additional Information ............................................... 2
Documents Incorporated by Reference .................................. 3
Summary of Terms ..................................................... 4
Special Considerations ............................................... 10
The Trust ............................................................ 11
Use of Proceeds ...................................................... 13
The CIT Group Securitization Corporation II, Seller .................. 13
The CIT Group/Sales Financing, Inc., Servicer ........................ 14
Yield Considerations ................................................. 17
Maturity and Prepayment Considerations ............................... 17
CIT .................................................................. 18
Description of the Certificates ...................................... 18
Description of FHA Insurance and VA Guarantees ....................... 33
Certain Legal Aspects of the Contracts ............................... 34
ERISA Considerations ................................................. 40
Certain Federal Income Tax Consequences .............................. 41
Legal Investment Considerations ...................................... 53
Ratings .............................................................. 53
Underwriting ......................................................... 54
Legal Matters ........................................................ 55
Experts .............................................................. 55
Index of Defined Terms ............................................... 56
Glossary ............................................................. 57
----------
Until February 12, 1996 (90 days after the commencement of the offering), all
dealers effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and the Prospectus to which it relates. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The CIT Group Securitization
Corporation II, Seller
(The CIT Group/Sales Financing, Inc., Servicer)
$199,201,194 (Approximate)
Manufactured Housing Contract
Senior/Subordinate Pass-Through
Certificates, Series 1995-2
PROSPECTUS SUPPLEMENT
CS First Boston
Morgan Stanley & Co.
Incorporated
- --------------------------------------------------------------------------------
