Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted without the delivery of a final prospectus supplement
and accompanying prospectus. This prospectus supplement and the accompanying
prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 10, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 8, 1997)
$500,000,000
(Approximate)
CIT Home Equity Loan Trust 1997-1
Home Equity Loan Asset Backed Certificates, Series 1997-1
THE CIT GROUP SECURITIZATION CORPORATION III
Depositor
THE CIT GROUP/CONSUMER FINANCE, INC.
Seller and Master Servicer
The Home Equity Loan Asset Backed Certificates, Series 1997-1 will consist
of (i) the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates, the Class
A-6 Certificates, the Class A-7 Certificates, the Class A-8 Certificates, the
Class A-9 Certificates and the Class A-10 Certificates (collectively, the "Class
A Certificates"), (ii) the Class M-1 Certificates and the Class M-2 Certificates
(collectively, the "Mezzanine Certificates"), (iii) the Class B-1 Certificates
and the Class B-2 Certificates (collectively, the "Class B Certificates" and
collectively with the Mezzanine Certificates, the "Subordinate Certificates"),
and (iv) the residual class of certificates (the "Class R Certificates"). Only
the Class A Certificates, the Mezzanine Certificates and the Class B-1
Certificates (collectively, the "Offered Certificates") are offered hereby.
Distributions on the Class M-1 Certificates will be subordinated to
distributions on the Class A Certificates, distributions on the Class M-2
Certificates will be subordinated to distributions on the Class M-1 Certificates
and the Class A Certificates, distributions on the Class B-1 Certificates will
be subordinated to distributions on the Mezzanine Certificates and the Class A
Certificates and distributions on the Class B-2 Certificates will be
subordinated to distributions on the Class B-1 Certificates, the Mezzanine
Certificates and the Class A Certificates, in each case, to the extent described
herein.
The Certificates will represent the entire beneficial ownership interest in
a trust fund (the "Trust Fund" or "Trust"), designated as the CIT Home Equity
Loan Trust 1997-1, to be created pursuant to a Pooling and Servicing Agreement,
dated as of July 1, 1997, among The CIT Group Securitization Corporation III
(the "Depositor"), The CIT Group/Consumer Finance, Inc., as master servicer
(referred to herein as "CIT Consumer Finance," or the "Master Servicer," as
applicable), The CIT Group/Consumer Finance, Inc. (the "Seller") and The Bank of
New York, as trustee (the "Trustee").
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE S-26 HEREIN AND ON PAGE 22 IN THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR,
THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
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.
<TABLE>
<CAPTION>
Original Certificate Underwriting Discounts Proceeds to
Balance Pass-Through Rate Price to Public and Commissions Depositor (1)
-------------------- ------------------ --------------- ---------------------- -------------
<S> <C> <C> <C> <C> <C>
Per Class A-1 Certificate $ %(2) % % %
Per Class A-2 Certificate $ %(2) % % %
Per Class A-3 Certificate $ %(2) % % %
Per Class A-4 Certificate $ %(2) % % %
Per Class A-5 Certificate $ %(2) % % %
Per Class A-6 Certificate $ %(2) % % %
Per Class A-7 Certificate $ %(2) % % %
Per Class A-8 Certificate $ %(2) % % %
Per Class A-9 Certificate $ %(2) % % %
Per Class A-10 Certificate $ (3) % % %
Per Class M-1 Certificate $ %(2) % % %
Per Class M-2 Certificate $ %(2) % % %
Per Class B-1 Certificate $ %(2) % % %
</TABLE>
- --------------
(1) Before deducting expenses, estimated to be $757,000.
(2) The Pass-Through Rate with respect to the Offered Certificates (other than
the Class A-10 Certificates) will on any Distribution Date equal the lesser
of (x) the Pass-Through Rate for such Class set out above and (y) the Fixed
Rate Group Available Funds Cap Rate (as defined herein) applicable to such
Distribution Date.
(3) On each Distribution Date, the Pass-Through Rate on the Class A-10
Certificates will be equal to the least of (x) with respect to any
Distribution Date which occurs on or prior to the Clean-up Call Date (as
defined herein), One-month LIBOR (as defined herein) plus .__% per annum
and for any Distribution Date thereafter, One-month LIBOR plus .__% per
annum, (y) the Adjustable Rate Group Available Funds Cap Rate (as defined
herein) applicable to such Distribution Date and (z) ___% per annum.
The Offered Certificates are offered by the Underwriters, subject to prior
sale, when, as and if 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 will be made in book-entry form only
through the facilities of The Depository Trust Company ("DTC") in the United
States or through Centrale de Livraison de Valeurs Mobiliers, S.A. ("CEDEL") and
the Euroclear System ("Euroclear") in Europe on or about July __, 1997.
MORGAN STANLEY DEAN WITTER
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
July __, 1997
<PAGE>
The Underwriters intend to make a secondary market in the Offered
Certificates but have no obligation to do so. There is currently no secondary
market for the Offered Certificates and there can be no assurance that such a
market will develop or, if it does develop, that it will continue.
-------------------
This Prospectus Supplement does not contain complete information about the
offering of the Certificates. Additional information is contained in the
Prospectus of the Depositor dated April 8, 1997 (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
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 the final Prospectus Supplement is
inconsistent with statements contained in this Prospectus Supplement, the
statements in the final Prospectus Supplement shall control. Terms used and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Prospectus.
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and the
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE OFFERED
CERTIFICATES. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
-------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "The Portfolio of
Mortgage Loans -- Delinquency and Loss Experience" may constitute
forward-looking statements within the meaning of Section 7A of the Securities
Act of 1933, as amended, and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of CIT Consumer Finance's mortgage loan portfolio to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
AVAILABLE INFORMATION
The Depositor has filed a Registration Statement under the Securities Act
of 1933, as amended (the "1933 Act"), with the Securities and Exchange
Commission (the "Commission") on behalf of the Trust with respect to the Offered
Certificates offered pursuant to the Prospectus dated April 8, 1997 and this
Prospectus Supplement. For further information, reference is made to the
Registration Statement and amendments thereof and to the exhibits thereto, which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, 13th Floor, New York, New York 10048; and at The
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission maintains a site on the World Wide Web containing
reports, proxy materials, information statements and other items. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
REPORTS TO THE CERTIFICATEHOLDERS
So long as the Offered Certificates are in book-entry form, monthly and
annual reports concerning the Certificates and the Trust will be sent by the
Trustee to Cede & Co., as the nominee of DTC and as registered holder of the
Offered Certificates pursuant to the Pooling and Servicing Agreement. DTC will
supply such reports to the Certificateholders in accordance with its procedures.
See "Risk Factors--Book-Entry Registration" in the Prospectus and "Description
of the Certificates--Book-Entry Certificates" herein and in the Prospectus. The
Depositor will file or cause to be filed with the Commission such periodic
reports with respect to the Trust as are required under the Securities Exchange
Act of 1934 and the rules and regulations of the Commission thereunder. It is
the Depositor's intent to suspend the filing of such reports as soon as such
reports are no longer statutorily required.
S-2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary of
Terms are defined elsewhere in this Prospectus Supplement or in the Prospectus.
Reference is made to the Index to Defined Terms for the location herein of the
definitions of certain capitalized terms used herein.
Issuer ..................... CIT Home Equity Loan Trust 1997-1 (the "Issuer").
Depositor .................. The CIT Group Securitization Corporation III (the
"Depositor"), a Delaware corporation and a limited
purpose finance subsidiary of The CIT Group
Holdings, Inc. ("CIT"), a Delaware corporation.
See "The CIT Group Securitization Corporation III,
The Depositor" herein and in the Prospectus.
Seller ..................... The CIT Group/Consumer Finance, Inc. ("CIT
Consumer Finance" or "Seller," as applicable). The
Mortgage Loans (as defined herein) were originated
or acquired by the Seller or its affiliates and
were acquired by the Depositor from the Seller in
a privately negotiated transaction.
Master Servicer ............ CIT Consumer Finance (in its capacity as master
servicer of the Mortgage Loans, the "Master
Servicer"). The Master Servicer will be
responsible for the servicing of the Mortgage
Loans. See "Servicing of Mortgage Loans" herein.
Sub-Servicer ............... The CIT Group/Sales Financing, Inc. ("CITSF") will
be appointed as a Sub-Servicer for all of the
Mortgage Loans in the Mortgage Pool (as defined
herein), and as a Sub-Servicer, will perform all
or most of the servicing responsibilities
described under "The Pooling and Servicing
Agreement" herein and in the Prospectus and
"Servicing of Mortgage Loans" herein, unless it is
replaced as described under "The CIT
Group/Consumer Finance, Inc., Seller and Master
Servicer" herein.
Cut-off Date ............... July 1, 1997 (the "Cut-off Date").
Closing Date ............... On or about July __, 1997 (the "Closing Date").
Trustee .................... The Bank of New York, a New York banking
corporation, not in its individual capacity but
solely as trustee on behalf of the holders of the
Certificates (the "Trustee").
The Certificates ........... The Home Equity Loan Asset-Backed Certificates,
Series 1997-1 (the "Certificates") will consist of
the Offered Certificates (as defined herein), the
Class B-2 Certificates and a class of residual
certificates (the "Class R Certificates"). The
Class B-2 Certificates and the Class R
Certificates are not offered hereby. The
Certificates will be issued pursuant to a pooling
and servicing agreement (the "Pooling and
Servicing Agreement") to be dated as of July 1,
1997 among the Depositor, the Seller, the Master
Servicer and the Trustee. Only the Offered
Certificates are offered hereby. The Depositor
will initially retain the Class B-2 Certificates.
Any information contained herein with respect to
the Class B-2 Certificates is provided only to
permit a better understanding of the Offered
Certificates.
- --------------------------------------------------------------------------------
S-3
<PAGE>
- --------------------------------------------------------------------------------
Denominations .............. The Offered Certificates will be issued in minimum
denominations of $1,000 and integral multiples of
$1,000 in excess thereof except that one
Certificate in each Class (as defined herein) may
be issued in a different denomination. Each
Offered Certificate and each Class B-2 Certificate
will represent a percentage interest (a
"Percentage Interest") in the respective Class
determined as of any date of determination by
dividing the Certificate Balance (as defined
herein) of such Certificate by the Certificate
Balance for the related Class.
The Trust Property ......... The Certificates will represent the entire
beneficial ownership interest in a trust fund (the
"Trust" or the "Trust Fund"), which will consist
primarily of a pool (the "Mortgage Pool" or
"Pool") of certain mortgage related assets (the
"Mortgage Assets") consisting of fixed and
adjustable rate mortgage loans (each, a "Mortgage
Loan") evidenced by promissory notes (each, a
"Mortgage Note") secured by mortgages, deeds of
trust or similar security instruments (each, a
"Mortgage") creating first or subordinate liens on
one- to four-family residential properties (each,
a "Mortgaged Property"). The Mortgage Pool will
consist of two groups of Mortgage Loans (each, a
"Mortgage Loan Group"). One Mortgage Loan Group
consists of a group of Fixed Rate Mortgage Loans
(as defined herein) (the "Fixed Rate Group") and
the other Mortgage Loan Group consists of a group
of Adjustable Rate Mortgage Loans (as defined
herein) (the "Adjustable Rate Group").
Pass-Through Rates
and Certificate
Balances ................. Home Equity Loan Asset Backed Certificates, Series
1997-1, to be issued in the following Classes
(each, a "Class") and Certificate Balances as of
the Closing Date, set forth below:
Pass-
Through Certificate
Class Rate Balance
----- -------- ----------
Class A-1 Certificates %(1) $
Class A-2 Certificates %(1) $
Class A-3 Certificates %(1) $
Class A-4 Certificates %(1) $
Class A-5 Certificates %(1) $
Class A-6 Certificates %(1) $
Class A-7 Certificates %(1) $
Class A-8 Certificates %(1) $
Class A-9 Certificates %(1) $
Class A-10 Certificates (2) $
Class M-1 Certificates %(1) $
Class M-2 Certificates %(1) $
Class B-1 Certificates %(1) $
Class B-2 Certificates %(1) $
----------------
(1) The Pass-Through Rate with respect to the
Offered Certificates and the Class B-2
Certificates (other than the Class A-10
Certificates) will on any Distribution Date equal
the lesser of (x) the Pass-Through Rate for such
Class set out above and (y) the Fixed Rate Group
Available Funds Cap Rate (as defined herein)
applicable to such Distribution Date.
(2) On each Distribution Date, the Pass-Through
Rate on the Class A-10 Certificates will be equal
to the least of (x) with respect to any
Distribution Date which occurs on or prior to the
Clean-up Call Date (as defined herein), One-month
LIBOR (as defined herein) plus .__% per annum and
for any Distribution Date thereafter, One-month
LIBOR plus .__% per annum, (y) the Adjustable Rate
Group Available Funds Cap Rate (as defined herein)
applicable to such Distribution Date and (z) ___%
per annum (the "Maximum Variable Rate").
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
The Fixed Rate Group Available Funds Cap Rate and
the Adjustable Rate Group Available Funds Cap Rate
are structured to take into account in certain
circumstances the Mortgage Rates on Mortgage Loans
which are not in the related Mortgage Loan Group.
Consequently, under certain loss and prepayment
scenarios, the amount of Current Interest payable
on one or more Classes of Fixed Rate Certificates
on any Distribution Date may be more or less than
the amount of Current Interest that would have
been payable if the Fixed Rate Group Available
Funds Cap Rate were based solely on the Mortgage
Rates on the Mortgage Loans in the Fixed Rate
Group; similarly, the amount of Current Interest
payable on the Variable Rate Certificates on any
Distribution Date may be more or less than the
amount of Current Interest that would have been
payable if the Adjustable Rate Group Available
Funds Cap Rate were based solely on the Mortgage
Rates on the Mortgage Loans in the Adjustable Rate
Group.
The "Fixed Rate Group Available Funds Cap Rate"
means as of any Distribution Date (as defined
herein), an amount, expressed as a per annum rate
(calculated on the basis of a 360 day year assumed
to consist of twelve 30-day months), equal to (i)
the weighted average interest rate on (A) all of
the Mortgage Loans in the Fixed Rate Group as of
the first day of the related Due Period and (B) a
portion of each Mortgage Loan in the Adjustable
Rate Group based on a fraction (which shall in no
event be greater than one), the numerator of which
is an amount equal to the excess of the
Certificate Balance of the Fixed Rate Certificates
as of the first day of the related Due Period over
the aggregate Principal Balance of the Mortgage
Loans in the Fixed Rate Group as of the first day
of the related Due Period and the denominator of
which is equal to the aggregate Principal Balance
of the Mortgage Loans in the Adjustable Rate Group
as of the first day of the related Due Period,
minus (ii) the Master Servicing Fee (as defined
herein), expressed as a per annum rate, minus
(iii) the Weighted Carve Out Fixed Rate.
The "Weighted Carve Out Fixed Rate" means, as of
any Distribution Date, an amount, expressed as a
per annum rate, equal to:
(I) if the Certificate Balance of the Fixed Rate
Certificates as of the first day of the related
Due Period is less than or equal to the aggregate
Principal Balance of the Mortgage Loans in the
Fixed Rate Group as of the first day of the
related Due Period, __%; or
(II) if the Certificate Balance of the Fixed Rate
Certificates as of the first day of the related
Due Period is greater than the aggregate Principal
Balance of the Mortgage Loans in the Fixed Rate
Group as of the first day of the related Due
Period, the sum of:
(i) the product of (x) a fraction the
numerator of which is the aggregate Principal
Balance of the Mortgage Loans in the Fixed
Rate Group as of the first day of the related
Due Period and the denominator of which is an
amount equal to the Certificate Balance of
the Fixed Rate Certificates as of the first
day of the related Due Period and (y) __%,
and
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
(ii) the product of (x) a fraction the
numerator of which is an amount equal to the
aggregate Principal Balance of the fraction
of the Mortgage Loans in the Adjustable Rate
Group as described in clause (B) of the
definition of Fixed Rate Group Available
Funds Cap Rate and the denominator of which
is an amount equal to the Certificate Balance
of the Fixed Rate Certificates as of the
first day of the related Due Period and (y)
__%.
The "Adjustable Rate Group Available Funds Cap
Rate" means as of any Distribution Date, an
amount, expressed as a per annum rate, equal to:
(x) the sum of (i)(a) the amount of interest
due and collected (or advanced) on all of the
Mortgage Loans in the Adjustable Rate Group
for the related Due Period, minus (b) the
product of (A) 1/12 of the weighted average
interest rate on all of the Mortgage Loans in
the Adjustable Rate Group as of the first day
of the related Due Period and (B) the
Principal Balance of the fractional Mortgage
Loans in the Adjustable Rate Group described
in clause (B) in the definition of the Fixed
Rate Group Available Funds Cap Rate
determined as of such Distribution Date, plus
(ii) the excess, if any, of the amount of
interest due and collected (or advanced) on
all of the Mortgage Loans in the Fixed Rate
Group for the related Due Period and on the
fractional Mortgage Loans for such Due Period
described in clause (i)(b) above over the
amount of interest due on the Fixed Rate
Certificates on such Distribution Date, minus
(iii) the Master Servicing Fee payable on
such Distribution Date, minus (iv) the
Weighted Carve Out Adjustable Amount, divided
by (y) the Certificate Balance of the Class
A-10 Certificates as of the first day of the
related Due Period, multiplied by (z) twelve.
The "Weighted Carve Out Adjustable Amount" means,
as of any Distribution Date, $___________.
The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the
Class A-4 Certificates, the Class A-5
Certificates, the Class A-6 Certificates, the
Class A-7 Certificates, the Class A-8
Certificates, the Class A-9 Certificates and the
Class A-10 Certificates are collectively referred
to herein as the "Class A Certificates." The Class
M-1 Certificates and the Class M-2 Certificates
are collectively referred to as the "Mezzanine
Certificates." The Class B-1 Certificates and the
Class B-2 Certificates are collectively referred
to as the "Class B Certificates." The Mezzanine
Certificates and the Class B Certificates are
collectively referred to as the "Subordinate
Certificates." The Class A Certificates, the
Mezzanine Certificates and the Class B-1
Certificates are collectively referred to as the
"Offered Certificates."
In addition, the Class A Certificates (other than
the Class A-10 Certificates), the Mezzanine
Certificates and the Class B Certificates are
collectively referred to as the "Fixed Rate
Certificates" and the
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
Class A-10 Certificates are referred to herein as
the "Variable Rate Certificates."
The Subordinate Certificates are subordinate in
right of distribution to the Class A Certificates
to the extent described herein. The Class M-1
Certificates are subordinate in right of
distribution to the Class A Certificates to the
extent described herein. The Class M-2
Certificates are subordinate in right of
distribution to the Class A Certificates and the
Class M-1 Certificates to the extent described
herein. The Class B-1 Certificates are subordinate
in right of distribution to the Class A
Certificates and the Mezzanine Certificates to the
extent described herein. The Class B-2
Certificates are subordinate in right of
distribution to the Class A Certificates, the
Mezzanine Certificates and the Class B-1
Certificates to the extent described herein.
On any date after the Closing Date, the "Aggregate
Certificate Balance" is the sum of the Certificate
Balance of all Classes of the Offered Certificates
and the Class B-2 Certificates.
The Mortgage Loans ......... The statistical information presented herein is
based on the number and the Principal Balances of
the Mortgage Loans as of the Cut-off Date. Unless
otherwise noted, all statistical percentages
presented herein are approximate and measured by
the aggregate Principal Balance of the Mortgage
Loans in the Trust, in relation to the Mortgage
Loans in the applicable Mortgage Loan Group or of
all the Mortgage Loans in the Trust, in each case
as of the Cut-off Date. The aggregate Principal
Balance of the Mortgage Loans in the Fixed Rate
Group is $410,062,866.73 and the aggregate
Principal Balance of the Mortgage Loans in the
Adjustable Rate Group is $90,005,693.10.
The Mortgage Pool will consist of conventional
adjustable rate and fixed rate mortgage loans
secured by first and subordinate liens on the
Mortgaged Properties. As of the Cut-off Date,
75.05% of the Mortgage Pool consists of Mortgage
Loans secured by first liens on the Mortgaged
Properties, and 24.95% of the Mortgage Pool
consists of Mortgage Loans secured by subordinate
liens on the Mortgaged Properties.
The interest rate on each Mortgage Loan (the
"Mortgage Rate") is either fixed (a "Fixed Rate"
and a Mortgage Loan relating thereto is a "Fixed
Rate Mortgage Loan") or adjustable semi-annually
or annually (an "Adjustable Rate" and a Mortgage
Loan relating thereto is an "Adjustable Rate
Mortgage Loan"). During either the first six,
twelve, twenty-four or thirty-six months following
origination, each such Adjustable Rate Mortgage
Loan will bear interest at a Mortgage Rate fixed
at origination. Thereafter, each Adjustable Rate
Mortgage Loan will bear interest at a Mortgage
Rate equal to either (i) the yield on U.S.
Treasury securities adjusted to a constant
maturity of one year ("One-year CMT") or (ii) the
London interbank offered rate for six-month United
States dollar deposits ("Six-month LIBOR") plus a
fixed percentage (the "Gross Margin") set forth in
the related Mortgage Note, subject to the
limitation that the Mortgage Rate will not
increase or decrease by more than a specified
percentage on any Adjustment Date (as defined
herein) (the "Periodic Rate Cap"). In addition,
adjustments
- -------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
to the Mortgage Rate for each Adjustable Rate
Mortgage Loan are subject to a lifetime maximum
interest rate (the "Maximum Rate").
Payment of a substantial portion of the original
principal balance of certain Mortgage Loans
("Balloon Loans") will be due on maturity
("Balloon Payments"). Certain of the Mortgage
Loans permit the mortgagee to require the
Mortgagor (as defined in the Prospectus) to pay
the full principal balance of the Mortgage Loan on
a specified date (the "Call Date") prior to the
maturity of the Mortgage Loan ("Call Loans").
Final Scheduled
Distribution Dates ...... The Final Scheduled Distribution Dates (each, a
"Final Scheduled Distribution Date") for each of
the respective Classes of Offered Certificates are
as follows, although it is anticipated that the
actual final Distribution Date for each Class will
occur earlier than the Final Scheduled
Distribution Date. See "Yield and Prepayment
Considerations" herein.
Final Scheduled
Class Distribution Date
----- -----------------
Class A-1 Certificates:
Class A-2 Certificates:
Class A-3 Certificates:
Class A-4 Certificates:
Class A-5 Certificates:
Class A-6 Certificates:
Class A-7 Certificates:
Class A-8 Certificates:
Class A-9 Certificates:
Class A-10 Certificates:
Class M-1 Certificates:
Class M-2 Certificates:
Class B-1 Certificates:
Business Day ............... Any day other than a Saturday, Sunday or any day
on which banking institutions or trust companies
in the states of New York, New Jersey or Oklahoma
are authorized by law, regulation or executive
order to be closed (each, a "Business Day").
Distribution Date .......... The 15th day of each month or, if such day is not
a Business Day, on the first Business Day
thereafter, commencing on August 15, 1997 (each, a
"Distribution Date").
Determination Date........ The third Business Day prior to each
Distribution Date (each, a "Determination Date").
Record Date ................ The calendar day preceding each Distribution Date
or, if Definitive Certificates (as defined herein)
are issued, the last Business Day of the month
preceding the month of such Distribution Date
(each, a "Record Date").
Due Period ................. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Mortgage Loans for application towards the
payment of principal
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
and interest to the Certificateholders and the
payment of fees on such Distribution Date. The
"Due Period" will be the calendar month
immediately preceding the Distribution Date. The
first Due Period will commence on and include July
1, 1997 and will end on and include July 31, 1997.
Distributions--General ..... For each Distribution Date, interest due with
respect to the Certificates will be the interest
which has accrued thereon at the applicable
Pass-Through Rate (subject to the Fixed Rate Group
Available Funds Cap Rate or, in the case of the
Class A-10 Certificates, determined by taking into
account the Adjustable Rate Group Available Funds
Cap Rate and the Maximum Variable Rate as
described herein) from the preceding Distribution
Date (or from the Closing Date in the case of the
first Distribution Date) to and including the date
prior to the current Distribution Date (the "
Accrual Period").
All calculations of interest on the Fixed Rate
Certificates will be made on the basis of a
360-day year assumed to consist of twelve 30-day
months.
All calculations of interest on the Variable Rate
Certificates will be made on the basis of the
actual number of days elapsed in the related
Accrual Period and a 360-day year.
Interest ................... On each Distribution Date, the Interest Remittance
Amount will be distributed in the following order
of priority:
First, to the holders of the Class A Certificates,
the Class A Current Interest plus the Interest
Carry Forward Amount with respect to each such
Class of Class A Certificates without any priority
among such Class A Certificates; provided, that if
the Interest Remittance Amount is not sufficient
to make a full distribution of interest with
respect to all Classes of the Class A
Certificates, the Interest Remittance Amount will
be distributed among the outstanding Classes of
Class A Certificates pro rata based on the
aggregate amount of interest due on each such
Class, and the amount of the shortfall will be
carried forward with accrued interest at the
applicable Pass-Through Rate;
Second, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
M-1 Certificates, the Class M-1 Current Interest;
Third, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
M-2 Certificates, the Class M-2 Current Interest;
Fourth, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
B-1 Certificates, the Class B-1 Current Interest;
Fifth, to the extent of the Interest Remittance
Amount then remaining, to the holders of the Class
B-2 Certificates, the Class B-2 Current Interest;
and
Sixth, the sum of (x) the amount, if any, of the
Interest Remittance Amount remaining in the
Certificate Account after application with respect
to the priorities set forth above plus (y) the
amount of any
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S-9
<PAGE>
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Overcollateralization Release Amount for such
Distribution Date (such amounts, the "Monthly
Excess Cashflow Amount" for a Distribution Date)
shall be applied, first, to pay the Master
Servicing Fee to the Master Servicer if CIT
Consumer Finance or one of its affiliates is the
Master Servicer and, second, as described below
under "Credit Enhancement--Application of Monthly
Excess Cashflow Amounts" in this Summary.
"Current Interest" with respect to each Class of
Offered Certificates and the Class B-2
Certificates means, with respect to any
Distribution Date, the aggregate amount of
interest accrued during the related Accrual Period
on the Certificate Balance of the related Class of
Offered Certificates and the Class B-2
Certificates at the applicable Pass-Through Rate
(subject to the Fixed Rate Group Available Funds
Cap Rate or, in the case of the Class A-10
Certificates, determined by taking into account
the Adjustable Rate Group Available Funds Cap Rate
and the Maximum Variable Rate as described
herein).
The "Interest Remittance Amount" means, as of any
Distribution Date, the sum of (i) all interest
collected or advanced by the Master Servicer
during the related Due Period on the Mortgage
Loans, including any late fees, prepayment fees
and other similar fees on the Mortgage Loans (less
the Master Servicing Fee if CIT Consumer Finance
or one of its affiliates is not the Master
Servicer), (ii) all Compensating Interest (as
defined herein) paid by the Master Servicer with
respect to such Due Period; (iii) the portion of
any Substitution Adjustment (as defined herein)
relating to interest delivered by the Seller in
connection with a substitution of a Mortgage Loan
with respect to the related Due Period, (iv) the
interest portion of any Purchase Price (as defined
herein) with respect to each Mortgage Loan that
was repurchased from the Trust during the related
Due Period and (v) all Liquidation Proceeds (as
defined herein) actually collected by the Master
Servicer during the related Due Period (to the
extent such Liquidation Proceeds related to
interest).
The "Interest Carry Forward Amount" with respect
to any Class of the Offered Certificates and the
Class B-2 Certificates for any Distribution Date
is the sum of (x) the amount, if any, by which (i)
the Current Interest as of the immediately
preceding Distribution Date plus the Interest
Carry Forward Amount from the immediately
preceding Distribution Date for such Class
exceeded (ii) the amount of the actual
distribution with respect to interest made to the
holders of such Class of Offered Certificates and
the Class B-2 Certificates on such immediately
preceding Distribution Date plus (y) interest on
such amount calculated for the related Accrual
Period at the related Pass-Through Rate in effect
with respect to such Class of Offered Certificates
and the Class B-2 Certificates.
Principal Before
the Stepdown Date
or if a Trigger Event
is in Effect ............. On each Distribution Date (a) before the Stepdown
Date (as defined herein) or (b) on or after the
Stepdown Date if a Trigger Event (as defined
herein) is in effect,
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S-10
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(I) the holders of the Class A Certificates will
be entitled to receive payment of 100% of an
amount equal to the Variable Rate Principal
Distribution Amount (as defined herein) for such
Distribution Date in the following amounts and
priorities:
First, to the holders of the Class A-10
Certificates until the Class A-10 Certificate
Balance has been reduced to zero;
Second, to the holders of the Class A-9
Certificates, in an amount equal to the Class A-9
Lockout Distribution Amount;
Third, to the holders of the Class A Certificates
(other than the Class A-9 Certificates and the
Class A-10 Certificates) in sequential order until
the Certificate Balance of each such Class of
Class A Certificates has been reduced to zero; and
Fourth, to the holders of the Class A-9
Certificates until the Class A-9 Certificate
Balance has been reduced to zero; and
(II) the holders of the Class A Certificates will
be entitled to receive payment of an amount equal
to 100% of the Fixed Rate Principal Distribution
Amount (as defined herein) for such Distribution
Date in the following amounts and priorities:
First, to the extent not previously distributed,
to the holders of the Class A-9 Certificates in an
amount equal to the Class A-9 Lockout Distribution
Amount;
Second, to the holders of the Class A Certificates
(other than the Class A-9 Certificates and the
Class A-10 Certificates) in sequential order until
the Certificate Balance of each such Class of
Class A Certificates has been reduced to zero;
Third, to the holders of the Class A-9
Certificates until the Class A-9 Certificate
Balance has been reduced to zero; and
Fourth, to the holders of the Class A-10
Certificates until the Class A-10 Certificate
Balance is reduced to zero.
Until the Stepdown Date, on each Distribution
Date, no principal will be distributed to the
Subordinate Certificates. Thereafter, principal
will be distributed to the Subordinate
Certificates only if a Trigger Event is not in
effect.
"Fixed Rate Principal Distribution Amount" means,
as of any Distribution Date, the sum of (i) the
Principal Remittance Amount (as defined herein)
with respect to the Fixed Rate Group, minus, for
Distribution Dates occurring on and after the
related Stepdown Date, the Fixed Rate Group
Overcollateralization Release Amount and (ii) the
Fixed Rate Group Extra Principal Distribution
Amount.
"Variable Rate Principal Distribution Amount"
means, as of any Distribution Date, the sum of (i)
the Principal Remittance Amount with respect to
the Adjustable Rate Group, minus, for Distribution
Dates occurring on and after the related Stepdown
Date,the Adjustable Rate Group
Overcollateralization Release Amount and (ii) the
Adjustable Rate Group Extra Principal Distribution
Amount.
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S-11
<PAGE>
- --------------------------------------------------------------------------------
"Extra Principal Distribution Amount" means, as of
any Distribution Date, the lesser of (x) the
Monthly Excess Interest Amount for such
Distribution Date and (y) the
Overcollateralization Deficiency (as defined
herein) for such Distribution Date.
The "Fixed Rate Group Extra Principal Distribution
Amount" is equal to the sum of (x) the greater of
(i) zero or (ii) the lesser of (I) the Extra
Principal Distribution Amount or (II) the product
of (1) an amount equal to (A) the Realized Losses
for the Fixed Rate Group in the preceding Due
Period divided by the aggregate Principal Balance
of the Mortgage Loans in the Fixed Rate Group
minus (B) the Realized Losses for the Adjustable
Rate Group in the preceding Due Period divided by
the aggregate Principal Balance of the Mortgage
Loans in the Adjustable Rate Group and (2) the
aggregate Principal Balance of the Mortgage Loans
in the Fixed Rate Group and (y) a pro-rata
portion, based on the aggregate Principal Balance
of the Mortgage Loans in the related Mortgage Loan
Group, of any Extra Principal Distribution Amount
remaining after taking into account clause (x) of
this definition and clause (x) of the definition
of the Adjustable Rate Group Extra Principal
Distribution Amount.
The "Adjustable Rate Group Extra Principal
Distribution Amount" is equal to the sum of (x)
the greater of (i) zero or (ii) the lesser of (I)
the Extra Principal Distribution Amount or (II)
the product of (1) an amount equal to (A) the
Realized Losses for the Adjustable Rate Group in
the preceding Due Period divided by the aggregate
Principal Balance of the Mortgage Loans in the
Adjustable Rate Group minus (B) the Realized
Losses for the Fixed Rate Group in the preceding
Due Period divided by the aggregate Principal
Balance of the Mortgage Loans in the Fixed Rate
Group and (2) the aggregate Principal Balance of
the Mortgage Loans in the Adjustable Rate Group
and (y) a pro-rata portion, based on the aggregate
Principal Balance of the Mortgage Loans in the
related Mortgage Loan Group, of any Extra
Principal Distribution Amount remaining after
taking into account clause (x) of this definition
and clause (x) of the definition of the Fixed Rate
Group Extra Principal Distribution Amount.
The "Fixed Rate Group Overcollateralization
Release Amount" is equal to the sum of (x) the
greater of (i) zero or (ii) the lesser of (I) the
Overcollateralization Release Amount or (II) the
product of (1) an amount equal to (A) the Realized
Losses for the Adjustable Rate Group in the
preceding Due Period divided by the aggregate
Principal Balance of the Mortgage Loans in the
Adjustable Rate Group minus (B) the Realized
Losses for the Fixed Rate Group in the preceding
Due Period divided by the aggregate Principal
Balance of the Mortgage Loans in the Fixed Rate
Group and (2) the aggregate Principal Balance of
the Mortgage Loans in the Fixed Rate Group and (y)
a pro-rata portion, based on the aggregate
Principal Balance of the Mortgage Loans in the
related Mortgage Loan Group, of any
Overcollateralization Release Amount remaining
after taking into account clause (x) of this
definition and clause (x) of the definition of the
Adjustable Rate Group Overcollateralization
Release Amount.
The "Adjustable Rate Group Overcollateralization
Release Amount" is equal to the sum of (x) the
greater of (i) zero or (ii) the lesser of (I) the
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S-12
<PAGE>
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Overcollateralization Release Amount or (II) the
product of (1) an amount equal to (A) the Realized
Losses for the Fixed Rate Group in the preceding
Due Period divided by the aggregate Principal
Balance of the Mortgage Loans in the Fixed Rate
Group minus (B) the Realized Losses for the
Adjustable Rate Group in the preceding Due Period
divided by the aggregate Principal Balance of the
Mortgage Loans in the Adjustable Rate Group and
(2) the aggregate Principal Balance of the
Mortgage Loans in the Adjustable Rate Group and
(y) a pro-rata portion, based on the aggregate
Principal Balance of the Mortgage Loans in the
related Mortgage Loan Group, of any
Overcollateralization Release Amount remaining
after taking into account clause (x) of this
definition and clause (x) of the definition of the
Fixed Rate Group Overcollateralization Release
Amount.
The "Class A-9 Lockout Distribution Amount" for
any Distribution Date will be the product of (i)
the applicable Class A-9 Lockout Percentage for
such Distribution Date and (ii) the Class A-9
Lockout Pro Rata Distribution Amount for such
Distribution Date.
The "Class A-9 Lockout Percentage" for each
Distribution Date shall be as follows:
Distribution Dates Lockout Percentage
------------------ ------------------
In no event shall the Class A-9 Lockout
Distribution Amount for a Distribution Date exceed
the Fixed Rate Principal Distribution Amount for
such Distribution Date.
The "Class A-9 Lockout Pro Rata Distribution
Amount" for any Distribution Date will be an
amount equal to the product of (x) a fraction, the
numerator of which is the Certificate Balance of
the Class A-9 Certificates immediately prior to
such Distribution Date and the denominator of
which is the aggregate Certificate Balance of all
Classes of the Class A Certificates (other than
the Class A-10 Certificates) immediately prior to
such Distribution Date and (y) the Class A
Principal Distribution Amount minus the Class A
Variable Allocation Amount (as defined herein) for
such Distribution Date.
The Class A Certificates (other than the Class
A-10 Certificates and the Class A-9 Certificates)
are "sequential pay" classes such that the holders
of the Class A-8 Certificates will receive no
payments of principal until the Class A-7
Certificate Balance is reduced to zero, the
holders of the Class A-7 Certificates will receive
no payments of principal until the Class A-6
Certificate Balance is reduced to zero, the
holders of the Class A-6 Certificates will receive
no payments of principal until the Class A-5
Certificate Balance is reduced to zero, the
holders of the Class A-5 Certificates will receive
no payments of principal until the Class A-4
Certificate Balance has been reduced to zero, the
holders of the Class A-4 Certificates will receive
no payments of principal until the Class A-3
Certificate Balance has been reduced to zero, the
holders of the Class A-3 Certificates will receive
no payments
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S-13
<PAGE>
- --------------------------------------------------------------------------------
of principal until the Class A-2 Certificate
Balance has been reduced to zero, and the holders
of the Class A-2 Certificates will receive no
payments of principal until the Class A-1
Certificate Balance has been reduced to zero;
provided, however, that on any Distribution Date
on which the sum of the Certificate Balance of the
Subordinate Certificates and the
Overcollateralization Amount is zero, any amounts
of principal payable to the holders of the Class A
Certificates on such Distribution Date shall be
distributed pro rata and not sequentially.
Principal on or After the
Stepdown Date if No Trigger
Event is in Effect ....... On each Distribution Date (a) on or after the
Stepdown Date and (b) as long as a Trigger Event
is not in effect, the holders of all Classes of
the Offered Certificates and the Class B-2
Certificates will be entitled to receive payments
of principal, in the amounts and the priorities
set forth below and to the extent of the Variable
Rate Principal Distribution Amount and the Fixed
Rate Principal Distribution Amount as follows:
First, an amount equal to (i) the lesser of (x)
the Variable Rate Principal Distribution Amount
and (y) the Class A Principal Distribution Amount,
shall be distributed in the following amounts and
priorities:
(1) to the holders of the Class A-10 Certificates
until the Class A-10 Certificate Balance has
been reduced to zero (such distribution
amount, the "Class A Variable Allocation
Amount");
(2) to the holders of the Class A-9 Certificates,
in an amount equal to the Class A-9 Lockout
Distribution Amount;
(3) to the holders of the Class A Certificates
(other than the Class A-9 Certificates and
the Class A-10 Certificates) in sequential
order until the Certificate Balance of each
such Class of Class A Certificates has been
reduced to zero; and
(4) to the holders of the Class A-9 Certificates
until the Class A-9 Certificate Balance has
been reduced to zero; and
an amount equal to (ii) the lesser of (x) the
Fixed Rate Principal Distribution Amount and (y)
the Class A Principal Distribution Amount minus
the amount distributed in clause (i) above, shall
be distributed in the following amounts and
priorities:
(1) to the extent not previously distributed, to
the holders of the Class A-9 Certificates, in
an amount equal to the Class A-9 Lockout
Distribution Amount;
(2) to the holders of the Class A Certificates
(other than the Class A-9 Certificates and
the Class A-10 Certificates) in sequential
order until the Certificate Balance of each
such Class of Class A Certificates has been
reduced to zero;
(3) to the holders of the Class A-9 Certificates
until the Class A-9 Certificate Balance has
been reduced to zero; and
(4) to the holders of the Class A-10 Certificates
until the Class A-10 Certificate Balance is
reduced to zero;
Second, the lesser of (x) the excess, if any, of
(i) the sum of (A) the Fixed Rate Principal
Distribution Amount and (B) the Variable Rate
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S-14
<PAGE>
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Principal Distribution Amount over (ii) the amount
distributed to the holders of the Class A
Certificates in clause "First" above and (y) the
Class M-1 Principal Distribution Amount, shall be
distributed to the holders of the Class M-1
Certificates, until the Class M-1 Certificate
Balance has been reduced to zero;
Third, the lesser of (x) the excess, if any, of
(i) the sum of (A) the Fixed Rate Principal
Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of
the amount distributed to the holders of the Class
A Certificates in clause "First" above and the
amount distributed to the holders of the Class M-1
Certificates in clause "Second" above and (y) the
Class M-2 Principal Distribution Amount, shall be
distributed to the holders of the Class M-2
Certificates, until the Class M-2 Certificate
Balance has been reduced to zero;
Fourth, the lesser of (x) the excess, if any, of
(i) the sum of (A) the Fixed Rate Principal
Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of
the amount distributed to the holders of the Class
A Certificates pursuant to clause "First" above,
the amount distributed to the holders of the Class
M-1 Certificates pursuant to clause "Second" above
and the amount distributed to the holders of the
Class M-2 Certificates pursuant to clause "Third"
above and (y) the Class B-1 Principal Distribution
Amount, shall be distributed to the holders of the
Class B-1 Certificates, until the Class B-1
Certificate Balance has been reduced to zero;
Fifth, the lesser of (x) the excess, if any, of
(i) the sum of (A) the Fixed Rate Principal
Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of
the amount distributed to the holders of the Class
A Certificates pursuant to clause "First" above,
the amount distributed to the holders of the Class
M-1 Certificates pursuant to clause "Second"
above, the amount distributed to the holders of
the Class M-2 Certificates pursuant to clause
"Third" above and the amount distributed to the
holders of the Class B-1 Certificates pursuant to
clause "Fourth" above and (y) the Class B-2
Principal Distribution Amount, shall be
distributed to the holders of the Class B-2
Certificates, until the Class B-2 Certificate
Balance has been reduced to zero; and
Sixth, any portion of the Principal Distribution
Amount remaining after making all of the
distributions in clauses "First," "Second,"
"Third," "Fourth" and "Fifth" above above shall be
a part of the Monthly Excess Cashflow Amount and
shall be applied as described below under "Credit
Enhancement--Application of Monthly Excess
Cashflow Amounts" in this summary.
The holders of the Class A-9 Certificates are
entitled to receive, from funds available
therefor, payments of the Class A-9 Lockout
Distribution Amount specified herein; provided,
that if on any Distribution Date the Certificate
Balance of the Class A Certificates (other than
the Class A-9 and the Class A-10 Certificates) is
zero, the holders of the Class A-9 Certificates
will be entitled to receive the entire Class A
Principal Distribution Amount for such
Distribution Date, and
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S-15
<PAGE>
- --------------------------------------------------------------------------------
on any Distribution Date that the Certificate
Balance of the Class A Certificates (other than
the Class A-9 and Class A-10 Certificates) have
been reduced to zero, the holders of the Class A-9
Certificates will be entitled to receive any
remaining Class A Principal Distribution Amount.
"Principal Remittance Amount" means for a Mortgage
Loan Group and as of any Distribution Date, the
sum of (i) the principal actually collected by the
Master Servicer on the Mortgage Loans in such
Mortgage Loan Group during the related Due Period,
(ii) the Principal Balance of each Mortgage Loan
in such Mortgage Loan Group that was repurchased
from the Trust with respect to the related Due
Period, (iii) the portion of any Substitution
Adjustment relating to principal delivered by the
Seller in connection with a substitution of a
Mortgage Loan in such Mortgage Loan Group with
respect to the related Due Period, and (iv) all
Liquidation Proceeds actually collected by the
Master Servicer during the related Due Period with
respect to Mortgage Loans in such Mortgage Loan
Group (to the extent such Liquidation Proceeds
related to principal).
A "Trigger Event" has occurred with respect to a
Distribution Date if the percentage obtained by
dividing (x) the principal amount of Mortgage
Loans as to which payments aggregating at least
$65 are 60 days or more delinquent by (y) the
aggregate outstanding Principal Balance of the
Mortgage Loans, in each case as of the last day of
the immediately preceding Due Period, equals or
exceeds ___% of the Senior Enhancement Percentage
(as defined herein).
"Stepdown Date" means the earlier to occur of (i)
the later to occur of (x) the Distribution Date in
_______ and (y) the first Distribution Date on
which the Senior Enhancement Percentage (after
taking into account distributions of principal on
such Distribution Date) is greater than or equal
to the Senior Specified Enhancement Percentage (as
defined herein) and (ii) the Distribution Date on
which the Certificate Balance of the Class A
Certificates has been reduced to zero.
"Class A Principal Distribution Amount" means as
of any Distribution Date (a) prior to the Stepdown
Date or on or after the Stepdown Date if a Trigger
Event is in effect, 100% of the sum of (A) the
Fixed Rate Principal Distribution Amount and (B)
the Variable Rate Principal Distribution Amount
and (b) on or after the Stepdown Date and as long
as a Trigger Event is not in effect, the greater
of (I) the lesser of (a) the Certificate Balance
of the Class A-10 Certificates and (b) the
Variable Rate Principal Distribution Amount and
(II) the excess of (x) the aggregate Certificate
Balance of the Class A Certificates immediately
prior to such Distribution Date over (y) the
lesser of (A) the product of (i) ____% and (ii)
the outstanding Principal Balance of the Mortgage
Loans as of the last day of the related Due Period
and (B) the outstanding Principal Balance of the
Mortgage Loans as of the last day of the related
Due Period minus $________.
"Class M-1 Principal Distribution Amount" means as
of any Distribution Date on or after the Stepdown
Date and as long as a
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S-16
<PAGE>
- --------------------------------------------------------------------------------
Trigger Event is not in effect, the excess of (x)
the sum of (i) the aggregate Certificate Balance
of the Class A Certificates (after taking into
account the payment of the Class A Principal
Distribution Amount on such Distribution Date) and
(ii) the Class M-1 Certificate Balance immediately
prior to such Distribution Date over (y) the
lesser of (A) the product of (i) ____% and (ii)
the outstanding Principal Balance of the Mortgage
Loans as of the last day of the related Due Period
and (B) the outstanding Principal Balance of the
Mortgage Loans as of the last day of the related
Due Period minus $________.
"Class M-2 Principal Distribution Amount" means as
of any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the
aggregate Certificate Balance of the Class A
Certificates (after taking into account the
payment of the Class A Principal Distribution
Amount on such Distribution Date), (ii) the Class
M-1 Certificate Balance (after taking into account
the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date) and
(iii) the Class M-2 Certificate Balance
immediately prior to such Distribution Date over
(y) the lesser of (A) the product of (i) _____%
and (ii) the outstanding aggregate Principal
Balance of the Mortgage Loans as of the last day
of the related Due Period and (B) the outstanding
Principal Balance of the Mortgage Loans as of the
last day of the related Due Period minus
$________.
"Class B-1 Principal Distribution Amount" means as
of any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the
aggregate Certificate Balance of the Class A
Certificates (after taking into account the
payment of the Class A Principal Distribution
Amount on such Distribution Date), (ii) the Class
M-1 Certificate Balance (after taking into account
the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date),
(iii) the Class M-2 Certificate Balance (after
taking into account the payment of the Class M-2
Principal Distribution Amount on such Distribution
Date) and (iv) the Class B-1 Certificate Balance
immediately prior to such Distribution Date over
(y) the lesser of (A) the product of (i) ____% and
(ii) the outstanding aggregate Principal Balance
of the Mortgage Loans as of the last day of the
related Due Period and (B) the outstanding
Principal Balance of the Mortgage Loans as of the
last day of the related Due Period minus
$________.
"Class B-2 Principal Distribution Amount" means as
of any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event is not in
effect, the excess of (x) the sum of (i) the
aggregate Certificate Balance of the Class A
Certificates (after taking into account the
payment of the Class A Principal Distribution
Amount on such Distribution Date), (ii) the Class
M-1 Certificate Balance (after taking into account
the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date),
(iii) the Class M-2 Certificate Balance (after
taking into account the payment of the Class M-2
Principal Distribution Amount on such Distribution
Date), (iv) the Class B-1 Certificate Balance
(after taking into account the payment of the
Class B-1 Principal Distribution Amount on such
Distribution Date)
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S-17
<PAGE>
- --------------------------------------------------------------------------------
and (v) the Class B-2 Certificate Balance
immediately prior to such Distribution Date over
(y) the lesser of (A) the product of (i) ____% and
(ii) the outstanding aggregate Principal Balance
of the Mortgage Loans as of the last day of the
related Due Period and (B) the outstanding
Principal Balance of the Mortgage Loans as of the
last day of the related Due Period minus
$________.
"Overcollateralization Amount" means as of any
Distribution Date the excess, if any, of (x) the
Principal Balance of the Mortgage Loans as of the
last day of the immediately preceding Due Period
over (y) the Aggregate Certificate Balance on such
Distribution Date (after taking into account all
distributions of principal on such Distribution
Date).
"Senior Enhancement Percentage" for any
Distribution Date is the percentage obtained by
dividing (x) the sum of (i) the aggregate
Certificate Balance of the Subordinate
Certificates and (ii) the Overcollateralization
Amount, in each case after taking into account the
distribution of the Principal Distribution Amount
on such Distribution Date by (y) the aggregate
Principal Balance of the Mortgage Loans as of the
last day of the related Due Period.
"Senior Specified Enhancement Percentage" means
____%.
"Overcollateralization Deficiency" means, as of
any Distribution Date, the excess, if any, of (x)
the Targeted Overcollateralization Amount for such
Distribution Date over (y) the
Overcollateralization Amount for such Distribution
Date, calculated for this purpose after taking
into account the reduction on such Distribution
Date of the Certificate Balance of all Classes of
the Offered Certificates and the Class B-2
Certificates resulting from the distribution of
the Principal Remittance Amount on such
Distribution Date, but prior to taking into
account any Realized Loss with respect to the
related Due Period.
"Overcollateralization Release Amount" means as of
any Distribution Date, the lesser of (x) the
related Principal Remittance Amount for such
Distribution Date and (y) the excess of (i) the
Overcollateralization Amount for such Distribution
Date, assuming that 100% of the Principal
Remittance Amount is applied on such Distribution
Date to the payment of principal on the Offered
Certificates and the Class B-2 Certificates, and
(ii) the Targeted Overcollateralization Amount (as
defined herein) for such Distribution Date.
"Targeted Overcollateralization Amount" means, as
of any Distribution Date, (x) prior to the
Stepdown Date, $____ and (y) on and after the
Stepdown Date, the greater of (i) ____% of the
aggregate outstanding Principal Balance of the
Mortgage Loans as of the last day of the related
Due Period and (ii) $________.
Credit Enhancement ......... The Credit Enhancement provided for the benefit of
the holders of the Class A Certificates consists
of the subordination of the Subordinate
Certificates, the priority of application of
Realized Losses (as defined herein) and the
application of Monthly Excess Cashflow Amounts.
Distributions and the priority of the application
of Realized Losses and Monthly Excess Cashflow
Amounts on the Class M-1 Certificates will be
subordinated to distributions and the priority of
the application of Realized Losses and Monthly
Excess Cashflow Amounts on the Class
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S-18
<PAGE>
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A Certificates, distributions and the priority of
the application of Realized Losses and Monthly
Excess Cashflow Amounts on the Class M-2
Certificates will be subordinated to distributions
and the priority of the application of Realized
Losses and Monthly Excess Cashflow Amounts on the
Class M-1 Certificates and the Class A
Certificates, distributions and the priority of
the application of Realized Losses and Monthly
Excess Cashflow Amounts on the Class B-1
Certificates will be subordinated to distributions
and the priority of the application of Realized
Losses and Monthly Excess Cashflow Amounts on the
Mezzanine Certificates and the Class A
Certificates, and distributions and the priority
of the application of Realized Losses and Monthly
Excess Cashflow Amounts on the Class B-2
Certificates will be subordinated to distributions
and the priority of the application of Realized
Losses and Monthly Excess Cashflow Amounts on the
Class B-1 Certificates, the Mezzanine Certificates
and the Class A Certificates, in each case to the
extent described herein.
Subordination of Subordinate Certificates. The
rights of the holders of the Subordinate
Certificates and the Class R Certificates to
receive distributions will be subordinated, to the
extent described herein, to such rights of the
holders of the Class A Certificates. This
subordination is intended to enhance the
likelihood of regular receipt by the holders of
the Class A Certificates of the full amount of
their scheduled monthly payment of interest and
principal and to afford such holders protection
against Realized Losses.
The protection afforded to the holders of the
Class A Certificates by means of the subordination
of the Subordinate Certificates and the Class R
Certificates will be accomplished by the
preferential right of the holders of the Class A
Certificates to receive, prior to any distribution
of interest being made on a Distribution Date in
respect of such Subordinate Certificates, the
amounts of interest due them and, prior to any
distribution of principal being made on a
Distribution Date in respect of such Subordinate
Certificates, the amounts of principal due them,
and, if necessary, by the right of the holders of
the Class A Certificates to receive future
distributions of amounts that would otherwise be
payable to the holders of the Subordinate
Certificates and the Class R Certificates.
In addition, the rights of the holders of the
Class M-2, Class B-1, Class B-2 and Class R
Certificates to receive distributions will be
subordinated, to the extent described herein, to
such rights of the holders of the Class A and
Class M-1 Certificates. This subordination is
intended to enhance the likelihood of regular
receipt by the holders of the Class A and Class
M-1 Certificates of the amount of interest due
them and principal available for distribution and
to afford such holders with protection against
Realized Losses.
The rights of the holders of the Class B-1, Class
B-2 and the Class R Certificates to receive
distributions will be subordinated in the same
manner to such rights of the holders of the Class
A, Class M-1 and Class M-2 Certificates, the
rights of the holders of the Class B-2
Certificates and the Class R Certificates to
receive distributions will be subordinated in the
same manner to such rights of the holders of the
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Class A, Class M-1, Class M-2 and Class B-1
Certificates, and the rights of holders of the
Class R Certificates to receive distributions will
be subordinated in the same manner to such rights
of the holders of the Offered Certificates and the
Class B-2 Certificates.
Application of Realized Losses. To the extent that
the Mortgage Loans experience Realized Losses,
such Realized Losses will reduce the aggregate
outstanding Principal Balance of the Mortgage
Loans (i.e., a reduction in the collateral balance
will occur). Since the Overcollateralization
Amount is the excess, if any, of the aggregate
Principal Balance of the Mortgage Loans over the
Aggregate Certificate Balance, any Realized Losses
will in the first instance reduce the
Overcollateralization Amount.
The Pooling and Servicing Agreement requires that
the Overcollateralization Amount be initially
increased to, and thereafter maintained at, the
Targeted Overcollateralization Amount. This
increase and subsequent maintenance are intended
to be accomplished by the application of Monthly
Excess Interest Amounts (if any) to the funding of
the related Extra Principal Distribution Amounts.
Such Extra Principal Distribution Amounts, which
are funded from interest collections on the
collateral but are distributed as principal on the
Offered Certificates and the Class B-2
Certificates, are intended to increase the
Overcollateralization Amount. However, if there
are not sufficient Extra Principal Distribution
Amounts, the Overcollateralization Amount will not
be increased to or maintained at the Targeted
Overcollateralization Amount.
If, on any Distribution Date after taking into
account all Realized Losses experienced during the
prior Due Period and after taking into account the
distribution of principal (including the Extra
Principal Distribution Amount) with respect to the
Offered Certificates and the Class B-2
Certificates on such Distribution Date, the
Aggregate Certificate Balance exceeds the
aggregate Principal Balance of the Mortgage Loans
as of the end of the related Due Period (i.e., if
the level of overcollateralization is negative),
then the Certificate Balance of the Subordinate
Certificates will be reduced (in effect, "written
down") so that the level of overcollateralization
is zero, rather than negative. Such a negative
level of overcollateralization is an "Applied
Realized Loss Amount," which will be applied as a
reduction in the Certificate Balance of the
Subordinate Certificates in reverse order of
seniority (i.e., first against the Class B-2
Certificate Balance until it is reduced to zero,
then against the Class B-1 Certificate Balance
until it is reduced to zero, then against the
Class M-2 Certificate Balance until it is reduced
to zero and then against the Class M-1 Certificate
Balance until it is reduced to zero). The Pooling
and Servicing Agreement does not permit the "write
down" of the Certificate Balance of any Class A
Certificate.
Once the Certificate Balance of a Class of
Subordinate Certificates has been "written down,"
the amount of such write down will no longer bear
interest, nor will such amount thereafter be
"reinstated" or "written up," although the amount
of such write down may, on future
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Distribution Dates be paid (without interest) to
holders of the Subordinate Certificates which
experienced the write down, in direct order of
seniority (i.e., first, the Class M-1
Certificates, second, the Class M-2 Certificates,
third, the Class B-1 Certificates and, fourth, the
Class B-2 Certificates). The source of funding of
such payments will be the amount, if any, of the
Monthly Excess Cashflow Amount remaining on such
future Distribution Dates after the funding of the
related Extra Principal Distribution Amounts and
after the payment of Interest Carry Forward
Amounts with respect to the Subordinate
Certificates on such Distribution Date.
Application of Monthly Excess Cashflow Amounts. As
of the Closing Date, the weighted average Mortgage
Rate for the Mortgage Loans is generally expected
to be higher than the weighted average of the
Pass-Through Rates on the Offered Certificates and
the Class B-2 Certificates plus the Master
Servicing Fee, thus generating certain excess
interest collections which, in the absence of
losses, will not be necessary to fund interest
distributions on the Offered Certificates and the
Class B-2 Certificates. The Pooling and Servicing
Agreement provides that this excess interest be
applied, to the extent available, to make
accelerated payments of principal (i.e., the Extra
Principal Distribution Amount) to the Class or
Classes then entitled to receive distributions of
principal. This application will cause the
Aggregate Certificate Balance to amortize more
rapidly than the Mortgage Loans, resulting in
overcollateralization. This excess interest for a
Due Period, together with interest on the
Overcollateralization Amount itself, on the
related Distribution Date, is the "Monthly Excess
Interest Amount" for such Distribution Date.
Prepayments and liquidations of Mortgage Loans
with higher Mortgage Rates would have the effect
of reducing or eliminating this excess interest.
The required level of overcollateralization for
any Distribution Date is the Targeted
Overcollateralization Amount for such Distribution
Date. The Targeted Overcollateralization Amount is
initially (i.e., prior to the Stepdown Date)
$________. Since the actual level of the
Overcollateralization Amount as of the Closing
Date is expected to be zero, in the early months
of the transaction, subject to the availability of
Monthly Excess Interest Amounts, Extra Principal
Distribution Amounts will be paid, with the result
that the Overcollateralization Amount is intended
to increase until such time, if ever, as it
reaches the Targeted Overcollateralization Amount.
Realized Losses which occur after the Targeted
Overcollateralization Amount has been reached will
result in an Overcollateralization Deficiency
since Realized Losses reduce the Principal Balance
of the Mortgage Loans without giving rise to a
corresponding reduction of the Aggregate
Certificate Balance. The cashflow priorities of
the Trust require that, in this situation, an
Extra Principal Distribution Amount be paid
(subject to the availability of any Monthly Excess
Interest Amount) for the purpose of
re-establishing the Overcollateralization Amount
at the required Targeted Overcollateralization
Amount at that date.
On and after the Stepdown Date, the Targeted
Overcollateralization Amount is permitted to
decrease or "stepdown" below the
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S-21
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$____________ level to a level equal to ____% of
the then current aggregate outstanding Principal
Balance of the Mortgage Loans (subject to a floor
of $_________). If the Targeted
Overcollateralization Amount is permitted to
"stepdown" on a Distribution Date, the Pooling and
Servicing Agreement permits a portion of the
related Principal Remittance Amount for such
Distribution Date not to be passed through as a
distribution of principal on such Distribution
Date. This has the effect of decelerating the
amortization of the Offered Certificates and the
Class B-2 Certificates relative to the aggregate
outstanding Principal Balance of the Mortgage
Loans, thereby reducing the actual level of the
Overcollateralization Amount to the new, lower
Targeted Overcollateralization Amount. This
portion of the Principal Remittance Amount not
distributed as principal on the Certificates
therefore releases overcollateralization from the
Trust with respect to the Mortgage Loans. The
amount of such releases are the
"Overcollateralization Release Amounts."
On any Distribution Date, the sum of the Monthly
Excess Interest Amount and the
Overcollateralization Release Amount is the
Monthly Excess Cashflow Amount, which is required
to be applied in the following order of priority
on such Distribution Date:
(1) to fund the Fixed Rate Group Extra Principal
Distribution Amount and the Adjustable Rate
Group Extra Principal Distribution Amount for
such Distribution Date;
(2) to fund the Class M-1 Interest Carry Forward
Amount, if any;
(3) to fund the Class M-1 Realized Loss
Amortization Amount (as defined herein) for
such Distribution Date;
(4) to fund the Class M-2 Interest Carry Forward
Amount, if any;
(5) to fund the Class M-2 Realized Loss
Amortization Amount (as defined herein) for
such Distribution Date;
(6) to fund the Class B-1 Interest Carry Forward
Amount, if any;
(7) to fund the Class B-1 Realized Loss
Amortization Amount (as defined herein) for
such Distribution Date;
(8) to fund the Class B-2 Interest Carry Forward
Amount, if any;
(9) to fund the Class B-2 Realized Loss
Amortization Amount (as defined herein) for
such Distribution Date;
(10) to the Master Servicer to the extent of any
unreimbursed Advances; and
(11) to the holders of the Class R Certificates.
Advances .................. The Master Servicer is obligated to make cash
advances (any such advance, an "Advance") with
respect to delinquent payments of interest on any
Mortgage Loan to the extent described herein. See
"Servicing of Mortgage Loans--Advances" herein.
Compensating Interest ...... Not later than the close of business on each
Determination Date, with respect to each Mortgage
Loan as to which the Master Servicer received a
principal prepayment in full in advance of the
final scheduled due date
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<PAGE>
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(a "Principal Prepayment") during the related Due
Period, the Master Servicer is required to remit
to the Trustee, but only to the extent of the
Master Servicing Fee for such Due Period, an
amount ("Compensating Interest") equal to any
excess of (a) 30 days' interest on the Principal
Balance of each such Mortgage Loan as of the
beginning of the related Due Period, at the
applicable Mortgage Rate over (b) the amount of
interest actually received on the related Mortgage
Loan during such Due Period.
Servicing .................. The Master Servicer is entitled to a servicing fee
of 0.50% per annum of the Principal Balance of
each Mortgage Loan as of the first day of the
related Due Period (the "Master Servicing Fee")
and payable monthly from the Interest Remittance
Amount. The Master Servicing Fee will be paid on
each Distribution Date prior to payment to the
Certificateholders and will reduce the Interest
Remittance Amount available to pay interest on the
Certificates. However, if the Master Servicer is
CIT Consumer Finance or an affiliate of CIT
Consumer Finance is the Master Servicer, the
Master Servicing Fee will be paid on each
Distribution Date only from the Interest
Remittance Amount remaining after all interest
payments due on the Certificates on such
Distribution Date have been made.
Registration of the Offered
Certificates ............. The Offered Certificates will initially be issued
in book-entry form. Persons acquiring beneficial
ownership interests in the Offered Certificates
(each, a "beneficial owner") may elect to hold
their Certificate interests through The Depository
Trust Company ("DTC") in the United States, or
through Centrale de Livraison de Valeurs
Mobiliers, S.A. ("CEDEL") or the Euroclear System
("Euroclear") in Europe. Transfers within DTC,
CEDEL or Euroclear, as the case may be, will be in
accordance with the usual rules and operating
procedures of the relevant system. So long as the
Offered Certificates are Book-Entry Certificates
(as defined herein), such Certificates will be
evidenced by one or more Certificates registered
in the name of Cede & Co. ("Cede"), as the nominee
of DTC. Crossmarket transfers between persons
holding directly or indirectly through DTC, on the
one hand, and persons holding directly or
indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through Citibank
N.A. ("Citibank") or Morgan Guaranty Trust Company
of New York ("Morgan"), the relevant depositories
of CEDEL and Euroclear, respectively, and each a
participating member of DTC. The Offered
Certificates will initially be registered in the
name of Cede. The interests of the holders of the
Offered Certificates will be represented by book
entries on the records of DTC and participating
members thereof. No person will be entitled to
receive a Definitive Certificate representing such
person's interest, except in the event that
Definitive Certificates are issued under the
limited circumstances described herein and in the
Prospectus.
See "Risk Factors--Book-Entry Registration" in the
Prospectus, "Description of the
Certificates--Book-Entry Certificates" herein and
in the Prospectus and "ANNEX I" attached hereto.
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<PAGE>
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Optional Termination ....... On any Distribution Date on which the outstanding
aggregate Principal Balances of the Mortgage Loans
in the Trust have declined to 10% or less of the
aggregate Principal Balances of the Mortgage Loans
as of the Closing Date, the Master Servicer will
have the option to purchase, in whole, the
Mortgage Loans and the REO Property (as defined in
the Prospectus), if any, remaining in the Trust
Fund as of that date (the first such Distribution
Date, the "Clean-up Call Date"). See "Description
of the Certificates--Optional Termination" herein.
Auction Sale ............... Within ten days after the first Distribution Date
on which the outstanding aggregate Principal
Balances of the Mortgage Loans in the Trust have
declined to 5% or less of the aggregate Principal
Balances of the Mortgage Loans as of the Closing
Date, the Trustee shall solicit bids for the
purchase of the Mortgage Loans and the REO
Property remaining in the Trust. In the event that
satisfactory bids are received as described under
"The Pooling and Servicing Agreement--Auction
Sale" herein, the net sale proceeds will be
distributed to Certificateholders on the second
Distribution Date succeeding such Due Period. Any
purchaser of the Mortgage Loans and the REO
Property must agree to the continuation of CIT
Consumer Finance as Master Servicer (if at such
time it is the Master Servicer) on terms
substantially similar to those in the Pooling and
Servicing Agreement. Any such sale will cause
early retirement of the Certificates.
Federal Income Tax
Considerations .......... An election will be made to treat certain assets
of the Trust Fund as a "real estate mortgage
investment conduit" ("REMIC") for federal income
tax purposes. The Offered Certificates and the
Class B-2 Certificates will constitute "regular
interests" in the REMIC and the Class R
Certificates will constitute the sole class of "
residual interests" in the REMIC. See "Certain
Federal Income Tax Consequences" herein and in the
Prospectus.
ERISA Considerations ....... As described under "ERISA Considerations" herein,
the Class A Certificates may be purchased by
employee benefit plans that are subject to ERISA.
The Subordinate Certificates may not be purchased
by employee benefit plans that are subject to
ERISA. See "ERISA Considerations" herein and in
the Prospectus.
Legal Investment ........... The Offered Certificates will not constitute
"mortgage related securi- ties" for purposes of
the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). In addition, institutions whose
activities are subject to review by federal or
state regulatory authorities may be or may become
subject to restrictions, which may be
retroactively imposed by such regulatory
authorities, on the investment by such
institutions in certain forms of mortgage related
securities. All investors whose investment
authority is subject to legal restrictions should
consult their own legal advisors to determine
whether, and to what extent, the Certificates will
constitute legal investments for them.
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S-24
<PAGE>
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Ratings .................... It is a condition of issuance of the Offered
Certificates that each Class of the Certificates
receive ratings from Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Ratings
Group ("S&P") as set forth below:
Class Moody's Rating S&P Rating
----- -------------- -----------
Class A Aaa AAA
Class M-1 Aa2 AA
Class M-2 A2 A-
Class B-1 Baa2 BBB-
A security rating is not a recommendation to buy,
sell or hold securities, and may be subject to
revision or withdrawal at any time by the rating
agency.
Use of Proceeds ............ Substantially all of the net proceeds to be
received from the sale of the Offered Certificates
will be received by the Depositor, which will
apply such proceeds to pay to the Seller the
purchase price for the Mortgage Loans and to pay
certain expenses of the offering.
Risk Factors ............... For a discussion of certain factors that should be
considered by prospective investors in the Offered
Certificates, see "Risk Factors" herein and in the
Prospectus.
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S-25
<PAGE>
RISK FACTORS
Prospective investors in the Offered Certificates should consider, among
other things, the following risk factors in connection with the purchase of the
Offered Certificates:
1. Limited Obligations. The Certificates will not represent an interest in
or obligation of the Trustee, the Depositor, CITSF, CIT Consumer Finance, CIT or
any of their respective affiliates. The Certificates will not be insured or
guaranteed by any government agency or instrumentality, nor by the Trustee, the
Depositor, CITSF, CIT Consumer Finance, CIT or any of their respective
affiliates. CIT will not provide a guarantee or assume other obligations with
respect to the Certificates.
2. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates or, if it does develop, that it will provide
the holders of the Certificates with liquidity of investment or that it will
remain for the term of such Certificates. Although the holders of the
Certificates will receive monthly statements containing certain statistical
information with respect to the Mortgage Pool, the Depositor publishes no
information relating to the Certificates or any Mortgage Pool. The limited
availability of any such published information may decrease the liquidity of the
Certificates.
3. Subordination of Payment. The rights of the holders of the Class M-1
Certificates to receive distributions with respect to the Mortgage Loans will be
subordinate to the rights of the holders of the Class A Certificates to receive
such distributions, the rights of holders of the Class M-2 Certificates to
receive distributions with respect to the Mortgage Loans will be subordinate to
the rights of the holders of the Class A and the Class M-1 Certificates to
receive such distributions, the rights of the holders of the Class B-1
Certificates to receive distributions with respect to the Mortgage Loans will be
subordinate to the rights of the holders of the Class A, Class M-1 and Class M-2
Certificates to receive such distributions and the rights of the holders of the
Class B-2 Certificates to receive distributions with respect to the Mortgage
Loans will be subordinate to the rights of the holders of the Class A, Class
M-1, Class M-2 and Class B-1 Certificates to receive such distributions. The
subordination of the Subordinate Certificates relative to the Class A
Certificates (and of the lower-ranking Classes of the Subordinate Certificates
to the higher-ranking Classes thereof) is intended to enhance the likelihood of
regular receipt by the holders of the Class A Certificates of the full amount of
the monthly distributions allocable to them and consequently decreases the
likelihood of receipt by the holders of the Subordinate Certificates of amounts
otherwise allocable to them. See "Risk Factors -- Subordination" in the
Prospectus.
4. Risk of Mortgage Loan Rates or the Maximum Variable Rate Reducing the
Pass-Through Rate on the Variable Rate Certificates. The calculation of the
Pass-Through Rate on the Variable Rate Certificates is based upon (i) the value
of an index (One-month LIBOR) which is different from the value of the index
applicable to the Mortgage Loans in the Adjustable Rate Group as described under
"The Mortgage Pool--Adjustable Rate Group" (either as a result of the use of a
different index, rate determination date or rate adjustment date or a
combination of all of the foregoing) and (ii) in part, the weighted average of
the Mortgage Rates of the Mortgage Loans in the Adjustable Rate Group which are
subject to periodic adjustment caps and maximum rate caps. The Pass-Through Rate
on the Variable Rate Certificates adjusts monthly based upon LIBOR as described
under "Description of the Certificates--Calculation of LIBOR" herein, subject to
the Adjustable Rate Group Available Funds Cap Rate and the Maximum Variable
Rate. However, 69.99% of the Mortgage Loans in the Adjustable Rate Group by
aggregate Principal Balance as of the Cut-off Date adjust semi-annually based
upon the London interbank offered rate for six-month United States dollar
deposits ("Six-month LIBOR") and 30.01% adjust annually based upon the one-year
constant maturity treasury ("One-year CMT"). Consequently, the interest which
becomes due on the Mortgage Loans in the Adjustable Rate Group (net of the
Master Servicing Fee if CIT Consumer Finance or one of its affiliates is not the
Master Servicer and certain required reductions) during any Due Period may not
equal the amount of interest that would accrue at One-month LIBOR plus the
margin on the Variable Rate Certificates during the related Accrual Period. In
addition, 39.63% of the Mortgage Loans in the Adjustable Rate Group by aggregate
Principal Balance as of the Cut-off Date provide for a fixed interest rate for a
period of approximately two years following origination and 4.47% of the
Mortgage Loans in the Adjustable Rate Group by aggregate Principal Balance as of
the Cut-off Date provide for a fixed interest rate for a period of approximately
three years following origination. Since the Pass-Through Rate on the Variable
Rate Certificates adjusts monthly, while the interest rates of the Mortgage
Loans in the Adjustable Rate Group adjust less frequently, the Adjustable Rate
Group Available Funds Cap Rate may limit increases in the Pass-Through Rate on
the Variable Rate Certificates for extended periods in a rising interest rate
environment. In addition, One-month LIBOR, Six-month LIBOR and One-year CMT may
respond differently to economic and market factors so that there may not
necessarily be a correlation among them. Thus, it is possible, for example, that
One-month LIBOR
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may rise during a period in which Six-month LIBOR or One-year CMT is stable or
is falling or that, even if One-month LIBOR, Six-month LIBOR and One-year CMT
rise during the same period, One-month LIBOR may rise more rapidly than
Six-month LIBOR or the One-year CMT. Furthermore, if the Adjustable Rate Group
Available Funds Cap Rate or the Maximum Variable Rate determines the
Pass-Through Rate on the Variable Rate Certificates for a Distribution Date, the
value of the Variable Rate Certificates will be temporarily or permanently
reduced. Moreover, if interest on the Variable Rate Certificates determined at
the Adjustable Rate Available Funds Cap Rate (or at the Maximum Variable Rate)
is less than interest at the Pass-Through Rate applicable to the Class A-10
Certificates shown on the cover page, such excess will be foregone permanently.
5. Prepayments on Fixed Rate Group May Affect Current Interest. The
Pass-Through Rate on each Class of Fixed Rate Certificates is subject to the
Fixed Rate Available Funds Cap Rate. Disproportionate prepayments (including
prepayments due to liquidations and repurchases or purchases by the Seller or
the Master Servicer as required by the Pooling and Servicing Agreement) of
Mortgage Loans with relatively high Mortgage Rates in comparison to the
Pass-Through Rate for a Class of Offered Certificates and the Class B-2
Certificates will increase the possibility that the Pass-Through Rate for such
Class of Offered Certificates and the Class B-2 Certificates will be limited by
the Fixed Rate Available Funds Cap Rate. As a result, if interest determined at
the applicable fixed Pass-Through Rate shown on the cover page is more than
interest determined at the Fixed Rate Available Funds Cap Rate, such excess will
be foregone permanently.
6. Yield and Prepayment Considerations. The yield to maturity of the
Offered Certificates will depend on the rate of payment of principal (including
prepayments due to liquidations and repurchases or purchases by the Seller or
the Master Servicer as required by the Pooling and Servicing Agreement) on the
Mortgage Loans and the price paid by holders of the Offered Certificates. Such
yield may be adversely affected by a higher or lower than anticipated rate of
prepayments on the Mortgage Loans. The yield to maturity on Offered Certificates
purchased at premiums or discounts to par will be extremely sensitive to the
rate of prepayments on the related Mortgage Loans. The yields to maturity on the
Mezzanine Certificates and Class B Certificates will be sensitive, in varying
degrees, to the frequency and number of defaults on the Mortgage Loans.
Investors should fully consider that the risks associated with an investment in
the Mezzanine Certificates or Class B Certificates include the possibility that
they may not fully recover their initial investment as a result of Realized
Losses on the Mortgage Loans.
7. Yields on Subordinated Certificates will be Adversely Affected by
Losses. The weighted average lives of, and the yields to maturity on, the
Subordinate Certificates will be sensitive to the rate and timing of defaults
and the severity of ensuing losses on the Mortgage Loans. The sensitivity of the
yields on the Subordinate Certificates will increase as the payment priority of
the related Class decreases so that the Class B-2 Certificates will be more
sensitive than the Class B-1 Certificates, the Class B-1 Certificates will be
more sensitive than the Class M-2 Certificate and the Class M-2 Certificates
will be more sensitive than the Class M-1 Certificates. If the actual rate and
severity of losses on the Mortgage Loans is higher than those assumed by a
holder of a Subordinate Certificate, the actual yield to maturity of such
Certificates will be lower than the yield expected by such holder based on such
assumption. The timing of losses on the Mortgage Loans will also affect an
investor's actual yield to maturity, even if the rate of defaults and severity
of losses over the life of the Mortgage Pool are consistent with an investor's
expectations. In general, the earlier a loss occurs, the greater the effect on
an investor's yield to maturity.
8. Geographic Concentration of Mortgaged Properties. As of the Cut-off
Date, approximately 20% (by aggregate Principal Balance of the related Mortgage
Loan) of the Mortgaged Properties in the Fixed Rate Group are located in the
States of California and Ohio and approximately 38% (by aggregate Principal
Balance of the related Mortgage Loan) of the Mortgaged Properties in the
Adjustable Rate Group are located in the States of Ohio, Michigan and
California. As of the Cut-off Date, approximately 20% (by aggregate Principal
Balance of the related Mortgage Loan) of the Mortgaged Properties (in the
Mortgage Pool) are located in the States of Ohio and California. An overall
decline in these residential real estate markets could adversely affect the
values of the Mortgaged Properties securing such Mortgage Loans so that the
Principal Balances of the related Mortgage Loans could equal or exceed the value
of such Mortgaged Properties. As many factors influence the residential real
estate market, including the general condition of the economy and interest
rates, residential real estate markets may weaken. If residential real estate
markets experience an overall decline in property values after the dates of
origination of the Mortgage Loans, the rates of losses on the Mortgage Loans
would be expected to increase, and the increase could be substantial.
9. Risk of Losses Associated with Balloon and Call Loans. 15.68% of the
Mortgage Loans in the Fixed Rate Group by Principal Balance as of the Cut-Off
Date represent Balloon Loans.15.04% and 8.09% of the Mortgage
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Loans in the Fixed Rate Group and the Adjustable Rate Group, respectively, by
Principal Balance as of the Cut-Off Date represent Call Loans. See "Risk
Factors--Risk of Losses Associated with Balloon and Call Loans" in the
Prospectus.
10. Risk of Losses Associated with Junior Liens. 29.62% and 3.67% of the
Mortgage Loans in the Fixed Rate Group and the Adjustable Rate Group,
respectively, by Principal Balance as of the Cut-Off Date represent Mortgage
Loans secured by subordinate mortgages. See "Risk Factors--Risk of Losses
Associated with Junior Liens" in the Prospectus.
11. ERISA Considerations. An investment in the Certificates by Plans (as
defined herein) may give rise to a prohibited transaction under ERISA (as
defined herein) Section 406 and be subject to tax under Code (as defined herein)
Section 4975 unless a statutory or administrative exemption is available.
Accordingly, fiduciaries of any employee benefit plan or other retirement
arrangement should consult their counsel before purchasing any class of
Certificates. The Subordinate Certificates will not be eligible for purchase by
Plans. See "ERISA Considerations" herein and in the Prospectus.
12. Certain Other Aspects of the Mortgage Loans.A variety of factors may
limit the ability of the holders of the Certificates to realize upon the
Mortgaged Properties securing the Mortgage Loans or may limit the amount
realized to less than the amount due. See "Risk Factors" and "Certain Legal
Aspects of the Mortgage Loans" in the Prospectus.
Each Mortgage Loan is secured by a Mortgage on a Mortgaged Property.
Mortgages in the Mortgaged Properties and enforcement of rights to realize upon
the value of the Mortgaged Properties as collateral for the Mortgage Loans are
subject to each state's real estate laws and other laws. See " Certain Legal
Aspects of the Mortgage Loans" in the Prospectus.
CIT Consumer Finance and the Depositor will not deliver to the Trustee
assignments of the Mortgage Loans securing the Mortgaged Properties. In the
absence of the recordation of an assignment to the Trustee of the Mortgage Loans
securing the Mortgaged Properties, the assignment to the Trustee may not be
effective against creditors of CIT Consumer Finance, the Depositor or a trustee
in the bankruptcy of CIT Consumer Finance or the Depositor. As a result, the
Trust would not be able to claim the Mortgaged Property as collateral for a
Mortgage Loan. See "The Pooling and Servicing Agreement--Assignment of the
Mortgage Loans" herein.
CIT Consumer Finance is not obligated to maintain hazard insurance
policies, and does not currently pay hazard insurance premiums if a Mortgagor
has not paid insurance premiums to maintain in effect the hazard insurance
policy for the related Mortgaged Property. As a result, there may be Mortgaged
Properties not covered by hazard insurance policies. To the extent such
Mortgaged Properties suffer Realized Losses as a result of insurable hazards and
such Realized Losses are not covered by overcollateralization or Monthly Excess
Cashflow Amounts, such Realized Losses will be allocated to the Certificates as
described herein. See "The Home Equity Lending Program--Underwriting-Other
Issues" and "The Pooling and Servicing Agreement--Hazard Insurance" in the
Prospectus.
13. Risks Associated with the Structure. Certain features of the structure
may pose additional risks to investors. All of the Subordinate Certificates are
Fixed Rate Certificates. The Subordinate Certificates provide credit support for
both the Fixed Rate Certificates and the Variable Rate Certificates.
Consequently, although the Subordinate Certificates are Fixed Rate Certificates,
they may be written down as a result of losses on Mortgage Loans in the
Adjustable Rate Group. In addition, the Interest Remittance Amount is comprised
of collections of interest from all Mortgage Loans and consequently, the amount
available to pay interest due on the Offered Certificates and the Class B-2
Certificates in either Mortgage Loan Group will depend, in part, on the payments
of interest on the Mortgage Loans in the other Mortgage Loan Group. In addition,
the Fixed Rate Group Available Funds Cap Rate and the Adjustable Rate Group
Available Funds Cap Rate are structured to take into account in certain
circumstances the Mortgage Rates on Mortgage Loans which are not in the related
Mortgage Loan Group. Consequently, under certain loss and prepayment scenarios,
the amount of Current Interest payable on one or more Classes of Offered
Certificates and the Class B-2 Certificates on any Distribution Date may be more
or less than the amount of Current Interest that would have been payable if the
related Cap Rate were based solely on the Mortgage Rates on the Mortgage Loans
in the related Mortgage Loan Group.
Although the Principal Remittance Amount is based on principal received
with respect to the related Mortgage Loan Group, principal collected with
respect to one Mortgage Loan Group may be distributed on Certificates relating
to the other Mortgage Loan Group. Moreover, because of the
cross-collateralization features, the amortization of the Fixed Rate
Certificates may be affected by the rate and timing of payments on the
Adjustable Rate Group; similarly, the amortization of the Variable Rate
Certificates may be affected by the rate and timing of payments on the Fixed
Rate Group. In making any investment in Certificates, an investor should
consider the potential effects of the other Mortgage Loan Group on the credit
quality and expected yield on its Class of Offered Certificates.
S-28
<PAGE>
THE PORTFOLIO OF MORTGAGE LOANS
General
CIT Consumer Finance, as the Master Servicer, is responsible for causing
the Mortgage Loans to be serviced in accordance with the terms set forth in the
Pooling and Servicing Agreement. Prior to the issuance of the Certificates, the
Master Servicer will enter into a subservicing agreement with CITSF (the
"Subservicing Agreement") pursuant to which CITSF will agree to perform most of
the servicing responsibilities of the Master Servicer under the Pooling and
Servicing Agreement (except that CIT Consumer Finance will not delegate to CITSF
the responsibility of confirming that the Mortgages are properly recorded and
that title policies, if required, are properly issued, recording Mortgage
releases and similar documents and maintaining loan files). The Trustee will be
an intended third-party beneficiary of the Subservicing Agreement and will have
the right to enforce such Subservicing Agreement as if it were a party thereto.
Currently, CIT Consumer Finance only performs those limited servicing functions
in connection with its portfolio described above. In the future, CIT Consumer
Finance may determine that it will perform all or a material portion of the
other servicing responsibilities or that CIT Consumer Finance will retain
another third party to perform all or a material portion of these servicing
responsibilities, instead of CITSF. The Pooling and Servicing Agreement provides
that CIT Consumer Finance may not permit CITSF to resign as Sub-Servicer nor may
CIT Consumer Finance terminate or replace CITSF as Sub-Servicer, or materially
reduce the duties of CITSF as Sub-Servicer in connection with collections,
lockbox arrangements, payment processing or foreclosure activities, unless (i) a
Termination Event has occurred and is continuing, in which event the Trustee may
terminate both CIT Consumer Finance and CITSF (See "The Pooling and Servicing
Agreement--Termination Events"), or (ii) the Rating Agency Condition is
satisfied. "Rating Agency Condition" means the condition that each Rating Agency
shall have been given at least 30 days prior notice of a contemplated action and
that each of the Rating Agencies shall not have notified the Depositor, the
Master Servicer and the Trustee in writing that such action will result in a
downgrade or withdrawal of the then current rating of the Offered Certificates.
Notwithstanding any such subservicing arrangement, the Master Servicer will
remain liable for its servicing duties and obligations under the Pooling and
Servicing Agreement as if the Master Servicer alone were servicing the Mortgage
Loans. See "The CIT Group/Sales Financing, Inc., Sub-Servicer" and "The Home
Equity Lending Program--Servicing and Collections" in the Prospectus.
As of March 31, 1997, CITSF serviced or subserviced for itself and others
approximately 43,400 residential first and second mortgages, representing an
outstanding balance of approximately $1.91 billion. CIT Consumer Finance
currently does not service mortgages on behalf of other owners.
Delinquency and Loss Experience
The following tables set forth the delinquency and loss experience with
respect to CIT Consumer Finance's entire portfolio of conventional mortgage
loans secured by first or subordinate liens on mortgaged properties, including
home equity lines of credit and Institutional Bulk Portfolios (as defined in the
Prospectus) which are excluded from the Mortgage Pool.
CIT Consumer Finance commenced origination of mortgage loans in December
1992 and therefore, information prior to 1993 is not available.
Delinquency Experience
(Dollar amounts in millions)
<TABLE>
<CAPTION>
December 31,
March 31, -----------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Number of Accounts (in thousands) ............ 55.3 52.6 27.1 13.2 3.5
Principal Balance ............................ $2,143.8 $2,005.5 $1,039.0 $ 570.8 $ 131.3
Principal Balance of Delinquent Accounts (1)
30-59 Days Past Due ..................... $ 52.5 $ 50.2 $ 18.7 $ 3.5 $ 0.1
60-89 Days Past Due ..................... 17.1 14.6 7.2 0.6 --
90 Days or More Past Due ................ 31.7 27.4 9.6 0.5 --
------- ------- ------- ------ ------
Total ........................................ $ 101.3 $ 92.2 $ 35.5 $ 4.6 $ 0.1
======= ======= ======= ====== ======
Principal Balance of Delinquent Accounts
As a percentage of Principal Balance ......... 4.73% 4.60% 3.42% 0.81% 0.02%
REO Property(2)
Number of Properties ......................... 47 43 -- -- --
Book Value(2) ................................ $ 1.96 $ 1.98 -- -- --
</TABLE>
- ----------
(1) Amounts include balances for which the underlying collateral is currently
in the foreclosure process.
(2) REO Property represents properties that secured mortgage loans that were
acquired by foreclosure or deed in lieu of foreclosure. Book value of REO
Properties is adjusted to reflect estimated fair value of property at time
of foreclosure.
S-29
<PAGE>
Loss Experience
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months Year Ended December 31,
Ended -----------------------------------------------
March 31, 1997 1996 1995 1994 1993
---------------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Charge-offs(1) $ 1,953 $ 4,706 $ 783 $ 54 $103
Valuation Reserve (Net) (2) 2,433 3,474 630 14 (43)
------ ------- ------- ----- ----
Total Net Losses $ 4,386 $ 8,180 $ 1,413 $ 68 $ 60
====== ======= ======= ===== ====
Total Net Losses as a percentage
of average principal balance
outstanding 0.85%(3) 0.61% 0.18% 0.02% 0.11%
Units Charged-off 75 176 36 6 5
</TABLE>
- ----------
(1) Represents actual losses (including all expenses of foreclosure and
liquidation but not including accrued interest) recorded at time of
liquidation net of recoveries.
(2) Represents net change in valuation reserves recorded against delinquent
mortgage loans and REO Property.
(3) Annualized. This ratio has been annualized and may not reflect the actual
loss experience for the entire year.
The data presented in the foregoing tables are for illustrative purposes
only. CIT Consumer Finance's mortgage loan portfolio has experienced significant
growth over the periods presented and the delinquency and loss percentages may
be affected by its size and relative lack of seasoning. In addition, such data
relates to the performance of CIT Consumer Finance's entire mortgage loan
portfolio, and is not historical data regarding solely the portion of CIT
Consumer Finance's portfolio constituting the Mortgage Pool. While the above
delinquency and loss rates represent recent experience, there can be no
assurance that the future delinquency and loss experience on the Mortgage Pool
will be similar.
Historically, several factors have influenced CIT Consumer Finance's
delinquency and loss experience on its portfolio of mortgage loans. These
factors include the seasoning of a growing portfolio, varying economic
conditions (which may or may not impact real property values) and changes to its
business and underwriting strategy made in October 1995 summarized in the
Prospectus under "The Home Equity Lending Program -- Underwriting Policies and
Procedure -- Overview."
The increase in delinquency at March 31, 1997 and at December 31, 1996
reflects the seasoning of the portfolio as well as the aforementioned changes to
CIT Consumer Finance's business and underwriting strategies. The effects of
these factors may result in different delinquency and loss experience than is
shown in the above tables since the mortgage loans included in such tables
include mortgage loans which were originated using CIT Consumer Finance's former
underwriting guidelines.
In addition, in October 1995, minimum credit scores were raised for
applicants of mortgage loans with a Combined Loan-to-Value Ratio equal to or
greater than 80% ("HLTV"). The increase in net loss experience for the three
months ended March 31, 1997 and the full year ended December 31, 1996 reflects
portfolio seasoning and unfavorable loss experience on certain HLTV mortgage
loans originated prior to the above noted changes in business and underwriting
strategy of HLTV mortgage loans. All of the mortgage loans to be included in the
Mortgage Pool were originated or acquired utilizing the revised underwriting
guidelines adopted in October 1995.
Underwriting Standards
The underwriting policies employed by CIT Consumer Finance during the
period when the Mortgage Loans were originated were substantially similar to
those described in the Prospectus. See "The Home Equity Lending
Program--Underwriting Policies and Procedures" in the Prospectus.
S-30
<PAGE>
THE MORTGAGE POOL
General
The Certificates will represent the entire beneficial ownership interest in
a trust fund (the "Trust Fund" or the "Trust"). The assets of the Trust Fund
will consist primarily of a pool ("Mortgage Pool" or "Pool") of certain mortgage
related assets (the "Mortgage Assets") consisting of fixed and adjustable rate
mortgage loans (each, a "Mortgage Loan") evidenced by promissory notes (each, a
"Mortgage Note") secured by mortgages, deeds of trust or similar security
instruments (each, a "Mortgage") creating first or subordinate liens on one- to
four-family residential properties or condominium units in condominium buildings
together with such condominium units' appurtenant interests in the common
elements of the condominium buildings (each, a "Mortgaged Property").
Depositor and Seller Recourse
The Depositor will purchase the Mortgage Loans from the Seller pursuant to
the Purchase Agreement, dated as of the Cut-off Date, between the Seller and the
Depositor (the "Purchase Agreement"), and will assign the Mortgage Loans to the
Trustee, for the benefit of Certificateholders, pursuant to the Pooling and
Servicing Agreement.
Under the Purchase Agreement and the Pooling and Servicing Agreement, the
Seller will make certain representations, warranties and covenants relating to,
among other things, the due execution and enforceability of the Purchase
Agreement and the Pooling and Servicing Agreement and certain characteristics of
the Mortgage Loans. Subject to the limitations described under "The Pooling and
Servicing Agreement--Assignment of the Mortgage Loans," the Seller will be
obligated to repurchase or substitute a conforming mortgage loan for any
Mortgage Loan as to which there exists an uncured material deficiency in the
documentation or an uncured material breach of any such representation, warranty
or covenant. The Seller will represent and warrant that the Mortgage Loans were
selected from among the outstanding adjustable and fixed rate one- to
four-family mortgage loans in the Seller' s portfolio at the Closing Date and
that the Seller selected the Mortgage Loans in a manner that would not adversely
affect the interests of the Certificateholders. See "Home Equity Lending Program
- -- Representations by Sellers; Repurchases" in the Prospectus. Under the Pooling
and Servicing Agreement, the holders of the Certificates (the
"Certificateholders") will have the benefit of all of the Seller's
representations, warranties and covenants (including the Seller's repurchase
obligation). The Depositor will make no representations or warranties with
respect to the Mortgage Loans and will have no obligation to repurchase Mortgage
Loans with deficient documentation or which are otherwise defective. CIT
Consumer Finance, in its capacity as Seller of the Mortgage Loans to the
Depositor, is selling such Mortgage Loans without recourse. Therefore, CIT
Consumer Finance's only obligations as Seller of the Mortgage Loans arise out of
its representations, warranties, covenants and repurchase obligations. The
obligations of CIT Consumer Finance, as Master Servicer under the Pooling and
Servicing Agreement, are limited to the Master Servicer's contractual servicing
obligations under the Pooling and Servicing Agreement.
Mortgage Pool Characteristics
The statistical information presented herein is based on the number and the
Principal Balances of the Mortgage Loans as of the Cut-off Date. Unless
otherwise noted, all statistical percentages presented herein are approximate
and measured by the aggregate Principal Balance of the Mortgage Loans in the
Trust, in relation to the Mortgage Loans in the applicable Mortgage Loan Group
or of all the Mortgage Loans in the Trust, in each case as of the Cut-off Date.
The Mortgage Pool is expected to consist of 9,555 Mortgage Loans with an
initial aggregate Principal Balance expected to be $500,068,559.83. The
"Principal Balance" of any Mortgage Loan will be the unpaid principal balance of
such Mortgage Loan as of the Cut-off Date, after deducting any principal
payments due and paid before the Cut-off Date, reduced by all principal payments
previously distributed with respect to such Mortgage Loan and reported as
allocable to principal. The Mortgage Loans provide for the amortization of the
amount financed over a series of monthly payments, which payments are due as of
various days during each month. The Seller or its affiliates acquired or
originated the Mortgage Loans to be included in the Mortgage Pool substantially
in accordance with the underwriting criteria specified herein and in the
Prospectus. At origination, all of the Mortgage Loans in the Mortgage Pool had a
stated maturity of not more than 360 months.
S-31
<PAGE>
The Mortgage Pool will consist of two groups of Mortgage Loans (each, a
"Mortgage Loan Group"). One Mortgage Loan Group consists of a group of Fixed
Rate Mortgage Loans (as defined herein) (the "Fixed Rate Group") and the other
Mortgage Loan Group consists of a group of Adjustable Rate Mortgage Loans (as
defined herein) (the "Adjustable Rate Group"). As of the Cut-off Date, the
aggregate Principal Balance of the Mortgage Loans in the Fixed Rate Group is
$410,062,866.73 and the aggregate Principal Balance of the Mortgage Loans in the
Adjustable Rate Group is $90,005,693.10.
As of the Cut-off Date, 93.32% of the Mortgage Loans are Simple Interest
Loans (as defined in the Prospectus). As of the Cut-off Date, 6.68% of the
Mortgage Loans are Scheduled Accrual Loans (as defined in the Prospectus).
The Mortgage Pool will include Mortgage Loans secured by Mortgages which
create first liens on one- to four-family residential properties and Mortgages
which create subordinate liens (which may be second, third or fourth liens) on
such properties.
Payment of a substantial portion of the original principal balance of
certain Mortgage Loans ("Balloon Loans") will be due on maturity ("Balloon
Payments"). Certain of the Mortgage Loans permit the mortgagee to require the
Mortgagor to pay the full principal balance of the loan on a specified date (the
"Call Date") prior to the maturity of the loan ("Call Loans"). As of the Cut-off
Date, the aggregate Principal Balance of Balloon Loans is $64,313,369.78 and the
aggregate Principal Balance of Call Loans is $68,942,188.87.
As of the Cut-off Date, no Mortgage Loan was delinquent more than 30 days.
No Mortgage Loan had a Combined Loan-to-Value Ratio (as defined herein) of
more than 100.05% as of the time of its origination. The weighted average of the
Combined Loan-to-Value Ratios (as of the time of their origination) of the
Mortgage Loans was 78.25%.
The "Combined Loan-to-Value Ratio" of a Mortgage Loan at any given time is
the ratio, expressed as a percentage, determined by dividing (x) the sum of the
original Principal Balance of the Mortgage Loan plus the then-current Principal
Balance of any loan or loans secured by a senior lien on the Mortgaged Property,
by (y) the value of the related Mortgaged Property, based upon the appraisal or
other valuation made at the time of origination of the Mortgage Loan.
11.07% and 9.89% of the Mortgage Loans (by Principal Balance as of the
Cut-off Date) will be secured by Mortgaged Properties located in Ohio and
California, respectively. Otherwise, no more than 5.72% of the Mortgage Loans
(by Principal Balance as of the Cut-off Date) will be secured by Mortgaged
Properties located in any one state. No more than 0.28% of the Mortgage Loans
(by Principal Balance as of the Cut-off Date) will be secured by Mortgaged
Properties located in any one postal zip code area.
The Mortgage Pool includes Mortgage Loans originated or acquired by CIT
Consumer Finance under its No Income Verification program, No Income Qualify
program and Lite Documentation program. See "The Home Equity Lending Program --
Specialized Underwriting Programs" in the Prospectus. In the following tables
the references to "Full Documentation Loans" are to Mortgage Loans which were
not originated or acquired under these specialized programs.
The Mortgage Pool also includes Mortgage Loans originated or acquired under
CIT Consumer Finance's specialized high loan to value loan program (see "The
Home Equity Lending Program -- Underwriting Policies and Procedures --
Overview"), as shown in the following tables entitled "Distribution of CLTVs."
The Mortgage Pool includes 40 Mortgage Loans (with Principal Balances as of
the Cut-off Date aggregating $1,790,547.25) which are refinancings and which are
secured by Mortgages on manufactured homes and the related real property. Each
such Mortgage Loan is represented in the following tables as a single family
residence.
Fixed Rate Group
Each Fixed Rate Mortgage Loan was originated or acquired by CIT Consumer
Finance on or after December 26, 1996. As of the Cut-off Date, the latest date
on which any Fixed Rate Mortgage Loan matures is July 5, 2027 and the earliest
stated maturity date of any Fixed Rate Mortgage Loan is February 1, 2000.
S-32
<PAGE>
As of the Cut-off Date, 70.38% of the Fixed Rate Mortgage Loans (by
Principal Balance) were secured by first mortgages, and 29.62% of the Fixed Rate
Mortgage Loans (by Principal Balance) were "subordinate mortgages" subject to
senior mortgages.
The weighted average of the Combined Loan-to-Value Ratios (as of the time
of their origination) of the Fixed Rate Mortgage Loans was approximately 78.09%.
9.96% and 9.56% of the Fixed Rate Mortgage Loans (by Principal Balance as
of the Cut-off Date) were secured by Mortgaged Properties located in California
and Ohio, respectively. Otherwise, no more than 6.22% of the Fixed Rate Mortgage
Loans (by Principal Balance as of the Cut-off Date) were secured by Mortgaged
Properties located in any one state. No more than 0.27% of the Fixed Rate
Mortgage Loans (by Principal Balance as of the Cut-off Date) were secured by
Mortgaged Properties located in any one postal zip code area.
The following information sets forth in tabular format certain information,
as of the Cut-off Date, relating to the Fixed Rate Mortgage Loans.
S-33
<PAGE>
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
State Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 731 $ 40,835,397.86 9.96% 10.714% $55,862 79.277% 84.68% 95.43%
Ohio 778 39,210,133.22 9.56 10.818 50,399 78.302 97.44 96.03
Pennsylvania 532 25,493,601.97 6.22 10.258 47,920 78.261 95.95 98.96
Indiana 602 24,212,236.75 5.90 10.644 40,220 74.967 95.20 97.79
Florida 483 24,102,227.93 5.88 11.018 49,901 74.969 85.48 94.50
New York 298 20,874,871.82 5.09 11.121 70,050 75.542 91.81 90.74
Kentucky 493 20,214,817.77 4.93 10.644 41,004 77.278 96.19 98.32
New Jersey 336 18,442,541.83 4.50 11.470 54,889 78.132 93.72 98.41
Georgia 305 14,773,656.74 3.60 10.915 48,438 80.609 91.55 98.34
Arizona 334 14,021,744.95 3.42 10.883 41,981 78.083 87.92 97.64
North Carolina 302 13,617,331.54 3.32 10.610 45,091 78.390 97.91 99.53
Maryland 244 13,320,664.61 3.25 11.119 54,593 82.070 96.08 98.97
Colorado 262 13,019,747.87 3.18 10.738 49,694 83.223 91.93 99.20
Washington 262 12,585,044.80 3.07 10.859 48,035 80.739 87.15 96.98
Michigan 228 11,521,760.13 2.81 12.075 50,534 79.161 94.02 97.44
Illinois 264 11,306,024.18 2.76 10.843 42,826 75.480 95.31 99.04
Tennessee 218 11,078,688.35 2.70 11.620 50,820 78.106 96.29 98.87
Utah 241 10,819,916.89 2.64 10.832 44,896 78.761 81.89 97.32
Oklahoma 254 10,750,308.38 2.62 10.263 42,324 78.001 96.70 96.50
Wisconsin 180 9,752,644.00 2.38 11.581 54,181 75.699 96.69 96.47
Missouri 215 8,417,598.84 2.05 10.982 39,152 76.335 95.54 98.41
Nevada 173 7,596,751.92 1.85 11.020 43,912 83.075 91.99 94.90
Oregon 165 7,589,454.28 1.85 10.985 45,997 78.680 73.46 98.78
Louisiana 78 3,263,339.61 0.80 12.771 41,838 73.866 97.77 95.46
Connecticut 52 3,075,351.90 0.75 11.065 59,141 76.436 88.76 99.14
South Carolina 70 2,901,421.56 0.71 12.356 41,449 73.443 96.48 99.21
Idaho 58 2,312,532.44 0.56 10.470 39,871 81.673 93.17 94.99
Mississippi 58 2,100,454.79 0.51 13.003 36,215 77.191 100.00 96.38
New Mexico 39 1,783,064.56 0.43 10.702 45,720 77.189 89.95 100.00
Delaware 35 1,715,508.09 0.42 10.930 49,015 77.959 100.00 95.64
Minnesota 32 1,644,844.25 0.40 12.296 51,401 74.188 87.15 100.00
Virginia 30 1,579,253.41 0.39 11.785 52,642 81.751 100.00 100.00
Kansas 41 1,196,396.47 0.29 0.959 29,180 77.001 92.18 100.00
Montana 34 1,150,628.16 0.28 10.628 33,842 82.370 97.18 100.00
Iowa 27 1,116,549.61 0.27 10.714 41,354 73.530 93.03 97.49
Massachusetts 11 776,527.00 0.19 11.079 70,593 73.444 100.00 78.76
Nebraska 15 693,128.02 0.17 11.983 46,209 80.792 87.81 100.00
Wyoming 21 613,733.80 0.15 11.302 29,225 80.776 84.02 100.00
West Virginia 7 276,304.00 0.07 12.452 39,472 80.924 85.56 100.00
District of Columbia 4 218,481.77 0.05 11.704 54,620 73.153 100.00 100.00
Rhode Island 1 74,499.22 0.02 13.990 74,499 97.620 100.00 100.00
South Dakota 1 13,681.44 0.00 9.100 13,681 37.840 100.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-34
<PAGE>
Distribution by Current Principal Balances
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Current Balance Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1 - $ 10,000 56 $ 523,978.68 0.13% 12.247% $ 9,357 71.668% 98.87% 98.21%
$ 10,001 - $ 20,000 1,314 20,767,257.54 5.06 11.810 15,805 73.515 95.98 97.31
$ 20,001 - $ 30,000 1,693 42,674,020.95 10.41 11.516 25,206 75.896 94.81 95.40
$ 30,001 - $ 40,000 1,458 51,187,431.85 12.48 11.453 35,108 76.753 95.08 96.69
$ 40,001 - $ 50,000 1,082 48,839,183.74 11.91 11.169 45,138 76.689 93.90 96.37
$ 50,001 - $ 60,000 872 48,037,049.51 11.71 10.891 55,088 77.595 93.86 97.84
$ 60,001 - $ 70,000 529 34,284,388.74 8.36 10.795 64,810 78.391 94.64 98.14
$ 70,001 - $ 80,000 388 28,979,637.08 7.07 10.672 74,690 79.742 90.39 98.42
$ 80,001 - $ 90,000 259 22,031,318.73 5.37 10.549 85,063 79.003 91.92 98.12
$ 90,001 - $100,000 216 20,537,719.49 5.01 10.591 95,082 80.090 88.43 97.72
$100,001 - $120,000 270 29,540,630.66 7.20 10.537 109,410 79.416 91.17 96.60
$120,001 - $140,000 130 16,883,822.37 4.12 10.412 129,876 79.925 88.67 96.13
$140,001 - $160,000 99 14,865,152.79 3.63 10.433 150,153 83.403 89.04 97.99
$160,001 - $180,000 51 8,641,051.72 2.11 10.331 169,432 80.981 84.00 97.95
$180,001 - $200,000 35 6,642,294.82 1.62 10.364 189,780 82.170 91.51 97.03
$200,001 - $220,000 16 3,317,605.53 0.81 9.976 207,350 80.200 80.68 93.72
$220,001 - $240,000 17 3,903,392.62 0.95 10.407 229,611 81.019 64.76 100.00
$240,001 - $260,000 9 2,251,594.60 0.55 10.541 250,177 76.338 66.29 100.00
$260,001 - $280,000 6 1,622,335.26 0.40 9.676 270,389 85.179 83.13 100.00
$280,001 - $300,000 6 1,743,633.61 0.43 10.253 290,606 77.884 100.00 83.18
$300,001 - $320,000 1 312,529.73 0.07 8.990 312,530 79.810 100.00 100.00
$320,001 - $340,000 3 997,502.20 0.24 10.506 332,501 78.184 100.00 66.23
$340,001 - $360,000 2 691,341.63 0.17 8.739 345,671 77.109 50.38 100.00
$360,001 - $380,000 1 367,764.74 0.09 9.990 367,765 99.590 100.00 100.00
Over $400,000 1 420,228.14 0.10 11.990 420,228 74.910 100.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $ 48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Mortgage Rates
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Mortgage Rates Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.501% - 8.000% 14 $ 1,778,556.08 0.43% 7.915% $127,040 73.619% 100.00% 100.00%
8.001% - 8.500% 64 4,420,753.61 1.08 8.424 69,074 73.911 100.00 100.00
8.501% - 9.000% 377 26,174,462.15 6.38 8.864 69,428 74.322 96.04 98.70
9.001% - 9.500% 656 36,026,852.55 8.79 9.336 54,919 74.031 96.22 99.17
9.501% - 10.000% 1,073 64,538,275.05 15.74 9.847 60,148 77.310 92.43 98.15
10.001% - 10.500% 1,085 56,583,016.57 13.80 10.334 52,150 78.070 91.00 94.91
10.501% - 11.000% 1,309 64,726,952.07 15.78 10.833 49,448 77.665 87.08 95.23
11.001% - 11.500% 630 29,861,509.17 7.28 11.338 47,399 77.970 89.67 94.96
11.501% - 12.000% 912 38,977,681.90 9.51 11.861 42,739 78.583 91.10 97.58
12.001% - 12.500% 722 27,051,130.33 6.60 12.338 37,467 81.506 95.12 97.06
12.501% - 13.000% 627 24,123,229.20 5.88 12.840 38,474 82.154 94.55 97.50
13.001% - 13.500% 346 11,901,704.76 2.90 13.342 34,398 85.146 95.53 98.29
13.501% - 14.000% 393 13,134,058.80 3.21 13.835 33,420 84.931 95.57 98.87
14.001% - 14.500% 119 4,585,991.69 1.12 14.302 38,538 78.868 96.89 98.59
14.501% - 15.000% 91 3,295,522.44 0.81 14.860 36,215 74.772 83.24 98.61
15.001% - 15.500% 35 1,278,027.27 0.31 15.364 36,515 77.013 100.00 96.39
15.501% - 16.000% 26 699,939.67 0.17 15.794 26,921 71.933 100.00 96.70
16.001% - 16.500% 9 216,281.59 0.05 16.246 24,031 59.274 100.00 100.00
16.501% - 17.000% 9 246,281.08 0.06 16.780 27,365 63.507 85.48 100.00
17.001% - 17.500% 9 258,638.64 0.06 17.330 28,738 58.861 100.00 100.00
17.501% - 18.000% 5 105,278.32 0.03 17.821 21,056 55.374 100.00 100.00
18.001% - 18.500% 1 15,496.87 0.00 18.250 15,497 50.000 100.00 100.00
18.501% - 19.000% 1 44,823.18 0.01 18.750 44,823 65.000 100.00 100.00
19.501% - 20.000% 1 18,403.74 0.00 19.700 18,404 52.860 100.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $ 48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-35
<PAGE>
Distribution by Remaining Months to Stated Maturity
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Remaining Months Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
to Stated Maturity Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25 - 36 3 $ 38,656.31 0.01% 9.613% $12,885 62.319% 100.00% 100.00%
37 - 48 4 105,115.27 0.03 9.273 26,279 43.806 100.00 100.00
49 - 60 93 1,790,398.97 0.44 10.812 19,252 65.379 93.85 100.00
61 - 72 7 173,043.86 0.04 10.586 24,721 67.332 91.42 100.00
73 - 84 41 1,616,299.30 0.39 11.026 39,422 76.452 94.40 87.59
85 - 96 5 138,459.54 0.03 11.133 27,692 76.888 100.00 100.00
97 - 108 4 78,938.02 0.02 10.706 19,735 75.456 100.00 100.00
109 - 120 637 15,140,711.45 3.69 11.217 23,769 75.738 97.82 98.58
121 - 132 3 99,802.20 0.03 10.191 33,267 71.931 100.00 64.17
133 - 144 20 730,802.76 0.18 11.017 36,540 75.607 100.00 93.82
145 - 156 7 283,494.39 0.07 11.095 40,499 66.228 100.00 100.00
157 - 168 9 305,700.26 0.07 10.701 33,967 76.723 100.00 100.00
169 - 180 5,267 218,829,826.78 53.36 11.329 41,547 78.131 91.72 97.06
181 - 192 1 34,138.76 0.01 11.800 34,139 54.440 100.00 100.00
193 - 204 2 64,617.68 0.02 9.990 32,309 69.259 100.00 43.74
205 - 216 1 48,391.34 0.01 12.500 48,391 78.130 100.00 100.00
229 - 240 708 38,720,133.36 9.44 10.765 54,689 75.697 95.62 96.56
253 - 264 2 145,758.29 0.04 10.965 72,879 79.524 100.00 100.00
277 - 288 1 75,759.00 0.02 9.750 75,759 79.750 100.00 100.00
289 - 300 25 1,494,675.15 0.37 9.911 59,787 76.846 96.49 97.66
337 - 348 1 57,390.58 0.01 9.240 57,391 64.160 100.00 100.00
349 - 360 1,673 130,090,753.46 31.72 10.326 77,759 79.328 91.27 97.04
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Number of Months of Seasoning
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Months of Seasoning Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 103 $ 4,613,745.86 1.13% 10.662% $44,794 75.014% 98.33% 96.50%
1 - 6 7,868 376,643,258.97 91.85 10.928 47,870 78.002 92.03 97.04
7 - 12 536 28,424,972.43 6.93 11.148 53,032 79.889 94.36 96.91
13 - 18 3 96,961.22 0.02 11.522 32,320 86.790 100.00 100.00
19 - 24 1 48,391.34 0.01 12.500 48,391 78.130 100.00 100.00
25 - 30 1 76,567.70 0.02 14.250 76,568 48.230 100.00 100.00
31 - 36 1 68,491.55 0.02 11.500 68,492 45.450 100.00 100.00
37 - 42 1 90,477.66 0.02 10.500 90,478 76.460 0.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-36
<PAGE>
Distribution by Original Combined Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Original Combined Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan-to-Value Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.01% - 10.00% 2 $ 34,737.64 0.01% 10.982% $17,369 7.920% 100.00% 100.00%
10.01% - 15.00% 24 519,035.53 0.13 10.631 21,626 13.261 73.56 88.24
15.01% - 20.00% 29 666,158.20 0.16 10.672 22,971 17.367 74.19 97.03
20.01% - 25.00% 40 1,023,694.69 0.25 10.653 25,592 22.410 95.83 92.63
25.01% - 30.00% 65 1,912,556.30 0.47 10.716 29,424 27.806 87.15 88.26
30.01% - 35.00% 82 2,309,967.70 0.56 10.922 28,170 32.726 81.06 96.80
35.01% - 40.00% 94 2,918,442.65 0.71 10.773 31,047 37.461 91.40 94.79
40.01% - 45.00% 139 4,666,106.86 1.14 10.955 33,569 42.708 89.86 97.55
45.01% - 50.00% 166 6,391,957.05 1.56 11.040 38,506 48.037 88.75 96.31
50.01% - 55.00% 205 7,826,758.05 1.91 10.843 38,179 52.958 79.44 96.40
55.01% - 60.00% 279 11,796,091.54 2.87 11.224 42,280 57.861 82.11 95.22
60.01% - 65.00% 393 17,671,102.89 4.31 10.794 44,965 63.122 83.89 90.66
65.01% - 70.00% 636 30,007,065.93 7.32 11.156 47,181 68.442 87.15 91.14
70.01% - 75.00% 1,084 53,529,357.36 13.05 11.006 49,381 73.630 84.03 92.76
75.01% - 80.00% 1,940 105,034,564.74 25.61 10.535 54,142 79.071 94.79 98.01
80.01% - 85.00% 1,515 80,166,142.33 19.55 10.384 52,915 84.211 94.83 99.92
85.01% - 90.00% 414 22,533,707.81 5.50 11.299 54,429 89.133 96.88 99.91
90.01% - 95.00% 330 14,513,247.59 3.54 12.098 43,980 93.046 100.00 99.85
95.01% - 100.00% 999 42,665,343.94 10.40 12.154 42,708 99.038 100.00 100.00
100.01% - 101.00% 78 3,876,827.93 0.95 11.435 49,703 100.028 100.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------- ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------- ------ ------
</TABLE>
Distribution by Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Original Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan-to-Value Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 18 $ 349,022.46 0.09% 11.207% $ 19,390 73.951% 90.75% 100.00%
5.01% - 10.00% 235 5,171,208.71 1.26 11.569 22,005 78.002 80.71 99.55
10.01% - 15.00% 694 17,157,543.63 4.18 11.579 24,723 78.998 85.76 99.00
15.01% - 20.00% 894 25,345,240.63 6.18 11.766 28,350 82.194 88.48 99.46
20.01% - 25.00% 768 24,810,589.75 6.05 11.581 32,305 80.626 91.93 97.67
25.01% - 30.00% 565 20,111,846.02 4.90 11.500 35,596 78.375 91.30 98.19
30.01% - 35.00% 329 11,843,647.83 2.89 11.446 35,999 74.714 89.05 98.37
35.01% - 40.00% 267 11,054,592.16 2.70 11.316 41,403 72.250 84.89 98.33
40.01% - 45.00% 212 8,611,532.83 2.10 11.099 40,620 63.670 90.30 98.01
45.01% - 50.00% 186 7,835,112.73 1.91 11.227 42,124 60.260 87.89 96.49
50.01% - 55.00% 192 8,346,400.81 2.04 10.882 43,471 60.939 85.89 97.29
55.01% - 60.00% 229 10,930,746.11 2.67 11.241 47,733 60.796 83.91 94.27
60.01% - 65.00% 293 14,559,757.86 3.55 10.790 49,692 64.354 90.13 89.65
65.01% - 70.00% 442 23,535,132.55 5.74 11.176 53,247 68.938 92.20 89.59
70.01% - 75.00% 698 40,441,523.99 9.86 11.004 57,939 73.787 89.25 91.67
75.01% - 80.00% 1,271 83,914,319.17 20.46 10.452 66,022 79.233 95.56 97.85
80.01% - 85.00% 782 56,069,179.27 13.67 10.205 71,700 84.283 96.08 99.88
85.01% - 90.00% 195 15,441,285.78 3.77 10.928 79,186 89.355 97.43 99.86
90.01% - 95.00% 63 5,849,910.23 1.43 11.032 92,856 93.182 100.00 99.64
95.01% - 100.00% 163 16,617,869.09 4.05 10.862 101,950 99.334 100.00 100.00
100.01% - 101.00% 18 2,066,405.12 0.50 10.368 114,800 100.025 100.00 100.00
- --------------------- ----- --------------- ------ ------ -------- ------- ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $ 48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ -------- ------- ------ ------
</TABLE>
S-37
<PAGE>
Distribution by Junior Lien Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Junior Lien Ratio Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 3 $ 62,210.94 0.05% 11.873% $20,737 86.562% 100.00% 100.00%
5.01% - 10.00% 96 1,932,332.30 1.59 11.844 20,128 85.175 82.55 100.00
10.01% - 15.00% 419 9,824,580.76 8.09 11.925 23,448 86.763 88.79 100.00
15.01% - 20.00% 695 18,180,604.20 14.97 12.061 26,159 88.057 92.62 99.27
20.01% - 25.00% 668 20,340,953.68 16.74 11.821 30,451 85.877 89.50 99.60
25.01% - 30.00% 544 17,689,157.10 14.56 11.677 32,517 83.385 91.33 99.44
30.01% - 35.00% 424 15,193,898.71 12.51 11.411 35,835 82.179 90.48 97.16
35.01% - 40.00% 259 9,485,833.64 7.81 11.363 36,625 80.897 87.29 99.68
40.01% - 45.00% 182 7,641,382.88 6.29 11.156 41,986 79.005 88.37 97.73
45.01% - 50.00% 124 4,841,877.57 3.99 11.293 39,047 77.733 88.95 99.48
50.01% - 55.00% 80 3,826,962.26 3.15 11.000 47,837 75.114 77.28 98.60
55.01% - 60.00% 67 2,891,298.68 2.38 11.190 43,154 74.459 75.64 97.56
60.01% - 65.00% 38 1,918,122.17 1.58 11.212 50,477 70.347 76.06 100.00
65.01% - 70.00% 43 2,001,482.20 1.65 11.024 46,546 71.881 78.12 100.00
70.01% - 75.00% 34 1,630,217.73 1.34 10.483 47,948 66.139 95.05 97.58
75.01% - 80.00% 34 1,561,262.78 1.29 10.744 45,919 65.233 98.59 95.13
80.01% - 85.00% 20 1,011,296.97 0.83 10.597 50,565 68.513 93.57 96.15
85.01% - 90.00% 13 684,696.54 0.56 10.278 52,669 66.170 100.00 100.00
90.01% - 95.00% 10 457,555.35 0.37 10.358 45,756 77.228 100.00 94.05
95.01% - 100.00% 4 300,963.45 0.25 10.551 75,241 55.467 100.00 100.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 3,757 $121,476,689.91 100.00% 11.572% $32,333 82.313% 89.16% 98.95%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Property Type
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Property Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single Family
Residence 7,974 $384,513,198.93 93.77% 10.943% $48,221 78.378% 92.18% 97.72%
2-4 Family 215 12,508,538.74 3.05 10.881 58,179 69.820 94.34 78.72
Townhouse 186 7,614,593.67 1.86 10.947 40,939 76.931 96.51 92.63
Condo 139 5,426,535.39 1.32 10.972 39,040 78.362 86.40 96.29
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Loan Purpose
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan-Purpose Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase 269 $ 18,196,854.77 4.44% 11.006% $67,646 78.560% 94.57% 93.71%
Refinance and/or
Cashout 8,245 391,866,011.96 95.56 10.939 47,528 78.068 92.14 97.18
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Occupancy Status
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Occupancy Status Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owner Occupied 8,248 $397,878,002.92 97.03% 10.939% $48,239 78.398% 92.01% 100.00%
Non-Owner Occupied 266 12,184,863.81 2.97 11.030 45,808 68.029 100.00 0.00
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
Total 8,514 $410,062,866.73 100.00% 10.942% $48,163 78.090% 92.25% 97.03%
- --------------------- ----- --------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-38
<PAGE>
Adjustable Rate Group
Other than during the first six, twelve, twenty-four or thirty-six months
following origination, during which time each Adjustable Rate Mortgage Loan will
bear interest at a Mortgage Rate fixed at origination, each Adjustable Rate
Mortgage Loan has a Mortgage Rate subject to semi-annual or annual adjustment on
the day of the month specified in the related Mortgage Note (each such date, an
"Adjustment Date") to equal the sum of (i) either (x) the yield on United States
Treasury securities adjusted to a constant maturity of one year ("One-year CMT")
generally calculated as the one-year constant maturity treasury index as
published in The Wall Street Journal as a Key Interest Rate each week (usually
on Tuesday) or (y) the London interbank offered rate for six-month United States
dollar deposits ("Six-month LIBOR" and, together with the CMT Index, the
"Index") generally calculated as the average of interbank offered rates for
six-month U.S. dollar-denominated deposits in the London market, as published in
The Wall Street Journal and (ii) a fixed percentage amount specified in the
related Mortgage Note (the "Gross Margin"); provided, however, that the Mortgage
Rate will not increase or decrease by more than a fixed percentage on any
Adjustment Date (the "Periodic Rate Cap").
Generally, the Adjustable Rate Mortgage Loans provide that over the life of
the Adjustable Rate Mortgage Loan the Mortgage Rate will in no event be more
than the initial Mortgage Rate plus a fixed percentage (such rate, the "Maximum
Rate"). Effective with the first payment due on an Adjustable Rate Mortgage Loan
after each related Adjustment Date, the monthly payment will be adjusted to an
amount which will fully amortize the outstanding principal balance of the
Adjustable Rate Mortgage Loan over its remaining term.
If the index ceases to be published or is otherwise unavailable, the Master
Servicer will select an alternative index for mortgage loans on single-family
residential properties, based upon comparable information, over which it has no
control and which is readily verifiable by mortgagors.
Each Adjustable Rate Mortgage Loan was originated or acquired by CIT
Consumer Finance on or after January 2, 1997.
As of the Cut-off Date, the latest date on which any Adjustable Rate
Mortgage Loan matures is July 8, 2027 and the earliest stated maturity date of
any Adjustable Rate Mortgage Loan is January 21, 2000.
96.33% of the Adjustable Rate Mortgage Loans (by Principal Balance as of
the Cut-off Date) were secured by first mortgages, and 3.67% of the Adjustable
Rate Mortgage Loans (by Principal Balance as of the Cut-off Date) were
"subordinate mortgages" subject to senior mortgages.
The weighted average of the Combined Loan-to-Value Ratios (as of the time
of their origination) of the Adjustable Rate Mortgage Loans was 78.99%.
17.93% and 10.07% of the Adjustable Rate Mortgage Loans (by Principal
Balance as of the Cut-off Date) were secured by Mortgaged Properties located in
Ohio and Michigan, respectively. Otherwise, no more than 9.57% of the Adjustable
Rate Mortgage Loans (by Principal Balance as of the Cut-off Date) were secured
by Mortgaged Properties located in any one state. No more than 0.80% of the
Adjustable Rate Mortgage Loans (by Principal Balance as of the Cut-off Date)
were secured by Mortgaged Properties located in any one postal zip code area.
S-39
<PAGE>
The following information sets forth in tabular format certain information,
as of the Cut-off Date, relating to the Adjustable Rate Mortgage Loans.
Geographic Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
State Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ohio 231 $16,141,374.85 17.93% 9.651% $ 69,876 78.592% 95.82% 99.63%
Michigan 145 9,065,665.83 10.07 10.629 62,522 77.746 93.90 99.06
California 55 8,617,937.60 9.57 8.980 156,690 82.460 87.73 100.00
Washington 66 7,310,299.96 8.12 9.138 110,762 79.586 80.64 100.00
Colorado 51 5,728,376.57 6.36 8.750 112,321 80.176 93.00 100.00
Oregon 44 4,921,947.15 5.47 9.293 111,862 77.573 78.00 93.26
Utah 41 4,192,453.44 4.66 9.062 102,255 80.073 98.01 98.56
Indiana 54 3,783,723.94 4.21 9.726 70,069 77.874 90.38 100.00
Pennsylvania 40 3,126,176.36 3.47 8.764 78,154 78.214 100.00 98.27
Arizona 27 2,684,750.58 2.98 9.378 99,435 81.283 75.90 100.00
Maryland 21 2,627,942.49 2.92 8.379 125,140 78.511 99.00 100.00
Kentucky 37 2,551,783.73 2.84 9.498 68,967 78.320 100.00 100.00
Wisconsin 32 2,542,106.92 2.82 9.815 79,441 79.512 100.00 100.00
New York 19 2,450,374.74 2.72 9.568 128,967 81.232 87.97 85.51
Nevada 16 2,060,847.14 2.29 8.911 128,803 79.077 81.70 95.52
Missouri 24 1,783,764.19 1.98 9.041 74,324 79.578 93.76 100.00
North Carolina 23 1,378,274.71 1.53 8.955 59,925 73.449 96.15 100.00
New Jersey 10 1,368,529.39 1.52 9.896 136,853 75.953 94.09 100.00
Georgia 13 1,114,787.65 1.24 10.212 85,753 79.265 93.90 100.00
Florida 17 1,060,736.93 1.18 9.589 62,396 76.307 91.52 100.00
Illinois 16 955,660.17 1.06 10.299 59,729 77.762 100.00 100.00
Oklahoma 12 924,808.59 1.03 9.047 77,067 79.031 100.00 100.00
Connecticut 8 914,004.14 1.02 8.981 114,251 69.962 100.00 100.00
Idaho 10 734,849.71 0.82 9.192 73,485 80.688 83.39 100.00
Minnesota 6 449,880.43 0.50 10.526 74,980 78.897 100.00 100.00
Kansas 7 345,959.49 0.38 9.614 49,423 78.940 90.98 73.36
Iowa 3 257,992.86 0.29 10.317 85,998 83.063 100.00 100.00
Virginia 4 213,931.75 0.24 10.812 53,483 72.778 100.00 100.00
New Mexico 2 196,100.00 0.22 9.047 98,050 81.039 100.00 100.00
Massachusetts 1 155,000.00 0.17 8.750 155,000 73.810 100.00 100.00
Montana 2 137,950.00 0.15 8.989 68,975 68.262 67.38 32.62
South Carolina 2 87,817.25 0.10 10.283 43,909 64.757 100.00 100.00
Louisiana 1 60,384.54 0.07 7.900 60,385 84.450 100.00 100.00
Tennessee 1 59,500.00 0.07 8.900 59,500 85.000 100.00 100.00
- --------------------- ----- -------------- ------ ----- -------- ------ ----- -----
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ----- -------- ------ ----- -----
</TABLE>
S-40
<PAGE>
Distribution by Current Principal Balances
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Current Balance Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10,001 - $ 20,000 19 $ 286,695.32 0.32% 10.589% $ 15,089 60.522% 83.28% 100.00%
$ 20,001 - $ 30,000 56 1,436,381.52 1.60 10.099 25,650 65.258 90.93 100.00
$ 30,001 - $ 40,000 77 2,754,452.22 3.06 10.180 35,772 70.278 98.87 98.85
$ 40,001 - $ 50,000 96 4,411,460.22 4.90 10.157 45,953 75.028 95.81 100.00
$ 50,001 - $ 60,000 151 8,339,820.16 9.27 9.884 55,231 77.111 95.50 98.63
$ 60,001 - $ 70,000 116 7,533,032.46 8.37 9.885 64,940 78.188 95.54 97.55
$ 70,001 - $ 80,000 73 5,506,396.76 6.12 9.740 75,430 79.151 93.08 98.66
$ 80,001 - $ 90,000 75 6,367,330.13 7.07 9.402 84,898 80.519 94.62 98.67
$ 90,001 - $100,000 69 6,590,557.34 7.32 9.465 95,515 79.455 97.13 95.77
$100,001 - $120,000 109 11,974,566.01 13.30 9.188 109,858 80.394 96.38 99.16
$120,001 - $140,000 61 7,849,426.39 8.72 9.186 128,679 80.151 86.61 100.00
$140,001 - $160,000 46 6,889,758.83 7.65 8.991 149,777 81.729 93.43 100.00
$160,001 - $180,000 31 5,278,635.80 5.86 9.190 170,279 81.075 80.49 100.00
$180,001 - $200,000 21 4,001,685.72 4.45 9.356 190,556 76.996 76.35 100.00
$200,001 - $220,000 9 1,851,910.68 2.06 9.410 205,768 81.511 66.80 100.00
$220,001 - $240,000 14 3,216,895.57 3.57 8.608 229,778 83.172 92.66 100.00
$240,001 - $260,000 4 985,640.36 1.10 8.517 246,410 81.190 49.78 100.00
$260,001 - $280,000 4 1,059,443.92 1.18 8.883 264,861 83.702 100.00 100.00
$300,001 - $320,000 5 1,537,665.99 1.71 8.928 307,533 80.663 80.44 100.00
$340,001 - $360,000 1 355,133.39 0.39 9.350 355,133 59.810 100.00 0.00
$360,001 - $380,000 1 374,629.64 0.42 9.500 374,630 75.000 100.00 100.00
Over $400,000 3 1,404,174.67 1.56 8.489 468,058 84.251 100.00 100.00
- --------------------- ----- -------------- ------ ----- -------- ------ ----- ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ----- -------- ------ ----- ------
</TABLE>
Distribution by Current Mortgage Rates
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Current Mortgage Rate Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.501% - 7.000% 2 $ 242,052.96 0.27% 6.957% $121,026 79.714% 100.00% 100.00%
7.001% - 7.500% 26 3,343,120.28 3.72 7.382 128,582 80.621 100.00 100.00
7.501% - 8.000% 55 6,988,017.26 7.77 7.803 127,055 81.352 94.81 96.74
8.001% - 8.500% 84 8,894,536.53 9.88 8.391 105,887 80.782 96.60 98.95
8.501% - 9.000% 183 16,711,825.62 18.57 8.869 91,321 80.022 91.71 99.45
9.001% - 9.500% 155 14,093,554.75 15.66 9.339 90,926 78.737 89.66 97.48
9.501% - 10.000% 199 17,427,096.31 19.36 9.816 87,573 79.107 87.70 99.45
10.001% - 10.500% 142 10,722,505.61 11.91 10.302 75,511 79.484 92.61 98.70
10.501% - 11.000% 99 5,719,942.76 6.36 10.833 57,777 75.328 92.69 97.90
11.001% - 11.500% 37 2,469,092.54 2.74 11.291 66,732 76.578 94.40 100.00
11.501% - 12.000% 32 2,074,713.95 2.31 11.766 64,835 72.754 78.70 95.16
12.001% - 12.500% 6 292,271.15 0.32 12.214 48,712 70.134 76.55 100.00
12.501% - 13.000% 7 433,807.79 0.48 12.749 61,973 72.409 100.00 100.00
13.001% - 13.500% 2 64,217.42 0.07 13.400 32,109 51.228 100.00 100.00
13.501% - 14.000% 4 172,177.04 0.19 13.813 43,044 64.981 100.00 100.00
14.001% - 14.500% 3 165,936.71 0.18 14.151 55,312 50.322 59.05 100.00
14.501% - 15.000% 5 190,824.42 0.21 14.677 38,165 54.889 100.00 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
S-41
<PAGE>
Distribution by Gross Margins
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Gross Margin Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3.001% - 3.500% 16 $ 2,181,880.21 2.42% 8.411% $136,368 179.468% 100.00% 100.00%
3.501% - 4.000% 51 7,337,074.33 8.15 8.411 143,864 87.210 96.68 100.00
4.001% - 4.500% 37 5,319,495.07 5.91 8.923 143,770 80.336 68.10 100.00
4.501% - 5.000% 109 11,368,312.10 12.63 8.813 104,296 78.247 92.94 95.59
5.001% - 5.500% 186 16,501,656.47 18.34 8.958 88,719 80.278 91.28 99.63
5.501% - 6.000% 149 12,216,539.65 13.57 9.252 81,990 78.730 93.01 98.14
6.001% - 6.500% 147 12,158,885.39 13.51 9.633 82,714 78.158 93.75 99.24
6.501% - 7.000% 287 18,825,229.91 20.92 10.562 65,593 76.623 95.89 98.96
7.001% - 7.500% 31 2,011,820.23 2.24 10.411 64,897 75.506 82.46 97.02
7.501% - 8.000% 18 1,145,340.36 1.27 10.765 63,630 73.893 76.61 92.58
8.001% - 8.500% 4 353,408.18 0.39 10.516 88,352 62.248 49.14 100.00
8.501% - 9.000% 6 586,051.20 0.65 12.117 97,675 71.388 64.55 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
Distribution by Maximum Mortgage Rates
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Maximum Mortgage Rate Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11.501% - 12.000% 1 $ 198,000.00 0.22% 10.000% $198,000 90.000% 100.00% 100.00%
12.001% - 12.500% 1 133,992.25 0.15 8.380 133,992 84.960 100.00 100.00
12.501% - 13.000% 2 242,052.96 0.27 6.957 121,026 79.714 100.00 100.00
13.001% - 13.500% 25 3,163,185.01 3.51 7.375 126,527 80.086 100.00 100.00
13.501% - 14.000% 48 6,105,809.69 6.79 7.796 127,204 81.251 95.89 99.01
14.001% - 14.500% 85 9,118,087.84 10.13 8.443 107,272 81.047 94.63 100.00
14.501% - 15.000% 179 16,599,713.87 18.44 8.878 92,736 80.336 92.39 98.44
15.001% - 15.500% 144 12,947,915.37 14.39 9.293 89,916 78.252 88.75 96.54
15.501% - 16.000% 196 17,062,430.16 18.96 9.756 87,053 78.965 87.08 99.63
16.001% - 16.500% 140 10,619,603.05 11.80 10.234 75,854 79.618 94.90 98.69
16.501% - 17.000% 104 6,390,326.79 7.10 10.559 61,445 75.982 93.03 98.56
17.001% - 17.500% 43 3,089,519.07 3.43 10.882 71,849 77.404 92.96 100.00
17.501% - 18.000% 41 2,585,304.94 2.87 11.429 63,056 73.760 85.93 93.78
18.001% - 18.500% 8 412,150.96 0.46 11.669 51,519 69.770 83.37 100.00
18.501% - 19.000% 9 705,311.43 0.78 12.424 78,368 74.724 70.54 100.00
19.001% - 19.500% 3 103,351.54 0.12 12.946 34,451 62.123 100.00 100.00
19.501% - 20.000% 4 172,177.04 0.19 13.813 43,044 64.981 100.00 100.00
20.001% - 20.500% 3 165,936.71 0.18 14.151 55,312 50.322 59.05 100.00
20.501% - 21.000% 5 190,824.42 0.21 14.677 38,165 54.889 100.00 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
S-42
<PAGE>
Distribution by Month of Next Adjustment Date
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Month of Next Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Adjustment Date Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 1997 16 $ 1,151,319.62 1.28% 8.806% $ 71,957 80.494% 100.00% 100.00%
August 1997 29 2,671,712.80 2.97 8.834 92,128 80.358 92.22 100.00
September 1997 28 2,059,548.05 2.29 9.120 73,555 78.762 100.00 97.09
October 1997 98 7,159,497.59 7.95 10.373 73,056 78.957 95.36 100.00
November 1997 131 9,474,615.81 10.53 10.102 72,325 77.945 95.07 98.94
December 1997 64 4,680,673.47 5.20 10.088 73,136 78.295 100.00 98.18
January 1998 36 2,827,634.83 3.14 8.674 78,545 77.048 100.00 87.53
February 1998 46 4,786,038.39 5.32 8.301 104,044 80.375 100.00 100.00
March 1998 60 4,881,908.52 5.42 8.729 81,365 80.613 94.10 98.76
April 1998 64 5,632,846.80 6.26 9.044 88,013 77.501 93.99 93.70
May 1998 28 2,753,858.11 3.06 9.189 98,352 83.005 79.37 100.00
June 1998 25 2,078,772.51 2.31 8.775 83,151 77.817 80.16 100.00
July 1998 2 154,150.00 0.17 9.525 77,075 81.370 100.00 100.00
October 1998 1 23,896.47 0.03 10.700 23,896 79.570 100.00 100.00
December 1998 2 76,884.36 0.09 11.606 38,442 82.455 100.00 100.00
March 1999 15 1,929,788.59 2.14 9.042 128,653 79.092 77.78 100.00
April 1999 98 9,342,706.39 10.38 9.351 95,334 78.338 86.10 99.66
May 1999 101 9,101,234.36 10.11 9.555 90,111 80.378 89.37 99.30
June 1999 147 13,963,922.73 15.51 9.592 94,993 79.096 90.50 100.00
July 1999 15 1,232,003.38 1.37 9.591 82,134 79.812 93.00 100.00
January 2000 1 145,349.33 0.16 11.300 145,349 80.000 100.00 100.00
May 2000 6 664,095.66 0.74 9.089 110,683 80.826 100.00 100.00
June 2000 26 2,905,252.33 3.23 9.263 111,740 78.175 74.26 96.06
July 2000 2 307,983.00 0.34 9.113 153,992 48.366 64.94 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
Distribution by Remaining Months to Stated Maturity
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Remaining Months Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
to Stated Maturity Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25 - 36 1 $ 25,142.36 0.03% 7.110% $25,142 45.900% 100.00% 100.00%
49 - 60 2 46,007.41 0.05 8.555 23,004 54.270 100.00 100.00
109 - 120 8 303,186.40 0.34 9.186 37,898 73.704 100.00 100.00
145 - 156 1 32,765.86 0.04 10.700 32,766 56.900 100.00 100.00
169 - 180 91 5,071,457.53 5.63 9.171 55,730 74.238 86.11 93.00
229 - 240 21 1,220,722.25 1.36 9.195 58,130 75.762 89.84 100.00
289 - 300 1 39,345.73 0.04 9.360 39,346 42.890 100.00 100.00
349 - 360 916 83,267,065.56 92.51 9.449 90,903 79.398 91.89 98.96
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Number of Months of Seasoning
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Months of Seasoning Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 24 $ 2,125,123.75 2.36% 9.338% $88,547 74.625% 90.86% 87.75%
1 - 6 1,007 87,338,984.43 97.04 9.430 86,732 79.105 91.55 98.90
7 - 12 10 541,584.92 0.60 9.640 54,158 77.982 100.00 100.00
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-43
<PAGE>
Distribution by Original Combined Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Principal Original of Full of Owner
Number of Principal Balance Weighted Average Combined Documentation Occupied
Original Combined Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan-to-Value Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.01% - 10.00% 1 $ 44,200.00 0.05% 9.350% $ 44,200 5.110% 100.00% 100.00%
10.01% - 15.00% 2 50,378.57 0.06 10.739 25,189 14.437 100.00 100.00
15.01% - 20.00% 1 25,426.23 0.03 9.870 25,426 15.280 0.00 100.00
20.01% - 25.00% 3 74,742.45 0.08 11.150 24,914 23.784 33.45 100.00
25.01% - 30.00% 2 222,025.78 0.25 8.432 111,013 28.347 100.00 100.00
30.01% - 35.00% 4 141,964.04 0.16 10.726 35,491 33.005 100.00 100.00
35.01% - 40.00% 6 170,436.89 0.19 10.480 28,406 37.645 100.00 100.00
40.01% - 45.00% 10 395,511.24 0.44 10.296 39,551 42.455 76.15 100.00
45.01% - 50.00% 14 561,589.48 0.62 10.679 40,114 47.809 90.72 100.00
50.01% - 55.00% 11 599,012.90 0.66 9.408 54,456 53.229 100.00 89.99
55.01% - 60.00% 18 1,468,414.70 1.63 9.986 81,579 58.534 75.03 63.19
60.01% - 65.00% 51 3,149,287.94 3.50 10.077 61,751 63.499 85.00 97.05
65.01% - 70.00% 51 4,117,829.76 4.57 9.784 80,742 68.394 77.60 100.00
70.01% - 75.00% 148 11,332,351.92 12.59 9.753 76,570 74.244 81.97 97.85
75.01% - 80.00% 371 32,114,767.16 35.68 9.503 86,563 79.275 94.07 99.11
80.01% - 85.00% 245 24,162,273.80 26.85 9.134 98,622 84.320 93.63 100.00
85.01% - 90.00% 84 9,234,396.22 10.26 9.126 109,933 89.482 98.83 100.00
90.01% - 95.00% 17 1,987,367.92 2.21 8.475 116,904 90.612 100.00 100.00
95.01% - 100.00% 2 153,716.10 0.17 9.730 76,858 98.778 100.00 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
Distribution by Original Loan-to-Value Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Principal Original of Full of Owner
Number of Principal Balance Weighted Average Combined Documentation Occupied
Original Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan-to-Value Ratios Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- --------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.01% - 5.00% 1 $ 44,200.00 0.05% 9.350% $ 44,200 5.110% 100.00% 100.00%
5.01% - 10.00% 8 171,031.18 0.19 9.829 21,379 82.553 54.00 100.00
10.01% - 15.00% 15 659,837.56 0.73 8.725 43,989 64.207 82.31 100.00
15.01% - 20.00% 12 664,830.34 0.74 9.647 55,403 78.448 84.90 100.00
20.01% - 25.00% 15 974,598.65 1.08 9.511 64,973 71.337 96.94 63.56
25.01% - 30.00% 6 375,928.85 0.42 9.162 62,655 41.945 71.18 100.00
30.01% - 35.00% 8 327,720.91 0.36 10.254 40,965 56.201 100.00 100.00
35.01% - 40.00% 9 441,905.14 0.49 10.001 49,101 65.206 54.92 100.00
40.01% - 45.00% 9 357,477.02 0.40 10.872 39,720 47.626 80.99 100.00
45.01% - 50.00% 12 493,362.89 0.55 10.795 41,114 47.995 100.00 100.00
50.01% - 55.00% 13 730,512.29 0.81 9.377 56,193 59.097 100.00 91.79
55.01% - 60.00% 15 1,075,275.41 1.19 10.208 71,685 58.090 65.90 82.75
60.01% - 65.00% 48 3,055,411.25 3.39 10.045 63,654 63.725 86.35 96.96
65.01% - 70.00% 50 4,073,086.16 4.53 9.782 81,462 68.385 78.46 100.00
70.01% - 75.00% 138 10,888,319.21 12.10 9.729 78,901 74.272 82.58 97.77
75.01% - 80.00% 357 31,302,569.51 34.78 9.519 87,682 79.316 93.98 99.08
80.01% - 85.00% 230 23,532,357.12 26.15 9.131 102,315 84.309 94.36 100.00
85.01% - 90.00% 78 8,780,994.41 9.76 9.112 112,577 89.483 98.77 100.00
90.01% - 95.00% 15 1,902,559.10 2.11 8.423 126,837 90.613 100.00 100.00
95.01% - 100.00% 2 153,716.10 0.17 9.730 76,858 98.778 100.00 100.00
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
S-44
<PAGE>
Distribution by Junior Lien Ratios
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Junior Lien Ratio Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.01% - 10.00% 3 $ 93,157.48 2.82% 9.949% $ 31,052 84.672% 45.65% 100.00%
10.01% - 15.00% 8 200,981.40 6.08 9.118 25,123 83.813 86.05 100.00
15.01% - 20.00% 7 375,491.42 11.36 8.166 53,642 76.908 88.08 100.00
20.01% - 25.00% 12 745,352.19 22.55 9.643 62,113 84.657 93.49 100.00
25.01% - 30.00% 8 295,872.55 8.95 9.268 36,984 80.485 100.00 100.00
30.01% - 35.00% 3 156,692.83 4.74 10.161 52,231 60.718 66.75 100.00
35.01% - 40.00% 4 195,182.79 5.90 8.864 48,796 43.683 86.48 100.00
40.01% - 45.00% 4 514,381.40 15.56 9.702 128,595 63.992 89.69 30.96
45.01% - 50.00% 4 299,915.57 9.07 9.795 74,979 77.332 15.13 100.00
50.01% - 55.00% 1 48,775.12 1.48 9.750 48,775 74.510 100.00 100.00
55.01% - 60.00% 4 138,602.34 4.19 10.106 34,651 69.226 100.00 100.00
60.01% - 65.00% 1 19,883.28 0.60 10.990 19,883 22.770 0.00 100.00
65.01% - 70.00% 2 124,847.99 3.77 9.344 62,424 79.964 100.00 100.00
75.01% - 80.00% 1 21,921.30 0.66 8.960 21,921 38.120 100.00 100.00
80.01% - 85.00% 1 74,913.75 2.27 8.750 74,914 75.020 100.00 100.00
- --------------------- ----- ------------- ------ ------ -------- ------ ------ ------
Total 63 $3,305,971.41 100.00% 9.413% $ 52,476 74.046% 82.52% 89.26%
- --------------------- ----- ------------- ------ ------ -------- ------ ------ ------
</TABLE>
Distribution by Property Type
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Property Type Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single
Family Residence 996 $86,116,742.19 95.68% 9.430% $86,463 79.000% 91.61% 98.75%
Condo 20 1,722,361.69 1.91 9.803 86,118 76.741 91.36 96.87
2-4 Family 13 1,250,824.28 1.39 9.150 96,217 79.486 88.82 92.57
Townhouse 12 915,764.94 1.02 8.955 76,314 81.875 92.83 100.00
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
</TABLE>
Distribution by Loan Purpose
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Loan Purpose Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchase 142 $15,525,978.07 17.25% 9.125% $109,338 82.047% 92.11% 98.41%
Refinance and/or
Cashout 899 74,479,715.03 82.75 9.492 82,847 78.356 91.47 98.69
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $ 86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ -------- ------ ------ ------
</TABLE>
Distribution by Occupancy Status
<TABLE>
<CAPTION>
Percentage of Weighted
Mortgage Pool Average Percent Percent
Aggregate by Aggregate Original of Full of Owner
Number of Principal Principal Balance Weighted Average Combined Documentation Occupied
Mortgage Balance of Mortgage Average Current Loan-to-Value Mortgage Mortgage
Occupancy Status Loans Outstanding Loans Coupon Balance Ratio Loans Loans
- ---------------------- --------- --------------- ----------------- -------- ------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owner Occupied 1,028 $88,782,343.51 98.64% 9.428% $86,364 79.152% 91.46% 100.00%
Non-Owner Occupied 13 1,223,349.59 1.36 9.456 94,104 67.426 100.00 0.00
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
Total 1,041 $90,005,693.10 100.00% 9.429% $86,461 78.993% 91.58% 98.64%
- --------------------- ----- -------------- ------ ------ ------- ------ ------ ------
</TABLE>
S-45
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of, and, if purchased at other than par, the
yield to maturity on an Offered Certificate will be directly related to the rate
of payment of principal of the Mortgage Loans, including for this purpose
voluntary payment in whole of the Mortgage Loans prior to stated maturity,
liquidations due to defaults, casualties and condemnations, and repurchases or
purchases of Mortgage Loans by the Seller or the Master Servicer. The actual
rate of principal prepayments on pools of mortgage loans is influenced by a
variety of economic, tax, geographic, demographic, social, legal and other
factors and has fluctuated considerably in recent years. In addition, the rate
of principal prepayments may differ among pools of mortgage loans at any time
because of specific factors relating to the mortgage loans in the particular
pool, including, among other things, the age of the mortgage loans, the
geographic locations of the properties securing the mortgage loans, the extent
of the mortgagors' equity in such properties, and changes in the mortgagors'
housing needs, job transfers and unemployment.
The timing of changes in the rate of prepayments may significantly affect
the actual yield to investors, even if the average rate of principal prepayments
is consistent with the expectations of investors. In general, the earlier the
payment of principal of the Mortgage Loans, the greater the effect on an
investor's yield to maturity. As a result, the effect on an investor's yield of
prepayments occurring at a rate higher (or lower) than the rate anticipated by
the investor during the period immediately following the issuance of the Offered
Certificates will not be offset by a subsequent like reduction (or increase) in
the rate of principal prepayments. Investors must make their own decisions as to
the appropriate prepayment assumptions to be used in deciding whether to
purchase any of the Offered Certificates. The Depositor makes no representations
or warranties as to the rate of prepayment or the factors to be considered in
connection with such determination.
Projected Prepayments and Yields for Offered Certificates
If purchased at other than par, the yield to maturity on an Offered
Certificate will be affected by the rate of the payment of principal of the
Mortgage Loans. If the actual rate of payments on the Mortgage Loans is slower
than the rate anticipated by an investor who purchases an Offered Certificate of
the related class at a discount, the actual yield to such investor will be lower
than such investor's anticipated yield. If the actual rate of payments on the
Mortgage Loans is faster than the rate anticipated by an investor who purchases
an Offered Certificate of the related class at a premium, the actual yield to
such investor will be lower than such investor's anticipated yield.
The Mortgage Loans in the Fixed Rate Group are all fixed rate mortgage
loans. The rate of prepayments with respect to conventional fixed rate mortgage
loans has fluctuated significantly in recent years. In general, if prevailing
interest rates fall significantly below the interest rates on fixed rate
mortgage loans, such mortgage loans are likely to be subject to higher
prepayment rates than if prevailing rates remain at or above the interest rate
on such mortgage loans. However, the monthly payment on mortgage loans similar
to the Mortgage Loans is often lower than the monthly payment on a
purchase-money first mortgage loan. Consequently, a decrease in the interest
rate payable as a result of a refinancing would result in a relatively small
reduction in the amount of the mortgagor's monthly payment, as a result of the
relatively small loan balance. Conversely, if prevailing interest rates rise
appreciably above the interest rates on fixed rate mortgage loans, such mortgage
loans may experience a lower prepayment rate than if prevailing rates remain at
or below the interest rates on such mortgage loans. 54.12% of the Mortgage Loans
with respect to the Fixed Rate Group by aggregate principal balance had
prepayment penalties.
All of the Mortgage Loans in the Adjustable Rate Group are adjustable rate
mortgage loans. As is the case with conventional fixed rate mortgage loans,
adjustable rate mortgage loans may be subject to a greater rate of principal
prepayments in a declining interest rate environment. For example, if prevailing
interest rates fall significantly, adjustable rate mortgage loans could be
subject to higher prepayment rates than if prevailing interest rates remain
constant because the availability of fixed rate mortgage loans at competitive
interest rates may encourage mortgagors to refinance their adjustable rate
mortgage loans to "lock in" a lower fixed interest rate. 69.30% of the
Adjustable Rate Group by aggregate principal balance were subject to prepayment
penalties.
The level and rate of prepayments on the Mortgage Loans in the Fixed Rate
Group and Adjustable Rate Group are subject to the factors described above and
are difficult to predict. Moreover, because the Mortgage Loan Groups are
cross-collateralized, prepayments (including as a result of liquidations) in the
Fixed Rate Group
S-46
<PAGE>
may affect the rate and timing of payments on the Variable Rate Certificates and
prepayments (including as a result of liquidations) in the Adjustable Rate Group
may affect the timing and amount of payments on the Fixed Rate Certificates.
In addition to the foregoing factors affecting the weighted average life of
each Class of the Offered Certificates, the overcollateralization provisions of
the Trust result in an additional reduction of the Certificate Balances of the
Class A Certificates relative to the amortization of the Mortgage Loans in the
early months of the transaction. The accelerated amortization is achieved by the
application of the Monthly Excess Interest Amount to the payment of the
Certificate Balance of the Classes of the Offered Certificates and the Class B-2
Certificates. This creates overcollateralization which results from the excess
of the aggregate Principal Balances of the Mortgage Loans over the Aggregate
Certificate Balance. Once the Targeted Overcollateralization Amount is reached,
the application of the Monthly Excess Interest Amount to pay down principal will
cease, unless necessary to maintain the Targeted Overcollateralization Amount.
"Weighted average life" refers to the average amount of time that will
elapse 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 the
Offered Certificates of each class will be influenced by the rate at which
principal payments on the Mortgage Loans are paid, which may be in the form of
scheduled amortization, accelerated amortization or prepayments or as a result
of an early termination of the Trust.
The Fixed Rate Group Available Funds Cap Rate and the Adjustable Rate Group
Available Funds Cap Rate on a Distribution Date will depend, in part, on the
weighted average of the then-current Mortgage Rates of the outstanding Mortgage
Loans. If the Mortgage Loans bearing higher Mortgage Rates were to prepay, the
weighted average Mortgage Rate of the Mortgage Loans, and consequently, the
Fixed Rate Group Available Funds Cap Rate and the Adjustable Rate Group
Available Funds Cap Rate, would be lower than otherwise would be the case.
The following table sets forth, with respect to all home equity mortgage
loans originated or acquired by CIT Consumer Finance (excluding whole loan
sales, Institutional Bulk Portfolios and home equity lines of credit which are
not included in the Mortgage Pool) in each year since 1993, the aggregate
initial principal balance of the mortgage loans originated or acquired in that
year, the approximate aggregate principal balance outstanding on the mortgage
loans originated at the end of such year and at the end of each subsequent
fiscal quarter.
Information Regarding Principal Reduction
of Home Equity Mortgage Loans Originated or Acquired by CIT Consumer Finance
(Dollar amounts in Millions)
Year of Origination or Acquisition 1993 1994 1995 1996
------------------------------ ----- ----- ----- -----
Volume (1) ...................... $110.5 $388.7 $590.5 $756.4
Aggregate Principal Balance as of (2)
12/31/93 ...................... $102.3
3/31/94 ...................... 95.9
6/30/94 ...................... 90.9
9/30/94 ...................... 86.3
12/31/94 ...................... 81.7 $387.0
3/31/95 ...................... 78.4 368.2
6/30/95 ...................... 74.0 346.2
9/30/95 ...................... 69.7 324.8
12/31/95 ...................... 65.8 302.2 $577.0
3/31/96 ...................... 61.0 278.5 540.4
6/30/96 ...................... 56.8 255.2 498.2
9/30/96 ...................... 52.4 236.5 464.0
12/31/96 ...................... 48.6 214.7 429.1 $741.6
3/31/97 ...................... 44.4 196.7 397.9 710.6
- -------------
(1) Volume represents the aggregate initial principal balance of each mortgage
loan originated or acquired in a particular year which was not subsequently
sold in a whole loan sale. Also excluded are all Institutional Bulk
Portfolios and home equity lines of credit.
(2) Represents the approximate aggregate principal balance outstanding as of
each date for the mortgages included in the volume reported for each year of
origination or acquisition.
S-47
<PAGE>
THE CIT GROUP SECURITIZATION CORPORATION III,
THE DEPOSITOR
The CIT Group Securitization Corporation III (the "Depositor") was
incorporated in the State of Delaware on April 8, 1996 and is a wholly-owned,
limited purpose finance subsidiary of CIT. The Depositor maintains its principal
office at 650 CIT Drive, Livingston, New Jersey 07039. Its telephone number is
(201) 535-3512.
The Depositor will have no ongoing servicing obligations or
responsibilities with respect to any Mortgage Loans. CIT Consumer Finance is an
affiliate of the Depositor. The Depositor will acquire the Mortgage Loans in a
privately negotiated transaction from CIT Consumer Finance.
Neither CIT nor any of its affiliates, including the Depositor and CIT
Consumer Finance, will be obligated with respect to the Certificates.
Accordingly, the Depositor has determined that the financial condition of CIT
Consumer Finance and its affiliates, including the Depositor, is not material to
the offering of the Certificates.
THE CIT GROUP/CONSUMER FINANCE, INC.,
SELLER AND MASTER SERVICER
The Mortgage Loans and any other applicable Mortgage Assets will be
purchased by the Depositor, either directly or through affiliates, from CIT
Consumer Finance or its affiliates, as Seller. The Mortgage Loans so acquired by
the Depositor will have been originated or purchased by CIT Consumer Finance or
its affiliates in accordance with the underwriting criteria specified herein and
in the Prospectus.
CIT Consumer Finance will be appointed pursuant to the Pooling and
Servicing Agreement as the master servicer for the Trust (the "Master
Servicer").
CIT Consumer Finance is a Delaware corporation and a wholly-owned
subsidiary of CIT. It has its principal executive office at 650 CIT Drive,
Livingston, New Jersey 07039, and its telephone number is (201) 740-5000.
CIT Consumer Finance offers loans to consumers secured by first and
subordinate mortgages on residential real estate (including condominiums).
Business is generated through several distribution channels across the country.
CIT Consumer Finance originates loans directly to consumers, using both its own
employees and mortgage brokers. CIT Consumer Finance also purchases loans from
mortgage bankers and other mortgage lenders, often referred to as
"correspondents." CIT Consumer Finance purchases loans individually and in
larger batches, including bulk portfolio purchases.
CIT Consumer Finance is the master servicer for the loans held in its
portfolio. CITSF performs most of the servicing functions for CIT Consumer
Finance as its Sub-Servicer from CITSF's Asset Service Center as described
below. CIT Consumer Finance has a network of offices nationwide which handle
business origination, credit, administration and management. In addition, CIT
Consumer Finance maintains its quality control department and its original
document retention and processing facility at its Marlton, New Jersey office.
Prior to the issuance of the Certificates, the Master Servicer will enter
into a subservicing agreement with CITSF (the "Subservicing Agreement") pursuant
to which CITSF will agree to perform all of the servicing responsibilities of
the Master Servicer under the Pooling and Servicing Agreement (except that CIT
Consumer Finance will not delegate to CITSF the responsibility of confirming
that the Mortgages are properly recorded and that title policies, if required,
are properly issued, recording Mortgage releases and similar documents and
maintaining loan files). The Trustee will be an intended third-party beneficiary
of the Subservicing Agreement and will have the right to enforce such
Subservicing Agreement as if it were a party thereto. Currently, CIT Consumer
Finance only performs those limited servicing functions in connection with its
portfolio described above. In the future, CIT Consumer Finance may determine
that it will perform all or a material portion of the other servicing
responsibilities or that CIT Consumer Finance will retain another third party to
perform all or a material portion of these servicing responsibilities, instead
of CITSF. The Pooling and Servicing Agreement provides that CIT Consumer Finance
may not permit CITSF to resign as Sub-Servicer nor may CIT Consumer Finance
terminate or replace CITSF as Sub-Servicer, or materially reduce the duties of
CITSF as Sub-Servicer, in connection with collections, lockbox arrangements,
payment processing or foreclosure activities unless (i) a Termination Event has
occurred and is continuing, in which event the Trustee may terminate both CIT
Consumer Finance and CITSF (See "The Pooling and Servicing
Agreement--Termination Events"), or (ii) the Rating Agency Condition is
satisfied.
S-48
<PAGE>
THE CIT GROUP/SALES FINANCING, INC., SUB-SERVICER
CITSF will be appointed as a Sub-Servicer for all of the Mortgage Loans in
each Mortgage Pool, and as a Sub-Servicer, will perform all or most of the
servicing responsibilities described under "The Pooling and Servicing Agreement"
herein and in the Prospectus.
CITSF is a Delaware corporation and a wholly-owned subsidiary of CIT. It
has its principal executive office at 650 CIT Drive, Livingston, New Jersey
07039 and its telephone number is (201) 740-5000.
CITSF originates, purchases and services retail installment sales
contracts, direct loans and mortgages for manufactured housing, recreational
vehicles, recreational marine and other consumer goods throughout the United
States and services mortgage loans originated and purchased by CIT Consumer
Finance and other affiliates of CIT. CITSF has a centralized asset service
facility (the "Asset Service Center") in Oklahoma City, Oklahoma. CITSF
services, on behalf of other owners, retail installment contracts, direct loans
and mortgage loans that were not originated by CITSF. These servicing
arrangements may be made with respect to the portfolios of other lending
institutions or finance companies, the portfolios of governmental agencies or
instrumentalities, or portfolios that have been sold by CITSF or others to
securitization trusts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for retail
installment contracts, direct loans and mortgages. In order to service these
transactions, CITSF uses sub-servicers, outside collectors and field remarketers
located throughout the United States.
At March 31, 1997, CITSF serviced approximately 215,000 consumer finance
accounts (including recreational vehicle, marine, manufactured housing and
mortgage receivables) at its Asset Service Center. In addition to expected
growth in its serviced portfolio, in 1997 CITSF will take over servicing of
approximately 43,000 additional recreational vehicle and marine consumer
contracts for another financial institution, which CITSF will also service at
its Asset Service Center. The addition of these contracts to its servicing
portfolio will require CITSF to increase staffing levels at the Asset Service
Center to support these contracts. The effect of this increase on CITSF's
performance as a servicer or subservicer cannot be determined at this time.
SERVICING OF MORTGAGE LOANS
Servicing Compensation and Payment of Expenses
The servicing fees for each Mortgage Loan are generally payable out of the
interest payments on such Mortgage Loan. The servicing compensation payable to
the Master Servicer in respect of its master servicing activities (the "Master
Servicing Fee") will be payable on each Distribution Date in an amount equal to
1/12 of the product of .50% per annum and the Principal Balance of each Mortgage
Loan as of the first day of the related Due Period. If CIT Consumer Finance or
one of its affiliates is no longer the Master Servicer, the Master Servicing Fee
will be payable before any distributions are made on the Certificates on a
Distribution Date, and will reduce the amount of available funds to make
distributions of interest and principal on the Certificates. However, if the
Master Servicer is CIT Consumer Finance or an affiliate of CIT Consumer Finance
is the Master Servicer, the Master Servicing Fee will be paid on each
Distribution Date only from the Interest Remittance Amount remaining after all
interest payments due on the Certificates on such Distribution Date have been
made. The Master Servicer will be responsible for the compensation of the
Sub-Servicer.
The Master Servicer is obligated to pay certain ongoing expenses associated
with the Trust Fund and incurred by the Master Servicer in connection with its
responsibilities under the Pooling and Servicing Agreement. The Master Servicer
will pay these amounts out of the Master Servicing Fee. The Master Servicer is
also entitled to retain all investment income earned on amounts on deposit in
the Certificate Account.
Compensating Interest
When a Mortgage Loan is prepaid between monthly payment dates ("Due
Dates"), the Mortgagor is required to pay interest on the amount prepaid to the
date of prepayment and not thereafter. Prepayments received during a calendar
month will be distributed to Certificateholders on the Distribution Date in the
month following the month of receipt. Pursuant to the Pooling and Servicing
Agreement, the Master Servicer will pay to the Trust, but
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<PAGE>
only to the extent of the Master Servicing Fee for such month, with respect to
each Mortgage Loan as to which the Master Servicer received a Principal
Prepayment during the related Due Period an amount ("Compensating Interest")
equal to the excess of (i) 30 days' interest on the Principal Balance of each
such Mortgage Loan as of the beginning of the related Due Period at the Mortgage
Rate over, (ii) the amount of interest actually received on the related Mortgage
Loan during such Due Period. Any shortfalls in interest as a result of
prepayments which cause the Compensating Interest to exceed the amount of the
Master Servicing Fee for the month, or any shortfalls in interest due to a
partial prepayment, will reduce the amount of interest available to be
distributed to Certificateholders from the amount which would otherwise have
been available.
In addition, with respect to each Simple Interest Loan, when a Mortgagor
makes a principal prepayment that exceeds the principal portion of the scheduled
payment, but the Mortgagor does not intend to satisfy the Mortgage Loan in full
or to cure a delinquency, interest will cease to accrue on the principal so
prepaid as of the date of prepayment. Moreover, if a Mortgagor makes a scheduled
payment on a Simple Interest Loan prior to its scheduled due date, the Mortgagor
pays less than 30 days' interest at the Mortgage Rate in such Due Period with
respect to such Mortgage Loan. These types of prepayments and early payments
will reduce the amount of interest available to be distributed to
Certificateholders from the amount which would otherwise have been available.
Advances
The Master Servicer will be required to make an advance of its own funds no
later than the day prior to the Distribution Date and in no event earlier than
the seventh Business Day of such month, in the amount, if any, by which 30 days'
interest at the Mortgage Rate on the then outstanding Principal Balance of a
Mortgage Loan exceeds the amount received by the Master Servicer in respect of
interest on the Mortgage Loan during the related Due Period (any such advance,
an "Advance"), subject to limitations set forth below.
Advances are intended to maintain a regular flow of scheduled interest
payments on the Certificates and not to guarantee or insure against losses. The
Master Servicer is obligated to make Advances with respect to delinquent
payments of interest on each Mortgage Loan only if in its judgment, such
Advances are reasonably recoverable from future payments and collections of the
related Mortgage Loan. If the Master Servicer determines on any Determination
Date to make an Advance, such Advance will be included with the distribution to
Certificateholders on the related Distribution Date.
DESCRIPTION OF THE CERTIFICATES
General
Persons in whose name an Offered Certificate is registered in the
Certificate Register maintained by the Trustee are the "holders" of the Offered
Certificates. For so long as the Offered Certificates are in book-entry form
with DTC, the only "holder" of the Offered Certificates as the term " holder" is
used in the Pooling and Servicing Agreement will be Cede. No person acquiring a
Book-Entry Certificate (each, a "beneficial owner") will be entitled to receive
a physical certificate representing such Certificate (a "Definitive
Certificate"), except in the event that Definitive Certificates are issued under
limited circumstances set forth in the Pooling and Servicing Agreement. All
references herein to the holders of Offered Certificates shall mean and include
the rights of beneficial owners, as such rights may be exercised through DTC and
its participating organizations, except as otherwise specified in the Pooling
and Servicing Agreement. See "Description of the Certificates--Book-Entry
Certificates" herein and in the Prospectus.
Book-Entry Certificates
The Offered Certificates will be book-entry certificates (the "Book-Entry
Certificates"). The beneficial owners may elect to hold their Offered
Certificates through DTC in the United States, or CEDEL or Euroclear in Europe
if they are Participants (as defined in the Prospectus) of such systems, or
indirectly through organizations which are Participants in such systems. The
Book-Entry Certificates will be issued in one or more certificates per Class of
Offered Certificates which in the aggregate equal the principal balance of such
Offered Certificates and will initially be registered in the name of Cede & Co.,
the nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of
their Participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositories which in turn
will hold such positions in
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<PAGE>
customers' securities accounts in the depositories' names on the books of DTC.
Citibank will act as depositary for CEDEL and Morgan will act as depository for
Euroclear. Investors may hold such beneficial interests in the Book-Entry
Certificates in minimum denominations representing principal amounts of $1,000
and in integral multiples in excess thereof. Except as described below, no
beneficial owner will be entitled to receive a Definitive Certificate. Unless
and until Definitive Certificates are issued, it is anticipated that the only
"holder" of such Offered Certificates will be Cede & Co., as nominee of DTC.
Beneficial owners will not be holders as that term is used in the Pooling and
Servicing Agreement. Beneficial owners are only permitted to exercise their
rights indirectly through Participants and DTC. See "Description of the
Certificates--Book-Entry Certificates" in the Prospectus.
Definitive Certificates will be issued to beneficial owners of Book-Entry
Certificates, or their nominees, rather than to DTC, only if (i) DTC or the
Depositor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-Entry Certificates and the Depositor or the
Trustee is unable to locate a qualified successor; (ii) the Depositor, at its
sole option, elects to terminate the book-entry system through DTC; or (iii)
after the occurrence of a Termination Event (as defined in the Pooling and
Servicing Agreement), beneficial owners of Certificates representing not less
than 51% of the aggregate Percentage Interests evidenced by each Class of
Certificates issued as Book-Entry Certificates advise the Trustee and DTC
through the Financial Intermediaries (as defined in the Prospectus) in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of the beneficial owners. See
"Description of the Certificates--Definitive Certificates" in the Prospectus.
Distribution Dates
Distributions on the Certificates are required to be made on the 15th day
of each month or, if such day is not a Business Day, on the first Business Day
thereafter (the "Distribution Date") commencing on August 15, 1997, to the
holders on each Record Date in an amount equal to the product of such holder's
Percentage Interest and the amount distributed in respect of such
Certificateholders' Class of such Certificates on such Distribution Date.
On each Distribution Date, the holders of each Class of the Offered
Certificates and the Class B-2 Certificates will be entitled to receive from
amounts then on deposit in the certificate account established and maintained by
the Trustee in accordance with the Pooling and Servicing Agreement (the
"Certificate Account") and until the Certificate Balance of such Class of
Offered Certificates and the Class B-2 Certificates is reduced to zero, and to
the extent funds are available therefor, the related Current Interest, any
Interest Carry Forward Amount and the portion of the Principal Distribution
Amount, if any, allocated therefor as of such Distribution Date, among the
Classes of the Offered Certificates and the Class B-2 Certificates as described
below. On each Distribution Date on or after the date (if ever) on which
Definitive Certificates are issued, distributions will be made in immediately
available funds to holders of Offered Certificates and the Class B-2
Certificates by wire transfer, to the account of such holder at a domestic bank
or other entity having appropriate facilities therefor, if such holder holds an
aggregate Percentage Interest of at least 5% of the Offered Certificates and the
Class B-2 Certificates and if such holder so requests pursuant to written
instructions delivered to the Trustee at least 10 days prior to such
Distribution Date, which instructions, until revised, will remain effective for
all Distribution Dates thereafter, or by check mailed to the address of the
person entitled thereto as it appears on the register (the "Certificate
Register") maintained by the Trustee as registrar (the "Certificate Registrar").
Certificateholders may experience some delay in the receipt of their payments
due to the operations of DTC. See "Risk Factors--Book-Entry Registration" in the
Prospectus and "Description of the Certificates--Book-Entry Certificates" herein
and in the Prospectus.
The Pooling and Servicing Agreement will provide that a holder who
possesses a physical certificate will be required to send such Certificate to
the Trustee in order to receive the final distribution on such holder's
Certificate.
Each holder of record of the related Class of the Offered Certificates and
the Class B-2 Certificates will be entitled to receive such holder's Percentage
Interest in the amounts due such Class on such Distribution Date.
Distributions
Upon receipt from the Master Servicer on the Deposit Date (as defined in
the Prospectus), the Trustee will be required to deposit into the Certificate
Account with respect to each Mortgage Loan Group (i) the total of the principal
and interest collections and any late fees, prepayment fees and other similar
fees on the Mortgage Loans,
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<PAGE>
including all cash amounts (net of Liquidation Expenses (as defined in the
Prospectus)) received and retained in connection with the liquidation of
defaulted Mortgage Loans, by foreclosure or otherwise ("Liquidation Proceeds")
and any Advances or Compensating Interest due from the Master Servicer, together
with any Substitution Adjustment and any Purchase Price (as defined herein) and
(ii) the proceeds of any liquidation of the Trust.
The Pooling and Servicing Agreement establishes a pass-through rate on each
Class of the Offered Certificates and the Class B-2 Certificates (each, a
"Pass-Through Rate") as set forth in the Summary of Terms herein, subject to the
Fixed Rate Group Available Funds Cap Rate or, in the case of the Class A-10
Certificates, determined by taking into account the Adjustable Rate Group
Available Funds Cap Rate and the Maximum Variable Rate.
On each Distribution Date, the Trustee is required to make the following
disbursements and transfers from monies then on deposit in the Certificate
Account as specified below in the following order of priority of each such
transfer and disbursement with respect to interest and principal:
Interest: On each Distribution Date, the Interest Remittance Amount will be
distributed in the following order of priority:
First, to the holders of the Class A Certificates, the Class A Current
Interest plus the Class A Interest Carry Forward Amount with respect
to each such Class of Class A Certificates without any priority among
such Class A Certificates; provided, that if the Interest Remittance
Amount is not sufficient to make a full distribution of interest with
respect to all Classes of the Class A Certificates, the Interest
Remittance Amount will be distributed among the outstanding Classes of
Class A Certificates pro rata based on the aggregate amount of
interest due on each such Class, and the amount of the shortfall will
be carried forward with accrued interest at the applicable
Pass-Through Rate;
Second, to the extent of the Interest Remittance Amount then
remaining, to the holders of the Class M-1 Certificates, the Class M-1
Current Interest;
Third, to the extent of the Interest Remittance Amount then remaining,
to the holders of the Class M-2 Certificates, the Class M-2 Current
Interest;
Fourth, to the extent of the Interest Remittance Amount then
remaining, to the holders of the Class B-1 Certificates, the Class B-1
Current Interest;
Fifth, to the extent of the Interest Remittance Amount then remaining,
to the holders of the Class B-2 Certificates, the Class B-2 Current
Interest; and
Sixth, the sum of (x) the amount, if any, of the Interest Remittance
Amount remaining in the Certificate Account after application with
respect to the priorities set forth above plus (y) the amount of any
Overcollateralization Release Amount for such Distribution Date (such
amounts, the "Monthly Excess Cashflow Amount" for a Distribution Date)
shall be applied, first, to pay the Master Servicing Fee to the Master
Servicer if CIT Consumer Finance or one of its affiliates is the
Master Servicer and, second, as described under "Credit
Enhancement--Application of Monthly Excess Cashflow Amounts."
Principal Before the Stepdown Date or if a Trigger Event is in effect.
Until the Stepdown Date and then only if a Trigger Event is not in effect on
each Distribution Date, no principal shall be distributed to the Subordinate
Certificates. On each Distribution Date (a) before the Stepdown Date or (b) on
or after the Stepdown Date if a Trigger Event is in effect,
(I) the holders of the Class A Certificates will be entitled to
receive payment of an amount equal to 100% of the Variable Rate Principal
Distribution Amount for such Distribution Date in the following amounts and
priorities:
First, to the holders of the Class A-10 Certificates until the Class
A-10 Certificate Balance has been reduced to zero;
Second, to the holders of the Class A-9 Certificates, in an amount
equal to the Class A-9 Lockout Distribution Amount;
Third, to the holders of the Class A Certificates (other than the
Class A-9 Certificates and the Class A-10 Certificates) in sequential
order until the Certificate Balance of each such Class of Class A
Certificates has been reduced to zero; and
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Fourth, to the holders of the Class A-9 Certificates until the Class
A-9 Certificate Balance has been reduced to zero; and
(II) the holders of the Class A Certificates will be entitled to
receive payment of an amount equal to 100% of the Fixed Rate Principal
Distribution Amount for such Distribution Date in the following amounts and
priorities:
First, to the extent not previously distributed, to the holders of the
Class A-9 Certificates in an amount equal to the Class A-9 Lockout
Distribution Amount;
Second, to the holders of the Class A Certificates (other than the
Class A-9 Certificates and the Class A-10 Certificates) in sequential
order until the Certificate Balance of each such Class of Class A
Certificates has been reduced to zero;
Third, to the holders of the Class A-9 Certificates until the Class
A-9 Certificate Balance has been reduced to zero; and
Fourth, to the holders of the Class A-10 Certificates until the Class
A-10 Certificate Balance is reduced to zero.
The Class A Certificates (other than the Class A-10 Certificates and the
Class A-9 Certificates) are "sequential pay" classes such that the holders of
the Class A-8 Certificates will receive no payments of principal until the Class
A-7 Certificate Balance is reduced to zero, the holders of the Class A-7
Certificates will receive no payments of principal until the Class A-6
Certificate Balance is reduced to zero, the holders of the Class A-6
Certificates will receive no payments of principal until the Class A-5
Certificate Balance is reduced to zero, the holders of the Class A-5
Certificates will receive no payments of principal until the Class A-4
Certificate Balance has been reduced to zero, the holders of the Class A-4
Certificates will receive no payments of principal until the Class A-3
Certificate Balance has been reduced to zero, the holders of the Class A-3
Certificates will receive no payments of principal until the Class A-2
Certificate Balance has been reduced to zero, and the holders of the Class A-2
Certificates will receive no payments of principal until the Class A-1
Certificate Balance has been reduced to zero; provided, however, that on any
Distribution Date on which the sum of the Certificate Balance of the Subordinate
Certificates and the Overcollateralization Amount is zero, any amounts of
principal payable to the holders of the Class A Certificates on such
Distribution Date shall be distributed pro rata and not sequentially.
Principal On or After the Stepdown Date if No Trigger Event is in Effect.
On each Distribution Date (a) on or after the Stepdown Date and (b) as long as a
Trigger Event is not in effect, the holders of all Classes of the Offered
Certificates and the Class B-2 Certificates will be entitled to receive payments
of principal, in the amounts and the priorities set forth below and to the
extent of the Variable Rate Principal Distribution Amount and the Fixed Rate
Principal Distribution Amount as follows:
First, an amount equal to (i) the lesser of (x) the Variable Rate
Principal Distribution Amount and (y) the Class A Principal Distribution
Amount, shall be distributed in the following amounts and priorities:
(1) to the holders of the Class A-10 Certificates until the Class
A-10 Certificate Balance has been reduced to zero (such
distribution amount, the "Class A Variable Allocation Amount");
(2) to the holders of the Class A-9 Certificates, in an amount equal
to the Class A-9 Lockout Distribution Amount;
(3) to the holders of the Class A Certificates (other than the Class
A-9 Certificates and the Class A-10 Certificates) in sequential
order until the Certificate Balance of each such Class of Class A
Certificates has been reduced to zero; and
(4) to the holders of the Class A-9 Certificates until the Class A-9
Certificate Balance has been reduced to zero; and
an amount equal to (ii) the lesser of (x) the Fixed Rate Principal
Distribution Amount and (y) the Class A Principal Distribution Amount minus
the amount distributed in clause (i) above, shall be distributed in the
following amounts and priorities:
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(1) to the extent not previously distributed, to the holders of the
Class A-9 Certificates, in an amount equal to the Class A-9
Lockout Distribution Amount;
(2) to the holders of the Class A Certificates (other than the Class
A-9 Certificates and the Class A-10 Certificates) in sequential
order until the Certificate Balance of each such Class of Class A
Certificates has been reduced to zero;
(3) to the holders of the Class A-9 Certificates until the Class A-9
Certificate Balance has been reduced to zero; and
(4) to the holders of the Class A-10 Certificates until the Class
A-10 Certificate Balance is reduced to zero;
Second, the lesser of (x) the excess, if any, of (i) the sum of (A)
the Fixed Rate Principal Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the amount distributed to the
holders of the Class A Certificates in clause "First" above and (y)
the Class M- 1 Principal Distribution Amount, shall be distributed to
the holders of the Class M-1 Certificates, until the Class M-1
Certificate Balance has been reduced to zero;
Third, the lesser of (x) the excess, if any, of (i) the sum of (A) the
Fixed Rate Principal Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of the amount
distributed to the holders of the Class A Certificates in clause
"First" above and the amount distributed to the holders of the Class
M-1 Certificates in clause "Second" above and (y) the Class M-2
Principal Distribution Amount, shall be distributed to the holders of
the Class M-2 Certificates, until the Class M-2 Certificate Balance
has been reduced to zero;
Fourth, the lesser of (x) the excess, if any, of (i) the sum of (A)
the Fixed Rate Principal Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of the amount
distributed to the holders of the Class A Certificates pursuant to
clause "First" above, the amount distributed to the holders of the
Class M-1 Certificates pursuant to clause "Second" above and the
amount distributed to the holders of the Class M-2 Certificates
pursuant to clause "Third" above and (y) the Class B-1 Principal
Distribution Amount, shall be distributed to the holders of the Class
B-1 Certificates, until the Class B-1 Certificate Balance has been
reduced to zero;
Fifth, the lesser of (x) the excess, if any, of (i) the sum of (A) the
Fixed Rate Principal Distribution Amount and (B) the Variable Rate
Principal Distribution Amount over (ii) the sum of the amount
distributed to the holders of the Class A Certificates pursuant to
clause "First" above, the amount distributed to the holders of the
Class M-1 Certificates pursuant to clause "Second" above, the amount
distributed to the holders of the Class M-2 Certificates pursuant to
clause "Third" above and the amount distributed to the holders of the
Class B-1 Certificates pursuant to clause "Fourth" above and (y) the
Class B-2 Principal Distribution Amount, shall be distributed to the
holders of the Class B-2 Certificates, until the Class B-2 Certificate
Balance has been reduced to zero; and
Sixth, any portion of the Principal Distribution Amount remaining
after making all of the distributions in clauses "First," "Second,"
"Third," "Fourth" and "Fifth" above shall be a part of the Monthly
Excess Cashflow Amount and shall be applied as described below under
"Credit Enhancement--Application of Monthly Excess Cashflow Amounts."
Notwithstanding the foregoing, in the event that the Certificate Balance of
all of the Class A Certificates has been reduced to zero, all amounts of
principal that would have been distributed to such Class A Certificates will be
distributed to the Subordinate Certificates sequentially in the following order:
first, to the Class M-1 Certificates, second, to the Class M-2 Certificates,
third, to the Class B-1 Certificates and, fourth, to the Class B-2 Certificates.
Similarly, if the Certificate Balance of the Class M-1 Certificates has been
reduced to zero, all amounts of principal that would have been distributed to
such Class M-1 Certificates will be distributed to the Class M-2, Class B-1 and
Class B-2 Certificates in that order. If the Certificate Balance of the Class
M-2 Certificates has been reduced to zero, all amounts of principal that would
have been distributed on such Class M-2 Certificates will be distributed to the
Class B-1 and Class B-2 Certificates in that order. Finally, if the Certificate
Balance of the Class B- 1 Certificates has been reduced to zero, all amounts of
principal that would have been distributed on such Class B-1 Certificates will
be distributed to the Class B-2 Certificates.
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The holders of the Class A-9 Certificates are entitled to receive, from
funds available therefor, payments of the Class A-9 Lockout Distribution Amount
specified herein; provided, that if on any Distribution Date the Certificate
Balance of the Class A Certificates (other than the Class A-9 and the Class A-10
Certificates) is zero, the holders of the Class A-9 Certificates will be
entitled to receive the entire Class A Principal Distribution Amount for such
Distribution Date, and on any Distribution Date that the Certificate Balance of
the Class A Certificates (other than the Class A-9 and the Class A-10
Certificates) have been reduced to zero, the holders of the Class A-9
Certificates will be entitled to receive any remaining Class A Principal
Distribution Amount.
Calculation of LIBOR
On the second business day preceding each Distribution Date or, in the case
of the first Distribution Date, on the second business day preceding the Closing
Date (each such date, an "Interest Determination Date"), the Trustee will
determine the London interbank offered rate for one-month U.S. dollar deposits
("One-month LIBOR") for the next Accrual Period for the Variable Rate
Certificates on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear in the Telerate Page 3750,
as of 11:00 a.m. (London time) on such Interest Determination Date. As used in
this section, (i) "business day" means a day on which banks are open for dealing
in foreign currency and exchange in London and New York City; (ii) "Telerate
Page 3750" means the display page currently so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying London interbank offered rates of major banks);
and (iii) "Reference Banks" means leading banks selected by the Trustee and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market.
On each Interest Determination Date, One-month LIBOR for the related
Accrual Period for the Variable Rate Certificates will be established by the
Trustee as follows:
(a) If on such Interest Determination Date two or more Reference Banks
provides such offered quotations, One-month LIBOR for the related Accrual Period
for the Variable Rate Certificates shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
1/16%).
(b) If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, One-month LIBOR for the related Accrual Period
for the Variable Rate Certificates shall be the higher of (x) One-month LIBOR as
determined on the previous Interest Determination Date and (y) the Reserve
Interest Rate. The "Reserve Interest Rate" shall be the rate per annum that the
Trustee determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 1/16%) of the one-month U.S. dollar
lending rates which New York City banks selected by the Trustee are quoting on
the relevant Interest Determination Date to the principal London offices of
leading banks in the London interbank market or (ii) in the event that the
Trustee can determine no such arithmetic mean, the lowest one-month U.S. dollar
lending rate which New York City banks selected by the Trustee are quoting to
leading European banks on such Interest Determination Date.
The establishment of One-month LIBOR on each Interest Determination Date by
the Trustee and the Trustee's calculation of the rate of interest applicable to
the Variable Rate Certificates for the related Accrual Period shall (in the
absence of manifest error) be final and binding. Each such rate of interest may
be obtained by telephoning the Trustee at 212-815-2297.
CREDIT ENHANCEMENT
The Credit Enhancement provided for the benefit of the holders of the Class
A Certificates consists of the subordination of the Subordinate Certificates,
the priority of application of Realized Losses and the application of Monthly
Excess Cashflow Amounts. Distributions and the priority of the application of
Realized Losses and Monthly Excess Cashflow Amounts on the Class M-1
Certificates will be subordinated to distributions and the priority of the
application of Realized Losses and Monthly Excess Cashflow Amounts on the Class
A Certificates distributions and the priority of the application of Realized
Losses and Monthly Excess Cashflow Amounts on the Class M-2 Certificates will be
subordinated to distributions and the priority of the application of Realized
Losses and Monthly Excess Cashflow Amounts on the Class M-1 Certificates and the
Class A Certificates, distributions and the priority of the application of
Realized Losses and Monthly Excess Cashflow Amounts on the Class B-1
Certificates will be subordinated to distributions and the priority of the
application of Realized Losses and Monthly Excess Cashflow Amounts on the
Mezzanine Certificates and the Class A Certificates, and distributions
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and the priority of the application of Realized Losses and Monthly Excess
Cashflow Amounts on the Class B-2 Certificates will be subordinated to
distributions and the priority of the application of Realized Losses and Monthly
Excess Cashflow Amounts on the Class B-1 Certificates, the Mezzanine
Certificates and the Class A Certificates, in each case to the extent described
herein.
Subordination of Subordinate Certificates
The rights of the holders of the Subordinate Certificates and the Class R
Certificates to receive distributions with respect to the Mortgage Loans will be
subordinated, to the extent described herein, to such rights of the holders of
the Class A Certificates. This subordination is intended to enhance the
likelihood of regular receipt by the holders of the Class A Certificates of the
full amount of their scheduled monthly payment of interest and principal and to
afford such holders protection against Realized Losses.
The protection afforded to the holders of the Class A Certificates by means
of the subordination of the Subordinate Certificates and the Class R
Certificates will be accomplished by the preferential right of the holders of
the Class A Certificates to receive, prior to any distribution of interest being
made on a Distribution Date in respect of such Subordinate Certificates, the
amounts of interest due them and, prior to any distribution of principal being
made on a Distribution Date in respect of such Subordinate Certificates, the
amounts of principal due them, and, if necessary, by the right of the holders of
the Class A Certificates to receive future distributions of amounts that would
otherwise be payable to the holders of the Subordinate Certificates and the
Class R Certificates.
In addition, the rights of the holders of the Class M-2, Class B and Class
R Certificates to receive distributions will be subordinated, to the extent
described herein, to such rights of the holders of the Class A and Class M-1
Certificates. This subordination is intended to enhance the likelihood of
regular receipt by the holders of the Class A and Class M-1 Certificates of the
amount of interest due them and principal available for distribution and to
afford such holders with protection against Realized Losses.
The rights of the holders of the Class B-1, Class B-2 and Class R
Certificates to receive distributions will be subordinated in the same manner to
such rights of the holders of the Class A, Class M-1 and Class M-2 Certificates,
the rights of the holders of the Class B-2 Certificates and the Class R
Certificates to receive distributions will be subordinated in the same manner to
such rights of the holders of the Class A, Class M-1, Class M-2 and Class B-1
Certificates, and the rights of holders of the Class R Certificates to receive
distributions will be subordinated in the same manner to such rights of the
holders of the Offered Certificates and the Class B-2 Certificates.
Application of Realized Losses
If a Mortgage Loan becomes a Liquidated Mortgage (as defined in the
Prospectus) during a Due Period, the Liquidation Proceeds relating thereto and
allocated to principal may be less than the Principal Balance of such Mortgage
Loan. The Pooling and Servicing Agreement provides that the amount of such
insufficiency is a "Realized Loss." Realized Losses which occur will, in effect,
be absorbed first, by the Class R Certificates (both through the application of
the Monthly Excess Interest Amount to fund such deficiency and through a
reduction in the Overcollateralization Amount), second, by the holders of the
Class B-2 Certificates, third, by the holders of the Class B-1 Certificates,
fourth, by the holders of the Class M-2 Certificates, and, fifth, by the holders
of the Class M-1 Certificates.
Any Realized Losses on Mortgage Loans will reduce the aggregate outstanding
Principal Balance of the Mortgage Loans (i.e., a reduction in the collateral
balance will occur). Since the Overcollateralization Amount is the excess, if
any, of the aggregate Principal Balance of the Mortgage Loans over the Aggregate
Certificate Balance, any Realized Losses will in the first instance reduce the
Overcollateralization Amount.
The Pooling and Servicing Agreement requires that the Overcollateralization
Amount be initially increased to, and thereafter maintained at, the Targeted
Overcollateralization Amount. This increase and subsequent maintenance are
intended to be accomplished by the application of Monthly Excess Interest
Amounts (if any) to the funding of the related Extra Principal Distribution
Amounts. Such Extra Principal Distribution Amounts, which are funded from
interest collections on the collateral but are distributed as principal on the
Offered Certificates and the Class B-2 Certificates, are intended to increase
the Overcollateralization Amount. However, if there are not sufficient Extra
Principal Distribution Amounts, the Overcollateralization Amount will not be
increased to or maintained at the Targeted Overcollateralization Amount.
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If, on any Distribution Date after taking into account all Realized Losses
experienced during the prior Due Period and after taking into account the
distribution of principal (including the Extra Principal Distribution Amount)
with respect to the Offered Certificates and the Class B-2 Certificates on such
Distribution Date, the Aggregate Certificate Balance exceeds the aggregate
Principal Balance of the Mortgage Loans as of the end of the related Due Period
(i.e., if the level of overcollateralization is negative), then the Certificate
Balance of the Subordinate Certificates will be reduced (in effect, "written
down") so that the level of overcollateralization is zero, rather than negative.
Such a negative level of overcollateralization is an "Applied Realized Loss
Amount," which will be applied as a reduction in the Certificate Balance of the
Subordinate Certificates in reverse order of seniority (i.e., first against the
Class B-2 Certificate Balance until it is reduced to zero, then against the
Class B-1 Certificate Balance until it is reduced to zero, then against the
Class M-2 Certificate Balance until it is reduced to zero and then against the
Class M-1 Certificate Balance until it is reduced to zero). The Pooling and
Servicing Agreement does not permit the "write down" of the Certificate Balance
of any Class A Certificate.
Once the Certificate Balance of a Class of Subordinate Certificates has
been "written down," the amount of such write down will no longer bear interest,
nor will such amount thereafter be "reinstated" or "written up," although the
amount of such write down may, on future Distribution Dates be paid (without
interest) to holders of the Subordinate Certificates which experienced the write
down, in direct order of seniority (i.e., first, the Class M-1 Certificates,
second, the Class M-2 Certificates, third, the Class B-1 Certificates and,
fourth, the Class B-2 Certificates). The source of funding of such payments will
be the amount, if any, of the Monthly Excess Cashflow Amount remaining on such
future Distribution Dates after the funding of the related Extra Principal
Distribution Amounts and after the payment of Interest Carry Forward Amounts
with respect to the Subordinate Certificates on such Distribution Date.
Application of Monthly Excess Cashflow Amounts
As of the Closing Date, the weighted average Mortgage Rate for the Mortgage
Loans is generally expected to be higher than the weighted average of the
Pass-Through Rates on the Offered Certificates and the Class B-2 Certificates
plus the Master Servicing Fee, thus generating certain excess interest
collections which, in the absence of losses, will not be necessary to fund
interest distributions on the Offered Certificates and the Class B-2
Certificates. The Pooling and Servicing Agreement provides that this excess
interest be applied, to the extent available, to make accelerated payments of
principal (i.e., the Extra Principal Distribution Amount) to the Class or
Classes then entitled to receive distributions of principal. This application
will cause the Aggregate Certificate Balance to amortize more rapidly than the
Mortgage Loans, resulting in overcollateralization. This excess interest for a
Due Period, together with interest on the Overcollateralization Amount itself,
on the related Distribution Date is the "Monthly Excess Interest Amount" for
such Distribution Date. Prepayments and liquidations of Mortgage Loans with
higher Mortgage Rates would have the effect of reducing or eliminating this
excess interest.
The required level of overcollateralization for any Distribution Date is
the Targeted Overcollateralization Amount for such Distribution Date. The
Targeted Overcollateralization Amount is initially (i.e., prior to the Stepdown
Date) $_________. Since the actual level of the Overcollateralization Amount as
of the Closing Date is expected to be zero, in the early months of the
transaction, subject to the availability of Monthly Excess Interest Amounts,
Extra Principal Distribution Amounts will be paid, with the result that the
Overcollateralization Amount is intended to increase until such time, if ever,
as it reaches the Targeted Overcollateralization Amount. CIT Consumer Finance
and its affiliates have no obligation to provide funds to increase the
Overcollateralization Amount to the Targeted Overcollateralization Amount or to
maintain it at that level.
Realized Losses which occur after the Targeted Overcollateralization Amount
has been reached will result in an Overcollateralization Deficiency since
Realized Losses reduce the Principal Balance of the Mortgage Loans without
giving rise to a corresponding reduction of the Aggregate Certificate Balance.
The cashflow priorities of the Trust require that, in this situation, an Extra
Principal Distribution Amount be paid (subject to the availability of any
Monthly Excess Interest Amount) for the purpose of re-establishing the
Overcollateralization Amount to the required Targeted Overcollateralization
Amount for such date.
On and after the Stepdown Date, the Targeted Overcollateralization Amount
is permitted to decrease or "step-down" below the $_______ level to a level
equal to ___% of the then current aggregate outstanding Principal Balance of the
Mortgage Loans (subject to a floor of $__________). If the Targeted
Overcollateralization Amount is permitted to "step-down" on a Distribution Date,
the Pooling and Servicing
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Agreement permits a portion of the Principal Remittance Amount for such
Distribution Date not to be passed through as a distribution of principal on
such Distribution Date. This has the effect of decelerating the amortization of
the Offered Certificates and the Class B-2 Certificates relative to the
aggregate outstanding Principal Balance of the Mortgage Loans, thereby reducing
the actual level of the related Overcollateralization Amount to the new, lower
Targeted Overcollateralization Amount. This portion of the Principal Remittance
Amount not distributed as principal on the Certificates therefore releases
overcollateralization from the Trust with respect to the Mortgage Loans. The
amount of such releases are the "Overcollateralization Release Amounts."
On any Distribution Date, the sum of the Monthly Excess Interest Amount and
the Overcollateralization Release Amount is the Monthly Excess Cashflow Amount,
which is required to be applied in the following order of priority on such
Distribution Date:
(1) to fund the Fixed Rate Group Extra Principal Distribution Amount and
the Adjustable Rate Group Extra Principal Distribution Amount for such
Distribution Date;
(2) to fund the Class M-1 Interest Carry Forward Amount, if any;
(3) to fund the Class M-1 Realized Loss Amortization Amount for such
Distribution Date;
(4) to fund the Class M-2 Interest Carry Forward Amount, if any;
(5) to fund the Class M-2 Realized Loss Amortization Amount for such
Distribution Date;
(6) to fund the Class B-1 Interest Carry Forward Amount, if any;
(7) to fund the Class B-1 Realized Loss Amortization Amount for such
Distribution Date;
(8) to fund the Class B-2 Interest Carry Forward Amount, if any;
(9) to fund the Class B-2 Realized Loss Amortization Amount for such
Distribution Date;
(10) to the Master Servicer to the extent of any unreimbursed Advances; and
(11) to the holders of the Class R Certificates.
The "Certificate Balance" of any Class of the Class A Certificates as of
any date of determination is the original Certificate Balance of such Class as
reduced by all amounts actually distributed to the holders of such Class of
Class A Certificates on account of principal on all prior Distribution Dates.
"Class B-1 Applied Realized Loss Amount" means, as to the Class B-1
Certificates and as of any Distribution Date, the lesser of (x) the Class B-1
Certificate Balance (after taking into account the distribution of the Principal
Distribution Amount on such Distribution Date, but prior to the application of
the Class B-1 Applied Realized Loss Amount, if any, on such Distribution Date)
and (y) the excess of (i) the Applied Realized Loss Amount as of such
Distribution Date over (ii) the Class B-2 Applied Realized Loss Amount as of
such Distribution Date.
"Class B-1 Certificate Balance" means, as to the Class B-1 Certificates and
as of any date of determination, the original Class B-1 Certificate Balance as
reduced by the sum of (x) all amounts actually distributed to the holders of the
Class B-1 Certificates on all prior Distribution Dates on account of principal
and (y) the aggregate cumulative amount of Class B-1 Applied Realized Loss
Amounts on all prior Distribution Dates.
"Class B-1 Realized Loss Amortization Amount" means, as to the Class B-1
Certificates and as of any Distribution Date, the lesser of (x) the Class B-1
Unpaid Realized Loss Amount as of such Distribution Date and (y) the excess of
(i) the Monthly Excess Cashflow Amount over (ii) the sum of the Extra Principal
Distribution Amount, the Class M-1 Realized Loss Amortization Amount, the Class
M-2 Realized Loss Amortization Amount, the Class M-1 Interest Carry Forward
Amount, the Class M-2 Interest Carry Forward Amount and the Class B-1 Interest
Carry Forward Amount, in each case for such Distribution Date.
"Class B-2 Applied Realized Loss Amount" means, as to the Class B-2
Certificates and as of any Distribution Date, the lesser of (x) the Class B-2
Certificate Balance (after taking into account the distribution of the Principal
Distribution Amount on such Distribution Date, but prior to the application of
the Class B-2 Applied Realized Loss Amount, if any, on such Distribution Date)
and (y) the Applied Realized Loss Amount as of such Distribution Date.
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"Class B-2 Certificate Balance" means, as to the Class B-2 Certificates and
as of any date of determination, the original Class B-2 Certificate Balance as
reduced by the sum of (x) all amounts actually distributed to the holders of the
Class B-2 Certificates on all prior Distribution Dates on account of principal
and (y) the aggregate cumulative amount of Class B-2 Applied Realized Loss
Amounts on all prior Distribution Dates.
"Class B-2 Realized Loss Amortization Amount" means, as to the Class B-2
Certificates and as of any Distribution Date, the lesser of (x) the Class B-2
Unpaid Realized Loss Amount as of such Distribution Date and (y) the excess of
(i) the Monthly Excess Cashflow Amount over (ii) the sum of the Extra Principal
Distribution Amount, the Class B-1 Realized Loss Amortization Amount, the Class
M-1 Realized Loss Amortization Amount, the Class M-2 Realized Loss Amortization
Amount, the Class M-1 Interest Carry Forward Amount, the Class M-2 Interest
Carry Forward Amount, the Class B-1 Interest Carry Forward Amount and the Class
B-2 Interest Carry Forward Amount, in each case for such Distribution Date.
"Class M-1 Applied Realized Loss Amount" means, as to the Class M-1
Certificates and as of any Distribution Date, the lesser of (x) the Class M-1
Certificate Balance (after taking into account the distribution of the Principal
Distribution Amount on such Distribution Date, but prior to the application of
the Class M-1 Applied Realized Loss Amount, if any, on such Distribution Date)
and (y) the excess of (i) the Applied Realized Loss Amount as of such
Distribution Date over (ii) the sum of the Class M-2 Applied Realized Loss
Amount, the Class B-1 Applied Realized Loss Amount and the Class B-2 Applied
Realized Loss Amount, in each case as of such Distribution Date.
"Class M-1 Certificate Balance" means, as to the Class M-1 Certificates and
as of any date of determination, the original Class M-1 Certificate Balance of
such Class as reduced by the sum of (x) all amounts actually distributed to the
holders of the Class M-1 Certificates on all prior Distribution Dates on account
of principal and (y) the aggregate cumulative amount of Class M-1 Applied
Realized Loss Amounts on all prior Distribution Dates.
"Class M-1 Realized Loss Amortization Amount" means, as to the Class M-1
Certificates of any Distribution Date, the lesser of (x) the Class M-1 Unpaid
Realized Loss Amount as of such Distribution Date and (y) the excess of (i) the
Monthly Excess Cashflow Amount over (ii) the sum of the Extra Principal
Distribution Amount and the Class M-1 Interest Carry Forward Amount, in each
case for such Distribution Date.
"Class M-2 Applied Realized Loss Amount" means, as to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Class M-2
Certificate Balance (after taking into account the distribution of the Principal
Distribution Amount on such Distribution Date, but prior to the application of
the Class M-2 Applied Realized Loss Amount, if any, on such Distribution Date)
and (y) the excess of (i) the Applied Realized Loss Amount as of such
Distribution Date over (ii) the sum of the Class B-1 Applied Realized Loss
Amount and the Class B-2 Applied Realized Loss Amount as of such Distribution
Date.
"Class M-2 Certificate Balance" means, as to the Class M-2 Certificates and
as of any date of determination, the original Class M-2 Certificate Balance of
such Class as reduced by the sum of (x) all amounts actually distributed to the
holders of the Class M-2 Certificates on all prior Distribution Dates on account
of principal and (y) the aggregate cumulative amount of Class M-2 Applied
Realized Loss Amounts on all prior Distribution Dates.
"Class M-2 Realized Loss Amortization Amount" means, as to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Class M-2
Unpaid Realized Loss Amount as of such Distribution Date and (y) the excess of
(i) the Monthly Excess Cashflow Amount over (ii) the sum of the Extra Principal
Distribution Amount, the Class M-1 Realized Loss Amortization Amount, the Class
M-1 Interest Carry Forward Amount and the Class M-2 Interest Carry Forward
Amount, in each case for such Distribution Date.
"Unpaid Realized Loss Amount" means, for any Class of the Subordinate
Certificates and as of any Distribution Date, the excess of (x) the aggregate
cumulative amount of Applied Realized Loss Amounts with respect to such Class
for all prior Distribution Dates over (y) the aggregate cumulative amount of
Realized Loss Amortization Amounts with respect to such Class for all prior
Distribution Dates.
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THE POOLING AND SERVICING AGREEMENT
In addition to the provisions of the Pooling and Servicing Agreement
summarized elsewhere in this Prospectus Supplement and the Prospectus, there is
set forth below a summary of certain other provisions of the Pooling and
Servicing Agreement.
Assignment of the Mortgage Loans
Pursuant to the Pooling and Servicing Agreement, the Depositor on the
Closing Date will sell, transfer, assign, set over and otherwise convey without
recourse to the Trustee in trust for the benefit of the Certificateholders all
right, title and interest of the Depositor in and to each Mortgage Loan and all
right, title and interest in and to all other assets included in the Trust Fund,
including all principal and interest received by the Master Servicer on or with
respect to the Mortgage Loans on and after the Cut-off Date, exclusive of
principal and interest due and paid prior to the Cut-off Date.
In connection with such transfer and assignment, the Seller and the
Depositor will deliver or cause to be delivered to the Trustee or a custodian
for the Trustee, within 90 days of the Closing Date, among other things, the
original Mortgage Note (and any modification or amendment thereto), the original
Mortgage with evidence of recording indicated thereon (except for any Mortgage
which has been lost or which was not returned from the public recording office,
a copy of which (together with a certificate that the original of such Mortgage
was delivered to such recording office) shall be delivered initially and the
original of which will be delivered to the Trustee as soon as the same is
available to the Depositor), and, if applicable, any riders or modifications to
such Mortgage Note and Mortgage, any title insurance policies with respect to
the Mortgages and any assumption or modification agreement (collectively, the
"Mortgage Documents"). Subsequent to the issuance of the Certificates, if CIT's
long-term senior debt is rated below A- by S&P or below A3 by Moody's, the
Seller will be required to deliver to the Trustee assignments of the related
Mortgages in recordable form (at the expense of the Seller), unless opinions of
counsel are delivered to the Trustee to the effect that recordation of
assignments is not required to protect the interests of the Trustee in the
Mortgage Loans and the related Mortgaged Property. The Trustee will be required
(at the expense of the Seller) to record such assignments of the related
Mortgages in favor of the Trustee. The Seller will be required either (i) to
repurchase from the Trustee any Mortgage Loan the related Mortgage of which is
not recorded due to defective documentation, at the Purchase Price with respect
to repurchases or (ii) to substitute therefor one or more Qualified Substitute
Mortgage Loans if within two years from the Closing Date. This repurchase or
substitution obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for failure of a Mortgage to be recorded.
The Trustee (or the custodian) will review each Mortgage Document within
180 days of delivery of such Mortgage Document and if any such document is found
to be missing or defective in a material respect, is not properly executed, is
unrelated to the Mortgage Loans of the Trust or does not conform in a material
respect to the description thereof provided by or on behalf of CIT Consumer
Finance, the Trustee will notify the Master Servicer and the Depositor, and the
Master Servicer will notify the related Seller. If the Seller does not cure such
defect within 90 days after notice thereof from the Trustee or knowledge thereof
and the defect materially and adversely affects the interest of the Trust in the
related Mortgage Loan, the Seller will be obligated to repurchase the related
Mortgage Loan from the Trust Fund at a price (the "Purchase Price") equal to
100% of the outstanding principal balance thereof as of the date of repurchase
plus accrued and unpaid interest thereon to the first day of the month in which
the Purchase Price is to be distributed at its Mortgage Rate. Rather than
repurchase the Mortgage Loan as provided above, the Seller may remove such
Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund and substitute in
its place another Mortgage Loan of like kind (a "Qualified Substitute Mortgage
Loan"); however, such substitution is permitted only within two years of the
Closing Date, and may not be made unless an opinion of counsel is provided to
the effect that such substitution would not disqualify the Trust Fund as a REMIC
or result in a "prohibited transaction" tax as defined in Section 860F of the
Code. Any Qualified Substitute Mortgage Loan generally will, on the date of
substitution, among other characteristics set forth in the Pooling and Servicing
Agreement, (i) have a Principal Balance not in excess of the Principal Balance
of the Deleted Mortgage Loan (the amount of any shortfall, plus accrued and
unpaid interest, to be deposited by the Seller in the Certificate Account not
later than the Determination Date and held for distribution to the
Certificateholders on the related Distribution Date (a "Substitution
Adjustment")), (ii) have a Maximum Rate not less than (and not more than two
percentage points greater than) the Maximum Rate of the Deleted Mortgage
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Loan, (iii) have the same index and Periodic Rate Cap as the Deleted Mortgage
Loan and a Gross Margin not less than that of the Deleted Mortgage Loan, (iv)
have a Mortgage Rate not lower than 1.00%, and not more than 1.00% per annum
higher than, that of the Deleted Mortgage Loan, (v) have a Combined
Loan-to-Value Ratio not higher than that of the Deleted Mortgage Loan; (vi) have
a remaining term to maturity not greater than (and not more than one year less
than) that of the Deleted Mortgage Loan, (vii) be of the same or better credit
risk category under the Seller's underwriting guidelines; and (viii) comply with
all of the representations and warranties set forth in the Pooling and Servicing
Agreement as of the date of substitution. This cure, repurchase or substitution
obligation constitutes the sole remedy available to Certificateholders or the
Trustee for omission of, or a material defect in, a Mortgage Document.
Reports to Certificateholders
On each Distribution Date, the Master Servicer or the Trustee will furnish
to each holder a statement setting forth, among other things:
(i) the Interest Remittance Amount, separately identifying Advances,
Compensating Interest and the portion of any Substitution
Adjustment, Purchase Price and Liquidation Proceeds relating to
interest;
(ii) the Principal Remittance Amount separately identifying Principal
Prepayments, and the portion of any Purchase Price, Substitution
Adjustment and Liquidation Proceeds relating to principal by
Mortgage Loan Group;
(iii) the Fixed Rate Principal Distribution Amount and the Variable Rate
Principal Distribution Amount;
(iv) the Fixed Rate Group Available Funds Cap Rate and the Adjustable
Rate Group Available Funds Cap Rate, if the applicable Pass-Through
Rate is limited by such Cap Rate;
(v) the amount of the distribution with respect to the each Class of
Certificates (based on a Certificate in the original principal
amount of $1,000);
(vi) the amount of such distribution allocable to principal on each Class
of Certificates (based on a Certificate in the original principal
amount of $1,000);
(vii) the amount of such distribution allocable to interest on each Class
of Certificates (based on a Certificate in the original principal
amount of $1,000);
(viii) the Interest Carry Forward Amount for each Class;
(ix) the principal amount of each Class of Certificates (based on a
Certificate in the original principal amount of $1,000) which will
be outstanding after giving effect to any payment of principal on
such Distribution Date;
(x) the aggregate Principal Balance of all Mortgage Loans and the
aggregate Principal Balance of the Mortgage Loans in each Mortgage
Loan Group after giving effect to any payment of principal on such
Distribution Date;
(xi) the weighted average Mortgage Rate and the weighted average
remaining stated term to maturity of the Mortgage Loans in each
Mortgage Loan Group;
(xii) whether a Trigger Event has occurred; (xiii) the Senior Enhancement
Percentage;
(xiv) the Overcollateralization Amount, the Targeted Overcollateralization
Amount, the Overcollateralization Release Amount and the
Overcollateralization Deficiency; and
(xv) the amount of any Applied Realized Loss Amount, Realized Loss
Amortization Amount and Unpaid Realized Loss Amount for each Class
as of the close of such Distribution Date.
In addition, on each Distribution Date the Master Servicer or the Trustee
will distribute to each holder, together with the information described above,
the following information prepared by the Servicer with respect to each Mortgage
Loan Group:
(a) the number and aggregate Principal Balance of Mortgage Loans (i) 30-59
days delinquent, (ii) 60-89 days delinquent and (iii) 90 or more days
delinquent, as of the close of business on the last business
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day of the calendar month next preceding the Distribution Date and the
number and aggregate Principal Balances of the Mortgage Loans and
related data;
(b) the number and aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings as of the close of business on the last
business day of the calendar month preceding such Distribution Date;
(c) the book value of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure as of the close of business on
the last business day of the calendar month next preceding the
Distribution Date;
(d) the amount of cumulative Realized Losses; and
(e) the aggregate Principal Balance of Mortgage Loans as to which payments
aggregating $65 are 60 days or more delinquent.
Optional Termination
On any Distribution Date on which the outstanding aggregate Principal
Balances of the Mortgage Loans in the Trust have declined to 10% or less of the
aggregate Principal Balances of the Mortgage Loans as of the Closing Date, the
Master Servicer will have the option to purchase, in whole, the Mortgage Loans
and the REO Property (as defined in the Prospectus), if any, remaining in the
Trust Fund as of that date (the first such Distribution Date, the "Clean-up Call
Date").
Auction Sale
Within ten days after the first Distribution Date on which the outstanding
aggregate Principal Balances of the Mortgage Loans in the Trust have declined to
5% or less of the aggregate Principal Balances of the Mortgage Loans as of the
Closing Date, the Trustee shall solicit bids for the purchase of the Mortgage
Loans and the REO Property remaining in the Trust. In the event that
satisfactory bids are received as described below, the net sale proceeds will be
distributed to Certificateholders on the second Distribution Date succeeding
such Due Period. Any purchaser of the Mortgage Loans must agree to the
continuation of CIT Consumer Finance as Master Servicer (if at such time it is
the Master Servicer) on terms substantially similar to those in the Pooling and
Servicing Agreement. Any such sale will effect early retirement of the
Certificates.
The Trustee must receive at least two bids from prospective purchasers
which are considered at the time to be competitive participants in the market
for home equity mortgage loans. The highest bid may not be less than the fair
market value of such Mortgage Loans and REO Property and must equal the sum of
(i) the greater of (a) the aggregate Purchase Price for the Mortgage Loans
(including Liquidated Mortgages) plus the appraised value of any other property
held by the Trust (less Liquidation Expenses), or (b) an amount that when added
to amounts on deposit in the Certificate Account available for distribution to
Certificateholders for the second succeeding Distribution Date would result in
proceeds sufficient to distribute the Aggregate Certificate Balance and interest
for such Distribution Date and any unpaid interest with respect to one or more
prior Distribution Dates, (ii) the sum of (a) an amount sufficient to reimburse
the Master Servicer for any unreimbursed Advances for which it is entitled to
reimbursement, and (b) the Master Servicing Fee payable on such final
Distribution Date, including any unpaid Master Servicing Fees with respect to
one or more prior Due Periods and (iii) the expenses of such auction sale. The
Trustee may consult with financial advisors, including any Underwriter, to
determine if a bid is equal to or greater than the fair market value of such
Mortgage Loans. Upon the receipt of such bids, such Trustee shall sell and
assign such Mortgage Loans and REO Property to the highest bidder and the
Certificates shall be retired on such second succeeding Distribution Date. If
any of the foregoing conditions are not met, the Trustee shall decline to
consummate such sale and shall not be under any obligation to solicit any
further bids or otherwise negotiate any further sale of Mortgage Loans and REO
Property remaining in the Trust. In such event, however, the Trustee may from
time to time solicit bids in the future for the purchase of such Mortgage Loans
and REO Property upon the same terms described above.
Termination Events
"Termination Events" will consist of: (i) any failure by the Master
Servicer to deposit in the Certificate Account the required amounts or remit to
the Trustee any payment (other than an Advance or Servicing Advance (as defined
in the Prospectus) required to be made under the terms of the Pooling and
Servicing Agreement) which
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continues unremedied for five Business Days after the giving of written notice
of such failure, requiring the same to be remedied, to the Master Servicer by
the Trustee or the Depositor or to the Master Servicer and the Trustee by
holders of Certificates (or, in the case of Book-Entry Certificates, the
beneficial interests therein) of any Class evidencing not less than 51% of the
aggregate Percentage Interests constituting such Class; (ii) any failure by the
Master Servicer duly to observe or perform in any material respect any other of
its covenants or agreements in the Pooling and Servicing Agreement, which
failure continues unremedied for 30 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Master Servicer by the Trustee or the Depositor or to the Master Servicer and
the Trustee by holders of Certificates (or, in the case of Book-Entry
Certificates, the beneficial interests therein) of any Class evidencing not less
than 51% of the aggregate Percentage Interests constituting such Class; (iii)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, and certain actions by or on behalf of the
Master Servicer indicating its insolvency or inability to pay its obligations;
or (iv) any failure of the Master Servicer to make an Advance or Servicing
Advance, to the extent such failure materially or adversely affects the
interests of the Certificateholders, which failure continues unremedied for a
period of five Business Days after the date on which notice of such failure,
requiring the same to be remedied, shall have been given to the Master Servicer
by the Trustee.
Rights Upon Termination Event
So long as a Termination Event remains unremedied, the Depositor or the
Trustee may, and upon the receipt of instructions from the holders of
Certificates (or, in the case of Book-Entry Certificates, the beneficial
interests therein) evidencing not less than 51% of the aggregate Percentage
Interests of the Offered Certificates and the Class B-2 Certificates, the
Depositor or Trustee shall terminate all of the rights and obligations of the
Master Servicer under the Pooling and Servicing Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all of the
responsibilities, duties, and liabilities of the Master Servicer under the
Pooling and Servicing Agreement, including the obligation to make Advances.
No Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under the Pooling and Servicing Agreement
to institute any proceeding with respect thereto, unless such holder previously
has given to the Trustee written notice of a Termination Event and unless the
holders of Certificates evidencing not less than 25% of the aggregate Percentage
Interests of the Offered Certificates and the Class B-2 Certificates have made
written request to the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for 60 days has neglected or refused to institute any such proceeding.
The Trustee
The Bank of New York will be the trustee under the Pooling and Servicing
Agreement (the "Trustee"). The Depositor and CIT Consumer Finance may maintain
other banking relationships in the ordinary course of business with the Trustee.
Certificates may be surrendered to the corporate trust office of the Trustee
located at 101 Barclay Street, 12 East, New York, New York 10286, Attention:
Mortgage Backed Securities or at such other addresses as the Trustee may
designate from time to time.
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USE OF PROCEEDS
The Depositor will apply the net proceeds of the sale of the Offered
Certificates to pay to the Seller the purchase price of the Mortgage Loans and
to pay certain expenses of the offering.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain of the anticipated federal
income tax consequences of the purchase, ownership and disposition of the
Offered Certificates. The discussion, and the opinions referred to below, are
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change or possibly differing interpretations. The discussion
below does not purport to deal with federal tax consequences applicable to all
categories of investors, some of which may be subject to special rules.
Investors should consult their own tax advisors in determining the federal,
state, local and other tax consequences to them of the purchase, ownership and
disposition of the Offered Certificates. For purposes of this tax discussion
(except with respect to information reporting, or where the context indicates
otherwise), the terms "Certificateholder " and "holder" mean the beneficial
owner of a Certificate.
REMIC Election
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election will be made to treat the Trust as a REMIC. The Offered Certificates
and the Class B-2 Certificates will be designated as "regular interests" in the
REMIC (within the meaning of Section 860G(a)(1) of the Code) and the Class R
Certificate will be designated as the "residual interest" in the REMIC (within
the meaning of Section 860G(a)(2) of the Code).
Qualification as a REMIC. Qualification as a REMIC involves ongoing
compliance with certain requirements and the following discussion assumes that
such requirements will be satisfied by the Trust as long as there are any
Certificates outstanding. If the Trust fails to comply with one or more of the
ongoing requirements for qualification as a REMIC, the Trust will not be treated
as a REMIC for the year during which such failure occurs and thereafter unless
the Internal Revenue Service (the "Service") determines, in its discretion, that
such failure was inadvertent (in which case, the Service may require any
adjustments which it deems appropriate). Failure to treat the Trust as a REMIC
may cause the Trust to be treated as an association taxable as a corporation.
Such treatment could result in income of the Trust being subject to corporate
tax and in a reduced amount being available for distribution to
Certificateholders as a result of the payment of such taxes.
Certificates
The Trustee will elect to treat the Trust as a REMIC. Schulte Roth & Zabel
LLP, counsel to the Depositor, will deliver its opinion generally to the effect
that under existing law and assuming (i) a proper and timely REMIC election, and
(ii) ongoing compliance with the provisions of the Pooling & Servicing Agreement
and applicable provisions of the Code and applicable Treasury regulations and
rulings, and in reliance upon the representations and warranties in the Pooling
& Servicing Agreement, the Trust will be a REMIC, the Offered Certificates and
the Class B-2 Certificates will be considered to evidence ownership of "regular
interests" in the REMIC within the meaning of Section 860G(a)(1) of the Code and
the Class R Certificates will be considered to evidence ownership of "residual
interests" in the REMIC within the meaning of the Section 860G(a)(2) of the
Code.
Status of Certificates as Real Property Loans. The Certificates will be
"real estate assets" for purposes of Section 856(c)(5)(A) of the Code and a
"regular . . . interest in a REMIC" within the meaning of Section
7701(a)(19)(C)(xi) of the Code (assets qualifying under one or more of those
sections, applying each section separately, "qualifying assets") to the extent
that the REMIC's assets are qualifying assets. However, if at least 95 percent
of the REMIC's assets are qualifying assets, then 100 percent of the
Certificates will be qualifying assets. Similarly, income on the Certificates
will be treated as "interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(B) of the Code, subject to the
limitations of the preceding two sentences. The Mortgage Assets generally will
be qualifying assets under the foregoing sections of the Code. However, Mortgage
Assets that are not secured by residential real property or real property used
primarily for church purposes may not constitute qualifying assets under Section
7701(a)(19)(c)(v) of the Code. The REMIC Regulations treat credit enhancements
as part of the mortgage or pool of mortgages to which they relate, and
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therefore credit enhancements generally should be qualifying assets. Regulations
issued in conjunction with the REMIC Regulations provide that amounts paid on
Mortgage Assets and held pending distribution to holders of Certificates
("Cashflow investments") will be treated as qualifying assets. In certain
instances, the principal balance of a Mortgage Loan may exceed the value of the
Mortgaged Property which secures such Mortgage Loan. Although no specific
authority addresses this issue, in such instances, the extent to which such a
Mortgage Loan may be treated as a qualifying asset and the extent to which
interest on such a Mortgage Loan comprises "interest on obligations secured by
mortgages on real property" under Section 856(c)(3)(B) of the Code may be
limited. Offered Certificates held by a regulated investment company or a real
estate investment trust will not constitute "Government Securities" within the
meaning of Sections 851(b)(4)(A)(i) and 856(c)(5)(A) of the Code, respectively.
Offered Certificates
Current Income on Offered Certificates--General. Except as otherwise
indicated herein, the Offered Certificates will be treated for federal income
tax purposes (but not necessarily for accounting or other purposes) as debt
instruments that are issued by the REMIC on the date of issuance of the Offered
Certificates and not as ownership interests in the REMIC or the REMIC's assets.
Stated interest on an Offered Certificate will be taxable as ordinary income.
Holders of Offered Certificates who would otherwise report income under a cash
method of accounting will be required to report income with respect to Offered
Certificates under an accrual method.
Original Issue Discount. Some or all of the Classes of Certificates may be
issued with "original issue discount" within the meaning of Section 1273(a) of
the Code . Holders of Offered Certificates issued with original issue discount
generally must include original issue discount in gross income for federal
income tax purposes as it accrues, in advance of receipt of the cash
attributable to such income, under a method that takes account of the
compounding of interest. The Code requires that information with respect to the
original issue discount accruing on any Offered Certificate be reported
periodically to the Service and to certain categories of holders of such Offered
Certificates.
The Trustee will report original issue discount, if any, to the holders of
Offered Certificates based on Sections 1271-1273 and 1275 of the Code,
regulations issued thereunder ("OID Regulations") and related legislative
history. Certificateholders should be aware that OID Regulations have not yet
been issued to address certain issues relevant to prepayable securities such as
the Offered Certificates. These rules provide that, in the case of a debt
instrument such as an Offered Certificate, (i) the amount and rate of accrual of
original issue discount will be calculated based on a reasonable assumed
prepayment rate (the "Prepayment Assumption"), and (ii) adjustments will be made
in the amount and rate of accrual of such discount to reflect differences
between the actual prepayment rate and the Prepayment Assumption. The method for
determining the appropriate assumed prepayment rate will eventually be set forth
in Treasury regulations, but those regulations have not yet been issued. The
applicable legislative history indicates, however, that such regulations will
provide that the assumed prepayment rate for securities as the Offered
Certificates will be the rate used in pricing the initial offering of the
securities. The Prepayment Assumption is ____________ but no representation is
made that the Offered Certificates will, in fact, prepay at a rate based on the
Prepayment Assumption or at any other rate.
In general, an Offered Certificate will be considered to be issued with
original issue discount if its stated redemption price at maturity exceeds its
issue price. Unless interest payable on an Offered Certificate constitutes
"qualified stated interest" for purposes of the OID Regulations, such interest
payments will be includable in the stated redemption price at maturity of the
Offered Certificate. Interest payments will not qualify as qualified stated
interest unless the interest payments are "unconditionally payable" at least
annually. Under the OID Regulations, there is some uncertainty as to treating
stated interest on a debt obligation like an Offered Certificate as
"unconditionally payable." In the absence of authority to the contrary, the
Trustee expects to treat stated interest of Offered Certificates as
unconditionally payable. The issue price of an Offered Certificate is the
initial offering price to the public (excluding bond houses and brokers) at
which a substantial amount of the class of Offered Certificates are sold. If a
portion of the initial offering price of an Offered Certificate is allocable to
interest that has accrued prior to its date of issue, the issue price of such an
Offered Certificate will be computed by including pre-issuance accrued interest.
Notwithstanding the general definition of original issue discount, such discount
will be considered to be zero for any Offered Certificate on which such discount
is de minimis, i.e., less than 0.25% of
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its stated redemption price at maturity multiplied by its weighted average life.
Although there is some uncertainty, in the absence of authority to the contrary,
the Trustee expects to compute the weighted average life of an Offered
Certificate for purposes of this de minimis rule as the sum, for all
distributions, included in the stated redemption price at maturity of the
Offered Certificate, of the amounts determined by multiplying (i) the number of
complete years (rounding down for partial years) from the Closing Date to the
date on which each such distribution is expected to be made, determined under
the Prepayment Assumption, by (ii) a fraction, the numerator of which is the
amount of such distribution and the denominator of which is the Offered
Certificate's stated redemption price at maturity. Generally, the original
holder of an Offered Certificate that includes a de minimis amount of original
issue discount includes that original issue discount in income as principal
payments are made. The amount includable in income with respect to each
principal payment equals a pro rata portion of the entire amount of de minimis
original issue discount with respect to that Offered Certificate. Any de minimis
amount of original issue discount includable in income by a holder of an Offered
Certificate is generally treated as a capital gain if the Offered Certificate is
a capital asset in the hands of the holder.
The holder of an Offered Certificate issued with original issue discount
must include in gross income the sum of the "daily portions" of such original
issue discount for each day during its taxable year on which it held such
Offered Certificate. In the case of an original holder of an Offered
Certificate, the daily portions of original issue discount are determined first
by calculating the portion of the original issue discount that accrued during
each period (an "accrual period") that begins on the date following a
Distribution Date (or in the case of the first such period, begins on the
Closing Date) and ends on the next succeeding Distribution Date. The original
issue discount accruing during each accrual period is then allocated ratably to
each day during such period to determine the daily portion of original issue
discount for that day.
The portion of the original issue discount that accrues in any accrual
period will equal the excess, if any, of (i) the sum of (A) the present value,
as of the end of the accrual period, of all of the distributions to be made on
the Offered Certificate, if any, in future periods, and (B) the distributions
made on the Offered Certificate during the accrual period that are included in
such Offered Certificate's stated redemption price at maturity, over (ii) the
adjusted issue price of such Offered Certificate at the beginning of the accrual
period. The present value of the remaining distributions referred to in the
preceding sentence will be calculated (i) assuming that the Offered Certificates
will be prepaid in future periods at a rate computed in accordance with the
Prepayment Assumption, and (ii) using a discount rate equal to the original
yield to maturity of the Offered Certificates. For these purposes, the original
yield to maturity of the Offered Certificates will be calculated based on their
issue price and assuming that the Offered Certificates will be prepaid in
accordance with the Prepayment Assumption. The adjusted issue price of an
Offered Certificate at the beginning of any accrual period will equal the issue
price of such Offered Certificate, increased by the portion of the original
issue discount that has accrued during prior accrual periods, and reduced by the
amount of any distributions made on such Offered Certificate in prior accrual
periods that were included in such Offered Certificate's stated redemption price
at maturity. The daily portions of original issue discount may increase or
decrease depending on the extent to which the actual rate of prepayments
diverges from the Prepayment Assumption. As described above, OID accrual will be
adjusted for the actual prepayments.
Under the OID Regulations, "variable rate debt instruments" are subject to
special rules. An Offered Certificate will qualify as a "variable rate debt
instrument" if (i) its issue price does not exceed the total noncontingent
principal payments due under the Offered Certificate by more than a specified de
minimis amount, and (ii) it provides for stated interest, paid or compounded at
least annually, at (A) one or more qualified floating rates, (B) a single fixed
rate and one or more qualified floating rates, (C) a single objective rate, or
(D) a single fixed rate and a single objective rate that is a qualified inverse
floating rate. The Trustee intends to treat the Offered Certificates as
qualifying as such "variable rate debt instruments."
For variable rate debt instruments, original issue discount, if any, is
computed as described above by assuming generally that the index used for the
variable rate will be fixed throughout the term of the debt. Approximate
adjustments are made for the actual variable rate.
The OID Regulations do not clearly address the treatment of an Offered
Certificate that is based on a weighted average of the interest rates on
underlying Mortgage Loans. Under the OID Regulations, interest payments on such
an Offered Certificate may be characterized as qualified stated interest which
is includable in income in a manner similar to that described in the previous
paragraph. However, it is also possible that interest
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payments on such an Offered Certificate would be treated as contingent interest
(possibly includable in income when the payments become fixed) or in some other
manner. Furthermore, if the Offered Certificates do not qualify as "variable
rate debt instruments" under the OID Regulations, then some or all of the
Offered Certificates would be treated as a contingent payment debt obligations.
It is not clear under current law how an Offered Certificate would be taxed if
it were treated as a contingent payment debt obligation.
A subsequent holder which purchases an Offered Certificate issued with
original issue discount at a cost less than its remaining stated redemption
price at maturity will also generally be required to include in gross income,
for each day on which it holds such Offered Certificate, the daily portions of
original issue discount with respect to the Offered Certificate, calculated as
described above. However, if (i) the excess of the remaining stated redemption
price at maturity over such cost is less than (ii) the aggregate amount of such
daily portions for all days after the date of purchase until final retirement of
such Offered Certificate, then such daily portions will be reduced
proportionately in determining the income of such holder.
Premium. A purchaser of an Offered Certificate that purchases such Offered
Certificate at a cost greater than its remaining stated redemption price at
maturity will be considered to have purchased such Offered Certificate at a
premium, and may, under Section 171 of the Code, elect to amortize such premium
under a constant yield method over the life of the Offered Certificate. In
addition, it appears that the same methods that apply to the accrual of market
discount on installment obligations are intended to apply in computing the
amortizable bond premium deduction with respect to an Offered Certificate. It is
not clear, however, (i) whether the alternatives to the constant-yield method
which may be available for the accrual of market discount are available for
amortizing premium on Offered Certificates, and (ii) whether the Prepayment
Assumption should be taken into account in determining the term of an Offered
Certificate for this purpose. Except as provided in regulations, amortizable
premium will be treated as an offset to interest income on the Offered
Certificate.
Market Discount. A holder that acquires an Offered Certificate at a market
discount (that is, a discount that exceeds any unaccrued original issue
discount) will recognize gain upon receipt of a principal distribution,
regardless of whether the distribution is scheduled or is a prepayment. In
particular, the Offered Certificateholder will be required to allocate that
principal distribution first to the portion of the market discount on such
Offered Certificate that has accrued but has not previously been includable in
income, and will recognize ordinary income to that extent. In general terms,
unless Treasury regulations when issued state otherwise, market discount on an
Offered Certificate may be treated, at the Offered Certificateholder's election,
as accruing either (i) under a constant yield method, taking into account the
Prepayment Assumption, or (ii) in proportion to accruals of original issue
discount (or, if there is no original issue discount, in proportion to payments
of interest at the Pass-Through Rate).
In addition, a holder may be required to defer deductions for a portion of
the holder's interest expense on any debt incurred or continued to purchase or
carry an Offered Certificate purchased with market discount. The deferred
portion of any interest deduction would not exceed the portion of the market
discount on the Offered Certificate that accrues during the taxable year in
which such interest would otherwise be deductible and, in general, would be
deductible when such market discount is included in income upon receipt of a
principal distribution on, or upon the sale of, the Offered Certificate. The
Code requires that information necessary to compute accruals of market discount
be reported periodically to the Service and to certain categories of holders of
Offered Certificates.
Notwithstanding the above rules, market discount on an Offered Certificate
will be considered to be zero if such discount is less than 0.25% of the
remaining stated redemption price at maturity of such Offered Certificate
multiplied by its weighted average remaining life. Although there is some
uncertainty, in the absence of authority to the contrary, the Trustee expects to
calculate the weighted average remaining life in a manner similar to weighted
average life (described above under "Current Income on Offered
Certificates--Original Issue Discount"), taking into account distributions
(including prepayments) prior to the date of acquisition of such Offered
Certificate by the subsequent purchaser. If market discount on an Offered
Certificate is treated as zero under this rule, the actual amount of such
discount must be allocated to the remaining principal distributions on the
Offered Certificate, and when each such distribution is made, gain equal to the
discount, if any, allocated to the distribution will be recognized.
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Election to Treat All Interest Under the Constant Yield Rules. The OID
Regulations provide that all holders may elect to include in gross income all
interest that accrues on a debt instrument by using the constant yield method.
For purposes of this election, interest includes stated interest, original issue
discount (including de minimis original issue discount), and market discount
(including any de minimis market discount), as adjusted to account for any
premium. Holders should consult their own tax advisors regarding the
availability or advisability of such an election.
Sales of Offered Certificates. If an Offered Certificate is sold, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale and its adjusted basis in the Offered Certificate. A
holder's adjusted basis in an Offered Certificate generally equals the cost of
the Offered Certificate to the holder, increased by income reported by the
holder with respect to the Offered Certificate and reduced (but not below zero)
by distributions on the Offered Certificate received by the holder and by
amortized premium. Except as indicated in the next two paragraphs, any such gain
or loss generally will be capital gain or loss provided the Offered Certificate
is held as a capital asset.
Gain from the sale of an Offered Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includable in the seller's income with respect to the Offered Certificate had
income accrued thereon at a rate equal to 110% of "the applicable Federal rate"
(generally, an average of current yields on Treasury securities), determined as
of the date of purchase of the Offered Certificate, over (ii) the amount
actually includable in the seller's income. In addition, gain recognized on the
sale of an Offered Certificate by a seller who purchased the Offered Certificate
at a market discount would be taxable as ordinary income in an amount not
exceeding the portion of such discount that accrued during the period the
Offered Certificate was held by such seller, reduced by any market discount
includable in income under the rules described above under "Current Income on
Offered Certificates--Market Discount."
Offered Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from a sale of
an Offered Certificate by a bank or other financial institution to which such
section applies would be ordinary income or loss.
Certain Taxes on the REMIC. The REMIC provisions of the Code impose a 100%
tax on any net income derived by a REMIC from certain prohibited transactions.
Such transactions are (i) any disposition of a qualified mortgage, other than
pursuant to the substitution of a qualified replacement mortgage for a qualified
mortgage (or the repurchase in lieu of substitution of a defective obligation),
a disposition incident to the foreclosure, default, or imminent default of a
mortgage, the bankruptcy or insolvency of the REMIC, or a qualified liquidation
of the REMIC; (ii) the receipt of income from assets other than qualified
mortgages and permitted investments; (iii) the receipt of compensation for
services; and (iv) the receipt of gain from the dispositions of Cashflow
investments. The REMIC Regulations provide that the modification of the terms of
a Mortgage Asset occasioned by default or a reasonably foreseeable default of
the Mortgage Asset, the assumption of the Mortgage Asset or the waiver of a
due-on-sale clause will not be treated as a disposition of the Mortgage Asset.
The Code also imposes a 100% tax on contributions to a REMIC made after the
Closing Date, unless such contributions are payments made to facilitate a
cleanup call or a qualified liquidation of the REMIC, payments in a nature of a
guaranty, contributions during the three-month period beginning on the Closing
Date or contributions to a qualified reserve fund of the REMIC by a holder of a
residual interest in the REMIC. The Code also imposes a tax on a REMIC at the
highest corporate rate on certain net income from foreclosure property that the
REMIC derives from property acquired by the REMIC in connection with the default
or imminent default of a loan. Generally, it is not anticipated that the Trust
will generate a significant amount of such income.
Liquidation of the REMIC. A REMIC may liquidate without the imposition of
entity-level tax only in a "qualified liquidation." A liquidation is considered
qualified if a REMIC adopts a plan of complete liquidation and sells all of its
assets (other than cash) within the ninety-day period beginning on the date of
the adoption of the plan of liquidation, provided that it distributes to holders
of Offered Certificates or the Class R Certificate, on or before the last day of
the ninety-day liquidation period, all the proceeds of the liquidation (plus all
cash), less amounts retained to meet claims.
Termination. The REMIC will terminate shortly following the REMIC's receipt
of the final payment in respect of the Mortgage Assets. The last distribution on
an Offered Certificate should be treated as a payment in full retirement of a
debt instrument.
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Realized Losses. Under Section 166 of the Code, both corporate holders of
Offered Certificates and noncorporate holders of Offered Certificates that
acquire such Certificates in connection with a trade or business should be
allowed to deduct, as ordinary losses, any losses sustained during a taxable
year in which their Certificates become wholly or partially worthless as the
result of one or more realized losses on the Mortgage Loans that are allocable
to such Certificates. However, it appears that a noncorporate holder that does
not acquire an Offered Certificate in connection with its trade or business will
not be entitled to deduct a loss under Section 166 of the Code until such
holder's Certificate becomes wholly worthless (i.e., until its outstanding
principal balance has been reduced to zero) and that the loss will be
characterized as a short-term capital loss.
Each holder of an Offered Certificate will be required to accrue interest
and original issue discount with respect to such Certificate, without giving
effect to any reductions in distributions attributable to a default or
delinquency on the Mortgage Loans until it can be established that any such
reduction ultimately will not be recoverable. As a result, the amount of taxable
income reported in any period by the holder of an Offered Certificate could
exceed the amount of economic income actually realized by the holder in such
period. Although the holder of an Offered Certificate eventually will recognize
a loss or reduction in income attributable to previously accrued and included
income that as the result of a realized loss ultimately will not be realized,
the law is unclear with respect to the timing and character of such loss or
reduction in income.
Foreign Investors
For purposes of this discussion, a "Foreign Holder" is a Certificateholder
who holds an Offered Certificate and who is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity organized in or
under the laws of the United States or a political subdivision thereof, (iii) an
estate or trust the income of which is includable in gross income for United
States tax purposes regardless of its source or (iv) a trust with respect to
which a court within the United States is able to exercise primary supervision
over its administration and one or more United States fiduciaries have the
authority to control all of its substantial decisions. Unless the interest on an
Offered Certificate is effectively connected with the conduct by the Foreign
Holder of a trade or business within the United States, the Foreign Holder is
not subject to federal income or withholding tax on interest (or original issue
discount, if any) on an Offered Certificate (subject to possible backup
withholding of tax, discussed below), provided the Foreign Holder is not a
controlled foreign corporation related to the Depositor (or subsequent holder of
the REMIC Residual Certificates) and does not own actually or constructively 10%
or more of the voting stock of the Depositor (or subsequent holder of the REMIC
Residual Certificates). To qualify for this tax exemption, the Foreign Holder
will be required to provide periodically a statement signed under penalties of
perjury certifying that the Foreign Holder meets the requirements for treatment
as a Foreign Holder and providing the Foreign Holder's name and address. The
statement, which may be made on a Form W-8 or substantially similar substitute
form, generally must be provided in the year a payment occurs or in either of
the two preceding years. The statement must be provided either directly or
through a clearing organization financial institution intermediaries, to the
person that otherwise would withhold tax. This exemption may not apply to a
Foreign Holder of an Offered Certificate which also owns, actually or
constructively, a Class R Certificate. If the interest on an Offered Certificate
is effectively connected with the conduct by a Foreign Holder of a trade or
business within the United States, then the Foreign Holder will be subject to
tax at the regular graduated rates and such a Foreign Holder may avoid
withholding of tax on such interest (or original issue discount, if any) if the
Foreign Holder provides a properly completed Form 4224. Under Proposed
Regulations, which are proposed to be effective for Payments made after December
31, 1997, Form W-8 and Form 4224, as well as certain other forms, would be
combined into a new Form W-8 which would generally be valid from the date signed
through the end of the third succeeding calendar year, unless the beneficial
owner's taxpayer identification number is provided, in which case the form
generally would be valid indefinitely. The proposed regulations would also
provide certain alternative means for qualifying for interest withholding
exemptions.
Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of an Offered Certificate generally will not be subject to
United States federal income tax unless either (i) the Foreign Holder is a
non-resident alien individual who holds the Offered Certificate as a capital
asset and who is present in the United States for 183 days or more in the
taxable year of the disposition and either the gain is attributable to an office
or other fixed place of business maintained in the U.S. by the individual or the
individual has a "tax home" in the United States, or (ii) the gain is
effectively connected with the conduct by the Foreign Holder of a trade or
business within the United States.
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An Offered Certificate will not be includable in the estate of a Foreign
Holder who does not own actually or constructively 10% or more of the voting
stock of the Depositor (or subsequent holder of the Class R Certificates).
Backup Withholding
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. Backup withholding may apply to a Certificateholder
who is a United States person if the holder, among other circumstances, fails to
furnish his Social Security number or other taxpayer identification number to
the Trustee. Backup withholding may apply, under certain circumstances, to a
Certificateholder who is a foreign person if the Certificateholder fails to
provide the trustee or the Certificateholder's securities broker with the
statement necessary to establish the exemption from federal income and
withholding tax on interest on the Certificate. Backup withholding, however,
does not apply to payments on a Certificate made to certain exempt recipients,
such as corporations and tax-exempt organizations, and to certain foreign
persons.
Reporting Requirements and Tax Administration
The Trustee will report annually to the Service, holders of record of the
Offered Certificates that are not excepted from the reporting requirements and,
to the extent required by the Code, other interested parties, information with
respect to the interest paid or accrued on the Offered Certificates, original
issue discount, if any, accruing on the Offered Certificates and information
necessary to compute the accrual of any market discount or the amortization of
any premium on the Offered Certificates.
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ERISA CONSIDERATIONS
The following describes certain considerations under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, which
apply to the Certificates.
ERISA imposes requirements on employee benefit plans (and on certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds, separate accounts and
insurance company general accounts in which such plans, accounts or arrangements
are invested) (collectively "Plans") subject to ERISA and on persons who are
fiduciaries with respect to such Plans. Generally, ERISA applies to investments
made by Plans. Among other things, ERISA requires that the assets of Plans be
held in trust and that the trustee, or other duly authorized fiduciary, have
exclusive authority and discretion to manage and control the assets of such
Plans. ERISA also imposes certain duties on persons who are fiduciaries of
Plans. Under ERISA, any person who exercises any authority or control respecting
the management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant).
Certain employee benefit plans, such as governmental plans (as defined in ERISA
Section 3(32)) and, if no election has been made under Section 410(d) of the
Code, church plans (as defined in ERISA Section 3(33)), are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in Class A
Certificates without regard to the ERISA considerations described above and
below, subject to the provisions of applicable state law. Any such plan which is
qualified and exempt from taxation under Code Sections 401(a) and 501(a),
however, is subject to the prohibited transaction rules set forth in Code
Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest acquired by the investing Plan is
a publicly-offered security. A publicly-offered security, as defined in Labor
Reg. Section 2510.3-101, is a security that is widely held, freely transferable
and registered under the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the
Mortgage Loans may be deemed Plan assets of each Plan that purchases
Certificates, an investment in the Certificates by a Plan might be a prohibited
transaction under ERISA Sections 406 and 407 and subject to an excise tax under
Code Section 4975 unless a statutory or administrative exemption applies.
The U.S. Department of Labor has granted to Morgan Stanley & Co.
Incorporated, an administrative exemption (Prohibited Transaction Exemption
90-22; Exemption Application No. D-7938) (the "Exemption") from certain of the
prohibited transaction rules of ERISA and the related excise tax provisions of
Section 4975 of the Code with respect to the initial purchase, the holding and
the subsequent resale by Plans of certificates in pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The Exemption applies to mortgage
loans such as the Mortgage Loans in the Trust Fund.
Among the conditions which must be satisfied for the Exemption to apply to
the Class A Certificates are the following:
(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A Certificates) that are at least
as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust Fund;
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(3) The Class A 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 S&P, Moody's, Duff & Phelps
Credit Rating Co. 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 Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The
sum of all payments made to and retained by the Depositor pursuant to
the sale of the Mortgage Loans to the Trust Fund represents not more
than the fair market value of such Mortgage Loans. The sum of all
payments made to and retained by the Master Servicer represents not
more than reasonable compensation for the Master Servicer's services
under the Pooling and Servicing Agreement and reimbursement of the
Master Servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the 1933 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 Class A Certificates in
connection with the initial issuance, at least fifty (50) percent of the Class A
Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Plan's investment in Class A Certificates does not
exceed twenty-five (25) percent of all of the Class A 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 Depositor, the Underwriters, the Trustee, the Master Servicer,
any obligor with respect to Mortgage Loans included in the Trust Fund
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust Fund, or any affiliate of such parties (the
"Restricted Group").
The Underwriters believe that the Exemption will apply to the acquisition
and holding of the Class A Certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors will be met. In
addition, as of the date hereof, there is no single Mortgagor that is the
obligor on 5% of the Mortgage Loans included in the Trust Fund by aggregate
unamortized principal balance of the assets of the Trust Fund.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1
described in the Prospectus and the Exemption, and the potential consequences in
their specific circumstances, prior to making an investment in the Class A
Certificates. Moreover, each Plan fiduciary should determine whether under the
general fiduciary standards of investment prudence and diversification, an
investment in the Class A Certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
No transfer of Subordinate Certificates will be permitted to be made to a
Plan. Each person acquiring a Subordinate Certificate will be deemed to
represent to the Trustee, the Depositor and the Master Servicer that such person
is neither a Plan nor acting on behalf of a Plan subject to ERISA or to Section
4975 of the Code.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
In addition, institutions whose activities are subject to review by federal or
state regulatory authorities may be or may become subject to restrictions, which
may be retroactively imposed by such regulatory authorities, on the investment
by such institutions in certain forms of mortgage related securities. All
investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether, and to what extent, the
Certificates will constitute legal investments for them.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and the Underwriters, the Depositor has agreed to sell to
the Underwriters, and the Underwriters have severally agreed to purchase from
the Depositor, the respective principal amount of the Offered Certificates, as
set forth opposite their respective names below:
Class A-1 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-2 Certificates
Underwriters Certificate Balance
------------ ------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-3 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-4 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-5 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-6 Certificates
Underwriters Certificate Balance
----------- -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-7 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
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Class A-8 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-9 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class A-10 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class M-1 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class M-2 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Class B-1 Certificates
Underwriters Certificate Balance
------------ -------------------
Morgan Stanley & Co. Incorporated $
First Chicago Capital Markets, Inc. $
Lehman Brothers Inc. $
Salomon Brothers Inc $
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. In connection with the sale of the Offered
Certificates, the Underwriters may be deemed to have received compensation from
the Depositor in the form of underwriting discounts.
The Underwriters have advised the Depositor that they intend to make a
market in the Offered Certificates but have no obligation to do so. A secondary
market for the Offered Certificates may not develop or, if it does develop, it
may not continue.
The Seller has agreed to indemnify the Underwriters against, or make
contributions to the Underwriters with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
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LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Schulte Roth
& Zabel LLP, New York, New York, for the Seller and Master Servicer by Martin B.
Schwam, Esq., General Counsel of CIT Consumer Finance, and for the Underwriters
by Stroock & Stroock & Lavan LLP, New York, New York. The material federal
income tax consequences of the Certificates will be passed upon for the
Depositor by Schulte Roth & Zabel LLP, New York, New York.
RATINGS
It is a condition of issuance of the Offered Certificates that each Class
of the Offered Certificates receive ratings from Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("S&P" and, together with
Moody's, the "Rating Agencies") as set forth below:
Class Moody's Rating S&P Rating
----- -------------- ----------
Class A Aaa AAA
Class M-1 Aa2 AA
Class M-2 A2 A-
Class B-1 Baa2 BBB-
Explanations of the significance of such ratings may be obtained from
Moody's, 99 Church Street, New York, New York 10007 and S&P, 25 Broadway, New
York, New York 10004. Such ratings will be the views only of such rating
agencies. Such ratings may not continue for any period of time and may be
revised or withdrawn. Any such revision or withdrawal of such ratings may have
an adverse effect on the market price of the Offered Certificates. A security
rating is not a recommendation to buy, sell or hold securities. The ratings of
the Offered Certificates should be evaluated independently from similar ratings
on other types of securities.
The Depositor has not requested that any rating agency other than Moody's
and S&P rate the Offered Certificates and the Depositor has not provided
information relating to the Offered Certificates or the Mortgage Loans to any
rating agency other than Moody's and S&P. However, another rating agency may
assign a different or lower rating to the Offered Certificates than the rating
assigned to such Offered Certificates by either or both of Moody's and S&P.
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors through CEDEL and Euroclear will
be conducted in the ordinary way in accordance with the normal rules and
operating procedures of CEDEL and Euroclear and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their Relevant Depository
which in turn will hold such positions in their accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
DTC settlement practices. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior home
equity loan asset-backed certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC, Seller and CEDEL or Euroclear Participants. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a CEDEL Participant or a Euroclear Participant, the purchaser
will send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the Relevant Depository, as the case may be, to receive
the Global Securities against payment. Payment will include interest accrued on
the Global Securities from and including the last coupon payment date to and
excluding the settlement
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<PAGE>
date, on the basis of the actual number of days in such accrual period and a
year assumed to consist of 360 days. For transactions settling on the 31st of
the month, payment will include interest accrued to and excluding the first day
of the following month. Payment will then be made by the Relevant Depository to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's account.
The securities credit will appear the next day (European time) and the cash debt
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the CEDEL or Euroclear cash debt will be valued instead as of
the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their account one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although the result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for crediting Global Securities
to the respective European Depository for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases CEDEL or Euroclear
will instruct the respective Depository, as appropriate, to credit the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist to 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of CEDEL Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). In the event that the CEDEL Participant or Euroclear Participant have a
line of credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action is taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
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<PAGE>
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U. S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons (as defined below), unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business in the chain of intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Owners of Global
Securities that are Non-U.S. Persons (as defined below) can obtain a
complete exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8
changes, a new Form W-8 must be filed within 30 days of such change.
Exemption for Non-U.S. Persons with effectively connected income (Form
4224). A Non-U.S. Person (as defined below), including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income is
effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form
4224 (Exemption from Withholding of Tax on Income Effectively Connected
with the Conduct of a Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons residing in a country that has a
tax treaty with the United States can obtain an exemption or reduced tax
rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by Certificate Owners
or their agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Owner of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
On April 22, 1996, the IRS proposed regulations relating to withholding,
backup withholding and information reporting that, if adopted in their current
form would, among other things, unify current certification procedures and forms
and clarify certain reliance standards. The regulations are proposed to be
effective for payments made after December 31, 1997 but provide that
certificates issued on or before the date that is 60 days after the proposed
regulations are made final will continue to be valid until they expire. Proposed
regulations, however, are subject to change prior to their adoption in final
form.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity organized in or under
the laws of the United States or any political subdivision thereof, (iii) an
estate that is subject to U.S. federal income tax regardless of the source of
its income or (iv) a trust if a court within the United States can exercise
primary supervision over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
The term "Non-U.S. Person" means any person who is not a U.S. Person. This
summary does not deal with all aspects of U.S. Federal income tax withholding
that may be relevant to foreign holders of the Global Securities. Investors are
advised to consult their own tax advisors for specific tax advice concerning
their holding and disposing of the Global Securities.
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<PAGE>
INDEX TO DEFINED TERMS
Page
----
1933 Act ......................................................................2
Accrual Period ................................................................9
Adjustable Rate ...............................................................7
Adjustable Rate Group .....................................................4, 32
Adjustable Rate Group Available Funds Cap Rate ................................6
Adjustable Rate Group Extra Principal Distribution Amount ....................12
Adjustable Rate Group Overcollateralization Release Amount ...................12
Adjustable Rate Mortgage Loan .................................................7
Adjustment Date ..............................................................39
Advance ..................................................................22, 50
Aggregate Certificate Balance .................................................7
Applied Realized Loss Amount ............................................ 20, 57
Asset Service Center .........................................................49
Balloon Loans .............................................................8, 32
Balloon Payments ..........................................................8, 32
beneficial owner .........................................................23, 50
Book-Entry Certificates ......................................................50
Business Day ..................................................................8
Call Date .................................................................8, 32
Call Loans ................................................................8, 32
Cede .........................................................................23
CEDEL .....................................................................1, 23
Certificate Account ..........................................................51
Certificate Balance ..........................................................58
Certificate Register .........................................................51
Certificate Registrar ........................................................51
Certificateholders ...........................................................31
Certificates ..................................................................3
CIT ...........................................................................3
CIT Consumer Finance .......................................................1, 3
Citibank .....................................................................23
CITSF .........................................................................3
Class .........................................................................4
Class A Certificates .......................................................1, 6
Class A Principal Distribution Amount ........................................16
Class A Variable Allocation Amount ...........................................53
Class A-9 Lockout Distribution Amount ........................................13
Class A-9 Lockout Percentage .................................................13
Class A-9 Lockout Pro Rata Distribution Amount ...............................13
Class B Certificates .......................................................1, 6
Class B-1 Applied Realized Loss Amount .......................................58
Class B-1 Certificate Balance ................................................58
Class B-1 Principal Distribution Amount ......................................17
Class B-1 Realized Loss Amortization Amount ..................................58
Class B-2 Applied Realized Loss Amount .......................................58
Class B-2 Certificate Balance ................................................59
Class B-2 Principal Distribution Amount ......................................17
Class B-2 Realized Loss Amortization Amount ..................................59
Class M-1 Applied Realized Loss Amount .......................................59
Class M-1 Certificate Balance ................................................59
Class M-1 Principal Distribution Amount ......................................16
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Page
----
Class M-1 Realized Loss Amortization Amount ..................................59
Class M-2 Applied Realized Loss Amount .......................................59
Class M-2 Certificate Balance ................................................59
Class M-2 Principal Distribution Amount ......................................17
Class M-2 Realized Loss Amortization Amount ..................................59
Class R Certificates .......................................................1, 3
Clean-up Call Date .......................................................24, 62
Closing Date ..................................................................3
Code .........................................................................64
Combined Loan-to-Value Ratio .................................................32
Commission ....................................................................2
Compensating Interest ....................................................23, 50
Current Interest .............................................................10
Cut-off Date ..................................................................3
Definitive Certificate .......................................................50
Deleted Mortgage Loan ........................................................60
Depositor ..............................................................1, 3, 48
Determination Date ............................................................8
Distribution Date .........................................................8, 51
DOL ..........................................................................71
DTC .......................................................................1, 23
Due Dates ....................................................................49
Due Period ....................................................................8
ERISA ........................................................................71
Euroclear .................................................................1, 23
Exemption ....................................................................71
Extra Principal Distribution Amount ..........................................12
Final Scheduled Distribution Date .............................................8
Fixed Rate ....................................................................7
Fixed Rate Certificates .......................................................6
Fixed Rate Group ..........................................................4, 32
Fixed Rate Group Available Funds Cap Rate .....................................5
Fixed Rate Group Extra Principal Distribution Amount .........................12
Fixed Rate Group Overcollateralization Release Amount ........................12
Fixed Rate Mortgage Loan ......................................................7
Fixed Rate Principal Distribution Amount .....................................11
Gross Margin ..............................................................7, 39
HLTV .........................................................................30
Index ........................................................................39
Interest Carry Forward Amount ................................................10
Interest Determination Date ..................................................55
Interest Remittance Amount ...................................................10
Issuer ........................................................................3
Liquidation Proceeds .........................................................52
Master Servicer ........................................................1, 3, 48
Master Servicing Fee .....................................................22, 49
Maximum Rate ..............................................................8, 39
Maximum Variable Rate .........................................................4
Mezzanine Certificates .....................................................1, 6
Monthly Excess Cashflow Amount ...........................................10, 52
Monthly Excess Interest Amount ...........................................21, 57
Moody's ..................................................................25, 75
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Page
----
Morgan .......................................................................23
Mortgage ..................................................................4, 31
Mortgage Assets ...........................................................4, 31
Mortgage Documents ...........................................................60
Mortgage Loan .............................................................4, 31
Mortgage Loan Group .......................................................4, 32
Mortgage Note .............................................................4, 31
Mortgage Pool .............................................................4, 31
Mortgage Rate .................................................................7
Mortgaged Property ........................................................4, 31
Offered Certificates .......................................................1, 6
OID Regulations ..............................................................65
One-month LIBOR ..............................................................55
One-year CMT ..........................................................7, 26, 39
Overcollateralization Amount .................................................18
Overcollateralization Deficiency .............................................18
Overcollateralization Release Amount .................................18, 22, 58
Pass-Through Rate ......................................................1, 4, 52
Percentage Interest ...........................................................4
Periodic Rate Cap .........................................................7, 39
Plans ........................................................................71
Pool ......................................................................4, 31
Pooling and Servicing Agreement ...............................................3
Prepayment Assumption ........................................................65
Principal Balance ............................................................31
Principal Prepayment .........................................................23
Principal Remittance Amount ..................................................16
Prospectus ....................................................................2
Purchase Agreement ...........................................................31
Purchase Price ...............................................................60
Qualified Substitute Mortgage Loan ...........................................60
Rating Agencies ..............................................................75
Rating Agency Condition ......................................................29
Realized Loss ................................................................56
Record Date ...................................................................8
Reference Banks ..............................................................55
REMIC ........................................................................24
Reserve Interest Rate ........................................................55
Restricted Group .............................................................72
S&P ......................................................................25, 75
Seller .....................................................................1, 3
Senior Enhancement Percentage ................................................18
Senior Specified Enhancement Percentage ......................................18
Service ......................................................................64
Six-month LIBOR .......................................................7, 26, 39
SMMEA ....................................................................24, 72
Stepdown Date ................................................................16
Subordinate Certificates ...................................................1, 6
Sub-Servicer ..................................................................3
Subservicing Agreement ...................................................29, 48
Substitution Adjustment ......................................................60
Targeted Overcollateralization Amount ........................................18
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Page
----
Telerate Page 3750 ...........................................................55
Termination Events ...........................................................62
Trigger Event ................................................................16
Trust ..................................................................1, 4, 31
Trust Fund .............................................................1, 4, 31
Trustee ................................................................1, 3, 63
Unpaid Realized Loss Amount ..................................................59
Variable Rate Certificates ....................................................7
Variable Rate Principal Distribution Amount ..................................11
Weighted Carve Out Fixed Rate .................................................5
Weighted Carve Out Adjustable Amount ..........................................6
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<PAGE>
PROSPECTUS
THE CIT GROUP SECURITIZATION CORPORATION III
Depositor
Home Equity Loan Asset Backed Certificates
(Issuable in Series)
-------------------
This Prospectus relates to Home Equity Loan Asset Backed Certificates (the
"Certificates"), which may be sold from time to time in one or more series
(each, a "Series") by The CIT Group Securitization Corporation III (the
"Depositor"), on terms determined at the time of sale and described in this
Prospectus and the related Prospectus Supplement. The Certificates of a Series
will evidence fractional undivided beneficial ownership interests in a trust
fund (a "Trust Fund" or "Trust"). As specified in the related Prospectus
Supplement, the primary assets of a Trust Fund for a Series of Certificates will
include one or more pools of certain mortgage related assets (the "Mortgage
Assets") consisting of (i) mortgage loans (or participation or other beneficial
interests therein) secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") creating first or subordinate liens on one- to
four-family residential properties (the "Mortgage Loans"), (ii) Private
Mortgage-Backed Securities (as defined herein), together with payments in
respect of such Mortgage Assets, and (iii) certain other accounts, obligations
or agreements, in each case as specified in the related Prospectus Supplement.
The Mortgage Assets will be acquired by the Depositor, either directly or
indirectly, from The CIT Group/Consumer Finance, Inc. ("CIT Consumer Finance")
and/or other affiliates of the Depositor (each, a "Seller"), and conveyed by the
Depositor to the related Trust Fund. The related Prospectus Supplement may
provide that monies will be on deposit in a separate trust account (the
"Pre-Funding Account") not to exceed 25% of the Certificate Balance (as defined
herein) to be maintained with the Trustee (as defined herein), which will be
used to purchase additional Mortgage Assets from the Depositor or any Seller
from time to time during the funding period specified in such Prospectus
Supplement in the manner set forth therein. If specified in the related
Prospectus Supplement, certain Certificates may evidence a fractional undivided
ownership interest in a Trust Fund which will hold a beneficial ownership
interest in another trust fund which will contain the Mortgage Assets. A Trust
Fund also may include insurance policies, cash accounts, reinvestment income,
limited guarantees by The CIT Group Holdings, Inc. ("CIT"), third party
guarantees (any of which may be limited in nature), letters of credit, other
forms of credit enhancement or other assets to the extent described in the
related Prospectus Supplement. In addition to or in lieu of the foregoing,
credit enhancement may be provided by means of subordination as described herein
and in the related Prospectus Supplement. See "Description of the Certificates"
and "Credit Enhancement" herein.
(cover continued on next page)
THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE CIT GROUP/CONSUMER
FINANCE, INC., THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP HOLDINGS, INC.
OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT. NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER
SERVICER, THE CIT GROUP/CONSUMER FINANCE, INC., THE CIT GROUP/SALES FINANCING,
INC., THE CIT GROUP HOLDINGS, INC. OR ANY OF THEIR AFFILIATES EXCEPT AS SET
FORTH HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR CERTAIN FACTORS TO BE CONSIDERED IN
PURCHASING THE CERTIFICATES.
---------------
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 OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Prior to issuance there will have been no market for the Certificates of
any Series, and there can be no assurance that a secondary market for any
Certificates will develop or, if it does develop, that it will continue. The
Depositor does not intend to list any of the Certificates on any securities
exchange and has not made any other arrangements for secondary trading of the
Certificates. This Prospectus may not be used to consummate sales of a Series of
Certificates unless accompanied by a Prospectus Supplement.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement.
The date of the Prospectus is April 8, 1997.
<PAGE>
Each Series of Certificates will be issuable in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership interests
of a specified percentage (which may be 0%) or portion of future interest
payments and a specified percentage (which may be 0%) or portion of future
principal payments on the Mortgage Assets in the related Trust. A class of
Certificates may be divided into two or more sub-classes, as specified in the
related Prospectus Supplement. A Series of Certificates may include one or more
classes that are senior in right of payment to one or more other classes of
Certificates of such Series. Certain Series or classes of Certificates may be
covered by insurance policies, surety bonds or other forms of credit
enhancement, in each case as described herein and in the related Prospectus
Supplement. One or more classes of Certificates of a Series may be entitled to
receive distributions of principal, interest or any combination thereof.
Distributions on one or more classes of a Series of Certificates may be made
prior to one or more other classes of Certificates of such Series, after the
occurrence of specified events, in accordance with a schedule or formula, on the
basis of collections from designated portions of the Mortgage Assets in the
related Trust, or on a different basis, or one or more classes of a Series of
Certificates may be required to absorb one or more types of losses prior to one
or more other classes of Certificates of such Series, in each case as specified
in the related Prospectus Supplement. The timing and amounts of such
distributions may vary among classes or over time as specified in the related
Prospectus Supplement.
Distributions to holders of Certificates (the "Certificateholders") will be
made monthly, quarterly, semiannually or at such other intervals and on the
dates specified in the related Prospectus Supplement. Distributions on the
Certificates of a Series will be made from the assets of the related Trust Fund
or funds or other assets held for the benefit of the Certificateholders as
specified in the related Prospectus Supplement.
The Certificates of any Series will not be insured or guaranteed by any
governmental agency or instrumentality or, unless otherwise specified in the
related Prospectus Supplement, by any other person. Unless otherwise specified
in the related Prospectus Supplement, the only obligations of the Depositor with
respect to a Series of Certificates will be to obtain certain representations
and warranties from each Seller and to assign to the Trustee for the related
Series of Certificates the Depositor's rights with respect to such
representations and warranties. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer for each Series of Certificates will
be The CIT Group/Consumer Finance, Inc. The principal obligations of the Master
Servicer named in the related Prospectus Supplement with respect to the related
Series of Certificates will be limited to obligations pursuant to certain
representations and warranties and to its contractual servicing obligations,
including any obligation it may have to advance delinquent payments on the
Mortgage Assets in the related Trust Fund to the extent described in the related
Prospectus Supplement.
The yield on each class of Certificates of a Series will be affected by,
among other things, the rate and timing of payment of principal (including
prepayments) on the Mortgage Assets in the related Trust Fund and the timing of
receipt of such payments as described herein and in the related Prospectus
Supplement. A Trust Fund may be subject to early termination under the
circumstances described herein and in the related Prospectus Supplement.
Each Trust Fund will be held in trust for the benefit of the holders of the
related Certificates of a Series pursuant to an Agreement (as defined herein) as
more fully described herein. If specified in the related Prospectus Supplement
for the Certificates of a Series, one or more elections may be made to treat the
related Trust Fund or specified portions thereof as one or more "real estate
mortgage investment conduits" (each, a "REMIC") for federal income tax purposes.
See "Certain Federal Income Tax Consequences" herein.
-2-
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to the Certificates of each Series to be
offered hereunder will, among other things, set forth with respect to such
Certificates, as appropriate: (i) a description of the class or classes of
Certificates and the related Pass-Through Rate (as defined herein) or method of
determining the amount of interest, if any, to be passed through to each such
class, (ii) the initial aggregate Certificate Balance (as defined herein) of
each class of Certificates included in such Series, Distribution Dates (as
defined herein) relating to such Series and, if applicable, the initial and
final scheduled Distribution Dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
Mortgage Assets included therein and, if applicable, the insurance surety bonds,
guarantees, financial guaranty insurance policies, letters of credit or other
instruments or agreements included in the Trust Fund, any overcollateralization,
and the amount and source of any Reserve Fund (as defined herein) or any other
cash account; (iv) the circumstances, if any, under which the Trust Fund may be
subject to early termination; (v) the method used to calculate the amount of
principal, if any, to be distributed with respect to each class of Certificates;
(vi) the order of application of distributions to each of the classes within
such Series, whether sequential, pro rata, or otherwise; (vii) additional
information with respect to the plan of distribution of such Certificates;
(viii) whether one or more REMIC elections will be made and designation of the
regular interests and residual interests; (ix) the aggregate original percentage
ownership interest in the Trust Fund to be evidenced by each class of
Certificates; (x) information as to the nature and extent of subordination with
respect to any class of Certificates that is subordinate in right of payment to
any other class of Certificates; and (xi) information as to the Seller, the
Master Servicer, CIT and the Trustee.
AVAILABLE INFORMATION
The Depositor and CIT have filed with the Securities and Exchange
Commission (the "Commission") on behalf of each Trust Fund a Registration
Statement (together with all amendments and exhibits thereto, the "Registration
Statement"), of which this Prospectus is a part, under the Securities Act of
1933, as amended, with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to such Registration Statement including exhibits
filed as part thereof. Such Registration Statement and exhibits can be inspected
without charge and copied at prescribed rates at the public reference facilities
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661;
and New York Regional Office, Seven World Trade Center, New York, New York
10048. Both registrants also file electronically. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document filed as an exhibit to the Registration Statement, while complete in
all material respects, do not necessarily describe all terms or provisions of
such contract, agreement or other document. For a complete description,
reference is made to each such contract, agreement or other document filed as an
exhibit to the Registration Statement. The Master Servicer, on behalf of each
Trust Fund, will also file or cause to be filed with the Commission such
periodic reports as are required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder. However, in accordance with the Exchange Act and the rules and
regulations of the Commission thereunder, the Depositor expects that each
Trust's obligation to file such reports will be terminated following the end of
the year in which such Trust Fund is formed. Such reports and other information
filed on behalf of each Trust Fund will be available for inspection as set forth
above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CIT's Annual Report on Form 10-K for the year ended December 31, 1996
together with the report of KPMG Peat Marwick LLP, independent certified public
accountants, has been filed with the Commission by CIT and is incorporated by
reference in this Prospectus.
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 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 part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS 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 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
All documents subsequently filed by or on behalf of the Trust Fund referred
to in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of any offering of the Certificates
issued by such Trust Fund shall be deemed to be incorporated by reference in
this Prospectus and to be a part of this Prospectus from the date of the 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 all purposes of this Prospectus to the extent that a statement
contained herein (or in the accompanying Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Trustee on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such requests should be directed to the corporate
trust office of the Trustee specified in the accompanying Prospectus Supplement.
--------------
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus and Prospectus Supplement when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Certificates
offered hereby and thereby nor an offer of the Certificates to any person in any
state or other jurisdiction in which such offer would be unlawful. The delivery
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of this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date.
--------------------
REPORTS TO CERTIFICATEHOLDERS
Periodic and annual reports concerning any Certificates and the related
Trust Fund will be provided to the Certificateholders. See "Description of the
Certificates -- Reports to Certificateholders" herein. If specified in the
related Prospectus Supplement, a Series of Certificates may be issuable in
book-entry form. In such event, the related Certificates will be registered in
the name of Cede & Co. ("Cede"), the nominee of The Depository Trust Company
("DTC"). All reports will be provided to Cede, which in turn will provide such
reports to its Participants and Indirect Participants (each, as defined herein).
Such Participants and Indirect Participants will then forward such reports to
the beneficial owners of Certificates. If specified in the related Prospectus
Supplement, Certificateholders may also hold Certificates of a Series through
Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in
Europe, if they are participants in such systems or indirectly through
organizations that are participants in such systems. See "Description of the
Certificates -- Book-Entry Certificates" herein.
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SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement with respect to the Series offered thereby. The Prospectus Supplement
for each Series will specify the extent (if any) to which the terms of such
Series or the related Trust Fund vary from the description of the Certificates
and Trust Funds in general that is contained in this Prospectus. Reference is
made to the Index to Defined Terms for the location herein of the definitions of
certain capitalized terms used herein.
Title of Securities............ Home Equity Loan Asset Backed Certificates
(the "Certificates"), issuable in series
(each, a "Series"). Each Series will be
issued under a separate pooling and servicing
agreement (each, an "Agreement") to be
entered into among the Depositor, the Master
Servicer, the applicable Sellers and the
Trustee (each, as defined herein) with
respect to each such Series.
Depositor...................... The CIT Group Securitization Corporation III,
a Delaware corporation (the "Depositor").
Seller......................... The entity or entities named as seller (each,
a "Seller") in the related Prospectus
Supplement, which will be The CIT
Group/Consumer Finance, Inc. ("CIT Consumer
Finance") and/or another affiliate of the
Depositor.
Master Servicer................ The CIT Consumer Finance or such other entity
named as master servicer in the related
Prospectus Supplement (the "Master
Servicer"), which may be an affiliate of the
Depositor. See "The CIT Group/Consumer
Finance, Inc., Master Servicer" and "The
Pooling and Servicing Agreement--Certain
Matters Regarding the Master Servicer and the
Depositor" herein.
Sub-Servicer................... Unless otherwise specified in the related
Prospectus Supplement, The CIT Group/Sales
Financing, Inc. ("CITSF") will be appointed
as a Sub-Servicer for all of the Mortgage
Loans (as defined herein) in each Mortgage
Pool (as defined herein), and as a
Sub-Servicer, will perform all or most of the
servicing responsibilities described under
"The Pooling and Servicing Agreement" herein
and "Servicing of Mortgage Loans" in the
related Prospectus Supplement. All references
in this Prospectus and any related Prospectus
Supplement to the "Master Servicer" or to CIT
Consumer Finance in a servicing capacity
shall include CIT Consumer Finance acting
through any Sub-Servicer, including CITSF, or
any agent.
Trustee........................ The trustee (the "Trustee") for each Series
of Certificates will be specified in the
related Prospectus Supplement. See "The
Pooling and Servicing Agreement" herein for a
description of the Trustee's rights and
obligations.
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Closing Date................... The date of initial issuance of a Series of
Certificates, as specified in the related
Prospectus Supplement (the "Closing Date").
Description of
the Certificates............... Each Certificate will represent a beneficial
ownership interest in a Trust created by the
Depositor pursuant to an Agreement among the
Depositor, the applicable Sellers, the Master
Servicer and the Trustee for the related
Series. The primary assets of such Trust will
be a Pool (as defined herein) of Mortgage
Loans and certain other Mortgage Assets (as
defined herein). See "-The Mortgage Assets"
below. The Certificates of any Series may be
issued in one or more classes as specified in
the related Prospectus Supplement. A Series
of Certificates may include one or more
classes of senior Certificates (the "Senior
Certificates") which receive certain
preferential treatment specified in the
related Prospectus Supplement with respect to
one or more classes of subordinate
Certificates (the "Subordinated
Certificates"). Each class may be divided
into sub-classes, each of which bears a
different Pass-Through Rate (as defined
herein) and has a specified priority in
payments of interest and principal. Certain
Series or classes of Certificates may be
covered by a Certificate Guaranty Insurance
Policy, Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy, Bankruptcy
Bond (each, as defined herein) or other
insurance policies, a Reserve Fund (as
defined herein), guarantees (including
guarantees by The CIT Group Holdings, Inc.,
its affiliates or an unaffiliated third
party, any of which may be limited in
nature), letters of credit, a spread account,
cash collateral account and/or other
accounts, overcollateralization, or other
forms of credit enhancement, in each case as
described herein and in the related
Prospectus Supplement.
Each class of Certificates within a Series
will evidence the interests specified in the
related Prospectus Supplement, which may (i)
include the right to receive
disproportionate, nominal or no distributions
allocable only to principal, only to interest
or to any combination thereof; (ii) include
the right to receive disproportionate,
nominal or no distributions only of
prepayments of principal throughout the lives
of the Certificates or during specified
periods; (iii) be subordinated in the right
to receive distributions of scheduled
payments of principal, prepayments of
principal, interest or any combination
thereof to one or more other classes of
Certificates of such Series throughout the
lives of the Certificates or during specified
periods or may be subordinated with respect
to certain losses or delinquencies; (iv)
include the right to receive distributions
only after the occurrence of events specified
in the related Prospectus Supplement; (v)
include the right to receive distributions in
accordance with a schedule or formula or on
the basis of collections from designated
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portions of the assets in the related Trust;
(vi) include, as to Certificates entitled to
distributions allocable to interest, the
right to receive interest at a Fixed Rate or
at an Adjustable Rate (each, as defined
herein) that is subject to change from time
to time, or the right to receive interest
based on the weighted average Mortgage Rate
(as defined herein), or the right to receive
interest as otherwise determined as specified
in the related Prospectus Supplement; and
(vii) include, as to Certificates entitled to
distributions allocable to interest, the
right to distributions allocable to interest
only after the occurrence of events specified
in the related Prospectus Supplement, and in
each case, may accrue interest until such
events occur, as specified in the related
Prospectus Supplement. The timing and amounts
of such distributions may vary among classes,
over time, or otherwise as specified in the
related Prospectus Supplement. A Series of
Certificates may also include one or more
classes of Certificates entitled to payments
derived from a specified group or groups of
Mortgage Assets held by the related Trust.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates will
be issuable in fully registered form, in
minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof, except
that one Certificate of each class may be
issued in a different denomination. See
"Description of the Certificates" herein.
Distributions
on the Certificates............. All distributions will be made to
Certificateholders in the priority, manner
and amount specified in the related
Prospectus Supplement. The amount allocable
to payments of principal and interest on any
Distribution Date will be determined as
specified in the related Prospectus
Supplement. The rate at which interest will
be passed through to holders of each class of
Certificates entitled thereto may be a Fixed
Rate or an Adjustable Rate from the date and
for the periods, in each case, as specified
in the related Prospectus Supplement. Any
such rate will be calculated as described in
the related Prospectus Supplement.
Distribution Date.............. Distributions on the Certificates entitled
thereto will be made monthly, quarterly,
semi-annually or at such other intervals and
on the dates specified in the related
Prospectus Supplement (each, a "Distribution
Date") out of the payments received in
respect of the assets of the related Trust or
other assets held for the benefit of the
Certificateholders as specified in the
related Prospectus Supplement.
Determination Date............. Unless otherwise specified in the related
Prospectus Supplement, the "Determination
Date" is the third Business Day (as defined
herein) prior to each Distribution Date. On
each Determination Date, the Master Servicer
will determine the
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amounts of principal and interest which will
be passed through to Certificateholders on
the related Distribution Date.
Due Period..................... The "Due Period" for any Series is the period
specified in the related Prospectus
Supplement. The "Due Period" is the period
during which principal, interest and other
amounts will be collected on the Mortgage
Loans for application to the payment of
principal and interest to the
Certificateholders and the payment of fees on
such Distribution Date.
Business Day................... A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states
of New York, Oklahoma and such other states
(if any) specified in the related Prospectus
Supplement are authorized by law, regulation
or executive order to be closed.
Cut-off Date................... The first day of the month of the issuance of
the related Series of Certificates or such
other date as is specified in the related
Prospectus Supplement (the "Cut-off
Date").
The Mortgage Assets............ The primary assets of the trust fund for a
Series of Certificates (each, a "Trust Fund"
or "Trust") will consist of one or more pools
(each a "Mortgage Pool" or "Pool") of certain
mortgage related assets (the "Mortgage
Assets") consisting of (i) mortgage loans (or
participation or other beneficial interests
therein) secured by mortgages, deeds of trust
or similar security instruments (the
"Mortgages") creating first or subordinate
liens on one- to four-family residential
properties (the "Mortgage Loans"), and, if
specified in the related Prospectus
Supplement, (ii) mortgage pass-through
certificates or participation certificates
evidencing an undivided interest in a pool of
mortgage loans or collateralized mortgage
obligations secured by mortgage loans (the
"Private Mortgage-Backed Securities"),
together with payments in respect of such
Mortgage Assets, and (iii) certain other
accounts, obligations or agreements, in each
case as specified in the related Prospectus
Supplement.
A. Mortgage Loans............ Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans
will be secured by Mortgages creating first
or subordinate liens on one- to four-family
residential properties (each, a "Mortgaged
Property"). If specified in the related
Prospectus Supplement, the Mortgage Loans may
include loans or participations therein
secured by Mortgages on condominium units in
condominium buildings together with such
condominium units' appurtenant interests in
the common elements of the condominium
buildings. If specified in the related
Prospectus Supplement, the Mortgage Assets of
the related Trust may include mortgage
participation certificates evidencing
interests in mortgage loans. Unless otherwise
specified in the related Prospectus
Supplement, such Mortgage Loans
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will be loans that are not insured or
guaranteed by any governmental agency.
B. General Attributes of
Mortgage Loans.............. The payment terms of the Mortgage Loans to be
included in a Trust will be described in the
related Prospectus Supplement and may include
any of the following features or combinations
thereof or other features described in the
related Prospectus Supplement:
(a) Interest may be payable at a fixed rate
(a "Fixed Rate" and a Mortgage Loan
subject thereto is a "Fixed Rate
Mortgage Loan"), a rate adjustable from
time to time in relation to an index
(which will be specified in the related
Prospectus Supplement), a rate that is
fixed for a period of time or under
certain circumstances and is followed by
an adjustable rate, a rate that
otherwise varies from time to time, or a
rate that is convertible from an
adjustable rate to a fixed rate (each of
the foregoing, an "Adjustable Rate" and
a Mortgage Loan subject thereto is an
"Adjustable Rate Mortgage Loan").
Changes to an Adjustable Rate may be
subject to periodic limitations, maximum
rates, minimum rates or a combination of
such limitations. Accrued interest may
be deferred and added to the principal
of a Mortgage Loan for such periods and
under such circumstances as may be
specified in the related Prospectus
Supplement. The loan agreement or
promissory note (the "Mortgage Note") in
respect of a Mortgage Loan may provide
for the payment of interest at a rate
lower than the interest rate (the
"Mortgage Rate") specified in such
Mortgage Note for a period of time or
for the life of the Mortgage Loan, and
the amount of any difference may be
contributed from funds supplied by the
seller of the related Mortgaged Property
or another source or may be treated as
accrued interest and added to the
principal of the Mortgage Loan.
(b) Principal may be payable on a declining
balance basis to fully amortize the
Mortgage Loan over its term, may be
calculated on the basis of an assumed
amortization schedule that is
significantly longer than the original
term to maturity or on an interest rate
that is different from the Mortgage Rate
or may not be amortized during all or a
portion of the original term. Payment of
all or a substantial portion of the
principal of certain Mortgage Loans
("Balloon Loans") may be due on maturity
("Balloon Payments"). Mortgage Loans may
permit the mortgagee to require the
Mortgagor (as defined herein) to pay the
full principal balance of the loan on a
specified date (the "Call Date") prior
to the maturity of the loan ("Call
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Loans"). Principal may include interest
that has been deferred and added to the
principal balance of the Mortgage Loan.
(c) Monthly payments of principal and
interest may be fixed for the life of
the Mortgage Loan, may increase over a
specified period of time (a "Graduated
Payment Loan") or may change from period
to period. The terms of a Mortgage Loan
may include limits on periodic increases
or decreases in the amount of monthly
payments and may include maximum or
minimum amounts of monthly payments.
(d) The Mortgage Loans generally may be
prepaid in whole or in part at any time.
If specified in the related Prospectus
Supplement, some prepayments of the full
principal balance of a loan may be
subject to a prepayment penalty or
premium. Such prepayment penalty or
premium will be applicable to certain
prepayments of principal made during a
specified period of time during the life
of the Mortgage Loan. The Mortgage Note
in respect of any Mortgage Loan subject
to a prepayment penalty or premium
generally will set forth the terms of
prepayment. Prepayments on the Mortgage
Loans as a result of a refinancing by
the Seller or Seller's transferee
generally will not be subject to a
prepayment penalty or premium. The
Mortgage Loans generally include "due on
sale" clauses which permit the mortgagee
to demand payment of the entire Mortgage
Loan in connection with the sale or
certain transfers of the related
Mortgaged Property. Other Mortgage Loans
may be assumable by persons meeting the
then applicable underwriting standards
for such Mortgage Loan.
(e) The real property constituting security
for repayment of a Mortgage Loan may be
located in any one of the fifty states
or the District of Columbia. Unless
otherwise specified in the related
Prospectus Supplement, all of the
Mortgage Loans will be covered by
standard hazard insurance policies
(each, a "Standard Hazard Insurance
Policy") insuring against losses due to
fire and various other causes. Mortgage
Loans with certain Combined
Loan-to-Value Ratios (as defined herein)
and/or certain principal balances are
generally not covered wholly or
partially by Primary Mortgage Insurance
Policies (as defined herein) unless
otherwise specified in the related
Prospectus Supplement.
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(f) Unless otherwise specified in the
related Prospectus Supplement, certain
of the Mortgage Loans underlying a given
Series of Certificates may have been
originated by CIT Consumer Finance or
affiliates thereof and certain Mortgage
Loans may have been purchased by CIT
Consumer Finance or an affiliate thereof
in the open market or in privately
negotiated transactions, including
transactions with entities affiliated
with CIT Consumer Finance.
The Prospectus Supplement for each Series of
Certificates will specify with respect to all
Mortgage Loans expected to be included in the
related Pool as of the date specified in the
related Prospectus Supplement, among other
things, (i) the expected aggregate
outstanding principal balance and the
expected average outstanding principal
balance of the Mortgage Loans in such Pool,
(ii) the largest expected principal balance
and the smallest expected principal balance
of any of the Mortgage Loans, (iii) the types
of Mortgaged Properties (e.g., detached
residential one- to four-family properties,
individual units in condominium apartment
buildings, vacation and second homes, or
other real property) and/or other assets
securing the Mortgage Loans, (iv) the
original terms to maturity of the Mortgage
Loans, (v) the expected weighted average term
to maturity of the Mortgage Loans as of the
date specified in such Prospectus Supplement
and the expected range of the terms to
maturity, (vi) the earliest origination date
and latest maturity date of any of the
Mortgage Loans, (vii) the expected aggregate
principal balance of Mortgage Loans having
Combined Loan-to-Value Ratios in specified
ranges, (viii) in the case of Fixed Rate
Mortgage Loans, the expected weighted average
Mortgage Rate and ranges of Mortgage Rates
borne by the Mortgage Loans (as the case may
be), (ix) in the case of Adjustable Rate
Mortgage Loans, the expected weighted average
of the Adjustable Rates as of the date set
forth in such Prospectus Supplement, any
periodic or lifetime rate caps or floors,
maximum permitted Adjustable Rates, if any,
and the Index (as defined herein) upon which
the Adjustable Rate is based, (x) the
expected aggregate outstanding principal
balance, if any, of Buydown Loans (as defined
herein) and Graduated Payment Loans, as of
the date set forth in such Prospectus
Supplement, (xi) the expected aggregate
outstanding principal balance, if any, of
Call Loans and Balloon Loans, (xii) the
amount of any Certificate Guaranty Insurance
Policy, Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy or Bankruptcy
Bond to be maintained with respect to such
Pool, (xiii) the amount, if any, and terms of
any other Credit Enhancement (as defined
herein) to be provided with respect to all or
any Mortgage Loans or the Pool, (xiv) the
priority of the Mortgages (first, second,
third or fourth) and (xv) the expected
geographic location of the Mortgaged
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Properties. See "The Trusts - The Mortgage
Loans-General" herein.
C. Private Mortgage-Backed
Securities................ Private Mortgage-Backed Securities may
consist of (i) mortgage pass-through
certificates or participation certificates
evidencing an undivided interest in a pool of
mortgage loans or (ii) collateralized
mortgage obligations secured by such mortgage
loans. Private Mortgage-Backed Securities may
include stripped mortgage-backed securities
representing an undivided interest in all or
a part of any of the principal distributions
(but not the interest distributions) or the
interest distributions (but not the principal
distributions) or in some specified portion
of the principal and interest distributions
(but not all of such distributions) on
certain mortgage loans. Although individual
mortgage loans underlying a Private
Mortgage-Backed Security may be insured or
guaranteed by the United States or an agency
or instrumentality thereof, they need not be,
and the Private Mortgage-Backed Securities
themselves will not be so insured or
guaranteed. Unless otherwise specified in the
related Prospectus Supplement, payments on
the Private Mortgage-Backed Securities will
be distributed directly to the Trustee as
registered owner of such Private
Mortgage-Backed Securities. See "The
Trusts--Private Mortgage-Backed Securities"
herein.
The related Prospectus Supplement for a
Series for which the Trust includes Private
Mortgage-Backed Securities will specify, with
respect to any Private Mortgage-Backed
Securities owned by the related Trust, among
other things, (i) the approximate aggregate
principal amount and type of any Private
Mortgage-Backed Securities to be included in
the Trust for such Series; (ii) certain
characteristics of the mortgage loans that
comprise the underlying assets for the
Private Mortgage-Backed Securities including:
(A) the payment features of such mortgage
loans, (B) the approximate aggregate
principal amount, if known, of such mortgage
loans that are insured or guaranteed by a
governmental entity, (C) the servicing fee or
range of servicing fees with respect to such
mortgage loans and (D) the minimum and
maximum stated maturities of such mortgage
loans at origination; (iii) the maximum
original term-to-stated maturity of the
Private Mortgage-Backed Securities; (iv) the
weighted average term-to-stated maturity of
the Private Mortgage-Backed Securities; (v)
the pass-through or certificate rate or
ranges thereof for the Private
Mortgage-Backed Securities; (vi) the weighted
average pass-through or certificate rate of
the Private Mortgage-Backed Securities; (vii)
the issuer of the Private Mortgage-Backed
Securities (the "PMBS Issuer"), the servicer
of the Private Mortgage-Backed Securities
(the "PMBS Servicer") if other than the PMBS
Issuer and the trustee of the Private
Mortgage-Backed Securities (the "PMBS
Trustee"); (viii) certain characteristics of
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credit support, if any, such as reserve
funds, insurance policies, surety bonds,
letters of credit or guarantees, relating to
the mortgage loans that comprise the
underlying assets for the Private
Mortgage-Backed Securities or to such Private
Mortgage-Backed Securities themselves; (ix)
the terms on which the mortgage loans that
comprise the underlying assets for such
Private Mortgage-Backed Securities may, or
are required to, be repurchased prior to
their stated maturity or the stated maturity
of the Private Mortgage-Backed Securities;
and (x) the terms on which substitute
mortgage loans may be delivered to replace
those initially deposited with the PMBS
Trustee. See "The Trusts" herein.
Pre-Funding Account............ If provided in the related Prospectus
Supplement, the original principal amount of
a Series of Certificates may exceed the
principal balance of the Mortgage Assets
initially being delivered to the Trustee with
respect to such Series. Cash in an amount
equal to such difference (the "Pre-Funded
Amount") will be deposited into a separate
trust account (the "Pre-Funding Account")
maintained with the Trustee. The Pre-Funded
Amount will not exceed 25% of the Certificate
Balance (as defined herein). During the
period ("Funding Period") set forth in the
related Prospectus Supplement, amounts on
deposit in the Pre-Funding Account may be
used to purchase additional Mortgage Assets
for the related Trust. In addition, if
provided in the related Prospectus
Supplement, certain additional amounts in
respect of interest will be deposited into
the Pre-Funding Account or in a separate
trust account. The related Prospectus
Supplement will specify the conditions which
must be satisfied prior to the transfer of
any such additional Mortgage Assets,
including the requisite characteristics of
such Mortgage Assets. Any amounts remaining
in the Pre-Funding Account at the end of the
Funding Period will be distributed as a
principal prepayment to the holders of the
related Series of Certificates at the time
and in the manner set forth in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, the specified period for the
acquisition by a Trust of additional Mortgage
Assets will not exceed three months from the
date such Trust is established.
Credit Enhancement............. The Mortgage Assets in a Trust or the
Certificates of one or more classes in the
related Series may have the benefit of one or
more types of credit enhancement described in
the related Prospectus Supplement. See
"Credit Enhancement" herein. The protection
against losses afforded by any such credit
support may be limited. Credit Enhancement
may include one or more of the following
types:
A. Subordination............. A Series of Certificates may consist of one
or more classes of Senior Certificates and
one or more classes of Subordinated
Certificates. The rights of the holders of
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the Subordinated Certificates of a Series
(the Certificateholders Subordinated
distributions "Subordinated
Certificateholders") to receive with respect
to the assets in the related Trust will be
subordinated to such rights of the holders of
the Senior Certificates of the same Series
(the "Senior Certificateholders") to the
extent described in the related Prospectus
Supplement. This subordination is intended to
enhance the likelihood of regular receipt by
Senior Certificateholders of the full amount
of the monthly payments of principal and
interest due to them. The protection afforded
to the Senior Certificateholders of a Series
by means of the subordination feature will be
accomplished by (i) the preferential right of
such holders to receive, prior to any
distribution being made in respect of the
related Subordinated Certificates, the
amounts of principal and interest due them on
each Distribution Date out of the funds
available for distribution on such date in
the related Certificate Account (as defined
herein) and, to the extent described in the
related Prospectus Supplement, by the right
of such holders to receive future
distributions on the assets in the related
Trust that would otherwise have been payable
to the Subordinated Certificateholders, (ii)
reducing the ownership interest of the
related Subordinated Certificates, (iii) a
combination of clauses (i) and (ii) above, or
(iv) as otherwise described in the related
Prospectus Supplement. If specified in the
related Prospectus Supplement, subordination
may apply only in the event of certain types
of losses not covered by other forms of
credit support, such as hazard losses not
covered by Standard Hazard Insurance Policies
or losses due to the bankruptcy or fraud of
the Mortgagor not covered by a Bankruptcy
Bond. The protection afforded to Senior
Certificateholders through subordination also
may be accomplished by allocating certain
types of losses or delinquencies to the
related Subordinated Certificates to the
extent described in the related Prospectus
Supplement. The related Prospectus Supplement
will set forth information concerning, among
other things, the amount of subordination of
a class or classes of Subordinated
Certificates in a Series, the circumstances
in which such subordination will be
applicable and the manner, if any, in which
the amount of subordination will decrease
over time. If specified in the related
Prospectus Supplement, the same class of
Certificates may constitute Senior
Certificates with respect to certain types of
payments or certain losses or delinquencies
and Subordinated Certificates with respect to
other types of payments or losses or
delinquencies.
B. Overcollateralization..... If specified in the related Prospectus
Supplement, credit support may consist of
overcollateralization whereby the aggregate
principal amount of the Mortgage Assets
exceeds the Certificate Balance of the
Certificates of such Series.
Overcollateralization may exist on the
Closing Date or may develop thereafter as a
result of the application of certain interest
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collections or other collections received in
connection with the Mortgage Assets in excess
of amounts necessary to pay the Pass-Through
Rate on the Certificates and certain other
amounts as may be specified in the related
Prospectus Supplement. The existence of any
overcollateralization and the manner, if any,
by which it increases or decreases, will be
set forth in the related Prospectus
Supplement.
C. Reserve Fund.............. One or more reserve funds (each, a "Reserve
Fund") may be established and maintained for
each Series. The related Prospectus
Supplement will specify whether or not any
such Reserve Fund will be included in the
corpus of the Trust for such Series and will
also specify the manner of funding the
related Reserve Fund and the conditions under
which the amounts in any such Reserve Fund
will be used to make distributions to holders
of Certificates of a particular class or
released from the related Trust.
D. Certificate Guaranty
Insurance Policy.......... A certificate guaranty insurance policy or
policies (each, a "Certificate Guaranty
Insurance Policy") may be obtained and
maintained for one or more class or classes
of a Series of Certificates. Certificate
Guaranty Insurance Policies generally
unconditionally and irrevocably guarantee to
Certificateholders that the full amount of
the distributions of principal and interest,
as well as any other amounts specified in the
related Prospectus Supplement, will be
received by an agent of the Trustee on behalf
of Certificateholders for distribution by the
Trustee to Certificateholders. If specified
in the related Prospectus Supplement, the
Certificate Guaranty Insurance Policy may
only cover ultimate payment of principal to
Certificateholders and not timely payment of
principal on each Distribution Date.
Certificate Guaranty Insurance Policies may
have certain limitations set forth in the
related Prospectus Supplement, including (but
not limited to) limitations on the insurer's
obligation to guarantee the Sellers' or the
Master Servicer's obligation to repurchase or
substitute for any Mortgage Loans, to
guarantee any specified rate of prepayments
or to provide funds to redeem Certificates on
any specified date. The Certificate Guaranty
Insurance Policy may also be limited in
amount.
E. Mortgage Pool
Insurance Policy.......... A mortgage pool insurance policy or policies
(each, a "Mortgage Pool Insurance Policy")
may be obtained and maintained for a Mortgage
Pool, which shall be limited in scope,
covering defaults on the related Mortgage
Loans in an initial amount equal to a
specified percentage of the aggregate
principal balance of all Mortgage Loans
included in the Mortgage Pool as of the
Cut-off Date and, if applicable, as of the
Subsequent Cutt-off Dates (as defined in the
related Prospectus Supplement) related to the
transfer of additional Mortage Loans, if any,
which are not covered as to their entire
outstanding principal balances by Primary
Mortgage Insurance Policies.
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F. Special Hazard
Insurance Policy.......... A special hazard insurance policy or policies
(each, a "Special Hazard Insurance Policy"),
may be obtained and maintained for a Mortgage
Pool, covering certain physical risks that
are not otherwise insured against by standard
hazard insurance policies. Each Special
Hazard Insurance Policy will be limited in
scope and will cover losses pursuant to the
provisions of each such Special Hazard
Insurance Policy as described in the related
Prospectus Supplement.
G. Bankruptcy Bond........... A bankruptcy bond or bonds (each, a
"Bankruptcy Bond") may be obtained to cover
certain losses resulting from proceedings
under the federal Bankruptcy Code with
respect to a Mortgage Loan. The level of
coverage and the limitations in scope of each
Bankruptcy Bond will be specified in the
related Prospectus Supplement.
H. Cross Collateralization... If specified in the related Prospectus
Supplement, the beneficial ownership of
separate Trusts or separate groups of assets
included in a Trust may be evidenced by
separate classes of the related Series of
Certificates. In such case, credit support
may be provided by a cross collateralization
feature which requires that distributions be
made with respect to Certificates evidencing
beneficial ownership of one or more separate
Trusts or asset groups prior to distributions
to Certificates evidencing a beneficial
ownership interest in other separate Trusts
or asset groups within the same Trust. If
specified in the related Prospectus
Supplement, the coverage provided by one or
more forms of credit support may apply
concurrently to two or more separate Trusts,
without priority among such Trusts, until the
credit support is exhausted. If applicable,
the related Prospectus Supplement will
identify the Trusts or asset groups to which
such credit support relates and the manner of
determining the amount of the coverage
provided thereby and of the application of
such coverage to the identified Trusts or
asset groups.
I. Other Credit Enhancement.. Other credit enhancement arrangements, as
described in the related Prospectus
Supplement, including (but not limited to)
one or more spread accounts, cash collateral
accounts and/or other accounts, letters of
credit, surety bonds, financial guaranty
insurance policies, interest rate swaps,
caps, floors and other derivative products,
guaranteed investment contracts or third
party guarantees (including guarantees by The
CIT Group Holdings, Inc., its affiliates, or
an unaffiliated third party, any of which may
be limited in nature) or similar instruments
or agreements, may be used to provide
coverage for certain risks or defaults or
losses. These arrangements may be in addition
to or in substitution for any forms of credit
support described in this Prospectus. Any
such arrangement must be acceptable to each
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nationally recognized statistical rating
organization that provides a rating for one
or more classes of the related Series of
Certificates (each, a "Rating Agency").
Advances....................... Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer
will be required to remit to the Trustee no
later than the day prior to the Distribution
Date and in no case earlier than the seventh
Business Day of such month the amount (an
"Advance"), if any, by which 30 days'
interest at the Mortgage Rate (or, if
specified in the related Prospectus
Supplement, at the Adjusted Mortgage Loan
Remittance Rate (as defined herein)) on the
then outstanding principal balance of a
Mortgage Loan exceeds the amount received by
the Master Servicer in respect of interest on
the Mortgage Loan as of the related Record
Date (as defined herein). Any Advances by the
Master Servicer will be reimbursable to the
Master Servicer out of recoveries on the
specific Mortgage Assets with respect to
which such Advances were made (e.g., late
payments made by the related Mortgagors, any
related Insurance Proceeds, Liquidation
Proceeds, Released Mortgaged Property
Proceeds (each, as defined herein) or
proceeds of any Mortgage Loan repurchased by
the Depositor, a Sub-Servicer or a Seller
pursuant to the related Agreement) and any
other amount that would otherwise be
distributed to the holder or holders of
Certificates representing the residual
interest of a Trust for which a REMIC
election has been made. In addition, Advances
by the Master Servicer also will be
reimbursable to the Master Servicer from cash
otherwise distributable to Certificateholders
(including Senior Certificateholders) to the
extent that the Master Servicer determines
that any such Advances previously made are
not ultimately recoverable as described in
the immediately preceding sentence. See
"Description of the Certificates -- Advances
and Compensating Interest" herein. Any
obligation to make Advances may be subject to
limitations as specified in the related
Prospectus Supplement. If provided in the
related Prospectus Supplement, the obligation
of the Master Servicer to make such Advances
will be limited to amounts corresponding to
delinquent interest payments on a Mortgage
Loan and/or will be limited to amounts that
the Master Servicer believes will be
recoverable out of late payments by
Mortgagors on a Mortgage Loan, Liquidation
Proceeds, Insurance Proceeds or otherwise.
Compensating Interest.......... Unless otherwise specified in the related
Prospectus Supplement, not later than the
close of business on the Business Day prior
to each Determination Date, with respect to
each Mortgage Loan as to which the Master
Servicer receives during the related Due
Period a principal payment in full in advance
of the final scheduled due date (a "Principal
Prepayment"), the Master Servicer will be
required to remit to the Trustee for deposit
in the Certificate Account from amounts
otherwise payable to the Master Servicer as
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servicing compensation, an amount
("Compensating Interest") equal to any excess
of (a) 30 days' interest on the principal
balance of each such Mortgage Loan as of the
beginning of the related Due Period at the
applicable Mortgage Rate (or, if specified in
the related Prospectus Supplement, at the
Adjusted Mortgage Loan Remittance Rate) over
(b) the amount of interest actually received
on the related Mortgage Loan during such Due
Period.
Optional Termination........... The Master Servicer, the Depositor, the
holder of the residual interest in a REMIC,
certain insurers or certain other entities
specified in the related Prospectus
Supplement may have the option to effect
early termination of a Series of Certificates
through the purchase of the Mortgage Assets
and other assets in the related Trust under
the circumstances and in the manner specified
in the related Prospectus Supplement and
herein under "The Pooling and Servicing
Agreement--Termination; Purchase of Mortgage
Loans."
Mandatory Termination.......... The Trustee, the Master Servicer or certain
other entities specified in the related
Prospectus Supplement may be required to
effect early termination of a Series of
Certificates under the circumstances and in
the manner specified in the related
Prospectus Supplement and herein under "The
Pooling and Servicing Agreement--Termination;
Purchase of Mortgage Loans."
Legal Investment............... The Prospectus Supplement for each Series of
Certificates will specify which, if any, of
the classes of Certificates offered thereby
will constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of
Certificates that qualify as "mortgage
related securities" will be legal investments
for certain types of institutional investors
to the extent provided in SMMEA, subject, in
any case, to any other regulations that may
govern investments by such institutional
investors. Investors should consult with
their counsel or the applicable authorities
to determine whether an investment in a
particular class of Certificates (whether or
not such class constitutes a "mortgage
related security") complies with applicable
guidelines, policy statements or
restrictions. See "Legal Investment" herein.
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<PAGE>
Certain Federal Income Tax
Consequences................... The federal income tax consequences to
Certificateholders will vary depending on
whether one or more elections are made to
treat the Trust or specified portions thereof
as a "real estate mortgage investment
conduit" ("REMIC") under the provisions of
the Internal Revenue Code of 1986, as amended
(the "Code"). The Prospectus Supplement for
each Series of Certificates will specify
whether such an election will be made.
Investors are advised to consult their tax
advisors and to review "Certain Federal
Income Tax Consequences" herein and, if
applicable, in the related Prospectus
Supplement.
ERISA Considerations........... A fiduciary of any employee benefit plan or
other retirement plan or arrangement
(including individual retirement accounts,
certain Keogh plans, and collective
investment funds, separate accounts and
insurance company general accounts in which
such plans, accounts or arrangements are
invested) subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or the Code should carefully
review with its legal advisors whether an
investment in Certificates will cause the
assets of the related Trust to be considered
plan assets under the Department of Labor
("DOL") regulations set forth in 29 C.F.R.
Section 2510.3-101 (the "Plan Asset
Regulations"), thereby subjecting the Trustee
and the Master Servicer to the fiduciary
investment standards of ERISA, and whether
the purchase, holding or transfer of
Certificates could give rise to a transaction
prohibited or not otherwise permissible under
ERISA or the Code or subject to the excise
tax provisions of Section 4975 of the Code,
unless a DOL administrative exemption
applies. See "ERISA Considerations" herein
and in the related Prospectus Supplement. If
specified in the related Prospectus
Supplement, certain classes of Certificates
may not be transferred unless the Trustee and
the Depositor are furnished with a letter of
representation or an opinion of counsel to
the effect that such transfer will not result
in a violation of the prohibited transaction
provisions of ERISA and the Code and will not
subject the Trustee, the Depositor or the
Master Servicer to additional obligations.
See "Description of the
Certificates--General" and "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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<PAGE>
Registration of
Certificates................... If specified in the related Prospectus
Supplement, Certificates will be represented
by global certificates registered in the name
of Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC"), or another
nominee. In such case, Certificateholders
will not be entitled to receive Definitive
Certificates (as defined herein) representing
such Certificateholders' interests, except in
certain circumstances described in the
related Prospectus Supplement. If specified
in the related Prospectus Supplement,
Certificateholders may also hold Certificates
of a Series through Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe, if they are
participants in such systems or indirectly
through organizations that are participants
in such systems. See "Description of the
Certificates--Book-Entry Certificates"
herein.
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RISK FACTORS
Prospective Certificateholders (as defined herein) should consider, among
other things, the following risk factors in connection with the purchase of the
Certificates (as defined herein):
1. General. An investment in Certificates evidencing interests in Mortgage
Loans (as defined herein) may be affected, among other things, by a decline in
real estate values or changes in mortgage market rates. An overall decline in
the market value of residential real estate, the general condition of a
Mortgaged Property (as defined herein), or other factors, could adversely affect
the values of the Mortgaged Properties such that the outstanding balances of the
Mortgage Loans, together with any senior liens on the Mortgaged Properties,
equal or exceed the value of the Mortgaged Properties. Such a decline could
extinguish the interest of the related Trust (as defined herein) in the
Mortgaged Properties before having any effect on the interest of the related
senior mortgagee. Certain of the Mortgage Loans may be secured by Mortgaged
Properties located in areas of the country which have experienced declines in
real estate values over the last few years. The Depositor (as defined herein)
will not be able to quantify the impact of any property value declines on the
Mortgage Loans or predict whether, to what extent or how long such declines may
continue. In periods of such declines, the actual rates of delinquencies,
foreclosures and losses on the Mortgage Loans could be higher than those
historically experienced in the mortgage lending industry in general. See "The
Home Equity Lending Program--Servicing and Collections" herein. To the extent
that such losses are not covered by the subordination of any class or Series (as
defined herein) of Certificates, applicable insurance policies or alternate
credit enhancement, holders of the Certificates of a Series evidencing interests
in a Mortgage Pool (as defined herein) will bear all risk of loss resulting from
default by borrowers on such Mortgage Loans (each a "Mortgagor") and will have
to look primarily to the value of the Mortgaged Properties for recovery of the
outstanding principal and unpaid interest of the defaulted Mortgage Loans. See
"The Trusts" herein.
2. Limited Obligations. The Certificates will not represent an interest in
or obligation of The CIT Group Securitization Corporation III (the "Depositor"),
The CIT Group/Sales Financing, Inc. ("CITSF"), The CIT Group/Consumer Finance,
Inc. ("CIT Consumer Finance"), The CIT Group Holdings, Inc. ("CIT") or any of
their respective affiliates, unless (and to the extent) expressly provided in
the related Prospectus Supplement. Unless expressly provided in the related
Prospectus Supplement, the Certificates will not be insured or guaranteed by any
government agency or instrumentality, nor by the Depositor, CIT Consumer
Finance, CITSF, CIT or any of their respective affiliates.
3. Yield and Prepayment Considerations. The yield to maturity of the
Certificates of each Series will depend on the rate of payment of principal
(including prepayments, liquidations due to defaults, and repurchases due to
conversion of Adjustable Rate Mortgage Loans to Fixed Rate Mortgage Loans (each,
as defined herein) or breaches of representations and warranties) on the
Mortgage Loans and the price paid by Certificateholders. Such yield may be
adversely affected by a higher or lower than anticipated rate of prepayments on
the related Mortgage Loans. The yield to maturity on Certificates purchased at
premiums or discounted to par will be extremely sensitive to the rate of
prepayments on the related Mortgage Loans. In addition, the yield to maturity on
certain other types of classes of Certificates, including certain other classes
in a Series including more than one class of Certificates, may be relatively
more sensitive to the rate of the prepayment on the related Mortgage Loans than
other classes of Certificates. See "Yield and Prepayment Considerations" herein.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans generally may be prepaid in whole or in part at any time.
However, if permitted by the mortgage documentation and applicable law, the
Master Servicer may charge a prepayment penalty or premium in connection with a
prepayment, but CIT Consumer Finance's current operating system cannot process
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<PAGE>
prepayment penalties for partial prepayments on any Mortgage Loan. Such
penalties or premiums will be property of the related Trust. See "Certain Legal
Aspects of the Mortgage Loans - Prepayment and Late Charges" and "Description of
the Certificates - Distributions on Certificates - Available Funds" herein. The
rate of prepayments of the Mortgage Loans cannot be predicted. The prepayment
experience on the Mortgage Loans and the mortgage loans underlying the Private
Mortgage-Backed Securities (as defined herein) will affect the average life of
the Certificates or each class of Certificates. Prepayments on the Mortgage
Loans and the mortgage loans underlying the Private Mortgage-Backed Securities
may be influenced by a variety of economic, geographic, social and other
factors, including the difference between the interest rates on the Mortgage
Loans or the mortgage loans underlying the Private Mortgage-Backed Securities
and prevailing mortgage rates (giving consideration to the cost of refinancing).
Therefore, no assurance can be given as to the level of prepayments that a Trust
will experience.
Evidence suggests that the prepayment behavior of a pool including home
equity loans may be significantly different from that of a pool composed
entirely of first-lien purchase money mortgage loans with equivalent interest
rates and maturities. For example, the smaller average principal balance of a
pool of home equity loans may result in a higher prepayment rate than that of a
pool of first-lien purchase money mortgage loans with a larger average balance,
regardless of the interest rate environment. A small principal balance, however,
also may make refinancing a home equity loan at a lower interest rate less
attractive to the borrower relative to refinancing a larger balance first-lien
purchase money mortgage loan because the borrower may perceive the impact of
lower interest rates on the size of the monthly payment for a home equity
mortgage loan to be less than for a first-lien purchase money mortgage loan with
a larger balance. The amounts of, and interest rates on, the underlying senior
mortgage loans might be expected to affect the prepayment rate of a pool of
junior mortgage loans. The use of first-lien mortgage loans as long-term
financing for home purchase and the use of junior lien mortgage loans as
shorter-term financing for a variety of purposes, including home improvement,
education expenses and purchases of consumer durables such as automobiles might
also affect prepayment rates. Accordingly, the Mortgage Loans which are home
equity loans may experience a higher rate of prepayment than traditional
fixed-rate mortgage loans. In addition, any future limitations on the right of
borrowers to deduct interest payments on home equity mortgage loans for federal
income tax purposes may further increase the rate of prepayments of such home
equity loans. See "Yield and Prepayment Considerations" herein.
Prepayments of the Mortgage Loans may result from voluntary early payments
by Mortgagors (including payments in connection with refinancings of the related
senior mortgage loan or loans), sales of Mortgaged Properties subject to "due on
sale" provisions and liquidations due to default, as well as the receipt of
proceeds from physical damage, credit life and disability insurance policies, if
any. The Mortgage Loans generally contain "due on sale" provisions, and the
Master Servicer will be required to enforce such provisions unless (i) such
enforcement will impair or threaten to impair any recovery under any related
Primary Mortgage Insurance Policy (as defined herein) or will materially
increase the risk of default or delinquency on, or materially decrease the
security for, such Mortgage Loan or (ii) such enforcement is not permitted by
applicable law or the applicable Mortgage (as defined herein), in which case the
Master Servicer is authorized to permit the purchaser of the related Mortgaged
Property to assume the Mortgage Loan. See "The Pooling and Servicing Agreement"
and "Certain Legal Aspects of the Mortgage Loans - Due on Sale Clauses" herein
and the related Prospectus Supplement.
Collections on the Mortgage Loans may vary due to the level of incidence of
delinquent payments and of prepayments. Collections on the Mortgage Loans may
also vary due to seasonal purchasing and payment habits of Mortgagors.
Prepayments may also result from mandatory prepayments relating to unused
moneys held in Pre-Funding Accounts (as defined herein), if any, and
refinancings by a Seller (as defined herein) of the Mortgage Loan. In addition,
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repurchases or purchases from a Trust of Mortgage Loans or substitution
adjustments required to be made under the related Agreement will have the same
effect on the Certificateholders as a prepayment of such Mortgage Loans.
4. Risk of Early Defaults. Certain of the Mortgage Loans underlying a
Series of Certificates may be recently originated as of the date of inclusion in
the related Mortgage Pool. Although little data is available, defaults on
mortgage loans are generally expected to occur with greater frequency in their
early years. Certain of the Mortgage Loans underlying a Series of Certificates
may be delinquent in respect of the payment of principal and interest. In
addition, certain of the Mortgagors under the Mortgage Loans underlying a Series
of Certificates may be subject to personal bankruptcy proceedings. Such Mortgage
Loans may be subject to a greater risk of default. See "Trusts" herein and "The
Mortgage Pool" in the related Prospectus Supplement.
5. Risk of the Losses Associated with Junior Liens. A substantial
proportion of the residential mortgage loans originated by CIT Consumer Finance
historically have been mortgage loans secured by liens subordinate to the rights
of the mortgagee under each related senior mortgage ("Junior Lien Loans"). In
most (or all) cases such senior mortgage or deed or trust will not be included
in the Mortgage Pool. Although little data is available on CIT Consumer
Finance's portfolio, the rate of default of Junior Lien Loans may be greater
than that of mortgage loans secured by senior liens on comparable properties.
A primary risk to holders of Junior Lien Loans is the possibility that
adequate funds will not be received in connection with a foreclosure of the
related senior lien to satisfy both the senior mortgage and the Junior Lien
Loan. The proceeds from any liquidation, insurance or condemnation proceedings
will be available to satisfy the principal balance of a Junior Lien Loan only to
the extent that the claims, if any, of each such senior mortgagee or beneficiary
are satisfied in full, including any related foreclosure costs and, in the case
of a judicial foreclosure, only to the extent that the junior mortgagee has
answered and established its claim. In addition, a mortgagee holding a Junior
Lien Loan may not foreclose on the related mortgaged property unless it
forecloses subject to the related senior mortgage or mortgages, in which case it
must either pay the entire amount of each senior mortgage to the applicable
mortgagee at or prior to the foreclosure sale or undertake the obligation to
make payments on each senior mortgage in the event of default thereunder. See
"Certain Legal Aspects of the Mortgage Loans - Foreclosure" herein.
In servicing Junior Lien Loans in its portfolio, it has been the practice
of CIT Consumer Finance to satisfy each such senior mortgage at or prior to the
foreclosure sale only to the extent that it determines any amount so paid will
be recoverable from future payments and collections on such Junior Lien Loans or
otherwise. In servicing Junior Lien Loans in its portfolio, it has been the
practice of CIT Consumer Finance to advance funds to keep the senior lien
current in the event the mortgagor is in default thereunder until such time as
CIT Consumer Finance satisfies the senior lien by sale of the mortgaged
property, but only to the extent that it determines such advances will be
recoverable from future payments and collections on that Junior Lien Loan or
otherwise. CIT Consumer Finance may modify these practices at any time. The
related Trust will have no source of funds to satisfy a senior mortgage or to
make payments due to any senior mortgagee. The Junior Lien Loans are subject and
subordinate to any senior liens affecting the related Mortgaged Property,
including limitations and prohibitions which may be contained in such senior
liens upon subordinate financing. See "Certain Legal Aspects of The Mortgage
Loans" herein.
6. Potential Conflict of Interest. CIT Consumer Finance may hold both a
senior mortgage and a Junior Lien Loan on the same Mortgaged Property (or CIT
Consumer Finance may in the future originate a mortgage loan which is junior or
senior to a Mortgage Loan included in the Mortgage Pool). In such circumstances,
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CIT Consumer Finance may, in its role as Master Servicer, be required to make
decisions regarding a Mortgage Loan which could affect the value or
collectability of a mortgage held by CIT Consumer Finance (or by a trust for
which CIT Consumer Finance acts as servicer) on the same Mortgaged Property.
7. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates of any Series or, if it does develop, that it
will provide the holders of Certificates of such Series with liquidity of
investment or that it will remain for the life of such Series of Certificates.
Although the Certificateholders of each Series will receive monthly statements
containing certain statistical information with respect to the related Mortgage
Pool, the Depositor publishes no information relating to the Certificates of any
Series or any Mortgage Pool. The limited availability of any such published
information may influence the liquidity of the Certificates.
8. Subordination. With respect to Certificates of a Series having a class
of Subordinated Certificates (as defined herein), while the subordination
feature is intended to enhance the likelihood of timely payment of principal and
interest to Senior Certificateholders (as defined herein), the level of
subordination may be limited, as specified in the Prospectus Supplement, the
Reserve Fund (as defined herein), if any, could be depleted, and payments
applied to the Senior Certificates (as defined herein) which are otherwise due
to the Subordinated Certificates may be less than the losses.
9. Risk of Losses Associated with Balloon and Call Loans. Certain of the
Mortgage Loans may constitute Balloon Loans and Call Loans (each, as defined
herein). Balloon Loans are originated with a stated maturity of less than the
period of time required to amortize the Balloon Loan principal based upon the
monthly payment amount. Consequently, upon the maturity of a Balloon Loan, the
Mortgagor will be required to make a Balloon Payment (as defined herein) that
will be significantly larger than the previous monthly payments. Call Loans have
a scheduled payment and term which fully amortizes principal. The terms of a
Call Loan permit the mortgagee to require the Mortgagor to pay the full
principal balance of the Mortgage Loan on a specified date before its scheduled
maturity date. If the mortgagee exercises the call option in a Call Loan, the
Mortgagor will be required to make a payment that will be significantly larger
than the previous monthly payments. The ability of such a Mortgagor to repay a
Balloon Loan at maturity or a Call Loan on the date a call option is exercised
frequently will depend on such Mortgagor's ability to refinance the Mortgage
Loan. The ability of a Mortgagor to refinance such a Mortgage Loan will be
affected by a number of factors, including the level of available mortgage rates
at the time, the value of the related Mortgaged Property, the Mortgagor's equity
in the related Mortgaged Property, the creditworthiness of the Mortgagor, the
tax laws and general economic conditions at the time.
Although a low interest rate environment may facilitate the refinancing of
a Balloon Payment, the receipt and reinvestment by Certificateholders of the
proceeds in such an environment may produce a lower return than that previously
received in respect of the related Mortgage Loan. Conversely, a high interest
rate environment may make it more difficult for the Mortgagor to accomplish a
refinancing and may result in delinquencies or defaults. Except as provided
below, none of the Depositor, the Sellers, the Master Servicer or the Trustee
will be obligated to provide funds to refinance any Mortgage Loan, including
Balloon Loans or Call Loans. However, CIT Consumer Finance may in certain
limited circumstances be required by law to provide such refinancing.
10. Risk of Losses Associated with Adjustable Rate Mortgage Loans.
Adjustable Rate Mortgage Loans (as defined herein) may be underwritten on the
basis of an assessment that Mortgagors will have the ability to make payments in
higher amounts after relatively short periods of time. In some instances, a
Mortgagor's income may not be sufficient to enable him or her to continue to
make his or her loan payments as such payments increase and thus the likelihood
of default will increase.
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11. Risk of Losses Associated with Bankruptcy of Mortgagors. General
economic conditions have an impact on the ability of Mortgagors to repay
Mortgage Loans. Loss of earnings, illness and other similar factors also may
lead to an increase in delinquencies and bankruptcy filings by Mortgagors. In
the event of personal bankruptcy of a Mortgagor, it is possible that a Trust
could experience a loss with respect to such Mortgagor's Mortgage Loan. In
conjunction with a Mortgagor's bankruptcy, a bankruptcy court may suspend or
reduce the payments of principal and interest to be paid with respect to such
Mortgage Loan or permanently reduce the principal balance of such Mortgage Loan,
thereby either delaying or permanently limiting the amount received by the Trust
with respect to such Mortgage Loan. Moreover, in the event a bankruptcy court
prevents the transfer of the related Mortgaged Property to a Trust, any
remaining balance on such Mortgage Loan may not be recoverable.
12. Delays in Liquidating Defaulted Mortgage Loans. Even if one assumes
that the Mortgaged Properties provide adequate security for the Mortgage Loans,
substantial delays could be encountered in connection with the liquidation of
defaulted Mortgage Loans resulting in corresponding delays in the receipt of
related proceeds by the Certificateholders. An action to foreclose on a
Mortgaged Property securing a Mortgage Loan is regulated by state statutes,
rules and judicial decisions and is subject to many of the delays and expenses
of other lawsuits if defenses or counterclaims are interposed, sometimes
requiring several years to complete. Furthermore, in some states, an action to
obtain a deficiency judgment against the Mortgagor is not permitted following a
nonjudicial sale of a Mortgaged Property. In the event of a default by a
Mortgagor, these restrictions, among other things, may impede the ability of the
Master Servicer to foreclose on or sell the Mortgaged Property or to obtain
liquidation proceeds (net of expenses) sufficient to repay all amounts due on
the related Mortgage Loan. The Master Servicer will be entitled to deduct from
Liquidation Proceeds (as defined herein) all expenses reasonably incurred in
attempting to recover amounts due on the related liquidated Mortgage Loan and
not yet repaid, including payments to prior lienholders, accrued Master
Servicing Fees (as defined herein), legal fees and costs of legal action, real
estate taxes, and maintenance and preservation expenses. In the event that the
Mortgaged Properties fail to provide adequate security for the related Mortgage
Loans and insufficient funds are available from any applicable credit
enhancement, Certificateholders could experience a loss on their investment.
Liquidation expenses with respect to defaulted Mortgage Loans do not vary
directly with the outstanding principal balance of the loan at the time of
default. Therefore, assuming that the Master Servicer takes the same steps in
realizing upon a defaulted Mortgage Loan having a small remaining principal
balance as it would in the case of a defaulted Mortgage Loan having a larger
principal balance, the amount realized after expenses of liquidation would be
less as a percentage of the outstanding principal balance of the smaller
principal balance Mortgage Loan than would be the case with a larger principal
balance loan. Because the average outstanding principal balances of the Mortgage
Loans which are home equity loans are small relative to the size of the loans in
a typical pool composed entirely of first mortgages, realizations net of
liquidation expenses on defaulted Mortgage Loans which are home equity loans may
also be smaller as a percentage of the principal amount of such home equity
loans than would be the case with a typical pool of first Mortgage Loans.
13. Risk of Losses Associated with Mortgaged Properties. No assurance can
be given that values of the Mortgaged Properties have remained or will remain at
their levels on the dates of origination of the related Mortgage Loans. If the
residential real estate market should experience an overall decline in property
values such that the outstanding principal balances of the Mortgage Loans (and
any additional financing by other lenders on the Mortgaged Properties) in a
particular Mortgage Pool become equal to or greater than the value of the
Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now experienced by CIT Consumer Finance or those now
generally experienced in the mortgage lending industry. In addition, adverse
economic conditions and other factors (which may or may not affect real property
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values) may affect the timely payment by Mortgagors of scheduled payments of
principal and interest on the Mortgage Loans and, accordingly, the actual rates
of delinquencies, foreclosures and losses with respect to any Mortgage Pool. To
the extent that such losses are not covered by subordination provisions or
alternative credit enhancement arrangements, such losses will be borne, at least
in part, by the holders of the Certificates of the related Series.
Certain of the Mortgaged Properties relating to Mortgage Loans may not be
owner occupied. It is possible that the rate of delinquencies, foreclosures and
losses on Mortgage Loans secured by nonowner occupied properties could be higher
than for loans secured by the primary residence of the Mortgagor.
Other factors affecting Mortgagors' ability to repay Mortgage Loans include
excessive building resulting in an oversupply of housing stock or a decrease in
employment reducing the demand for units in an area; federal, state or local
regulations and controls affecting rents; prices of goods and energy;
environmental restrictions; increasing labor and material costs; and the
relative attractiveness of the Mortgaged Properties. To the extent that such
losses are not covered by credit enhancements, such losses will be borne, at
least in part, by the Certificateholders of the related Series.
14. Litigation. Any material litigation pending against the Depositor, a
Seller or the Master Servicer will be specified in the related Prospectus
Supplement.
15. Geographic Concentration of Mortgaged Properties. Certain geographic
regions from time to time will experience weaker regional economic conditions
and housing markets than will other regions, and, consequently, will experience
higher rates of loss and delinquency on mortgage loans generally. The Mortgage
Loans underlying certain Series of Certificates may be concentrated in such
regions, and such concentrations may present risk considerations in addition to
those generally present for similar mortgage loan asset-backed securities
without such concentrations. Information with respect to geographic
concentration of Mortgaged Properties will be specified in the related
Prospectus Supplement.
16. Legal Considerations. Applicable state laws generally regulate interest
rates and other charges, require certain disclosures, and require licensing of
the Mortgage Loan originators, the Master Servicer and any Sub-Servicer (as
defined herein). In addition, most states have other laws, public policy and
general principles of equity relating to the protection of consumers, unfair and
deceptive practices and practices that may apply to the origination, servicing
and collection of the Mortgage Loans. Depending on the provisions of the
applicable law and the specific facts and circumstances involved, violations of
these laws, policies and principles may limit the ability of a Trust or of the
Master Servicer to collect all or part of the principal of or interest on the
Mortgage Loans, may entitle the Mortgagor to a refund of amounts previously paid
and, in addition, could subject a Trust and the Master Servicer to damages and
administrative sanctions. See "Certain Legal Aspects of The Mortgage Loans"
herein. Unless otherwise specified in the related Prospectus Supplement, neither
the related Trust nor the Depositor will obtain any licenses under any federal
or state consumer laws or regulations. The absence of such licenses may impede
the enforcement of certain rights or may give rise to certain defenses in
actions seeking enforcement of such rights which may prevent a Trust from
collecting amounts due under the Mortgage Loans.
The Mortgage Loans may also be subject to federal laws, including: (i) the
Federal Truth-in-Lending Act and Regulation Z promulgated thereunder and the
Real Estate Settlement Procedures Act and Regulation X promulgated thereunder,
which require certain disclosures to the Mortgagors regarding the terms of the
Mortgage Loans; (ii) the Equal Credit Opportunity Act and Regulation B
promulgated thereunder, which prohibit discrimination in the extension of credit
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and administration of loans on the basis of age, race, color, sex, religion,
marital status, national origin, receipt of public assistance or the exercise of
any right under the Consumer Credit Protection Act; (iii) the Fair Credit
Reporting Act, which regulates the use and reporting of information related to
the Mortgagor's credit experience, and (iv) the Fair Housing Act, which
prohibits discrimination on the basis of, among other things, familial status or
handicap.
The Mortgage Loans may be subject to the Home Ownership and Equity
Protection Act of 1994 (the "Home Ownership Act") which amended the Federal
Truth-in-Lending Act as it applies to mortgages subject to the Home Ownership
Act. The Home Ownership Act requires certain additional disclosures, specifies
the timing of such disclosures and limits or prohibits the inclusion of certain
provisions in mortgages subject to the Home Ownership Act. The Home Ownership
Act also provides that any purchaser or assignee of a mortgage covered by the
Home Ownership Act is subject to all of the claims and defenses which the
borrower could assert against the original lender. The maximum damages that may
be recovered by a borrower from an assignee in an action under the Home
Ownership Act are the remaining amount of indebtedness plus the total amount
paid by the borrower in connection with the mortgage loan. Any Trust for which
the Mortgage Assets (as defined herein) include Mortgage Loans subject to the
Home Ownership Act would be subject to all of the claims and defenses which the
Mortgagor could assert against the original lender. Any violation of the Home
Ownership Act which would result in such liability would be a breach of the
Seller's representations and warranties, and the Seller would be obligated to
cure, repurchase or, if permitted by the related Agreement, substitute another
Mortgage Loan for the Mortgage Loan in question.
Depending on the provisions of the applicable law and the specific facts
and circumstances involved, violations of these laws, policies and general
principles of equity may limit the ability of a Trust or of the Master Servicer
to collect all or part of the principal of or interest on the Mortgage Loans,
may entitle the Mortgagor to rescind the Mortgage Loan and the Mortgage or to
obtain a refund of amounts previously paid and, in addition, could subject a
Trust or the Master Servicer to damages and administrative sanctions. If the
Master Servicer is unable to collect all or part of the principal or interest on
the Mortgage Loans because of a violation of the aforementioned laws, public
policies or general principles of equity, then the Trust may delay payments to,
or be unable to repay all amounts owed to, Certificateholders. Furthermore,
depending upon whether damages and sanctions are assessed against the Master
Servicer such violations may materially impact the financial ability of CIT
Consumer Finance to continue to act as Master Servicer or the ability of CIT
Consumer Finance to repurchase or replace Mortgage Loans if such violation
breaches a representation or warranty contained in the related Agreement.
In addition, numerous other federal and state statutory provisions,
including the federal bankruptcy laws, the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act") and state debtor relief laws, may
also adversely affect the Master Servicer's ability to collect the principal of
or interest on the Mortgage Loans and also would affect the interests of the
Certificateholders in such Mortgage Loans if such laws result in the Mortgage
Loans being uncollectible. See "Certain Legal Aspects of the Mortgage Loans"
herein.
Generally, under the terms of the Relief Act or similar state legislation,
a Mortgagor who enters military service after the origination of the related
Mortgage Loan (including a Mortgagor who is a member of the National Guard or is
in reserve status at the time of the origination of the Mortgage Loan and is
later called to active duty) may not be charged interest (including fees and
charges) above an annual rate of 6% during the period of such Mortgagor's active
duty status, unless a court orders otherwise upon application of the lender. It
is possible that such action could have an effect, for an indeterminate period
of time, on the ability of the Master Servicer to collect full amounts of
interest on certain of the Mortgage Loans. In addition, the Relief Act imposes
limitations that would impair the ability of the Master Servicer to foreclose on
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an affected Mortgage Loan during the Mortgagor's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the inability to realize upon the Mortgaged
Property in a timely fashion.
Under environmental legislation and judicial decisions applicable in
various states, a secured party which takes a deed in lieu of foreclosure, or
acquires at a foreclosure sale a mortgaged property that, prior to foreclosure,
has been involved in decisions or actions which may lead to contamination of a
property, may be liable for the costs of cleaning up the purportedly
contaminated site. It is unclear whether such costs, which could be substantial,
would be imposed on a holder of a mortgage note (such as a Trust) which does not
directly or through its agents use the Mortgaged Properties in a manner causing
an environmental hazard. See "Certain Legal Aspects of The Mortgage Loans"
herein.
17. Liens and Certain Other Aspects of the Mortgage Loans. A variety of
factors may limit the ability of the Certificateholders to realize upon the
Mortgaged Properties securing the Mortgage Loans or may limit the amount
realized to less than the amount due. See "Certain Legal Aspects of the Mortgage
Loans" herein.
Because of the expense and administrative inconvenience involved, the
Seller and the Depositor will not deliver to the Trustee any assignments in
recordable form of the Mortgages. Consequently, in some states, if the
assignment is not recorded in the proper office, the assignment to the Trustee
may not be effective against creditors of the Seller or the Depositor or a
trustee in bankruptcy of the Seller or the Depositor. As a result, the Trust
would not be able to claim the Mortgaged Property as collateral for a Mortgage
Loan.
18. The Status of the Mortgage Loans in the Event of Bankruptcy of the
Depositor, CIT Consumer Finance or CITSF. In the event of the bankruptcy of the
Depositor, CIT Consumer Finance, CITSF or any affiliate thereof which originated
any Mortgage Loans, a trustee in bankruptcy of the Depositor, CIT Consumer
Finance, CITSF or such affiliate, or the creditors thereof could attempt to
convince the relevant court to recharacterize the transfer of the Mortgage Loans
to the related Trust as a borrowing by the Depositor, CIT Consumer Finance,
CITSF or such affiliate with the result, if such recharacterization were upheld,
that the Certificateholders would be deemed creditors of the Depositor, CIT
Consumer Finance, CITSF or such affiliate, secured by a pledge of the Mortgage
Loans. If the Mortgage Loans were deemed "sold" to the related Trust, the
Mortgage Loans would not be assets of the Depositor, CIT Consumer Finance, CITSF
or such affiliate and would not be available to their creditors. In the event
that an attempt to convince the relevant court to recharacterize the transfer of
the Mortgage Loans as a secured loan were successful, the Trustee, on behalf of
the holders of the Certificates, would have a secured claim against the relevant
entity but would be delayed or prohibited from exercising remedies with respect
to the Mortgage Loans or taking actions with respect to the relevant entity
absent court approval. In addition, other collateral might be substituted for
the Mortgage Loans, and collections on the Mortgage Loans or such other
collateral might be applied to make distributions of principal and interest on
the Certificates at different times than those required by the related
Agreement. Moreover, payment of interest which accrued after the commencement of
the bankruptcy or insolvency proceeding might be limited, and payment of the
"loan" could be accelerated, with holders of Certificates losing the right to
future interest distributions. Even if such an attempt were not successful, it
is possible that distributions on the Certificates would be subject to delays
while the claim was being resolved by a court.
19. ERISA Considerations. An investment in a class of Certificates of any
Series by Plans (as defined herein) may give rise to a prohibited transaction
under ERISA (as defined herein) Section 406 and be subject to tax under Code (as
defined herein) Section 4975 unless a statutory or administrative exemption is
available. Accordingly, fiduciaries of any employee benefit plan or other
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retirement arrangement should consult their counsel before purchasing any class
of Certificates. Certain classes of Certificates will not be eligible for
purchase by Plans. See "ERISA Considerations" herein and in the related
Prospectus Supplement.
20. Limitations, Reduction and Substitution of Credit Enhancement. Credit
enhancement may be provided with respect to one or more classes of Certificates
of a Series to cover certain types of losses on the underlying Mortgage Loans.
Credit enhancement may be provided by one or more forms, including, but not
limited to, subordination of one or more classes of Certificates of such Series,
letter of credit, financial guaranty insurance policy, mortgage pool insurance
policy, special hazard insurance policy, reserve fund, spread account, cash
collateral account, overcollateralization, cross collateralization or other type
of credit enhancement (each, a "Credit Enhancement" and the entity providing it,
a "Credit Enhancer"). The coverage of any Credit Enhancement may be limited or
have exclusions from coverage and may decline over time or under certain
circumstances, all as specified in the related Prospectus Supplement. See
"Credit Enhancement" herein.
21. Certificate Rating. It will be a condition to the issuance of a Series
of Certificates that each class be rated in the rating categories specified in
the related Prospectus Supplement by each Rating Agency (as defined herein)
identified in the related Prospectus Supplement. Any such rating would be based
on, among other things, the adequacy of the value of the Mortgage Loans and any
credit enhancement with respect to such Series. Such rating should not be deemed
a recommendation to purchase, hold or sell Certificates, inasmuch as it does not
address market price or suitability for a particular investor. Ratings on
mortgage pass-through certificates do not represent an assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. There is also no
assurance that any such rating will remain in effect for any given period of
time or may not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. In addition to being lowered or
withdrawn due to any erosion in the adequacy of the value of the Mortgage Loans,
such rating might also be lowered or withdrawn, among other reasons, because of
an adverse change in the financial or other condition of a Credit Enhancer or a
change in the rating of such a Credit Enhancer's long term debt. In the event
the rating is lowered or withdrawn, the liquidity of the related Certificates
may be adversely affected.
The rating of Certificates credit enhanced through external Credit
Enhancement such as a letter of credit, financial guaranty insurance policy or
mortgage pool insurance will depend primarily on the creditworthiness of the
Credit Enhancer. Any reduction in the rating assigned to the claims-paying
ability of the related Credit Enhancer below the rating initially given to the
Certificates would likely result in a reduction in the rating of the
Certificates. See "Ratings" herein and in the related Prospectus Supplement.
22. The Subsequent Mortgage Loans. The conveyance of additional Mortgage
Assets by the Depositor during the Funding Period (as defined herein), is
subject to the conditions described in the related Prospectus Supplement. If the
Depositor is unable to originate Mortgage Loans satisfying such conditions
during the Funding Period, the Depositor will have insufficient Mortgage Loans
to sell to the Trust, thereby resulting in prepayments of principal to
Certificateholders as described below.
Each additional Mortgage Asset must satisfy the eligibility criteria
specified in the related Prospectus Supplement and in the related Agreement at
the time of its addition. The Depositor or its affiliate (the seller of any
additional Mortgage Assets to the Trust) will certify that all such eligibility
criteria have been satisfied and CIT Consumer Finance or its affiliate (the
seller of any additional Mortgage Assets to the Depositor) will certify that all
conditions precedent to the sale of the additional Mortgage Assets to the Trust
have been satisfied. It is a condition to the sale of any additional Mortgage
Assets to the Trust that the Rating Agencies, after receiving prior notice of
the proposed transfer of additional Mortgage Assets to the Trust, have not
advised the Seller or the Trustee that the conveyance of such additional
Mortgage Assets will result in a qualification, downgrade, or withdrawal of its
then current rating of the Certificates. Following the transfer of additional
Mortgage Assets to the Pool the aggregate characteristics of the Mortgage Assets
then held in the Pool may vary from those of the Mortgage Loans originally
included therein.
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The ability of the Trust to invest in additional Mortgage Assets is largely
dependent upon whether CIT Consumer Finance or its affiliates are able to
originate or purchase Mortgage Loans that meet the requirements for transfer
from CIT Consumer Finance to the Depositor under the related Agreement. The
ability of CIT Consumer Finance or its affiliates to originate or purchase such
Mortgage Loans may be affected by a variety of social and economic factors.
Moreover, such factors may affect the ability of the Mortgagors thereunder to
perform their obligations thereunder which may cause Mortgage Loans originated
or purchased by CIT Consumer Finance or its affiliates to fail to meet the
requirements for transfer under the related Agreement. Economic factors include
interest rates, unemployment levels, the rate of inflation and consumer
perception of economic conditions generally. However, CIT Consumer Finance is
unable to determine and has no basis to predict whether or to what extent
economic or social factors will affect the performance by such Mortgagors and
the availability of additional Mortgage Loans.
23. Prepayment from the Pre-Funding Account. To the extent that the
Pre-Funded Amount has not been fully applied by the Trust to purchase additional
Mortgage Assets by the end of the Funding Period, the amount remaining on
deposit in the Pre-Funding Account will be payable as principal to
Certificateholders on the first Distribution Date following the end of the
Funding Period, or, if the end of the Funding Period is on a Distribution Date,
then on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to the
Certificateholders, such partial retirement of Certificates may shorten the
average life of the Certificates and may cause the Certificateholders to
experience a lower yield on the Certificates. In addition, any reinvestment risk
resulting from such partial retirement will be borne by the holders of such
Certificates.
24. Risk of Commingling. At any time that the requirements as specified
under "The Pooling and Servicing Agreement--Payments on Mortgage Assets;
Deposits to Certificate Account," are met, the Master Servicer may deposit
payments and collections received on or with respect to the Mortgage Loans in
the Certificate Account monthly on the Deposit Date (as defined herein). Until
the Master Servicer makes such a monthly deposit into the Certificate
Account,the Master Servicer may invest collections on the Mortgage Loans at its
own risk and for its own benefit and need not segregate the collections from its
own funds. If the Master Servicer were unable to remit such funds or if the
Master Servicer became insolvent, the holders of the Certificates could incur a
loss with respect to collections not deposited in the Certificate Account.
25. Book-Entry Registration. Issuance of the Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for which they
cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described in the
related Prospectus Supplement.
Transactions in Certificates will, in most cases, be able to be effected
only through The Depository Trust Company ("DTC"), Participants or Indirect
Participants (each, as defined herein) and certain banks or through Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in Europe. Since
a Certificateholder will not generally be able to obtain a physical security
under such systems, the ability of a Certificateholder to use effectively the
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Certificate as collateral for a loan from persons or entities that do not
participate in such systems, or otherwise to take actions in respect of such
Certificates, may be limited.
Certificateholders may experience delay in their receipt of distributions
of interest on and principal of the Certificates since distributions will be
forwarded by the Trustee to DTC and, in such a case, DTC will be required to
credit such distributions to the accounts of its Participants which thereafter
will be required to credit them to the accounts of the applicable class of
Certificateholders either directly or indirectly through Indirect Participants.
Unless and until Definitive Certificates (as defined herein) are issued, it
is anticipated that the only "Certificateholder" of the Book-Entry Certificates
(as defined herein) will be DTC or its nominee. Beneficial owners of the
Book-Entry Certificates will not be Certificateholders, as that term will be
used in the Agreement relating to such Series of Certificates. Beneficial owners
are only permitted to exercise the rights of Certificateholders indirectly
through Financial Intermediaries (as defined herein) and DTC. Monthly and annual
reports on the related Trust provided to DTC or its nominee, as the case may be,
as holder of record of the Book-Entry Certificates, may be made available to
beneficial owners upon request, in accordance with the rules, regulations and
procedures creating and affecting DTC, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates of such beneficial owners are
credited. See "Description of the Certificates -- Book-Entry Certificates"
herein.
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THE TRUSTS
The Trust for each Series will be held by the Trustee for the benefit of
the related Certificateholders. Each Trust will consist of one or more pools
(each, a "Mortgage Pool" or "Pool") of certain mortgage related assets (the
"Mortgage Assets") consisting of (i) mortgage loans (or participation or other
beneficial interests therein) secured by mortgages, deeds of trust or similar
security instruments (the "Mortgages") creating first or subordinate liens on
one- to four-family residential properties (the "Mortgage Loans") and, if
specified in the related Prospectus Supplement, (ii) Private Mortgage-Backed
Securities, together with payments in respect of such Mortgage Assets, and (iii)
certain other accounts, obligations or agreements, in each case as specified in
the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment from the assets of the related Trust or
other assets held for the benefit of the holders of such Certificates (the
"Certificateholders") as specified in the related Prospectus Supplement and will
not be entitled to payments in respect of the assets of any other trust
established by the Depositor, a Seller or any of their affiliates.
The Mortgage Assets will be acquired by the Depositor either directly or
indirectly from CIT Consumer Finance and/or other affiliates of the Depositor
(each, a "Seller") and conveyed by the Depositor to the related Trust Fund.
Mortgage Loans acquired by the Depositor will have been originated or purchased
by CIT Consumer Finance or its affiliates in accordance with the underwriting
criteria specified below under "Mortgage Loan Program--Underwriting Standards"
or as otherwise described in a related Prospectus Supplement. Certain Mortgage
Loans originated in the State of Minnesota will have been originated or
purchased by CITSF in accordance with the same underwriting criteria. Certain
Mortgage Loans originated in the State of New York will have been originated or
purchased by The CIT Group/Consumer Finance, Inc. (NY), a New York corporation
and a wholly owned subsidiary of CIT, in accordance with the same underwriting
criteria. Mortgage Loans may have been acquired by CIT Consumer Finance or an
affiliate thereof in the open market or in privately negotiated transactions,
including transactions with entities affiliated with CIT Consumer Finance.
The following is a brief description of the Mortgage Assets expected to be
included in the Trusts. If provided in the related Prospectus Supplement, the
original principal amount of a Series of Certificates may exceed the principal
balance of the Mortgage Assets initially being delivered to the Trustee with
respect to such Series. Cash in an amount equal to such difference (the
"Pre-Funded Amount") will be deposited into a separate trust account (the
"Pre-Funding Account") maintained with the Trustee. The Pre-Funded Amount will
not exceed 25% of the Certificate Balance (as defined herein). During the period
(the "Funding Period") set forth in the related Prospectus Supplement, amounts
on deposit in the Pre-Funding Account may be used to purchase additional
Mortgage Assets for the related Trust. In addition, if so provided in the
related prospectus Supplement, certain additional amounts in respect of interest
will be deposited into the Pre-Funding Account or in a separate trust account.
The related Prospectus Supplement will specify the conditions which must be
satisfied prior to the transfer of any such additional Mortgage Assets,
including the requisite characteristics of such Mortgage Assets. Any amounts
remaining in the Pre-Funding Account at the end of such Funding Period will be
distributed as a principal prepayment to the holders of the related Series of
Certificates at the time and in the manner set forth in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement, the
specified period for the acquisition by a Trust of additional Mortgage Assets
will not exceed three months from the date such Trust is established.
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If specific information with respect to the Mortgage Assets is not known at
the time the related Series of Certificates initially is offered, more general
information of the nature described below will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Securities and Exchange
Commission (the "Commission") within fifteen days after the initial issuance of
such Certificates (the "Detailed Description"). A copy of the Agreement with
respect to each Series of Certificates will be attached to the Current Report on
Form 8-K and will be available for inspection at the corporate trust office of
the Trustee specified in the related Prospectus Supplement. A schedule of the
Mortgage Assets relating to such Series will be attached to the Agreement
delivered to the Trustee upon delivery of the Certificates.
THE MORTGAGE LOANS-GENERAL
For purposes hereof, the real property that secures repayment of the
Mortgage Loans is referred to collectively as "Mortgaged Properties." The
Mortgaged Properties may be located in any one of the fifty states or the
District of Columbia. Unless otherwise specified in the related Prospectus
Supplement, all of the Mortgage Loans will be loans that are not insured or
guaranteed by any governmental agency. Mortgage Loans with certain Combined
Loan-to-Value Ratios and/or certain principal balances may be covered wholly or
partially by primary mortgage guaranty insurance policies (each, a "Primary
Mortgage Insurance Policy") to the extent provided in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans will generally be covered by standard hazard insurance policies
(each, a "Standard Hazard Insurance Policy"). The existence, extent and duration
of any such coverage will be described in the related Prospectus Supplement.
The Mortgage Loans in a Mortgage Pool will have monthly payments due on
various days of each month. The payment terms of the Mortgage Loans to be
included in a Trust will be described in the related Prospectus Supplement and
may include any of the following features or combination thereof or other
features described in the related Prospectus Supplement:
(a) Interest may be payable at a fixed rate ("Fixed Rate" and a
Mortgage Loan subject thereto is a "Fixed Rate Mortgage Loan"), a rate
adjustable from time to time in relation to an index which will be
specified in the related Prospectus Supplement, a rate that is fixed for a
period of time or under certain circumstances and is followed by an
adjustable rate, a rate that otherwise varies from time to time, or a rate
that is convertible from an adjustable rate to a fixed rate (each of the
foregoing, an "Adjustable Rate" and a Mortgage Loan subject thereto is an
"Adjustable Rate Mortgage Loan"). Changes to an Adjustable Rate may be
subject to periodic limitations, maximum rates, minimum rates or a
combination of such limitations. Accrued interest may be deferred and added
to the principal of a loan for such periods and under such circumstances as
may be specified in the related Prospectus Supplement. The loan agreement
or promissory note (the "Mortgage Note") in respect of a Mortgage Loan may
provide for the payment of interest at a rate lower than the interest rate
(the "Mortgage Rate") specified in such Mortgage Note for a period of time
or for the life of the Mortgage Loan, and the amount of any difference may
be contributed from funds supplied by the seller of the related Mortgaged
Property or another source or may be treated as accrued interest added to
the principal of the Mortgage Loan.
(b) Principal may be payable on a declining balance basis to fully
amortize the Mortgage Loan over its term, may be calculated on the basis of
an assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from the
Mortgage Rate or may not be amortized during all or a portion of the
original term. Payment of all or a substantial portion of the principal of
certain Mortgage Loans ("Balloon Loans") may
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be due on maturity ("Balloon Payments"). Mortgage Loans may permit the
mortgagee to require the Mortgagor to pay the full principal balance of the
loan on a specified date the ("Call Date") prior to the maturity of the
Loan ("Call Loans"). Principal may include interest that has been deferred
and added to the principal balance of the Mortgage Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Mortgage Loan, may increase over a specified period of time (a
"Graduated Payment Loan") or may change from period to period. The terms of
a Mortgage Loan may include limits on periodic increases or decreases in
the amount of monthly payments and may include maximum or minimum amounts
of monthly payments. Graduated Payment Loans may require the monthly
payments of principal and interest to increase for a specified period,
provide for deferred payment of a portion of the interest due monthly
during such period, and recoup the deferred interest through negative
amortization whereby the difference between the scheduled payment of
interest and the amount of interest actually accrued is added monthly to
the outstanding principal balance. Other Mortgage Loans sometimes referred
to as "growing equity" mortgage loans may provide for periodic scheduled
payment increases for a specified period with the full amount of such
increases being applied to reduce principal.
(d) The Mortgage Loans generally may be prepaid in whole or in part at
any time. If specified in the related Prospectus Supplement, some
prepayments of the full principal balance of a loan may be subject to a
prepayment penalty or premium. Such prepayment penalty or premium will be
applicable to certain prepayments of principal made during a specified
period of time during the life of the Mortgage Loan. The Mortgage Note in
respect of any Mortgage Loan subject to a prepayment penalty or premium
generally will set forth the terms of prepayment. Prepayments on the
Mortgage Loans as a result of a refinancing by the Seller or Seller's
transferee generally will not be subject to a prepayment penalty or
premium. The Mortgage Loans generally include "due on sale" clauses which
permit the mortgagee to demand payment of the entire Mortgage Loan in
connection with the sale or certain transfers of the related Mortgaged
Property. Other Mortgage Loans may be assumable by persons meeting the then
applicable underwriting standards for such Mortgage Loan.
A Trust may contain certain Mortgage Loans ("Buydown Loans") that include
provisions whereby a third party partially subsidizes the monthly payments of
the Mortgagors on such Buydown Loans during the early years of such Buydown
Loans, the difference to be made up from a fund (a "Buydown Fund") contributed
by such third party at the time of origination of the Buydown Loan. A Buydown
Fund will be in an amount equal either to the discounted value or full aggregate
amount of future payment subsidies. The underlying assumption of buydown plans
is that the income of the Mortgagor will increase during the buydown period as a
result of normal increases in compensation and inflation, so that the Mortgagor
will be able to meet the full mortgage payments at the end of the buydown
period. To the extent that this assumption as to increased income is not
fulfilled, the possibility of defaults on Buydown Loans is increased. The
related Prospectus Supplement will contain information with respect to any
Buydown Loan concerning limitations on the interest rate paid by the Mortgagor
initially, on annual increases in the interest rate and on the length of the
buydown period.
Unless otherwise specified in the Prospectus Supplement, the Mortgage Loans
will be Simple Interest Loans, Scheduled Accrual Loans and Precomputed Loans.
"Simple Interest Loans" provide that interest is charged to the Mortgagor
at the applicable Mortgage Rate (as defined herein) on the outstanding principal
balance of the related Mortgage Note (as defined herein) and calculated based on
the actual days elapsed from receipt of the Mortgagor's last payment to receipt
of the Mortgagor's most current payment. Such interest is deducted from the
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Mortgagor's payment amount and the remainder, if any, of the payment is applied
as a reduction to the outstanding principal balance of such Mortgage Note.
Although the Mortgagor is required to remit equal monthly payments on a
specified monthly payment date that would reduce the outstanding principal
balance of such Mortgage Note to zero at such Mortgage Note's maturity date,
payments that are made by the Mortgagor after the due date therefor (assuming
all other payments are made on their specified monthly payment dates) would
cause the outstanding principal balance of such Mortgage Note not to be reduced
to zero. In such a case, the Mortgagor would be required to make an additional
principal payment at the maturity date for such Mortgage Note. On the other
hand, if a Mortgagor makes a payment before the due date therefor or pays an
amount greater than the scheduled payment amount (assuming all other payments
are made on their specified monthly payment dates), the reduction in the
outstanding principal balance of such Mortgage Note would occur over a shorter
period of time than it would have occurred had it been based on the original
amortization schedule of such Mortgage Note.
"Scheduled Accrual Loans" provide that interest is charged to the Mortgagor
at the applicable Mortgage Rate (as defined herein) on the outstanding principal
balance of the related Mortgage Note and calculated as though each payment is
made on the scheduled payment date. Scheduled monthly payments made by the
Mortgagors on the Scheduled Accrual Loans either earlier or later than the
scheduled due dates thereof will not affect the amortization schedule or the
relative application of such payments to principal and interest. Interest on
such Scheduled Accrual Loans will be calculated based on a 360-day year of
twelve 30-day months. When the Mortgagor remits a payment greater than the
amount currently due on the Mortgage Note, the additional payment is generally
applied to the next scheduled installment unless otherwise specified by the
Mortgagor. This application will not affect the amortization schedule or the
relative application of such payment to principal and interest. No more than two
future installments can be paid ahead in such manner. If payments are received
which would result in the Mortgage Note being paid ahead more than two months or
if the Mortgagor specifically instructs that any additional payment be applied
to principal, then this partial prepayment of principal is generally effective
as of the most recently paid installment and the relative application of
principal and interest of future payments will be adjusted to reflect the
partial principal prepayment. When a full prepayment of principal is made on a
Scheduled Accrual Loan during a month, the Mortgagor is charged interest only on
the days of the month actually elapsed up to the date of such prepayment, at a
daily interest rate that is applied to the principal amount of the loan so
prepaid.
A "Precomputed Loan" provides for the payment by the related Mortgagor of a
specified total amount of payments, payable in monthly installments on each due
date, which total represents the principal and precomputed interest in an amount
calculated at the stated Mortgage Rate for the term of the Mortgage Loan on the
declining principal balance on the assumption that all scheduled payments are
made when due. Any partial prepayment received in excess of the current amount
due will be applied against future installments and will have no effect on the
amortization of principal and interest. If a Mortgage Loan prepays in full, the
Mortgagor will receive a refund of unearned interest calculated on an actuarial
basis, which calculation may vary from state to state depending on state
regulations.
The Prospectus Supplement for each Series of Certificates will specify with
respect to all Mortgage Loans expected to be included in the related Pool as of
the date specified in the related Prospectus Supplement, among other things, (i)
the expected aggregate outstanding principal balance and the expected average
outstanding principal balance of the Mortgage Loans in such Pool, (ii) the
largest expected principal balance and the smallest expected principal balance
of any of the Mortgage Loans, (iii) the types of Mortgaged Properties (e.g.,
detached residential one- to four-family properties, individual units in
condominiums, vacation and second homes, or other real property) and/or other
assets securing the Mortgage Loans, (iv) the original terms to maturity of the
Mortgage Loans, (v) the expected weighted average term to maturity of the
Mortgage Loans as of the date specified in such Prospectus Supplement and the
expected range of the terms of maturity, (vi) the earliest origination date and
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latest maturity date of any of the Mortgage Loans, (vii) the expected aggregate
principal balance of Mortgage Loans having Combined Loan-to-Value Ratios (as
defined herein) in specified ranges, (viii) in the case of Fixed Rate Mortgage
Loans, the expected weighted average Mortgage Rate and ranges of Mortgage Rates
borne by the Mortgage Loans (as the case may be), (ix) in the case of Adjustable
Rate Mortgage Loans, the expected weighted average of the Adjustable Rates as of
the date set forth in such Prospectus Supplement, any periodic or lifetime rate
caps or floors, maximum permitted Adjustable Rates, if any, and the Index (as
defined herein) upon which the Adjustable Rate is based, (x) the expected
aggregate outstanding principal balance, if any, of Buydown Loans and Graduated
Payment Loans, as of the date set forth in the Prospectus Supplement, (xi) the
expected aggregate outstanding principal balance, if any, of Call Loans and
Balloon Loans, (xii) the amount of any Certificate Guaranty Insurance Policy,
Mortgage Pool Insurance Policy, Special Hazard Insurance Policy or Bankruptcy
Bond (each, as defined herein) to be maintained with respect to such Pool,
(xiii) the amount, if any, and terms of any other Credit Enhancement to be
provided with respect to all or any Mortgage Loans or the Pool, (xiv) the
priority of the Mortgages (first, second, third or fourth) and (xv) the expected
geographic location of the Mortgaged Properties. If specific information
respecting the Mortgage Loans is not known to the Depositor at the time the
related Certificates are initially offered, more general information of the
nature described above will be provided in the Detailed Description.
The "Combined Loan-to-Value Ratio" of a Mortgage Loan at any given time is
the ratio, expressed as a percentage, determined by dividing (x) the sum of the
original principal balance of the Mortgage Loan (less the amount, if any, for
the items specified in the related Prospectus Supplement) plus the principal
balance of any loan or loans secured by a senior lien on the Mortgaged Property
at the time of origination of the Mortgage Loan, by (y) the value of the related
Mortgaged Property, based upon the appraisal or other valuation made at the time
of origination of the Mortgage Loan (see "The Home Equity Lending Program --
Underwriting Standards").
The Depositor will cause the Mortgage Loans comprising each Mortgage Pool
to be assigned to the Trustee named in the related Prospectus Supplement for the
benefit of the Certificateholders of the related Series. The Master Servicer
named in the related Prospectus Supplement will service the Mortgage Loans,
either directly or through other mortgage servicing institutions (each, a
"Sub-Servicer"), pursuant to a Pooling and Servicing Agreement (each, an
"Agreement"), and will receive a fee for such services. See "The Home Equity
Lending Program" and "The Pooling and Servicing Agreement" herein.
Unless otherwise specified in the related Prospectus Supplement, CITSF will
be appointed as a Sub-Servicer for all of the Mortgage Loans in each Mortgage
Pool, and as a Sub-Servicer, will perform all or most of the servicing
responsibilities described under "The Pooling and Servicing Agreement" herein
and "Servicing of Mortgage Loans" in the related Prospectus Supplement. All
references in this Prospectus and any related Prospectus Supplement to the
"Master Servicer" or to CIT Consumer Finance in a servicing capacity shall
include CIT Consumer Finance acting through any Sub-Servicer, including CITSF,
or any agent. With respect to Mortgage Loans serviced by the Master Servicer
through a Sub-Servicer, the Master Servicer will remain liable for its servicing
obligations under the related Agreement as if the Master Servicer alone were
servicing such Mortgage Loans.
The Mortgage Loans generally will be evidenced by Mortgage Notes and
secured by Mortgages. The "Mortgage Documents" for each Mortgage Loan are (i)
the original Mortgage Note (except in the circumstances discussed under "The
Pooling and Servicing Agreement--Assignment of Mortgage Assets"), (ii) the
Mortgage with evidence of recording indicated thereon (except for any Mortgage
not returned from the public recording office or which has been lost, in which
case the Depositor will, unless otherwise specified in the related Prospectus
Supplement, deliver or cause to be delivered to the custodian a copy of such
Mortgage together with a certificate that the original of such Mortgage was
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delivered to such recording office), (iii) any intervening assignments of the
Mortgages (iv) any title insurance policies with respect to the Mortgages, (v)
any assumption or modification agreement and (vi) such other security documents
as may be specified in the related Prospectus Supplement or the related
Agreement. Some or all of the Mortgage Documents may, as specified in the
related Prospectus Supplement, be held for the benefit of the Trust by a
custodian appointed pursuant to the related Agreement or a separate custodial
agreement among the Depositor, the Trustee and such custodian. If specified in
the related Prospectus Supplement, CIT Consumer Finance will be appointed as
custodian of the Mortgage Documents pursuant to the related Agreement and, in
such capacity, will retain possession of the Mortgage Documents.
Unless otherwise specified in the related Prospectus Supplement, the
Depositor will have no obligations with respect to a Series of Certificates. See
"The Pooling and Servicing Agreement--Assignment of Mortgage Assets" herein.
The obligations of the Master Servicer with respect to the Mortgage Loans will
consist principally of its contractual servicing obligations under the related
Agreement, including its obligation to enforce the obligations of the
Sub-Servicers or Sellers, or both, as more fully described herein under "The
Home Equity Lending Program--Representations by Sellers; Repurchases" and its
obligation to make certain cash advances in the event of delinquencies in
payments on or with respect to the Mortgage Loans in the amounts described
herein under "Description of the Certificates--Advances" herein. The obligations
of the Master Servicer to make advances may be subject to limitations, to the
extent provided herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans will be secured by Mortgages creating first or subordinate liens
on one- to four-family residential properties (each such property, a "Mortgaged
Property"). If so specified in the related Prospectus Supplement, the Mortgage
Loans may include loans or participations therein secured by Mortgages on
condominium units in condominium buildings together with such condominium units'
appurtenant interests in the common elements of the condominium buildings. If
specified in the related Prospectus Supplement, the Mortgage Assets of the
related Trust may include mortgage participation certificates evidencing
interests in Mortgage Loans. Unless otherwise specified in the related
Prospectus Supplement, such Mortgage Loans will be loans that are not insured or
guaranteed by any governmental agency.
The Mortgaged Properties relating to Mortgage Loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units, individual
units in planned unit developments and certain other dwelling units. Such
Mortgaged Properties may include vacation and second homes, investment
properties and leasehold interests. In the case of leasehold interests, the term
of the leasehold will exceed the scheduled maturity of the Mortgage Loan by at
least five years, unless otherwise specified in the related Prospectus
Supplement.
PRIVATE MORTGAGE-BACKED SECURITIES
"Private Mortgage-Backed Securities" may consist of (i) mortgage
pass-through certificates or participation certificates evidencing an undivided
interest in a pool of mortgage loans, (ii) collateralized mortgage obligations
secured by mortgage loans, together with payments in respect of such Mortgage
Assets, and (iii) certain other accounts, obligations or agreements, in each
case as specified in the related Prospectus Supplement. Private Mortgage-Backed
Securities may include stripped mortgage-backed securities representing an
undivided interest in all or a part of either the principal distributions (but
not the interest distributions) or the interest distributions (but not the
principal distributions) or in some specified portion of the principal and
interest distributions (but not all of such distributions) on certain mortgage
loans. Private Mortgage-Backed Securities will have been issued pursuant to a
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pooling and servicing agreement, an indenture or similar agreement (a "PMBS
Agreement"). Unless otherwise specified in the related Prospectus Supplement,
the seller/servicer of the underlying mortgage loans will have entered into the
PMBS Agreement with the trustee under such PMBS Agreement (the "PMBS Trustee").
The PMBS Trustee or its agent, or a custodian, will possess the mortgage loans
underlying such Private Mortgage-Backed Security. Mortgage loans underlying a
Private Mortgage-Backed Security will be serviced by a servicer (the "PMBS
Servicer") directly or by one or more sub-servicers who may be subject to the
supervision of the PMBS Servicer.
The issuer of the Private Mortgage-Backed Securities (the "PMBS Issuer")
will be a financial institution or other entity engaged generally in the
business of mortgage lending, a public agency or instrumentality of a state,
local or federal government, or a limited purpose corporation organized for the
purpose of, among other things, establishing trusts and acquiring and selling
housing loans to such trusts and selling beneficial interests in such trusts. If
specified in the related Prospectus Supplement, the PMBS Issuer may be an
affiliate of the Depositor. The obligations of the PMBS Issuer will generally be
limited to certain representations and warranties with respect to the assets
conveyed by it to the related Trust. Unless otherwise specified in the related
Prospectus Supplement, the PMBS Issuer will not have guaranteed any of the
assets conveyed to the related Trust or any of the Private Mortgage-Backed
Securities issued under the PMBS Agreement. Additionally, although the
individual mortgage loans underlying the Private Mortgage-Backed Securities may
be guaranteed by the United States or an agency or instrumentality thereof, they
need not be, and the Private Mortgage-Backed Securities themselves will not be
so insured or guaranteed.
Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the PMBS Trustee or the PMBS Servicer directly to the Trustee as
registered owner of such Private Mortgage-Backed Securities, unless otherwise
specified in the related Prospectus Supplement. The PMBS Issuer or the PMBS
Servicer may have the right to repurchase assets underlying the Private
Mortgage-Backed Securities after a certain date or under other circumstances
specified in the related Prospectus Supplement.
The mortgage loans underlying the Private Mortgage-Backed Securities may
consist of Fixed Rate, level payment, fully amortizing Mortgage Loans or
Graduated Payment Loans, Buydown Loans, Adjustable Rate Mortgage Loans or
Mortgage Loans having balloon or other special payment features. Such Mortgage
Loans may be secured by single family property or multifamily property or by a
condominium or by an assignment of the proprietary lease or occupancy agreement
relating to a specific dwelling within a Cooperative and the related shares
issued by such Cooperative.
The related Prospectus Supplement for a Series for which the Trust includes
Private Mortgage-Backed Securities will specify, with respect to any Private
Mortgage-Backed Securities owned by the related Trust, among other things, (i)
the approximate aggregate principal amount and type of any Private
Mortgage-Backed Securities to be included in the Trust for such Series; (ii)
certain characteristics of the mortgage loans that comprise the underlying
assets for the Private Mortgage-Backed Securities including: (A) the payment
features of such mortgage loans, (B) the approximate aggregate principal amount,
if known, of such mortgage loans that are insured or guaranteed by a
governmental entity, (C) the servicing fee or range of servicing fees with
respect to such mortgage loans and (D) the minimum and maximum stated maturities
of such mortgage loans at origination; (iii) the maximum original term-to-stated
maturity of the Private Mortgage-Backed Securities; (iv) the weighted average
term-to-stated maturity of the Private Mortgage-Backed Securities; (v) the
pass-through or certificate rate of the Private Mortgage-Backed Securities; (vi)
the weighted average pass-through or certificate rate of the Private
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Mortgage-Backed Securities; (vii) the PMBS Issuer, the PMBS Servicer (if other
than the PMBS Issuer) and the PMBS Trustee for such Private Mortgage-Backed
Securities; (viii) certain characteristics of credit support, if any, such as
reserve funds, insurance policies, surety bonds, letters of credit or
guarantees, relating to the mortgage loans that comprise the underlying assets
for the Private Mortgage-Backed Securities or to such Private Mortgage-Backed
Securities themselves; (ix) the terms on which the mortgage loans that comprise
the underlying assets for such Private Mortgage-Backed Securities may, or are
required to, be purchased prior to their stated maturity or the stated maturity
of the Private Mortgage-Backed Securities; and (x) the terms on which substitute
mortgage loans may be delivered to replace those initially deposited with the
PMBS Trustee.
SUBSTITUTION OF MORTGAGE ASSETS
Substitution of Mortgage Assets will be permitted in the event of breaches
of representations and warranties with respect to any Mortgage Asset or in the
event the documentation with respect to any Mortgage Asset is determined by the
Trustee to be incomplete. The period during which such substitution will be
permitted generally and the criteria for substituting for a Mortgage Asset will
be indicated in the related Prospectus Supplement. The related Prospectus
Supplement will describe any other conditions upon which Mortgage Assets may be
substituted for Mortgage Assets initially included in the Trust.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Mortgage Assets from the applicable
Sellers and to pay expenses of the offering. The applicable Sellers will apply
the proceeds for general corporate purposes, including the origination and
acquisition of residential mortgage loans and other loans. The Depositor expects
to sell Certificates in Series from time to time, but the timing and amount of
offerings of Certificates will depend on a number of factors, including the
volume of Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
THE CIT GROUP HOLDINGS, INC.
CIT, a Delaware corporation, is a successor to a company founded in St.
Louis, Missouri on February 11, 1908. It has its principal executive offices at
1211 Avenue of the Americas, New York, New York 10036, and its telephone number
is (212) 536-1950. CIT, operating directly or through its subsidiaries primarily
in the United States, engages in financial services activities through a
nationwide distribution network. CIT provides financing primarily on a secured
basis to commercial borrowers, ranging from middle-market to larger companies,
and to a lesser extent to consumers. While these secured lending activities
reduce the risk of losses from extending credit, CIT's results of operations can
also be affected by other factors, including general economic conditions,
competitive conditions, the level and volatility of interest rates,
concentrations of credit risk, and government regulation and supervision. CIT
does not finance the development or construction of commercial real estate. CIT
has eight strategic business units which offer commercial and consumer financing
and factoring products and services to clients.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995, from CBC Holding
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(Delaware) Inc. (formerly known as MHC Holdings (Delaware) Inc.) ("CBC
Holding"), a wholly owned subsidiary of Chemical Banking Corporation ("CBC").
The Chase Manhattan Corporation ("Chase") acquired CBC Holding as part of the
merger between Chase and CBC on March 31, 1996 and continues to own the
remaining twenty percent (20%) common stock interest in CIT through CBC Holding.
DKB has a five-year option, expiring December 15, 2000, to purchase the
remaining twenty percent (20%) common stock interest from CBC and its parent.
In accordance with a stockholders agreement among DKB, Chase, as direct
successor to CBC, and CIT, dated as of December 29, 1989, as amended by an
Amendment to Stockholders' Agreement, dated December 15, 1995 (the "Stockholders
Agreement"), one nominee of the Board of Directors is designated by Chase. The
Stockholders Agreement also contains restrictions with respect to the transfer
of the stock of CIT to third parties.
CIT is subject to the informational requirements of The Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information can be
inspected and copied at the offices of the Commission. Certain of CIT's
securities are listed on the New York Stock Exchange and reports and other
information concerning CIT can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. See "Available
Information" herein.
Unless CIT has issued a Limited Guarantee (as defined herein) with respect
to any Series of Certificates, CIT will have no obligations or liabilities with
respect to any Series of Certificates.
THE CIT GROUP SECURITIZATION CORPORATION III,
THE DEPOSITOR
The CIT Group Securitization Corporation III (the "Depositor") was
incorporated in the State of Delaware on April 8, 1996 and is a wholly-owned,
limited purpose finance subsidiary of CIT. The Depositor maintains its principal
office at 650 CIT Drive, Livingston, New Jersey 07039. Its telephone number is
(201) 535-3512.
As described herein and in the related Prospectus Supplement, the
obligations, if any, of the Depositor with respect to any Series of Certificates
are limited. The Depositor will have no ongoing servicing obligations or
responsibilities with respect to any Mortgage Assets. CIT Consumer Finance is an
affiliate of the Depositor. Unless otherwise specified in the Prospectus
Supplement, the Depositor will acquire the Mortgage Assets in a privately
negotiated transaction from CIT Consumer Finance.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Depositor and CIT Consumer Finance,
will be obligated with respect to any Series of Certificates. Accordingly, the
Depositor has determined that financial statements of CIT Consumer Finance and
its affiliates, including the Depositor, are not material to the offering of any
Series of Certificates. If, with respect to a Series of Certificates any such
financial statements are material, they will be included or incorporated by
reference in the related Prospectus Supplement.
THE CIT GROUP/CONSUMER FINANCE, INC., SELLER AND MASTER SERVICER
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans and any other applicable Mortgage Assets will be purchased by the
Depositor, either directly or through affiliates, from CIT Consumer Finance or
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its affiliates, as Seller. Unless otherwise specified in the related Prospectus
Supplement, the Mortgage Loans so acquired by the Depositor will have been
originated or purchased by CIT Consumer Finance or its affiliates in accordance
with the underwriting criteria specified below under "Underwriting Standards."
Unless otherwise specified in the related Prospectus Supplement, CIT
Consumer Finance will be appointed pursuant to the related Agreement as the
master servicer for each Trust (the "Master Servicer").
CIT Consumer Finance is a Delaware corporation and a wholly-owned
subsidiary of CIT. It has its principal executive office at 650 CIT Drive,
Livingston, New Jersey 07039, and its telephone number is (201) 740-5000.
CIT Consumer Finance offers loans to consumers secured by first and
subordinate mortgages on residential real estate (including condominiums).
Business is generated through several distribution channels across the country.
CIT Consumer Finance originates loans directly to consumers, using both its own
employees and mortgage brokers. CIT Consumer Finance also purchases loans from
mortgage bankers and other mortgage lenders, often referred to as
"correspondents." CIT Consumer Finance purchases loans individually and in
larger batches, including bulk portfolio purchases.
CIT Consumer Finance is the master servicer for the loans held in its
portfolio. CITSF performs many servicing functions for CIT Consumer Finance as
its Sub-Servicer from CITSF's Oklahoma City, Oklahoma Asset Service Center as
described below. CIT Consumer Finance has a network of offices nationwide which
handle business origination, credit, administration and management. In addition,
CIT Consumer Finance maintains its quality control department and its original
document retention and processing facility at its Marlton, New Jersey office.
THE CIT GROUP/SALES FINANCING, INC., SUB-SERVICER
Unless otherwise specified in the related Prospectus Supplement, CITSF will
be appointed as a Sub-Servicer for all of the Mortgage Loans in each Mortgage
Pool, and as a Sub-Servicer, will perform all or most of the servicing
responsibilities described under "The Pooling and Servicing Agreement". All
references in this Prospectus and any related Prospectus Supplement to the
"Master Servicer" or to CIT Consumer Finance in a servicing capacity shall
include CIT Consumer Finance acting through any Sub-Servicer, including CITSF,
or any agent.
Unless otherwise specified in the related Prospectus Supplement, CITSF
originated the Mortgage Loans, if any, for which the Mortgaged Properties are
located in the State of Minnesota and will sell such Mortgage Loans to CIT
Consumer Finance for resale to the Depositor and then to a Trust.
CITSF is a Delaware corporation and a wholly-owned subsidiary of CIT. It
has its principal executive office at 650 CIT Drive, Livingston, New Jersey
07039 and its telephone number is (201) 740-5000.
CITSF originates, purchases and services retail installment sales
contracts, direct loans and mortgages for manufactured housing, recreational
vehicles, recreational marine and other consumer goods throughout the United
States and services mortgage loans originated and purchased by CIT Consumer
Finance and other affiliates of CIT. CITSF has a centralized asset service
facility (the "Asset Service Center") in Oklahoma City, Oklahoma. CITSF
services, on behalf of other owners, retail installment contracts, direct loans
and mortgage loans that were not originated by CITSF. These servicing
arrangements may be made with
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respect to the portfolios of other lending institutions or finance companies,
the portfolios of governmental agencies or instrumentalities, or portfolios that
have been sold by CITSF or others to securitization trusts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for retail
installment contracts, direct loans and mortgages. In order to service these
transactions, CITSF uses sub-servicers, outside collectors and field remarketers
located throughout the United States.
THE HOME EQUITY LENDING PROGRAM
Overview
The mortgage lending activities of CIT Consumer Finance consist primarily
of originating, purchasing and selling Mortgage Loans secured by Mortgages
creating first or subordinate liens on Mortgaged Properties (each such Mortgage
Loan, a "Home Equity Loan"). Such Mortgaged Properties include condominiums,
single-family detached homes, single-family attached homes and planned unit
developments. It has been the policy of CIT Consumer Finance generally not to
make Home Equity Loans secured by cooperative residences or other categories of
properties that management believes have demonstrated relatively high levels of
risk. CIT Consumer Finance makes the majority of its Home Equity Loans to
borrowers who own a single-family detached home. CIT Consumer Finance approves
Home Equity Loans to enable its borrowers to refinance an existing mortgage (in
many cases replacing the existing loan with a loan with a larger principal
balance), purchase a home, pay for education, pay for home improvements and
consolidate debt, among other purposes.
Initially, CIT Consumer Finance originated or purchased the majority of its
Home Equity Loans with original terms of up to 180 months. Starting in 1994, CIT
Consumer Finance began more frequently to originate and purchase Home Equity
Loans with original terms of up to 360 months. CIT Consumer Finance believes
that the longer term, and correspondingly lower monthly payments, of these Home
Equity Loans are attractive to customers who might otherwise refinance an
existing loan or obtain a new loan from a bank or other traditional long term
lender. CIT Consumer Finance believes that its rapid turnaround time from
application to funding a Home Equity Loan also makes CIT Consumer Finance more
competitive with more traditional lenders.
CIT Consumer Finance's area offices are located throughout the country.
Three regional offices supervise the operations of a group of states. All Home
Equity Loan area offices have a manager who reports to senior management. The
supervision of all of CIT Consumer Finance's underwriting and administrative
functions is conducted from the Livingston, New Jersey headquarters.
The following sections describe the origination, underwriting and servicing
procedures which CIT Consumer Finance follows in its Home Equity Loan program.
Home Equity Loan Origination
The entire application process for Home Equity Loans is generally conducted
either in person or by phone, facsimile, direct mail response, or the internet.
Each loan application is entered into an automated application processing system
which obtains a credit bureau report and calculates CIT Consumer Finance's
proprietary internal credit score. CIT Consumer Finance attempts to process the
applications as quickly as possible. An underwriter is responsible for
completing, evaluating and processing the loan application of a prospective
borrower based on information obtained from the borrower, some of which is
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verified with third parties. Depending on the characteristics of the requested
loan, loan applications will be reviewed by an underwriter in the area office,
regional office, or the Livingston, New Jersey headquarters.
Underwriters are trained to structure loans that meet the applicant's
needs, while satisfying CIT Consumer Finance's underwriting criteria. If an
applicant does not meet the underwriting criteria under the applicable loan
program, the underwriter may decline the application or suggest a loan on
different terms.
CIT Consumer Finance originates business directly to the consumer through a
direct marketing campaign and through mortgage brokers.
Direct Marketing
Utilizing a staff of marketing professionals, CIT Consumer Finance markets
directly to the consumer through print ads, direct mail, and other media.
Prospective applicants submit an application by mailing in a loan application
included in the advertisement or by calling a toll free telephone number and
giving the information to a representative. Applicants who apply by mail will
also supply additional required information by telephone after CIT Consumer
Finance has received the application. Once a completed application is received,
a preliminary approval may be given within twenty four hours.
Broker Business
CIT Consumer Finance also originates Home Equity Loans based upon
applications received from independent mortgage brokers. CIT Consumer Finance
will directly underwrite and fund these broker loans. A nationwide network of
CIT Consumer Finance sales executives solicits broker business. These sales
executives are responsible for the development and maintenance of the broker
relationships and the coordination between the mortgage broker and CIT Consumer
Finance's offices. Mortgage brokers participating in this program must be
approved by CIT Consumer Finance by satisfying its established requirements
pertaining to experience, financial stability, and licensing. After the mortgage
broker is approved, CIT Consumer Finance conducts regular periodic reviews of
the relationship and the broker's performance. In these reviews, CIT Consumer
Finance will examine the performance of loans originated by the broker and
sometimes other factors, including maintenance of required regulatory licenses.
Based upon the review, CIT Consumer Finance may adjust or terminate its
relationship with the broker.
CIT also purchases loans from mortgage bankers and other mortgage lenders,
as described below.
Correspondent Lending
CIT Consumer Finance also purchases Mortgage Loans through its
correspondent lending program. CIT Consumer Finance will purchase loans on an
individual basis from correspondents based upon applications which CIT Consumer
Finance has previously approved. CIT Consumer Finance will also purchase from
correspondents groups of loans submitted in small batches referred to as
"bulks." CIT Consumer Finance establishes certain requirements which every
correspondent must meet. These requirements concern the correspondent's
experience, financial stability, and licensing. CIT Consumer Finance has
agreements with the correspondents governing the nature of the relationship.
Generally, all loans acquired through these correspondents conform to the
underwriting criteria used by CIT Consumer Finance for its direct originations.
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Institutional Bulk Portfolios
CIT Consumer Finance also purchases portfolios of Home Equity Loans from
other lenders ("Institutional Bulk Portfolios") which originated these loans
under their own underwriting criteria. Institutional Bulk Portfolios are
reviewed at the Livingston, New Jersey headquarters by senior level management,
who formulate a bid to purchase the portfolio. CIT Consumer Finance performs a
financial analysis on the portfolio as a whole. Depending upon the size of the
portfolio, CIT Consumer Finance performs a due diligence review on either all
the loans in the portfolio or on a statistical sample of the loans in the
portfolio. The due diligence review includes legal and credit file reviews and
recertification of property values. When purchasing Institutional Bulk
Portfolios, CIT Consumer Finance may rely upon representations and warranties
made by the seller to cover certain risks relating to origination, documentation
and other matters which might have come to the attention of CIT Consumer Finance
during the due diligence review process. CIT Consumer Finance also adjusts the
price it offers for an Institutional Bulk Portfolio based upon CIT Consumer
Finance's perception of the risk inherent in the portfolio as a whole.
When CIT Consumer Finance purchases an Institutional Bulk Portfolio, the
origination, underwriting, valuation and documentation standards are those of
the originating lender. The description of CIT Consumer Finance's origination,
underwriting and valuation practices set forth herein may not apply to a
transaction from an Institutional Bulk Portfolio. Each Institutional Bulk
Portfolio is different and the loans in its pool have different characteristics.
When CIT Consumer Finance reviews an Institutional Bulk Portfolio, it may find
certain risks inherent in the portfolio which are different from the risks which
CIT Consumer Finance accepts for direct originations. In purchasing an
Institutional Bulk Portfolio, CIT Consumer Finance may adjust its offering price
or require representations and warranties from the seller to cover any such
risks in origination, underwriting, valuation or documentation for loans in the
portfolio.
Underwriting Policies and Procedures
Overview
The following is a brief description of certain of the underwriting
policies and procedures used by CIT Consumer Finance to underwrite Home Equity
Loans. Underwriting standards are applied by a lender to evaluate the borrower's
credit standing and repayment ability, and the value and adequacy of the
mortgaged property as collateral for the Home Equity Loan.
CIT Consumer Finance uses a combination of credit scoring and judgmental
credit analysis in making its underwriting decisions. As part of its
underwriting process, CIT Consumer Finance will adjust the interest rate it
charges on each Home Equity Loan to reflect CIT Consumer Finance's evaluation of
the relative risk associated with a particular loan applicant. This practice is
known as "risk-based" pricing.
Initially, CIT Consumer Finance's credit criteria focused on high credit
quality loans. These loans generally had shorter terms and were mostly second
mortgages. In 1994, CIT Consumer Finance introduced risk-based pricing and
changed its credit criteria to include certain specialized loan programs such as
high loan to value, no income verification and purchase money loan programs.
Under these specialized programs, underwriters can approve applicants with
certain positive attributes (such as a high credit score, good credit bureau
history, or characteristics of stability) with low equity in the property,
without income verification, or if the purpose of the loan is to purchase real
estate. These factors might have disqualified the applicant under CIT Consumer
Finance's pre-1994 loan programs. CIT Consumer Finance believes that the
positive attributes of these applicants overcome the other less favorable
indicators that may be present.
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In 1995, CIT Consumer Finance added loan programs accommodating applicants
with a record of more serious credit problems. Under the terms of these
programs, the underwriter places greater emphasis on the applicant's equity in a
home as well as other positive factors which are intended to compensate for the
previous blemished credit record.
CIT Consumer Finance may in the future change the underwriting policies and
procedures described herein.
Description of Underwriting Process
CIT Consumer Finance's underwriting process occurs at the local office,
regional office, and the home office. Generally, loan applications for direct,
broker, and correspondent business are input into an automated application
processing system which allows CIT Consumer Finance to track its underwriting
systematically and to achieve more uniform underwriting decisions. The system
displays both an internal proprietary credit score and in some cases the credit
bureau score ("FICO"). The internal credit score which CIT Consumer Finance
utilizes is a proprietary model that was purchased from Fair, Isaac Company. CIT
Consumer Finance's internal score is calculated by evaluating the
characteristics of each individual loan application. The characteristics
include: (1) occupancy status; (2) length of time at the residence; (3) length
of time at the present employer; (4) debt to income ratio; (5) bank account
references; (6) credit bureau information; and (7) loan-to-value ratio.
The underwriter evaluates the application and loan package based upon both
the applicable credit scores and other characteristics of the application. The
underwriter may approve or deny the application even if the credit score does
not indicate that approval or denial is warranted if, in the opinion of the
underwriter, other factors exist which would support an approval or denial of
the application. The extent of an underwriter's credit authority will be based
in part on certain minimum internal credit scores and the FICO score.
The Chief Credit Officer of CIT Consumer Finance assigns credit authority
to individual underwriters based upon their experience and understanding of CIT
Consumer Finance's underwriting policies and procedures. There is a hierarchy of
credit authority in the organization beginning at the office level, progressing
to the regional office and then to headquarters. If an underwriter believes that
an approval is warranted but the underwriter does not have the authority to
issue a loan approval, the underwriter recommends the loan application to the
next higher credit authority. This more senior underwriter may have the
appropriate level of authority to approve the loan. This process insures that an
underwriter with the appropriate level of experience is reviewing the loan
application. CIT Consumer Finance's Credit Department management monitors the
performance of its underwriters.
CIT Consumer Finance has produced and consistently updates a written
policies and procedures manual detailing the loan underwriting process and
procedures as well as the loan programs.
Generally, loan applications are subject to a credit investigation. A
prospective borrower applying for a home equity loan directly from CIT Consumer
Finance is required to fill out or to submit information to complete an
application. The application is designed to provide to the underwriter pertinent
credit information with respect to the applicant's liabilities, income, credit
history, employment history and personal information. In addition, with respect
to each purchase money mortgage, each applicant may be required to have adequate
cash to pay the down payment and closing costs.
Credit reports, whether or not received as part of the original loan
application, are generally obtained and reviewed for all lines of business. For
direct originations, correspondent lending and broker business, CIT Consumer
Finance requires a credit report on each applicant from a credit reporting
company. The credit report typically contains information relating to such
matters as credit history with local and
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national merchants and lenders, installment debt payments and any record of
defaults, bankruptcy, repossession, suits or judgments. All adverse information
obtained relative to legal actions, payment records and character may be
required to be satisfactorily explained and acceptable to the underwriter. The
applicant may also be required to provide a letter explaining all late payments
on mortgage and consumer (i.e., non-mortgage) debt noted on the credit report.
CIT Consumer Finance generally obtains other evidence of employment to
verify information provided by the borrower. CIT Consumer Finance sometimes
obtains a written verification from the borrower's employer. This verification
usually reports the length of employment with that organization, the borrower's
current salary and whether it is expected that the borrower will continue such
employment in the future. Instead of the written verification from the
borrower's employer, CIT Consumer Finance may instead obtain from the applicant
recent tax returns or other tax forms (e.g., W-2 forms) or current pay stubs or
may telephone the applicant's employer to verify an applicant's employment
status. If the employer will not verify employment history over the telephone,
CIT Consumer Finance may rely solely on the other information provided by the
applicant. If a prospective borrower is self-employed, the borrower may be
required to submit copies of the two most recent signed tax returns.
The borrower may also be required to authorize verification of deposits at
financial institutions where the borrower has demand or savings accounts.
As part of the loan approval, the underwriter will assign a credit risk
rating or program code to the proposed loan. The underwriter may also add
written conditions required in order to fund the loan.
Correspondent Business Underwriting
For correspondent business, the loan package or application is reviewed,
the information input into an automated application processing system, a credit
report obtained (except where not permitted by law), and the property appraisal
reviewed by a collateral risk manager. After this process is complete, the
underwriter will review the loan application and other materials. If the
underwriter approves the loan, the underwriter will do so based upon the
criteria applicable to the program under which the loan is approved. In the loan
approval, the underwriter will add written conditions required in order to fund
the loan. CIT Consumer Finance will purchase the loan only if the borrower and
correspondent meet these written conditions.
Loans purchased from a correspondent on a bulk basis are reviewed in some
cases at the correspondent's office. CIT Consumer Finance's underwriter will
approve the loan package based on the information in the file and subject to the
confirmation of this information. When CIT Consumer Finance receives the loan
documentation from the correspondent for funding, CIT Consumer Finance generally
obtains a credit report, verifies employment and determines that all other
conditions to funding have been met.
Institutional Bulk Portfolio Underwriting
In the case of an Institutional Bulk Portfolio, CIT Consumer Finance may
underwrite the entire portfolio by taking a representative statistical sample of
loans from the portfolio to review to determine if these loans would, at the
time of their origination, have met the underwriting criteria of CIT Consumer
Finance. Based upon the sampling, the senior underwriter may approve the
purchase of the entire portfolio without underwriting each loan in the pool.
Since CIT Consumer Finance does not actually review the documents in each loan
file, it cannot determine if all loan files have the same characteristics as the
sample. Similarly, CIT Consumer Finance cannot determine if all its underwriting
criteria have been met for each loan in the Institutional Bulk Portfolio since
it has not reviewed the files on every loan. If, during the credit review of an
Institutional Bulk Portfolio, CIT Consumer Finance determines that the loans do
not conform to its underwriting standards, CIT Consumer Finance may purchase the
Institutional Bulk Portfolio at a price which CIT Consumer Finance believes will
reflect the increased risk in the portfolio.
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Valuation Underwriting - General
In determining the adequacy of the mortgaged property as collateral,
Combined Loan-to-Value Ratio guidelines are established depending on the type of
loan. Except as otherwise set forth in the related Prospectus Supplement, the
maximum Combined Loan-to-Value Ratio is determined by the loan program and
credit risk rating. Property values for properties appraised at over $400,000
(or $500,000 in California, New Jersey, Connecticut and the New York
metropolitan area) are adjusted downward, generally by 20% of the appraised
amount in excess of $400,000 (or $500,000 in California, New Jersey, Connecticut
and the New York metropolitan area). The Combined Loan-to-Value Ratio is
generally lower for self-employed individuals, and is generally reduced in
respect of properties other than single family detached owner occupied
properties. Generally, CIT Consumer Finance confirms the value of the property
to be mortgaged by appraisals performed by independent appraisers or other
valuation methods.
Valuation Methods And Standards By Different Lines Of Business
For loans originated by CIT Consumer Finance including loans referred by
third party brokers, appraisals may be obtained from outside service companies
approved by CIT Consumer Finance. Standards for this approval may vary by line
of business. Such appraisals are based upon an appraiser's inspection of the
subject property and verification that such property is in acceptable condition.
Following each appraisal, the appraiser prepares a report which includes a
market data analysis based on recent sales of comparable homes in the area and,
when deemed appropriate, a replacement cost analysis based on the current cost
of constructing a similar home. All appraisals are required to conform to FNMA
or FHLMC appraisal standards then in effect. Every independent appraisal is
reviewed by a CIT Consumer Finance underwriter before the loan is funded. CIT
Consumer Finance's collateral risk managers also perform desktop reviews on
selected appraisals. If CIT Consumer Finance determines that these valuations
are inaccurate, it may reevaluate the appraiser or in some cases require a
recourse party to repurchase the transaction.
CIT Consumer Finance requires a full appraisal for certain transactions
based upon its underwriting guidelines which take into account the loan amount,
the loan to value ratio and the type of property. Based upon the underwriting
guidelines, CIT Consumer Finance may not require a full appraisal for a loan.
Instead, CIT Consumer Finance may accept a "drive-by" valuation, which is made
by an appraiser who may not inspect the interior of the building. Some drive-by
valuations may only involve a visual observation of the exterior characteristics
and condition of the property and the neighborhood. Since the appraiser has not
inspected the interior dimensions, improvements and conditions of the property,
the drive-by method produces only a general approximation of value for the
particular property. If there is an appraisal which was completed within six
months of the loan application, in certain cases CIT Consumer Finance may rely
on the prior appraisal.
Application packages received from correspondents for pre-approval will
have the property appraisal reviewed by a CIT Consumer Finance collateral risk
manager prior to funding. Each appraisal for correspondent loans purchased in
bulk from correspondents is reviewed by a CIT Consumer Finance collateral risk
manager after purchasing the loan. Each property appraisal is reviewed by a
collateral risk manager and if there is any variance outside of the tolerance
shown in the correspondent agreement, the loan may be presented to the
correspondent for repurchase.
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CIT Consumer Finance will review the accuracy of appraised values of all or
a portion of the mortgaged properties securing the loans in an Institutional
Bulk Portfolio. This verification may include obtaining review or drive-by
appraisals or relying on an external vendor's automated appraised value
database. In addition, CIT Consumer Finance's collateral risk managers will
generally conduct a desktop review of the appraisals from the statistical
sampling of loan files selected for due diligence review.
Underwriting - Other Issues
CIT Consumer Finance has several procedures which it uses to verify the
applicant's outstanding balance and payment history on any senior mortgage,
including a telephone call to the senior mortgage lender. If the senior mortgage
lender does not verify this information by telephone, CIT Consumer Finance may
rely upon information provided by the applicant, such as a recent statement from
the senior lender and evidence of payment, such as canceled checks, or upon
information provided by national credit bureaus.
Once all applicable employment, credit and property information is
received, CIT Consumer Finance makes a determination as to whether the
prospective borrower has sufficient monthly income available to meet the
borrower's (i) monthly obligations on the proposed mortgage and any other
mortgage debt on the mortgaged property and other expenses related to the
mortgaged property (such as property taxes and hazard insurance), (ii) monthly
housing expenses and other financial obligations and (iii) monthly living
expenses. Specialized underwriting programs described below may also apply to
prospective borrowers.
Currently, CIT Consumer Finance generally accepts debt service ratios with
respect to fixed rate mortgage loans and adjustable rate mortgage loans of up to
45% of the proposed borrower's estimated monthly gross income, generally based
upon historically consistent income over a two year period. For adjustable rate
mortgage loans, CIT Consumer Finance computes the borrower's monthly obligation
on the proposed mortgage loan using the initial mortgage amount and the maximum
mortgage rate permitted after one year. CIT Consumer Finance makes exceptions to
the underwriting criteria described above. For example, for certain types of
loans CIT Consumer Finance may approve debt service ratios up to 55% with
generally lower maximum Combined Loan-to-Value Ratios.
CIT Consumer Finance also offers different loan programs with different
underwriting standards, particularly with respect to the level of loan
documentation and the mortgagor's income and credit history, in appropriate
cases where factors such as low Combined Loan-to-Value Ratios or other favorable
credit factors exist.
Certain of the types of loans in CIT Consumer Finance's portfolio have been
originated under new programs and may involve additional credit uncertainties
not present in traditional types of loans. For example, certain of the mortgage
loans may provide for escalating or variable payments by the mortgagor. CIT
Consumer Finance may underwrite such a loan on the basis of a judgment that the
mortgagor can make the initial monthly payments. In some instances, however, a
mortgagor may not have sufficient income to continue to make the required loan
payments as such payments increase. CIT Consumer Finance may also underwrite
such a loan in reliance on Combined Loan-to-Value Ratios or other favorable
credit factors.
CIT Consumer Finance will not purchase or close a Home Equity Loan prior to
receiving evidence that the property securing the loan is insured against
casualty loss. CIT Consumer Finance requires evidence of fire and extended
coverage casualty insurance on the home in an amount at least equal to the
principal balance of the related mortgage loan plus, in the case of a mortgage
loan secured by a subordinate priority lien on the mortgaged property, the
amount of each mortgage secured by senior priority liens, or, if required by
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law, the replacement cost of the property if such replacement cost is less than
the mortgages. In addition, at the closing, the borrower is required to sign a
letter addressed to his insurance carrier naming CIT Consumer Finance as a loss
payee under the insurance policy, which CIT Consumer Finance will thereafter
mail to the insurer. Accordingly, CIT Consumer Finance normally will not be
named as a loss payee with respect to the property securing the Home Equity Loan
at the time the loan is made or purchased and insurance proceeds might not be
available to cover any loss to CIT Consumer Finance.
After closing, CIT Consumer Finance monitors the continued existence of
casualty insurance on the mortgaged properties. However, CIT Consumer Finance
does not currently "force place" casualty insurance coverage if CIT Consumer
Finance discovers that casualty insurance coverage has lapsed. Instead, CIT
Consumer Finance requests that its borrowers reinstate any lapsed insurance as
required by the terms of the mortgage documentation.
CIT Consumer Finance requires title insurance on all of its mortgage loans
secured by liens on real property if the principal balance is over $100,000, if
the Combined Loan-to-Value Ratio is greater than 85% on a first lien position,
if the borrower is a trust, if there is a transfer of title, if closing is
conducted pursuant to a power of attorney, if the home was not subject to an
existing mortgage or, if the first lien holder is a not an institutional lender.
In cases where CIT Consumer Finance does not require title insurance, it instead
obtains a last owner title search which is ordered to verify that the borrower
is the last owner of record of the mortgaged property.
The actual maximum amount that CIT Consumer Finance will lend is determined
by an evaluation of the applicant's ability to repay the loan, the value of the
applicant's equity in the real estate, and the ratio of such equity to the real
estate's appraised value.
Specialized Underwriting Programs
CIT Consumer Finance also originates or purchases mortgage loans pursuant
to alternative sets of underwriting criteria under its No Income Verification
program, No Income Qualify program and Lite Documentation program. Under these
programs, relatively more emphasis is placed on property underwriting than on
credit underwriting and certain credit underwriting documentation concerning
income and employment verification therefore is waived. Mortgage loans
underwritten under these programs are limited to self-employed borrowers with
credit histories that demonstrate an established ability to repay indebtedness
in a timely fashion. Self-employed borrowers with poorer credit histories are
considered with lower Combined Loan-to-Value Ratios. Permitted maximum Combined
Loan-to-Value Ratios under these programs are more restrictive than under CIT
Consumer Finance's standard underwriting criteria. Mortgage loans underwritten
pursuant to these programs generally must be secured by owner-occupied primary
residences. These programs are designed to facilitate the loan approval process
and thereby improve CIT Consumer Finance's competitive position among other
mortgage loan originators. Under the No Income Verification program, the
customer does not provide income documentation. Under the No Income Qualify
program income documentation is provided by the customer but the documentation
does not support the stated income reported by the prospective borrower to CIT
Consumer Finance. The stated income must appear reasonable and realistic to the
underwriter compared to the customer's assets and credit history. The Lite
Documentation program stresses the verification of the borrower's cash flow by
reviewing bank statements.
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CIT Consumer Finance may modify or eliminate these specialized underwriting
programs from time to time. CIT Consumer Finance may also introduce new,
additional specialized underwriting programs in the future, which may modify the
underwriting guidelines set forth herein. If changes in underwriting guidelines
are applicable to a material portion of the Mortgage Pool, these changes will be
described in the related Prospectus Supplement.
QUALITY CONTROL
CIT Consumer Finance implements quality control programs in three areas: 1)
lending and documentation standards, 2) re-certification of appraisals, and 3)
re-verification of employment.
CIT Consumer Finance applies the lending and documentation standards
quality control program to its own originations and to purchased loans. The
quality control procedures are designed to assure that a consistent level of
quality applies to all loans in the portfolio, regardless of source. CIT
Consumer Finance may vary quality control procedures based upon the business
source for the loan. CIT Consumer Finance also performs general quality control
review through a central quality control effort. These procedures include a
review of a sample of originated and purchased loans from each of CIT Consumer
Finance's production offices. Every office is audited monthly and loans
originated during prior months are reviewed for compliance with lending and
documentation standards. In addition, loans originated by CIT Consumer Finance
are audited at random on a monthly basis for compliance with lending and
documentation standards.
In order to confirm the validity of appraisals obtained at the time loans
are made, reappraisals are obtained for the property securing some of such
loans. In this manner, CIT Consumer Finance monitors the quality of the original
appraiser and the appraisal process.
In addition, CIT Consumer Finance re-verifies employment of its borrowers.
These re-verifications are conducted monthly on some of the loans in the
portfolio to detect fraud and to confirm the accuracy of the information
provided in the application.
Refinancing Policy
Where CIT Consumer Finance believes that borrowers having existing loans
with it are likely to refinance such loans due to interest rate changes or other
reasons, CIT Consumer Finance actively attempts to retain such borrowers through
solicitations of such borrowers to refinance with CIT Consumer Finance. Such
refinancings may generate fee income for CIT Consumer Finance. CIT Consumer
Finance may refinance Mortgage Loans held by a Trust. Since the solicited
borrowers may refinance their existing loans in any case, CIT Consumer Finance
believes that this practice will be unlikely to affect the prepayment experience
of the Home Equity Loans in a material respect. CIT Consumer Finance also
solicits its borrowers who are in good standing to apply for additional loans
secured by the same property, consistent with its origination standards. As a
result, CIT Consumer Finance may, now or in the future, hold a loan (or may sell
a loan to another trust) which is also secured by a Mortgaged Property securing
a Mortgage Loan held by a Trust.
Servicing and Collections
CIT Consumer Finance, as Master Servicer, will be required under the
related Agreement to service the Mortgage Loans and other Mortgage Assets
underlying a particular Series of Certificates with the same degree of skill and
care that it exercises with respect to all comparable loans and assets that it
services for its own account. In the servicing of its own portfolio, CIT
Consumer Finance currently delegates most of the servicing duties described
below to CITSF, as Sub-Servicer, pursuant to a servicing
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agreement between CIT Consumer Finance and CITSF. Accordingly, references herein
to actions taken by CIT Consumer Finance as Master Servicer refer in most cases
to actions taken by CITSF as Sub-Servicer. CIT Consumer Finance typically
performs the quality control reviews, oversees the recording of the mortgages,
follows through on insurance documentation and maintains the Mortgage Loan
files. CITSF is generally responsible for billing, collecting, foreclosure
procedures and liquidations. Servicing by CITSF also includes customer service
and remittance handling.
Borrowers are sent monthly statements which specify the payment due. Due
dates for payments occur throughout the calendar month. Generally if payment is
not received within 10 working days after the due date, an initial collection
effort by telephone is made in an attempt to bring the delinquent account
current. CIT Consumer Finance continues to monitor and evaluate the various
stages of delinquency on a continuous basis.
Delinquent accounts are contacted by collection staff by various methods
including, but not limited to, telephone calls and collection letters. When an
account is 30 days past due, the collection supervisor analyzes the account to
determine the appropriate course of action. If a borrower is experiencing
difficulty in making payments on time, CIT Consumer Finance may modify the
payment schedule consistent with CIT Consumer Finance's procedures.
The course of action taken by CIT Consumer Finance is dependent upon a
number of factors including the borrower's payment history, the amount of equity
in the related mortgaged property and the reason for the current inability to
make timely payments.
When a loan is 60 days past due, the related mortgaged property may be
reappraised and the results evaluated by CIT Consumer Finance to determine a
course of action. Foreclosure laws and practices and the rights of the owner in
default vary from state to state, but generally foreclosure procedures may be
initiated if: (i) the loan is 90 days or more delinquent; (ii) a notice of
default on a senior lien is received or (iii) the loan is otherwise in default.
During the foreclosure process, any expenses incurred by CIT Consumer Finance
may be added to the amount owed by the borrower, to the extent permitted by
applicable law. Upon completion of the foreclosure, the property is sold to an
outside bidder, or passes to the mortgagee in which case CIT Consumer Finance
proceeds to liquidate the asset.
CIT Consumer Finance may not foreclose on the property securing a Junior
Lien Loan unless it forecloses subject to the related senior mortgages. In such
cases, CIT Consumer Finance may pay the amount due on the senior mortgages to
the senior mortgagees, if CIT Consumer Finance considers it to be advisable to
do so. In the event that foreclosure proceedings have been instituted on a
senior mortgage prior to the initiation of CIT Consumer Finance's foreclosure
action, CIT Consumer Finance will either satisfy such mortgage at the time of
the foreclosure sale or take other appropriate action. In servicing Junior Lien
Loans in its portfolio, it has been the practice of CIT Consumer Finance to
satisfy each such senior mortgage at or prior to the foreclosure sale only to
the extent that it determines any amount so paid will be recoverable from future
payments and collections on such Junior Lien Loans or otherwise. In servicing
Junior Lien Loans, it is generally the practice of CIT Consumer Finance to
advance funds to keep the senior lien current in the event the mortgagor is in
default thereunder until such time as CIT Consumer Finance satisfies the senior
lien by sale of the mortgaged property, but only to the extent that it
determines such advances will be recoverable from future payments and
collections on that Junior Lien or otherwise. Such practice may not be followed
by CIT Consumer Finance in servicing loans more junior than second Mortgages or
may be modified at any time.
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CIT Consumer Finance's servicing and charge-off policies and collection
practices may change over time in accordance with CIT Consumer Finance's
business judgment, changes in its serviced loan portfolio and applicable laws
and regulations, as well as other items.
Regulations and practices regarding the liquidation of properties (e.g.,
foreclosure) and the rights of the borrower in default vary greatly from state
to state. CIT Consumer Finance will generally initiate a foreclosure only if the
delinquency or other breach will not be cured. If, after determining that
purchasing a property securing a mortgage loan will minimize the loss associated
with such defaulted loan, CIT Consumer Finance may bid at the foreclosure sale
for such property or accept a deed in lieu of foreclosure.
DESCRIPTION OF THE CERTIFICATES
The Home Equity Loan Asset Backed Certificates (the "Certificates") will be
issuable in series (each, a "Series") and each Series of Certificates will be
issued pursuant to an Agreement (see "The Pooling and Servicing AgreementThe
Pooling and Servicing Agreement" herein), dated as of the first day of the month
of issuance of such Series of Certificates or such other date as is specified in
the related Prospectus Supplement (the "Cut-off Date"), among the Depositor, the
Master Servicer, the applicable Sellers and the Trustee for the benefit of the
holders of the Certificates of such Series. The provisions of each Agreement
will vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust. A form of an Agreement is an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries describe certain provisions that may appear in each Agreement. The
Prospectus Supplement for a Series of Certificates will describe any provision
of the Agreement relating to such Series that materially differs from, or is in
addition to, the description thereof contained in this Prospectus. The following
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Agreement for each
Series of Certificates and the related Prospectus Supplement. The Depositor will
provide a copy of the Agreement (without exhibits) relating to any Series
without charge upon written request of a holder of record of a Certificate of
such Series addressed to the Depositor at 650 CIT Drive, Livingston, New Jersey
07039.
General
The Certificates of each Series will not represent an interest in or
obligation of the Depositor, CIT Consumer Finance, CITSF, CIT or any of their
respective affiliates, except as set forth herein and in the related Prospectus
Supplement. Neither the certificates nor the underlying mortgage loans will be
insured or guaranteed by the Depositor, CIT Consumer Finance, CITSF, CIT, or any
of their affiliates except as set forth herein and in the related Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement, the Certificates
of each Series will be issued in either fully registered or book-entry form in
the authorized denominations specified in the related Prospectus Supplement,
will evidence specified beneficial ownership interests in certain trusts (each,
a "Trust Fund" or "Trust") created pursuant to the related Agreement and will
not be entitled to payments in respect of the assets included in any other Trust
established by the Depositor. The Mortgage Loans will not be insured or
guaranteed by any governmental entity or other person, unless otherwise
specified in the related Prospectus Supplement. Each Trust will consist of, to
the extent provided in the related Agreement, (i) the Mortgage Assets that from
time to time are subject to the related Agreement (exclusive of any amounts
specified in the related Prospectus Supplement (the "Retained Interest")); (ii)
such assets as from time to time are required to be deposited in the related
Certificate Account (as defined herein) or other fund or account which, pursuant
to the related Agreement, constitutes part of a Trust; (iii) properties that
secured Mortgage Loans and that are acquired on behalf of the
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Certificateholders by foreclosure or deed in lieu of foreclosure or comparable
procedure ("REO Property"); (iv) any Primary Mortgage Insurance Policies and any
other insurance policies or other forms of credit enhancement required to be
maintained pursuant to the related Agreement; and (v) such other property
(including amounts on deposit in a Pre-Funding Account) as may be specified in
the related Prospectus Supplement. If specified in the related Prospectus
Supplement, a Trust may also include one or more of the following: reinvestment
income on payments received on the Mortgage Assets, a Reserve Fund, a
Certificate Guaranty Insurance Policy, a Mortgage Pool Insurance Policy, a
Special Hazard Insurance Policy, a Bankruptcy Bond, one or more spread accounts,
cash collateral accounts and/or other accounts, letters of credit, surety bonds,
financial guarantee insurance policies, third party guarantees (including
guarantees by CIT, its affiliates, or an unaffiliated third party, any of which
may be limited in nature), interest rate swaps, caps, floors or other derivative
products, or similar instruments or other agreements.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the Mortgage Assets in the related Trust. A class of Certificates
may be divided into two or more sub-classes, as specified in the related
Prospectus Supplement. A Series of Certificates may include one or more classes
that are senior in right to payment to one or more other classes of Certificates
of such Series (See "Credit Enhancement--Subordination" herein). Certain Series
or classes of Certificates may be covered by insurance policies, surety bonds or
other forms of credit enhancement, in each case as described herein and in the
related Prospectus Supplement. One or more classes of Certificates of a Series
may be entitled to receive distributions of principal, interest or any
combination thereof. Distributions on one or more classes of a Series of
Certificates may be made prior to one or more other classes of Certificates of
such Series, after the occurrence of specified events, in accordance with a
schedule or formula, on the basis of collections from designated portions of the
Mortgage Assets in the related Trust, or on a different basis, or one or more
classes of a Series of Certificates may be required to absorb one or more types
of loses prior to one or more other classes of Certificates of such Series, in
each case as specified in the related Prospectus Supplement. The timing and
amounts of such distributions may vary among classes or over time as specified
in the related Prospectus Supplement.
Definitive Certificates, if issued, will be freely transferable and
exchangeable at the corporate trust office of the Trustee as set forth in the
related Prospectus Supplement or, at the election of the Trustee, at the office
of a certificate registrar appointed by the Trustee. No service charge will be
made for any registration of exchange or transfer of Certificates of any Series,
but the Trustee may require payment of a sum sufficient to cover any related tax
or other governmental charge.
Under current law the purchase and holding by or on behalf of any employee
benefit plan or other retirement arrangement (including individual retirement
accounts and annuities, Keogh plans and collective investment funds in which
such plans, accounts or arrangements are invested) subject to provisions of
ERISA or the Code of a class of Certificates entitled only to a specified
percentage of payments of either interest or principal or a notional amount of
either interest or principal on the related Mortgage Assets or a class of
Certificates entitled to receive payments of interest and principal on the
Mortgage Assets only after payments to other classes or after the occurrence of
certain specified events may result in "prohibited transactions" within the
meaning of ERISA and the Code. See "ERISA Considerations" herein and in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, transfer of Certificates of such a class will not be registered
unless the transferee (i) represents that it is not, and is not purchasing on
behalf of, any such plan, account or arrangement or (ii) provides an opinion of
counsel satisfactory to the Trustee and the Depositor that the purchase of
Certificates of such a class by or on behalf of such plan, account or
arrangement is permissible under applicable law and will not subject the
Trustee, the Master Servicer or the Depositor to any obligation or liability in
addition to those undertaken in the Agreement.
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As to each Series, an election may be made to treat the related Trust or
designated portions thereof as one or more "real estate mortgage investment
conduits" (each, a "REMIC") as defined in the Code. The related Prospectus
Supplement will specify whether a REMIC election is to be made. Alternatively,
the Agreement for a Series may provide that a REMIC election may be made at the
discretion of the Depositor or the Master Servicer and may be made only if
certain conditions are satisfied. As to any such Series, the terms and
provisions applicable to the making of a REMIC election, as well as any material
federal income tax consequences to Certificateholders not otherwise described
herein, will be set forth in the related Prospectus Supplement. If such an
election is made with respect to a Series, one of the classes will be designated
as evidencing the sole class of "residual interests" in the related REMIC, as
defined in the Code. All other classes of Certificates in such a Series will
constitute "regular interests" in the related REMIC, as defined in the Code. As
to each Series with respect to which a REMIC election is to be made, the Master
Servicer or a holder of the related residual certificate or certificates will be
obligated to take all actions required in order to comply with applicable laws
and regulations and will be obligated to pay any prohibited transaction taxes.
The Master Servicer, unless otherwise specified in the related Prospectus
Supplement, will be entitled to reimbursement for any such payment from any
holder of the related residual certificate or certificates.
Distributions on Certificates
General. In general, the method of determining the amount of distributions
on a particular Series of Certificates will depend on the type of credit
support, if any, that is used with respect to such Series. See "Credit
Enhancement" herein and in the related Prospectus Supplement. The Prospectus
Supplement for each Series of Certificates will describe the method to be used
in determining the amount of distributions on the Certificates of such Series.
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal only
or interest only) on the related Certificates will be made by the Trustee,
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the Prospectus Supplement (each, a "Distribution Date") out of the
payments received in respect of the assets of the related Trust or other assets
held for the benefit of the Certificateholders as specified in the related
Prospectus Supplement. The amount allocable to payments of principal and
interest on any Distribution Date will be determined as specified in the related
Prospectus Supplement. Distributions will be made to the persons in whose names
the Certificates are registered at the close of business on the dates specified
in the related Prospectus Supplement (each, a "Record Date"). Distributions will
be made by check or money order mailed to the persons entitled thereto at the
address appearing in the register maintained for holders of Certificates (the
"Certificate Register") or, if specified in the related Prospectus Supplement,
in the case of Certificates that are of a certain minimum denomination, upon
written request by the Certificateholder, by wire transfer or by such other
means as are described therein; provided, however, that the final distribution
in retirement of Certificates will be made only upon presentation and surrender
of the Certificates at the office or agency of the Trustee or other person
specified in the notice to Certificateholders of such final distribution.
Distributions allocable to principal of and interest on the Certificates
will be made by the Trustee out of, and only to the extent of, funds in the
related Certificate Account, including any funds transferred from any Reserve
Fund or Pre-Funding Account. (See "The Pooling And Servicing Agreement--Payments
on Mortgage Assets; Deposits to Certificate Account" herein.) As between
Certificates of different classes and as between distributions of principal
(and, if applicable, between distributions of
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Principal Prepayments (as defined herein) and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be allocated and
applied as specified in the related Prospectus Supplement. All distributions to
any class of Certificates will be made in the priority, manner and amount
specified in the related Prospectus Supplement.
Available Funds. All distributions on the Certificates of each Series on
each Distribution Date will be made from the Available Funds, in accordance with
the terms described in the related Prospectus Supplement and specified in the
related Agreement. Unless otherwise provided in the related Prospectus
Supplement, "Available Funds" for each Distribution Date will generally equal
the amount on deposit in the related Certificate Account (including any
prepayment charges, assumption fees and late payment charges and other
administrative fees and charges, to the extent collected from Mortgagors), and,
if applicable, the amount on deposit in the related Pre-Funding Account on such
Distribution Date or on the last day of the Due Period (net of related fees and
expenses payable by the related Trust) (see "The Pooling And Servicing
Agreement--Payments on Mortgage Assets; Deposits to Certificate Account" and
"The Pooling and Servicing Agreement -- Servicing and Other Compensation and
Payment of Expenses") other than amounts to be held therein for distribution on
future Distribution Dates.
Unless otherwise specified in the related Prospectus Supplement, the
"Determination Date" is the third Business Day prior to each Distribution Date.
On each Determination Date, the Master Servicer will determine the amounts of
principal and interest which will be passed through to Certificateholders on the
related Distribution Date. The "Due Period" for any Series is the period
specified in the related Prospectus Supplement. The "Due Period" is the period
during which principal, interest and other amounts will be collected on the
Mortgage Loans for application to the payment of principal and interest to the
Certificateholders and the payment of fees on such Distribution Date. A
"Business Day" is any day other than a Saturday, Sunday or any day on which
banking institutions or trust companies in the states of New York, Oklahoma and
such other states (if any) specified in the related Prospectus Supplement are
authorized by law, regulation or executive order to be closed.
Distributions of Interest. Unless otherwise specified in the related
Prospectus Supplement, interest will accrue on the aggregate Certificate Balance
(or, in the case of Certificates entitled only to distributions allocable to
interest, the aggregate notional amount) of each class of Certificates (the
"Class Certificate Balance") entitled to interest at the "Pass-Through Rate"
(which may be a Fixed Rate or an Adjustable Rate as specified in such Prospectus
Supplement) from the date and for the periods specified in such Prospectus
Supplement. To the extent funds are available therefor, interest accrued during
each such specified period on each class of Certificates entitled to interest
(other than a class of Certificates that provides for interest that accrues, but
is not currently payable, referred to hereafter as "Accrual Certificates") will
be distributable on the Distribution Dates specified in the related Prospectus
Supplement until the Class Certificate Balance of such class has been
distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate notional amount of such
Certificates is reduced to zero or for the period of time designated in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the original Certificate Balance of each Certificate will
equal the aggregate distributions allocable to principal to which such
Certificate is entitled. Unless otherwise specified in the related Prospectus
Supplement, distributions allocable to interest on each Certificate which is not
entitled to distributions allocable to principal will be calculated based on the
notional amount of such Certificate. The notional amount of a Certificate will
not evidence an interest in or entitlement to distributions allocable to
principal but will be used solely for convenience in expressing the calculation
of interest and for certain other purposes.
If specified in the related Prospectus Supplement, one or more class or
classes of Certificates may provide that any interest that has accrued but is
not paid on a given Distribution Date will be added to the Class Certificate
Balance of such class of Certificates on that Distribution Date (such
Certificates,
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"Accrual Certificates"). Unless otherwise specified in the related Prospectus
Supplement, distributions of interest on each class of Accrual Certificates will
commence only after the occurrence of the events specified in such Prospectus
Supplement and, prior to such time, the beneficial ownership interest of such
class of Accrual Certificates in the Trust, as reflected in the Class
Certificate Balance of such class of Accrual Certificates, will increase on each
Distribution Date by the amount of interest that accrued on such class of
Accrual Certificates during the preceding interest accrual period but that was
not required to be distributed to such class on such Distribution Date. Any such
class of Accrual Certificates will thereafter accrue interest on its outstanding
Class Certificate Balance as so adjusted.
Distributions of Principal. Unless otherwise specified in the related
Prospectus Supplement, the aggregate original balance of the Certificates (the
"Certificate Balance") will equal the aggregate distributions allocable to
principal that such Certificates will be entitled to receive. Unless otherwise
specified in the related Prospectus Supplement, the Class Certificate Balance of
any class of Certificates entitled to distributions of principal will be the
original Class Certificate Balance of such class of Certificates specified in
such Prospectus Supplement, reduced by all distributions allocable to principal
and (i) in the case of Accrual Certificates, unless otherwise specified in the
related Prospectus Supplement, increased by all interest accrued but not then
distributable on such Accrual Certificates, and (ii) in the case of Adjustable
Rate Certificates, unless otherwise specified in the related Prospectus
Supplement, subject to the effect of negative amortization. The related
Prospectus Supplement will specify the method by which the amount of principal
to be distributed on the Certificates on each Distribution Date will be
calculated and the manner in which such amount will be allocated among the
classes of Certificates entitled to distributions of principal.
If so provided in the related Prospectus Supplement, one or more classes of
senior Certificates (the "Senior Certificates") will be entitled to receive all
or a disproportionate percentage of the payments of principal that are received
from Mortgagors in advance of their scheduled due dates and are not accompanied
by amounts representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or for
the periods specified in such Prospectus Supplement. Any such allocation of
Principal Prepayments to such class or classes of Senior Certificates will have
the effect of accelerating the amortization of such Senior Certificates while
increasing the interests evidenced by the subordinated Certificates (the
"Subordinated Certificates") in the Trust. Increasing the interests of the
Subordinated Certificates relative to that of the Senior Certificates is
intended to preserve the availability of the subordination provided by the
Subordinated Certificates. See "Credit Enhancement--Subordination" herein and
"Credit Enhancement--Subordination of the Subordinated Certificates" in the
related Prospectus Supplement.
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Certificates will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the manner
described below and in such Prospectus Supplement. If applicable, the Trustee
will be required to make such unscheduled distributions on the day and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the Mortgage Assets,
the Trustee or the Master Servicer determines that the funds available or
anticipated to be available from the Certificate Account and, if applicable, any
Pre-Funding Account or Reserve Fund, may be insufficient to make required
distributions on the Certificates on such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed the
amount that would otherwise have been required to be distributed as principal on
the Certificates on the next Distribution Date. Unless otherwise specified in
the related Prospectus Supplement, all unscheduled distributions will include
interest at the applicable Pass-Through Rate (if any) on the amount of the
unscheduled distribution allocable to principal for the period and to the date
specified in such Prospectus Supplement.
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Unless otherwise specified in the related Prospectus Supplement, all
distributions allocable to principal in any unscheduled distribution will be
made in the same priority and manner as distributions of principal on the
Certificates would have been made on the next Distribution Date. With respect to
Certificates of the same class, unscheduled distributions of principal will be
made in the priority and manner specified in the related Prospectus Supplement.
The Trustee will give notice to Certificateholders of any unscheduled
distribution prior to the date of such distribution.
Example of Distributions
The following is an example of the flow of funds as it would relate to a
hypothetical Series of Certificates issued, and with a Cut-off Date occurring in
July, 1997 (all days are assumed to be Business Days):
July 1 - July 30........... (1) Due Period. Master Servicer
receives scheduled payments on the
Mortgage Assets and any Principal
Prepayments made by Mortgagors and
applicable interest thereon.
July 30.................... (2) Record Date.
August 12.................. (3) Determination Date. Distribution
amount determined.
August 14.................. (4) Deposit Date.
August 15.................. (5) Distribution Date.
Succeeding months follow the pattern above, subject to adjustment if the
Distribution Date is not a Business Day as specified in the related Prospectus
Supplement. The flow of funds with respect to any Series of Certificates may
differ from the above, and the flow of funds for each Series of Certificates
will be specified in the related Prospectus Supplement. Reference should be made
to the related Prospectus Supplement to determine the flow of funds for any
particular Series of Certificates. In addition, there are other sources and uses
of funds with respect to each Series of Certificates, as outlined herein and in
the related Prospectus Supplement, that are not specified in the above example
(see "The Pooling and Servicing Agreement" and "Credit Enhancement" herein).
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(1) Scheduled payments and Principal Prepayments may be received at any time
during this period and will be deposited on the Deposit Date in the
Certificate Account by the Master Servicer for distribution to
Certificateholders. When a Mortgage Loan is prepaid in full, interest on
the amount prepaid is collected from the Mortgagor only to the date of
payment.
(2) Distributions on the Distribution Date will be made to Certificateholders
of record at the close of business on the last business day of the month
immediately preceding the month of distribution.
(3) On August 12 (the third Business Day prior to the Distribution Date), the
Master Servicer will determine the amounts of principal and interest which
will be passed through on the Distribution Date.
(4) On August 14 (the Business Day immediately preceding the Distribution
Date), the Master Servicer may advance funds to cover any delinquencies, in
which event the distribution to Certificateholders on the Distribution Date
will include the full amounts of principal and interest due during the
period in respect of the delinquencies. The Master Servicer will also
calculate any changes in the relative interests evidenced by the Senior
Certificates and the Subordinate Certificates in the Trust Fund, if
applicable.
(5) On August 15, the amounts determined on August 12 will be distributed to
Certificateholders of record on the Record Date.
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Advances and Compensating Interest
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be required to remit to the Trustee no later than the day prior to
each Distribution Date and in no case earlier than the seventh Business Day of
such month, the amount (an "Advance"), if any by which 30 days' interest at the
Mortgage Rate (or, if specified in the related Prospectus Supplement, at the
Adjusted Mortgage Loan Remittance Rate) on the then outstanding principal
balance of a Mortgage Loan exceeds the amount received by the Master Servicer in
respect of interest on the Mortgage Loan as of the related Record Date. If
provided in the related Prospectus Supplement, the obligation of the Master
Servicer to make such Advances will be limited to amounts corresponding to
delinquent interest payments on a Mortgage Loan and/or will be limited to
amounts that the Master Servicer believes will be recoverable out of late
payments by Mortgagors on a Mortgage Loan, Liquidation Proceeds, Insurance
Proceeds (each, as defined herein) or otherwise. If and to the extent specified
in the related Prospectus Supplement, the amount of the Advance may be
determined based on an "Adjusted Mortgage Loan Remittance Rate" (determined as
set forth in the Prospectus Supplement), and may include delinquent principal
payments and other amounts.
Unless otherwise specified in the related Prospectus Supplement, in making
Advances, the Master Servicer will endeavor to maintain a regular flow of
scheduled interest payments to Certificateholders, rather than to guarantee or
insure against losses. Unless otherwise specified in the related Prospectus
Supplement, if Advances are made by the Master Servicer from cash being held for
future distribution to Certificateholders, the Master Servicer will replace such
funds on or before any future Distribution Date to the extent that funds in the
applicable Certificate Account on such Distribution Date would be less than the
amount required to be available for distributions to Certificateholders on such
date. Unless otherwise specified in the related Prospectus Supplement, any
Advances by the Master Servicer will be reimbursable to the Master Servicer out
of recoveries on the specific Mortgage Assets with respect to which such
Advances were made (e.g., late payments made by the related Mortgagors, any
related Insurance Proceeds, Liquidation Proceeds, Released Mortgaged Property
Proceeds (as defined herein) or proceeds of any Mortgage Loan repurchased by the
Depositor, a Sub-Servicer or a Seller pursuant to the related Agreement) and any
other amount that would otherwise be distributed to the holder or holders of
Certificates representing the residual interest of a Trust for which a REMIC
election has been made. Unless otherwise specified in the related Prospectus
Supplement, Advances by the Master Servicer also will be reimbursable to the
Master Servicer from cash otherwise distributable to Certificateholders
(including Senior Certificateholders) to the extent that the Master Servicer
determines that any such Advances previously made are not ultimately recoverable
as described in the immediately preceding sentence.
If specified in the Prospectus Supplement, the Master Servicer also will be
obligated to make Advances, to the extent recoverable out of Insurance Proceeds,
Liquidation Proceeds or otherwise, in respect of certain taxes and insurance
premiums not paid by Mortgagors on a timely basis and to otherwise protect the
related Mortgaged Property. Funds so advanced are reimbursable to the Master
Servicer to the extent permitted by the related Agreement.
If specified in the related Prospectus Supplement, the obligations of the
Master Servicer to make Advances may be supported by a cash advance reserve
fund, a surety bond or other arrangement, in each case as described in such
Prospectus Supplement.
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Unless otherwise specified in the related Prospectus Supplement, not later
than the close of business on the Business Day prior to each Determination Date,
with respect to each Mortgage Loan as to which the Master Servicer receives
during the related Due Period a principal payment in full in advance of the
final scheduled due date (a "Principal Prepayment"), the Master Servicer will be
required to remit to the Trustee for deposit in the Certificate Account from
amounts otherwise payable to the Master Servicer as servicing compensation, an
amount ("Compensating Interest") equal to the excess of (a) 30 days' interest on
the principal balance of each such Mortgage Loan as of the beginning of the
related Due Period at the applicable Mortgage Rate (or, if specified in the
related Prospectus Supplement, at the Adjusted Mortgage Loan Remittance Rate),
over (b) the amount of interest actually received on the related Mortgage Loan
for such Due Period.
REPORTS TO CERTIFICATEHOLDERS
Prior to or concurrently with each distribution on a Distribution Date and
except as otherwise set forth in the related Prospectus Supplement, the Master
Servicer or the Trustee will furnish to each Certificateholder of record of the
related Series a statement setting forth, to the extent applicable to such
Series of Certificates, among other things:
(i) the amount available in the Certificate Account;
(ii) the amount of such distribution allocable to principal for each
class of the related Series, separately identifying the aggregate amount of
any Principal Prepayments and, if so specified in the related Prospectus
Supplement, prepayment penalties included therein;
(iii) the amount of such distribution allocable to interest for each
class of the related Series;
(iv) the amount of any Advance;
(v) the aggregate amount (a) otherwise allocable to the Subordinated
Certificateholders on such Distribution Date and (b) withdrawn from the
Reserve Fund, if any, that is included in the amounts distributed to the
Certificateholders;
(vi) the aggregate amount, if any, withdrawn from letters of credit,
pool policies or other forms of credit enhancement that is included in
amounts distributed to Certificateholders;
(vii) the Class Certificate Balance and corresponding pool factor or
notional amount of each class of the related Series after giving effect to
the distribution of principal on such Distribution Date;
(viii) the percentage of principal payments on the Mortgage Assets
(excluding prepayments), if any, which each such class will be entitled to
receive on the following Distribution Date;
(ix) the percentage of Principal Prepayments with respect to the
Mortgage Assets, if any, which each such class will be entitled to receive
on the following Distribution Date;
(x) the related amount of the servicing compensation retained or
withdrawn from the Certificate Account by the Master Servicer, and the
amount of additional servicing compensation received by the Master Servicer
attributable to penalties, fees, excess Liquidation Proceeds and other
similar charges and items;
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(xi) the number and aggregate principal balances of Mortgage Loans:
(A) delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59
days, (2) 60 to 89 days and (3) 90 or more days, and (B) in foreclosure as
of the close of business on the last day of the calendar month preceding
such Distribution Date;
(xii) the number and aggregate principal balances of Mortgage Loans
acquired (and not subsequently sold) through foreclosure or grant of a deed
in lieu of foreclosure as of the end of the related Due Period;
(xiii) the number and aggregate principal balances of Mortgage Loans
acquired through foreclosure or grant of a deed in lieu of foreclosure
during the related Due Period;
(xiv) the number and aggregate principal balance of Mortgage Loans
which became Liquidated Mortgages and the amount of Liquidation Proceeds
received during the related Due Period;
(xv) the cumulative number and aggregate principal balance of Mortgage
Loans which became Liquidated Mortgages and the cumulative amount of
Liquidation Proceeds;
(xvi) if applicable, the amount remaining in the Reserve Fund at the
close of business on the Distribution Date;
(xvii) the Pass-Through Rate and the applicable Index for Adjustable
Rate classes expected to be applicable on the next Distribution Date to
such class;
(xviii) any amounts remaining under financial guaranty insurance
policies, letters of credit, guarantees, pool policies or other forms of
credit enhancement;
(xix) the aggregate amount on deposit in the Pre-Funding Account, if
any; and
(xx) the number and aggregate principal amount of additional Mortgage
Assets purchased by the Trust, if any.
Where applicable, any amount set forth above may be expressed as a dollar
amount per single Certificate of the relevant class having the Percentage
Interest (as defined herein) specified in the related Prospectus Supplement. The
report to Certificateholders for any Series of Certificates may include
additional or other information of a similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report (a)
as to the aggregate of amounts reported pursuant to clause (i) and (ii) above
for such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such year, and (b) such other customary information as may be deemed necessary
or desirable for Certificateholders to prepare their tax returns.
Book-Entry Certificates
If specified in the related Prospectus Supplement, one or more classes of
the Certificates of any Series (each, a class of "Book-Entry Certificates") may
be initially issued through the book-entry facilities of DTC in the United
States or Cedel or Euroclear in Europe. Each class of Book-Entry Certificates of
a Series will be issued in one or more certificates which equal the aggregate
initial Class
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Certificate Balance of each such class and which will be registered in the name
of Cede as nominee of DTC. Cedel and Euroclear will hold omnibus positions with
respect to the Certificates on behalf of Cedel Participants and Euroclear
Participants (each, as defined herein), respectively, through customers'
securities accounts in Cedel's and Euroclear's name on the books of their
respective depositories (each, a "Depository") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books 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. 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 its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, 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").
Beneficial interests in the Book-Entry Certificates of a Series will be
held indirectly by investors through the book-entry facilities of DTC, as
described herein. Investors may hold such beneficial interests in the Book-Entry
Certificates in minimum denominations representing an original principal amount
of $1,000 and integral multiples in excess thereof. Accordingly, DTC or its
nominee is expected to be the holder of record of the Book-Entry Certificates.
Except as described below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Certificate (a "Definitive Certificate").
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will be recorded on the records of DTC, if the
beneficial owner's Financial Intermediary is not a Participant). Therefore, the
beneficial owner must rely on the foregoing procedures to evidence its
beneficial ownership of a Book-Entry Certificate. Beneficial ownership of a
Book-Entry Certificate may only be transferred by compliance with the procedures
of such Financial Intermediaries and Participants.
In accordance with its normal procedures, DTC is expected to record the
positions held by each Participant in the Book-Entry Certificates, whether held
for its own account or as a nominee for another person. In general, beneficial
ownership of Book-Entry Certificates will be subject to the rules, regulations
and procedures governing DTC and Participants as in effect from time to time.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable Participants in
accordance with DTC's normal procedures. Each Participant will be responsible
for disbursing such payments to the beneficial owners of the Book-Entry
Certificates that it represents and to each Financial Intermediary for which it
acts as agent. Each such Financial Intermediary will be responsible for
disbursing funds to the beneficial owners of the Book-Entry Certificates that it
represents.
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Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience delay in their receipt of payments, since payments will be
forwarded by the Trustee to DTC or its nominee, as the case may be, as holder of
record of the Book-Entry Certificates. Because DTC can act only on behalf of
Financial Intermediaries, the ability of a beneficial owner to pledge Book-Entry
Certificates to persons or entities that do not participate in DTC system, or
otherwise take actions in respect of such Book-Entry Certificates, may be
limited due to the lack of physical certificates for such Book-Entry
Certificates. In addition, issuance of the Book-Entry Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary market since
certain potential investors may be unwilling to purchase Certificates for which
they cannot obtain physical certificates.
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Book-Entry Certificates will be DTC or its
nominee. Beneficial owners of the Book-Entry Certificates will not be
Certificateholders, as that term will be used in the Agreement relating to such
Series of Certificates. Beneficial owners are only permitted to exercise the
rights of Certificateholders indirectly through Financial Intermediaries and
DTC. Monthly and annual reports on the related Trust provided to DTC or its
nominee, as the case may be, as holder of record of the Book-Entry Certificates,
may be made available to beneficial owners upon request, in accordance with the
rules, regulations and procedures creating and affecting DTC, and to the
Financial Intermediaries to whose DTC accounts the Book-Entry Certificates of
such beneficial owners are credited.
Unless otherwise specified in the related Prospectus Supplement, unless and
until Definitive Certificates are issued, DTC will take any action permitted to
be taken by the holders of the Book-Entry Certificates of a particular Series
under the related Agreement only at the direction of one or more Financial
Intermediaries to whose DTC accounts such Book-Entry Certificates are credited
to the extent that such actions are taken on behalf of Financial Intermediaries
whose holdings include such Book-Entry Certificates.
Transfers between Participants will occur in accordance with DTC's rules,
regulations and procedures. Transfers between Cedel Participants and Euroclear
Participants will occur in accordance with their respective rules and operating
procedures.
Due to time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participant on such business day. Cash received in Cedel or Euroclear as
result of sales of Certificates by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding
Certificates through DTC, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC's rules, regulations and procedures on behalf of the
relevant European international clearing system by its Depository; however, such
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadline
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositories.
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Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, Definitive
Certificates will be issued to beneficial owners of Book-Entry Certificates, or
their nominees, rather than to DTC, only if (i) DTC or the Depositor advises the
Trustee in writing that DTC is no longer willing, qualified or able to discharge
properly its responsibilities as nominee and depository with respect to the
Book-Entry Certificates and the Depositor or the Trustee is unable to locate a
qualified successor; (ii) the Depositor, at its sole option, elects to terminate
the book-entry system through DTC; or (iii) after the occurrence of an Event of
Default (as defined in the related Agreement), beneficial owners of Certificates
representing not less than 51% of the aggregate Percentage Interests evidenced
by each class of Certificates of the related Series issued as Book-Entry
Certificates advise the Trustee and DTC through the Financial Intermediaries in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of the beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability of Definitive
Certificates. Upon surrender by DTC of the global certificate or certificates
representing the Book-Entry Certificates and instructions for re-registration,
the Trustee will issue the Definitive Certificates, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as Certificateholders
under the Agreement relating to such Series of Certificates.
CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of a
Series of Certificates or with respect to the Mortgage Assets in the related
Trust. Credit enhancement may be in the form of a limited Certificate Guaranty
Insurance Policy issued by an entity named in the related Prospectus Supplement,
the subordination of one or more classes of the Certificates of such Series, the
establishment of one or more reserve funds, the use of a cross collateralization
feature, the use of overcollateralization, the use of a Mortgage Pool Insurance
Policy, Certificate Guaranty Insurance Policy, Bankruptcy Bond, Special Hazard
Insurance Policy, surety bond, letter of credit, guaranteed investment contract,
financial guaranty insurance policy, third party guarantee (which may be limited
in nature), a Limited Guarantee issued by CIT, spread accounts, cash collateral
accounts and/or other accounts, or the use of any similar instruments or
agreements or other methods of credit enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Unless otherwise
specified in the related Prospectus Supplement, no credit enhancement will
provide protection against all risks of loss or guarantee repayment of the
entire principal balance of the Certificates and interest thereon. If losses
occur which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, Certificateholders will bear their allocable
share of any deficiencies. If a form of credit enhancement applies to several
classes of Certificates, and if principal payments equal to the aggregate
principal balances of certain classes will be distributed prior to such
distributions to other classes, the classes which receive such distributions at
a later time are more likely to bear any losses which exceed the amount covered
by credit enhancement. Unless otherwise specified in the Prospectus Supplement,
coverage under any credit enhancement may be canceled or reduced by the Master
Servicer if such cancellation or reduction would not adversely affect the rating
or ratings of the related Certificates. The Trustee of the related Trust will
have the right to sue providers of credit enhancement if a default is made on a
required payment.
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Subordination
If specified in the related Prospectus Supplement, the rights of the
holders of one or more classes of Subordinated Certificates (the "Subordinated
Certificateholders") will be subordinate to the rights of holders of one or more
other classes of Senior Certificates (the "Senior Certificateholders") of such
Series to receive distributions in respect of scheduled principal, Principal
Prepayments, interest or any combination thereof that otherwise would have been
payable to holders of Subordinated Certificates under the circumstances and to
the extent specified in the related Prospectus Supplement. This subordination is
intended to enhance the likelihood of regular receipt by Senior
Certificateholders of the full amount of the monthly payments of principal and
interest which such holders would be entitled to receive if there had been no
losses or delinquencies.
The protection afforded to the Senior Certificateholders of a Series by
means of the subordination feature will be accomplished by (i) the preferential
right of such holders to receive, prior to any distribution being made in
respect of the related Subordinated Certificates, the amounts of principal and
interest due them on each Distribution Date out of the funds available for
distribution on such date in the related Certificate Account (as defined herein)
and, to the extent described in the related Prospectus Supplement, by the right
of such holders to receive future distributions on the assets in the related
Trust that would otherwise have been payable to the Subordinated
Certificateholders; (ii) reducing the ownership interest of the related
Subordinated Certificates; (iii) a combination of clauses (i) and (ii) above; or
(iv) as otherwise described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, subordination may apply only in the event
of certain types of losses not covered by other forms of credit support, such as
hazard losses not covered by Standard Hazard Insurance Policies or losses due to
the bankruptcy or fraud of the Mortgagor not covered by a Bankruptcy Bond. The
protection afforded to Senior Certificateholders through subordination also may
be accomplished by allocating certain types of losses or delinquencies to the
related Subordinated Certificates to the extent described in the related
Prospectus Supplement. The related Prospectus Supplement will set forth
information concerning, among other things, the amount of subordination of a
class or classes of Subordinated Certificates in a Series, the circumstances in
which such subordination will be applicable and the manner, if any, in which the
amount of subordination will decrease over time, the manner of funding any
Reserve Fund, and the conditions under which amounts in any such Reserve Fund
will be used to make distributions to Senior Certificateholders or released to
Subordinated Certificateholders from the related Trust.
If specified in the related Prospectus Supplement, delays in receipt of
scheduled payments on the Mortgage Assets and losses with respect to the
Mortgage Assets will be borne first by the various classes of Subordinated
Certificates and thereafter by the various classes of Senior Certificates, in
each case under the circumstances and subject to the limitations specified in
such Prospectus Supplement. The aggregate distributions in respect of delinquent
payments on the Mortgage Assets over the lives of the Certificates or at any
time, the aggregate losses in respect of Mortgage Assets which must be borne by
the Subordinated Certificates by virtue of subordination and the amount of the
distributions otherwise distributable to the Subordinated Certificateholders
that will be distributable to Senior Certificateholders on any Distribution Date
may be limited as specified in the related Prospectus Supplement. If aggregate
distributions in respect of delinquent payments on the Mortgage Assets or
aggregate losses in respect of such Mortgage Assets were to exceed the total
amounts payable and available for distribution to holders of Subordinated
Certificates or, if applicable, were to exceed the amount specified in the
related Prospectus Supplement, Senior Certificateholders would experience losses
on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of Subordinated Certificates on any Distribution Date may instead be
deposited into one or more Reserve Funds established and maintained with the
Trustee. If specified in the Prospectus Supplement, such deposits may be made on
each Distribution Date for specified periods or until the balance in the Reserve
Fund has reached a specified amount and,
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following payments from the Reserve Fund, to holders of Senior Certificates or
otherwise, thereafter to the extent necessary to restore balance in the Reserve
Fund to required levels, in each case as specified in the Prospectus Supplement.
If specified in the related Prospectus Supplement, amounts on deposit in the
Reserve Fund may be released to the holders of the class of Certificates
specified in the Prospectus Supplement at the times and under the circumstances
specified in the Prospectus Supplement. See "--Reserve Fund" below.
If specified in the related Prospectus Supplement, the same class of
Certificates may be Senior Certificates with respect to certain types of
payments or certain types of losses or delinquencies and Subordinated
Certificates with respect to other types of payment or types of losses or
delinquencies.
If specified in the related Prospectus Supplement, various classes of
Senior Certificates and Subordinated Certificates may themselves be subordinate
in their right to receive certain distributions to other classes of Senior and
Subordinated Certificates, respectively, through a cross collateralization
mechanism or otherwise.
As between classes of Senior Certificates and as between classes of
Subordinated Certificates, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events or
(iv) otherwise, in each case as specified in the related Prospectus Supplement.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a class or classes of Subordinated Certificates in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the amount of subordination will decrease over time,
the manner of funding any Reserve Funds, and the conditions under which amounts
in any such Reserve Funds will be used to make distributions to Senior
Certificateholders or released to Subordinated Certificateholders from the
related Trust. As between classes of Subordinated Certificates, payments to
Senior Certificateholders on account of delinquencies or losses and payments to
the Reserve Fund will be allocated as specified in the related Prospectus
Supplement.
Overcollateralization
If specified in the related Prospectus Supplement, credit support may
consist of overcollateralization whereby the aggregate principal amount of the
Mortgage Assets exceeds the Certificate Balance (as defined herein) of the
Certificates of such Series. Overcollateralization may exist on the Closing Date
or may develop thereafter as a result of the application of certain interest
collections or other collections received in connection with the Mortgage Assets
in excess of amounts necessary to pay the Pass-Through Rate on the Certificates
and certain other amounts as may be specified in the related Prospectus
Supplement. The existence of any overcollateralization and the manner, if any,
by which it increases or decreases, will be set forth in the related Prospectus
Supplement.
Reserve Fund
If so specified in the related Prospectus Supplement, credit support with
respect to a Series of Certificates may be provided by the establishment and
maintenance with the Trustee for such Series of Certificates, of one or more
reserve funds (each, a "Reserve Fund") for such Series. The related Prospectus
Supplement will specify whether or not a Reserve Fund will be included in the
corpus of the Trust for such Series.
The Reserve Fund for a Series will be funded (i) by the deposit therein of
cash, investment securities or instruments evidencing ownership of principal or
interest payments thereon, letters of credit, demand notes, certificates of
deposit or a combination thereof in the aggregate amount specified in the
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related Prospectus Supplement, (ii) by the deposit therein from time to time of
certain amounts, as specified in the related Prospectus Supplement, to which the
Subordinated Certificateholders, if any, would otherwise be entitled, or (iii)
in such other manner as may be specified in the related Prospectus Supplement.
Any amounts on deposit in the Reserve Fund and the proceeds of any other
instrument deposited therein upon maturity will be held in cash or will be
invested in "Permitted Investments" which, unless otherwise specified in the
related Prospectus Supplement, will include obligations of the United States and
certain agencies thereof, certificates of deposit, certain commercial paper
(including commercial paper issued by CIT), time deposits and bankers
acceptances sold by eligible commercial banks and certain repurchase agreements
of United States government securities with eligible commercial banks. If a
letter of credit is deposited with the Trustee, such letter of credit will be
irrevocable unless replaced. Unless otherwise specified in the related
Prospectus Supplement, any letter of credit deposited therein will name the
Trustee, in its capacity as trustee for the Certificateholders, as beneficiary
and will be issued by an entity acceptable to each Rating Agency. Additional
information with respect to such instruments deposited in the Reserve Funds will
be set forth in the related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Fund for distribution to the
Certificateholders for the purposes, in the manner and at the times specified in
the related Prospectus Supplement.
Certificate Guaranty Insurance Policies
If so specified in the related Prospectus Supplement, a certificate
guaranty insurance policy or policies (each, a "Certificate Guaranty Insurance
Policy") may be obtained and maintained for one or more class or classes of
Series of Certificates. The issuer of any Certificate Guaranty Insurance Policy
(a "Certificate Guaranty Insurer") will be described in the related Prospectus
Supplement. A copy of any such Certificate Guaranty Insurance Policy will be
attached as an exhibit to the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
Certificate Guaranty Insurance Policies generally unconditionally and
irrevocably guarantee to Certificateholders that an amount equal to each full
and complete Insured Payment will be received by an agent of the Trustee (an
"Insurance Paying Agent") on behalf of Certificateholders, for distribution by
the Trustee to each Certificateholder. The "Insured Payment" will equal the full
amount of the distributions of principal and interest to which
Certificateholders are entitled under the related Agreement plus any other
amounts specified therein or in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, the Certificate Guaranty Insurance Policy
may only cover ultimate payment of principal to Certificateholders and not
timely payment of principal on each Distribution Date.
The specific terms of any Certificate Guaranty Insurance Policy will be as
set forth in the related Prospectus Supplement. Certificate Guaranty Insurance
Policies may have limitations including (but not limited to) limitations on the
Certificate Guaranty Insurer's obligation to guarantee the Seller's or the
Master Servicer's obligation to repurchase or substitute for any Mortgage Loans,
to guarantee any specified rate of prepayments or to provide funds to redeem
Certificates on any specified date. The Certificate Guaranty Insurance Policy
may also be limited in amount.
Subject to the terms of the related Agreement, the Certificate Guaranty
Insurer may be subrogated to the rights of each Certificateholder to receive
payments under the Certificates to the extent of any payments by such
Certificate Guaranty Insurer under the related Certificate Guaranty Insurance
Policy.
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Mortgage Pool Insurance Policies
If specified in the related Prospectus Supplement relating to a Mortgage
Pool, a separate mortgage pool insurance policy or policies (each, a "Mortgage
Pool Insurance Policy") will be obtained and maintained for the Mortgage Pool
and issued by the insurer (the "Pool Insurer") named in such Prospectus
Supplement. Each Mortgage Pool Insurance Policy will, subject to the limitations
described below, cover loss by reason of default in payment on Mortgage Loans in
the Mortgage Pool in an amount equal to a percentage specified in such
Prospectus Supplement of the aggregate principal balance of such Mortgage Loans
on the Cut-off Date and, if applicable, as of the Subsequent Cut-off Dates (as
defined in the related Prospectus Supplement) related to the transfer of
additional Mortgage Loans, if any, which are not covered as to their entire
outstanding principal balances by Primary Mortgage Insurance Policies. As more
fully described below, the Master Servicer will present claims thereunder to the
Pool Insurer on behalf of itself, the Trustee and the Certificateholders. The
Mortgage Pool Insurance Policies, however, are not blanket policies against
loss, since claims thereunder may be made only respecting particular defaulted
Mortgage Loans and only upon satisfaction of certain conditions precedent
described below. Unless otherwise specified in the related Prospectus
Supplement, the Mortgage Pool Insurance Policies will not cover losses due to a
failure to pay or denial of a claim under a Primary Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Pool Insurance Policy will provide that no claims may be validly
presented unless (i) any required Primary Mortgage Insurance Policy is in effect
for the defaulted Mortgage Loan and a claim thereunder has been submitted and
settled; (ii) hazard insurance on the related Mortgaged Property has been kept
in force and real estate taxes and other protection and preservation expenses
have been paid; (iii) if there has been physical loss or damage to the Mortgaged
Property, the damaged property has been restored to its physical condition
(reasonable wear and tear excepted) at the time of issuance of the policy; and
(iv) the insured has acquired good and marketable title to the Mortgaged
Property free and clear of liens except certain permitted encumbrances. Upon
satisfaction of these conditions, the Pool Insurer will have the option either
(i) to purchase the Mortgaged Property at a price equal to the principal balance
of the related Mortgage Loan plus accrued and unpaid interest at the Mortgage
Rate to the date of such purchase and certain expenses incurred by the Master
Servicer on behalf of the Trustee and Certificateholders, or (ii) to pay the
amount by which the sum of the principal balance of the defaulted Mortgage Loan
plus accrued and unpaid interest at the Mortgage Rate to the date of payment of
the claim and the aforementioned expenses exceeds the proceeds received from an
approved sale of the Mortgaged Property, in either case net of certain amounts
paid or assumed to have been paid under the related Primary Mortgage Insurance
Policy. If any Mortgaged Property is damaged, and proceeds, if any, from the
related hazard insurance policy or the applicable Special Hazard Insurance
Policy are insufficient to restore the damaged property to a condition
sufficient to permit recovery under the Mortgage Pool Insurance Policy, the
Master Servicer will not be required to expend its own funds to restore the
damaged property unless it determines that (i) such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses, and (ii) such expenses
will be recoverable by it through proceeds of the sale of the Mortgaged Property
or proceeds of the related Mortgage Pool Insurance Policy or any related Primary
Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, no
Mortgage Pool Insurance Policy will insure (and many Primary Mortgage Insurance
Policies do not insure) against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the Mortgagor, the
originator or persons involved in the origination thereof, or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. If
specified in the related Prospectus Supplement, an endorsement to the Mortgage
Pool Insurance Policy, a bond or other credit support may cover fraud in
connection with the origination of Mortgage Loans. If specified in the related
Prospectus Supplement, a failure of coverage attributable to one of the
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foregoing events might result in a breach of the related Seller's
representations described above and, in such event, might give rise to an
obligation on the part of such Seller to repurchase the defaulted Mortgage Loan
if the breach cannot be cured by such Seller. No Mortgage Pool Insurance Policy
will cover (and many Primary Mortgage Insurance Policies do not cover) a claim
in respect of a defaulted Mortgage Loan occurring when the Master Servicer of
such Mortgage Loan, at the time of default or thereafter, was not approved by
the applicable insurer.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Mortgage Pool Insurance Policy will be
reduced over the life of the related Certificates by the aggregate dollar amount
of claims paid less the aggregate of the net amounts realized by the Pool
Insurer upon disposition of all foreclosed properties. The amount of claims paid
will include certain expenses incurred by the Master Servicer as well as accrued
interest on delinquent Mortgage Loans to the date of payment of the claim,
unless otherwise specified in the related Prospectus Supplement. Accordingly, if
aggregate net claims paid under any Mortgage Pool Insurance Policy reach the
original policy limit, coverage under that Mortgage Pool Insurance Policy will
be exhausted and any further losses will be borne by the Certificateholders.
The terms of any pool insurance policy relating to a Pool will be described
in the related Prospectus Supplement.
Special Hazard Insurance Policies
If specified in the related Prospectus Supplement, a separate special
hazard insurance policy or policies (each, a "Special Hazard Insurance Policy")
will be obtained and maintained for the Mortgage Pool and will be issued by the
insurer (the "Special Hazard Insurer") named in such Prospectus Supplement. Each
Special Hazard Insurance Policy will, subject to limitations described below,
protect holders of the related Certificates from (i) loss by reason of damage to
Mortgaged Properties caused by certain hazards (including earthquakes and, to a
limited extent, tidal waves and related water damage or as otherwise specified
in the related Prospectus Supplement) not insured against under the standard
form of hazard insurance policy for the respective states in which the Mortgaged
Properties are located or under a flood insurance policy if the Mortgaged
Property is located in a federally designated flood area, and (ii) loss caused
by reason of the application of the coinsurance clause contained in hazard
insurance policies. See "The Pooling and Servicing Agreement--Hazard Insurance"
herein. No Special Hazard Insurance Policy will cover losses occasioned by fraud
or conversion by the Trustee or Master Servicer, war, insurrection, civil war,
certain governmental action, errors in design, faulty workmanship or materials
(except under certain circumstances), nuclear or chemical reaction, flood (if
the Mortgaged Property is located in a federally designated flood area), nuclear
or chemical contamination and certain other risks. The amount of coverage under
any Special Hazard Insurance Policy will be specified in the related Prospectus
Supplement. Each Special Hazard Insurance Policy will provide that no claim may
be paid unless hazard and, if applicable, flood insurance on the property
securing the Mortgage Loan have been kept in force and other protection and
preservation expenses have been paid.
Subject to the foregoing limitations, and unless otherwise specified in the
related Prospectus Supplement, each Special Hazard Insurance Policy will provide
that where there has been damage to property securing a foreclosed Mortgage Loan
(title to which has been acquired by the insured) and to the extent such damage
is not covered by the hazard insurance policy or flood insurance policy, if any,
maintained by the Mortgagor or the Master Servicer, the Special Hazard Insurer
will pay the lesser of (i) the cost of repair or replacement of such property,
or (ii) upon transfer of the property to the Special Hazard Insurer, the unpaid
principal balance of such Mortgage Loan at the time of acquisition of such
property by foreclosure or deed in lieu of foreclosure, plus accrued interest to
the date of claim settlement and certain expenses incurred by the Master
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Servicer with respect to such property. If the unpaid principal balance of a
Mortgage Loan plus accrued interest and certain expenses is paid by the Special
Hazard Insurer, the amount of further coverage under the related Special Hazard
Insurance Policy will be reduced by such amount less any net proceeds from the
sale of the property. Any amount paid as the cost of repair of such property
will further reduce coverage by such amount. So long as a Mortgage Pool
Insurance Policy remains in effect, the payment by the Special Hazard Insurer of
the cost of repair or of the unpaid principal balance of the related Mortgage
Loan plus accrued interest and certain expenses will not affect the total
insurance proceeds paid to Certificateholders, but will affect the relative
amounts of coverage remaining under the related Special Hazard Insurance Policy
and Mortgage Pool Insurance Policy. Any hazard losses not covered by either the
standard hazard insurance policies or the Special Hazard Insurance Policy will
not be insured against, and, unless otherwise specified in the related
Prospectus Supplement, will be borne by the Certificateholders.
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each Rating Agency in a special trust account to provide
protection in lieu of or in addition to that provided by a Special Hazard
Insurance Policy. The amount of any Special Hazard Insurance Policy or of the
deposit to the special trust account in lieu thereof relating to such
Certificates may be reduced so long as any such reduction will not result in a
downgrading of the rating of such Certificates by any such Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, since each
Special Hazard Insurance Policy will be designed to permit full recovery under
the Mortgage Pool Insurance Policy in circumstances in which such recoveries
would otherwise be unavailable because property has been damaged by a cause not
insured against by a standard hazard policy and thus would not be restored, each
Agreement will provide that, if the related Mortgage Pool Insurance Policy shall
have been terminated or been exhausted through payment of claims, the Master
Servicer will be under no further obligation to maintain such Special Hazard
Insurance Policy.
The terms of any Special Hazard Insurance Policy relating to a Pool will be
described in the related Prospectus Supplement.
Bankruptcy Bonds
If specified in the related Prospectus Supplement, a bankruptcy bond or
bonds (each, a "Bankruptcy Bond") may be obtained to cover certain losses
resulting from proceedings under the federal Bankruptcy Code with respect to a
Mortgage Loan. Such Bankruptcy Bond will be issued by an insurer named in such
Prospectus Supplement. Each Bankruptcy Bond will cover, to the extent specified
in the related Prospectus Supplement, certain losses resulting from a reduction
by a bankruptcy court of scheduled payments of principal and interest on a
Mortgage Loan or a reduction by such court of the principal amount of a Mortgage
Loan and will cover certain unpaid interest on the amount of such a principal
reduction from the date of the filing of a bankruptcy petition. The required
amount of coverage under, and the limitations in scope of, each Bankruptcy Bond
will be set forth in the related Prospectus Supplement. Coverage under a
Bankruptcy Bond may be canceled or reduced by the Master Servicer if such
cancellation or reduction would not adversely affect the then current rating or
ratings of the related Certificates. See "Certain Legal Aspects of the Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" herein.
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each Rating Agency in a special trust account to provide
protection in lieu of or in addition to that provided by a Bankruptcy Bond. The
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amount of any Bankruptcy Bond or of the deposit to the special trust account in
lieu thereof relating to such Certificates may be reduced so long as any such
reduction will not result in a downgrading of the rating of such Certificates by
any such Rating Agency.
The terms of any Bankruptcy Bond relating to a Pool will be described in
the related Prospectus Supplement.
Cross Collateralization
If specified in the related Prospectus Supplement, the beneficial ownership
of separate Trusts or separate groups of assets included in a Trust may be
evidenced by separate classes of the related Series of Certificates. In such
case, credit support may be provided by a cross collateralization feature which
requires that distributions be made with respect to Certificates evidencing
beneficial ownership of one or more separate Trusts or asset groups prior to
distributions to Certificates evidencing a beneficial ownership interest in
other separate Trusts or asset groups within the same Trust. The related
Prospectus Supplement for a Series that includes a cross collateralization
feature will describe the manner and conditions for applying such cross
collateralization feature.
If specified in the related Prospectus Supplement, the coverage provided by
one or more forms of credit support may apply concurrently to two or more
separate Trusts, without priority among such Trusts, until the credit support is
exhausted. If applicable, the related Prospectus Supplement will identify the
Trusts or asset groups to which such credit support relates and the manner of
determining the amount of the coverage provided thereby and of the application
of such coverage to the identified Trusts or asset groups.
Limited Guarantee
If specified in the related Prospectus Supplement, certain payments on a
class of the Certificates of a Series, certain deficiencies in principal or
interest payments on the Mortgage Loans, or certain liquidation losses on the
Mortgage Loans, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee") limited in scope and amount, issued by CIT.
If not specified, the Certificateholders will have no recourse to CIT for any
amounts due on the Certificates. If specified, CIT may be obligated to take one
or more of the following actions in the event the Seller or Master Servicer
fails to do so: make deposits to an account, make advances, or purchase
defaulted Mortgage Loans. Any such Limited Guarantee will be limited in an
amount and a portion of the coverage of any such Limited Guarantee may be
separately allocated to certain events. The scope, amount and, if applicable,
the allocation of any Limited Guarantee will be described in the related
Prospectus Supplement.
Other Insurance, Surety Bonds, Guarantees, Letters of Credit and Similar
Instruments or Agreements
If specified in the related Prospectus Supplement, a Trust may also include
insurance, third party guarantees (any of which may be limited in nature),
surety bonds, spread accounts, cash collateral accounts and/or other accounts,
letters of credit, interest rate swaps, caps, floors or other derivative
products, or similar arrangements for the purpose of (i) maintaining timely
payments or providing additional protection against losses or interest rate
fluctuations on the assets included in such Trust, (ii) paying administrative
expenses, (iii) establishing a minimum reinvestment rate on the payments made in
respect of such assets or principal payment rate on such assets, or (iv)
accomplishing such other purpose as may be described in the Prospectus
Supplement. The Trust may include a guaranteed investment contract or
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reinvestment agreement pursuant to which funds held in one or more accounts will
be invested at a specified rate. If any class of Certificates has a floating
interest rate, or if any of the Mortgage Assets has a floating interest rate,
the Trust may include an interest rate swap contract, an interest rate cap
agreement or similar contract providing limited protection against interest rate
risks. Such arrangements may include agreements under which Certificateholders
are entitled to receive amounts deposited in various accounts held by the
Trustee upon the terms specified in such Prospectus Supplement. These
arrangements may be in addition to or in substitution for any forms of credit
support described in this Prospectus. Any such arrangement must be acceptable to
each Rating Agency.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates will
be affected primarily by the amount and timing of principal payments received on
or in respect of the Mortgage Assets included in the related Trust, the
allocation of available funds to various classes of Certificates, the
Pass-Through Rates for various classes of Certificates and the purchase price
paid for the Certificates. The original terms to maturity of the underlying
Mortgage Loans with respect to the Mortgage Assets in a given Mortgage Pool will
vary depending upon the type of Mortgage Loans included therein, and each
Prospectus Supplement will contain information with respect to the type and
maturities of such Mortgage Loans. Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans may be prepaid without penalty in full
or in part at any time, although a prepayment fee or penalty may be imposed in
connection therewith. The prepayment experience on the underlying Mortgage Loans
with respect to the Mortgage Assets will affect the life of the related Series
of Certificates.
Generally, home equity loans have smaller average principal balances than
senior or first mortgage loans and are not viewed by borrowers as permanent
financing. Accordingly, mortgage loans which are home equity loans may
experience a higher rate of prepayment than mortgage loans which represent first
liens. In addition, any future limitations on the right of borrowers to deduct
interest payments on mortgage loans for Federal income tax purposes may result
in a higher rate of prepayment of the mortgage loans (particularly the home
equity loans). The obligation of the Master Servicer to enforce "due on sale"
provisions (described below) of the mortgage loans may also increase
prepayments. The prepayment experience of the Mortgage Pools may be affected by
a wide variety of factors, including general and local economic conditions,
mortgage market interest rates, the availability of alternative financing and
homeowner mobility.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer generally will enforce any "due on sale" or due on encumbrance clause,
to the extent it has knowledge of the conveyance or further encumbrance or the
proposed conveyance or proposed further encumbrance of the Mortgaged Property
and reasonably believes that it is entitled to do so under applicable law and
the applicable Mortgage; provided, however, that the Master Servicer will not
take any enforcement action that would impair or threaten to impair any recovery
under any related insurance policy or materially increase the risk of default or
delinquency on, or materially decrease the security for, the Mortgage Loan. See
"The Pooling and Servicing Agreement -- Collection Procedures" and "Certain
Legal Aspects of the Mortgage Loans" herein for a description of certain
provisions of each Agreement and certain legal developments that may affect the
prepayment experience on the Mortgage Loans.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans, the Mortgage
Loans are likely to be subject to higher prepayment rates than if prevailing
interest rates remain at or above such Mortgage Rates. Conversely, if prevailing
interest rates rise appreciably above the Mortgage Rates borne by the Mortgage
Loans, the Mortgage Loans are likely to experience a lower prepayment rate than
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if prevailing rates remain at or below such Mortgage Rates. However, there can
be no assurance that such will be the case.
Greater than anticipated prepayments of principal will increase the yield
on Certificates purchased at a price less than par. Similarly, greater than
anticipated prepayments of principal will decrease the yield on Certificates
purchased at a price greater than par. The effect on an investor's yield of
principal prepayments on the Mortgage Loans occurring at a rate that is faster
(or slower) than the rate anticipated by the investor in the period immediately
following the issuance of the applicable class of Certificates may not be offset
by a subsequent like reduction (or increase) in the rate of principal payments.
The weighted average lives of Certificates will also be affected by the
amount and timing of delinquencies and defaults on the Mortgage Loans and the
liquidations of defaulted Mortgage Loans. Delinquencies and defaults will
generally slow the rate of payment of principal to the Certificateholders.
However, this effect will be offset to the extent that lump sum recoveries on
defaulted Mortgage Loans and foreclosed Mortgaged Properties result in principal
payments on the Mortgage Loans faster than otherwise scheduled.
When a full prepayment is made on a Simple Interest Loan, the Mortgagor is
charged interest on the principal amount of the Simple Interest Loan so prepaid
only for the number of days in the month actually elapsed up to the date of the
prepayment. This is generally also the case with respect to Scheduled Accrual
Loans and Precomputed Loans. With respect to each Simple Interest Loan, when a
principal payment is made that exceeds the principal portion of the scheduled
payment, but which was not intended by the Mortgagor to satisfy the Mortgage
Loan in full or to cure a delinquency, interest will cease to accrue on the
principal amount so prepaid as of the date of the prepayment. Unless otherwise
specified in the related Prospectus Supplement, the effect of prepayments will
be to reduce the amount of interest passed through in the following month to
Certificateholders because interest on the principal amount of any Simple
Interest Loan so prepaid will be paid only to the date of prepayment. Partial
prepayments in a given month may be applied to the outstanding principal
balances of the Simple Interest Loans so prepaid on the date of receipt. Unless
otherwise specified in the related Prospectus Supplement, both full and partial
prepayments will not be passed through until the Distribution Date following the
Due Period in which it is received. Interest shortfalls also could result from
the application of the Relief Act as described under "Certain Legal Aspects of
the Mortgage Loans--Soldiers' and Sailors' Civil Relief Act" herein. Unless
otherwise specified in the related Prospectus Supplement, in the event that less
than 30 days' interest is collected on a Mortgage Loan during a Due Period due
to prepayment in full, the Master Servicer will be obligated to pay Compensating
Interest with respect thereto. To the extent such shortfalls exceed the amount
of Compensating Interest that the Master Servicer is obligated to pay, the yield
on the Certificates could be adversely affected.
As a result of the payment terms of Simple Interest Loans, the making of a
scheduled payment, or the prepayment of, such a Simple Interest Loan prior to
its scheduled due date may result in the collection of less than one month's
interest on such Simple Interest Loan for the period since the preceding payment
was made. Conversely, if the scheduled payment on such a Simple Interest Loan is
made after its scheduled payment date or the Simple Interest Loan is prepaid
after the scheduled due date, the collection of interest on such Simple Interest
Loan for such period may be greater than one month's interest on such Simple
Interest Loan. In addition, the extent to which Simple Interest Loans experience
early payment or late payment of scheduled payments will correspondingly change
the amount of principal received during a monthly period and, accordingly, the
amount of principal to be distributed on the related Distribution Date and the
amount of unpaid principal due at the stated maturity of such Simple Interest
Loans. To the extent shortfalls attributable to prepayments or the early receipt
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of scheduled payments on Simple Interest Loans are not compensated for by any
forms of credit enhancement described in the related Prospectus Supplement, the
Certificateholders will experience delays or losses in amounts due them.
If a Mortgagor pays more than one scheduled installment on a Simple
Interest Loan at a time, the entire amount of the additional installment will be
treated as a principal prepayment and passed through to Certificateholders in
the month following the month of receipt. In such case, although the Mortgagor
may not be required to make the next regularly scheduled installment, interest
will continue to accrue on the principal balance of the Simple Interest Loan, as
reduced by the application of the additional installment. As a result, when the
Mortgagor pays the next required installment, the installment so paid may be
insufficient to cover the interest that has accrued since the last payment by
the Mortgagor. Notwithstanding such insufficiency, the Mortgagor's Simple
Interest Loan would be considered to be current. If specified in the related
Prospectus Supplement, the Master Servicer will be required to advance the
amount of such insufficiency. This insufficiency will continue until the
installment payments received are once again sufficient to cover all accrued
interest and to reduce the principal balance of the Simple Interest Loan.
Depending on the principal balance and interest rate of the related Simple
Interest Loan and on the number of installments that were paid early, there may
be extended periods of time during which Simple Interest Loans that are current
are not amortizing.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC, certain insurers or other entities specified in
the related Prospectus Supplement may have the option to purchase the assets of
a Trust Fund thereby effecting earlier retirement of the related Series of
Certificates. See "The Pooling and Servicing Agreement--Termination; Purchase of
Mortgage Loans" herein.
If and to the extent specified in the related Prospectus Supplement, one or
more class or classes of Certificates of a Series may receive a principal
payment at the end of the Funding Period from the portion of the Pre-Funded
Amount, if any, not used to purchase additional Mortgage Assets during such
Funding Period.
Factors other than those identified herein and in the related Prospectus
Supplement could significantly affect principal prepayments at any time and over
the lives of the Certificates. The relative contribution of the various factors
affecting prepayment may also vary from time to time. There can be no assurance
as to the rate of payment of principal of the Mortgage Assets at any time or
over the lives of the Certificates.
The Prospectus Supplement relating to a Series of Certificates will discuss
in detail the effect of the rate and timing of principal payments (including
Principal Prepayments), delinquencies and losses on the yield, weighted average
lives and maturities of such Certificates.
THE POOLING AND SERVICING AGREEMENT
Set forth below is a summary of certain provisions of each Agreement which
are not described elsewhere in this Prospectus. Where particular provisions or
terms used in an Agreement are referred to, such provisions or terms are as
specified in the related Agreement. The summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the provisions
of each Agreement.
Assignment of Mortgage Assets
Assignment of the Mortgage Loans. At the time of issuance of the
Certificates of a Series, the Depositor will cause the Mortgage Loans and other
Mortgage Assets comprising the related Trust to be assigned to the Trustee,
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together with all principal and interest received (or, in certain circumstances,
due) on or with respect to such Mortgage Loans on and after the Cut-off Date,
other than, if specified in the related Prospectus Supplement, principal and
interest due before the Cut-off Date and other than any Retained Interest
specified in the related Prospectus Supplement. The Trustee will, concurrently
with such assignment, deliver the Certificates to the Depositor in exchange for
the Mortgage Loans and other Mortgage Assets. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the related Agreement. Such
schedule will include information as to the outstanding principal balance of
each Mortgage Loan transferred to the Trust, as well as information regarding
the Mortgage Rate, the current scheduled monthly payment of principal and
interest, the maturity of the loan, and certain other information.
In addition, unless otherwise specified in the related Prospectus
Supplement or as described below, the Seller and the Depositor will deliver or
cause to be delivered to the Trustee (or the custodian hereinafter referred to)
the Mortgage Documents relating to each Mortgage Loan. If specified in the
related Prospectus Supplement, CIT Consumer Finance will be appointed as
custodian of the Mortgage Documents pursuant to the related Agreement and, in
such capacity, will retain possession of the Mortgage Documents. However, except
as otherwise specified in the related Prospectus Supplement, the Seller and the
Depositor will not deliver to the Trustee (or the custodian) assignments of the
related Mortgages to be recorded in the appropriate public office for real
property records. Subsequent to the issuance of the Certificates, the Seller may
be required in the circumstances specified in the related Agreement to deliver
to the Trustee (or the custodian) assignments of the related Mortgages to be
recorded (at the expense of the Seller) at such time after issuance of the
Certificates as may be specified in the related Prospectus Supplement, in such
an event, the Agreement may, as specified in the related Prospectus Supplement,
require any such Seller to repurchase from the Trustee any Mortgage Loan the
related Mortgage of which is not recorded within the specified time period, at
the Purchase Price. Unless otherwise provided in the related Prospectus
Supplement, the enforcement of the repurchase obligation would constitute the
sole remedy available to the Certificateholders and the Trustee for the failure
of a Mortgage to be recorded.
If the Depositor were to make a sale, assignment, satisfaction or discharge
of any Mortgage Loan prior to recording or filing the assignments to the
Trustee, the other parties to such sale, assignment, satisfaction or discharge
might have rights superior to those of the Trustee. If the Depositor were to do
so without authority under the Agreement, it would be liable to the related
Certificateholders. In addition, if insolvency proceedings relating to the
Depositor were commenced prior to such recording or filing, creditors of the
Depositor might be able to assert rights in the affected Mortgage Loans superior
to those of the Trustee.
In no event will the Seller be required to cause assignments of the
Mortgages to be recorded in states in which, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in such loans against the claim of any subsequent transferee
or any successor to or creditor of the Depositor or the originator of such
loans. Under each Agreement, the Trustee will be appointed attorney-in-fact for
each Seller and the Depositor with power to prepare, execute and record
assignments of the related Mortgages to the related Trust in the event that the
Seller and the Depositor fail to do so on a timely basis.
For certain Mortgage Loans transferred by the Depositor to the Trust, CIT
Consumer Finance will deliver to the Trustee (or the custodian), in lieu of the
original Mortgage Note, a new promissory note signed by the borrower confirming
its obligation under the original Mortgage Note (a "Confirmatory Mortgage
Note"). Furthermore, a Trust may include Mortgage Loans where the original
Mortgage Note or a Confirmatory Mortgage Note is not delivered to the Trustee
(or the custodian) if CIT Consumer Finance instead delivers to the Trustee (or
the custodian) an affidavit of the Seller certifying
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that the Seller or the Depositor was the sole owner of the indebtedness
evidenced by such note and the original thereof has been lost or destroyed and
the Seller indemnifies the Trust against any loss, liability, damage, claim or
expense resulting from CIT Consumer Finance's failure to deliver to the Trustee
(or the custodian) the original Mortgage Note or Confirmatory Mortgage Note.
Such indemnification will be terminated if CIT Consumer Finance subsequently
delivers the original Mortgage Note or a Confirmatory Mortgage Note. If CIT
Consumer Finance delivers such a lost note affidavit or fails to deliver any
assumption and modification agreement, within 45 days after the date of initial
issuance of the related series of Certificates it will deliver to the Trustee
(or the custodian) either the original Mortgage Note or Confirmatory Mortgage
Note and assumption and modification agreement, as applicable, or an opinion of
counsel satisfactory to the Trustee from counsel admitted to practice in the
jurisdiction in which the related Mortgaged Property is located to the effect
that the absence of the originals of such documents will not preclude the Master
Servicer from initiating or prosecuting to completion any foreclosure proceeding
with respect to such Mortgaged Property. If CIT Consumer Finance does not
deliver such documents or an opinion of counsel within such 45-day period, it
will be required to use its best reasonable efforts to substitute another
Mortgage Loan or, if it is unable to make such substitution, to repurchase the
original Mortgage Loan at the Purchase Price.
The Trustee (or the custodian if such custodian is not the Master Servicer
or CITSF) will review such Mortgage Documents within the time period specified
in the related Prospectus Supplement after receipt thereof, and will hold such
documents in trust for the benefit of the Certificateholders. Unless otherwise
specified in the related Prospectus Supplement, if any such document is found to
be missing or defective in any material respect, is not properly executed, is
unrelated to the Mortgage Loans of the related Trust or does not conform in a
material respect to the description thereof provided by or on behalf of CIT
Consumer Finance, the Trustee (or the custodian) or the Certificate Guaranty
Insurer, if any, will notify the Master Servicer and the Depositor, and the
Master Servicer will notify the related Seller. The related Seller is required
to use reasonable efforts to remedy a material defect in a document of which it
is so notified. If, however (unless otherwise specified in the related
Prospectus Supplement), within 90 days after the Trustee's notice to it
respecting such defect, such Seller has not remedied the defect and the defect
materially and adversely affects the interest of the Trust in the related
Mortgage Loan or the interests of the Certificate Guaranty Insurer, if any, such
Seller is required to (i) substitute in lieu of such Mortgage Loan a Qualified
Substitute Mortgage Loan (as defined herein) and, if the then outstanding
principal balance of such Qualified Substitute Mortgage Loan is less than the
principal balance of such Mortgage Loan as of the date of such substitution,
deposit in the related Certificate Account the Substitution Adjustment (as
defined herein), or (ii) purchase such Mortgage Loan at a price equal to the
Purchase Price related to such Mortgage Loan, which purchase price will be
deposited in the Certificate Account and delivered to the Trustee on the next
succeeding Deposit Date, except for the portion thereof, if any, relating to
unreimbursed Insured Payments, if any, which shall be paid directly to the
Certificate Guaranty Insurer.
There can be no assurance that a Seller will fulfill this purchase
obligation. Although the Master Servicer may be obligated to enforce such
obligation to the extent described above under "Mortgage Loan
Program--Representations by Sellers; Repurchases," neither the Master Servicer
nor the Depositor will be obligated to purchase such Mortgage Loan if such
Seller defaults on its purchase obligation. Unless otherwise specified in the
related Prospectus Supplement, this purchase obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or a
material defect in, a Mortgage Document.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee will appoint a custodian (which, if specified in the related Prospectus
Supplement, may be the Master Servicer or CITSF) pursuant to a custodial
agreement to maintain possession of and, if applicable, to review the Mortgage
Documents as agent of the Trustee.
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Notwithstanding the foregoing provisions, with respect to a Trust for which
a REMIC election is to be made, unless the related Prospectus Supplement
otherwise provides, no purchase of or substitution for a Mortgage Loan will be
made without having first received an opinion of counsel knowledgeable in
federal income tax matters that such purchase or substitution would not result
in a prohibited transaction tax or would cause such Trust to fail to qualify as
a REMIC. If a REMIC election is to be made with respect to a Trust, unless
otherwise provided in the related Prospectus Supplement, the Master Servicer or
a holder of the related residual certificate will be obligated to pay any
prohibited transaction tax that may arise in connection with any such repurchase
or substitution. The Master Servicer, unless otherwise specified in the related
Prospectus Supplement, will be entitled to reimbursement for any such payment
from any holder of the related residual certificate. See "Description of the
Certificates--General" herein and in the related Prospectus Supplement.
Assignment of Private Mortgage-Backed Securities. The Depositor will cause
the Private Mortgage-Backed Securities to be registered in the name of the
Trustee. The Trustee (or the custodian) will have possession of any certificated
Private Mortgage-Backed Securities. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will not be in possession of or be assignee
of record of any underlying assets for a Private Mortgage-Backed Security. See
"The Trusts--Private Mortgage-Backed Securities" herein. Each Private
Mortgage-Backed Security will be identified in a schedule appearing as an
exhibit to the related Agreement which will specify the original principal
amount, outstanding principal balance as of the Cut-off Date, annual
pass-through rate or interest rate and maturity date and certain other pertinent
information for each Private Mortgage-Backed Security conveyed to the Trustee.
Payments on Mortgage Assets; Deposits to Certificate Account
The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust a separate account or accounts
for the collection of payments on the related Mortgage Assets in the Trust (the
"Certificate Account"), which unless otherwise specified in the related
Prospectus Supplement, must be either (i) maintained with a depository
institution the short-term debt obligations of which (or in the case of a
depository institution that is the principal subsidiary of a holding company,
the short-term debt obligations of which) are rated in the highest short-term
rating category by the nationally recognized statistical rating organization(s)
that provides a rating for one or more classes of the related Series of
Certificates (each, a "Rating Agency"), (ii) an account or accounts the deposits
in which are fully insured by the FDIC, (iii) an account or accounts the
deposits in which are insured by the FDIC, and the uninsured deposits in which
are otherwise secured such that the Certificateholders have a claim with respect
to the funds in the Certificate Account or a perfected first priority security
interest against any collateral securing such funds that is superior to the
claims of any other depositors or general creditors of the depository
institution with which the Certificate Account is maintained, (iv) a trust
account or accounts maintained with the trust department of a Federal or a state
chartered depository institution or trust company, acting in a fiduciary
capacity or (v) an account or accounts otherwise acceptable to each such Rating
Agency. The collateral eligible to secure amounts in the Certificate Account is
limited to Permitted Investments. A Certificate Account may be maintained as an
interest bearing account or the funds held therein may be invested pending each
succeeding Distribution Date in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or its
designee will be entitled to receive any such interest or other income earned on
funds in the Certificate Account as additional compensation and will be
obligated to deposit in the Certificate Account the amount of any loss
immediately as realized. The Certificate Account may be maintained with the
Master Servicer or with a depository institution that is an affiliate of the
Master Servicer, provided it meets the standards set forth above.
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Unless otherwise specified herein or in the related Prospectus Supplement,
the Master Servicer will deposit in the Certificate Account no later than two
Business Days following receipt thereof the following payments and collections
received or made by it (net of the Master Servicing Fee and other amounts due to
the Master Servicer) subsequent to the Cut-off Date (including scheduled
payments of principal and interest due on or after the Cut-off Date but received
by the Servicer on or before the Cut-off Date):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement,
prepayment penalties, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes,
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the Master Servicer, if any) of the hazard
insurance policies and any Primary Mortgage Insurance Policies and any
other insurance policies covering a Mortgage Loan, Mortgaged Property or
REO Property, to the extent such proceeds are not applied to the
restoration of the Mortgaged Property or released to the Mortgagor in
accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts (net of
unreimbursed expenses and Servicing Advances incurred in connection with
liquidation or foreclosure ("Liquidation Expenses") and unreimbursed
Advances, if any) received and retained in connection with the liquidation
of defaulted Mortgage Loans, by foreclosure or otherwise ("Liquidation
Proceeds"), together with any net proceeds received on a monthly basis with
respect to any Mortgaged Properties acquired on behalf of the
Certificateholders by foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Mortgage Loan or Mortgaged Property in
respect thereof purchased by the Master Servicer, the Depositor or any
Seller as described under "The Pooling and Servicing
Agreement--Representations by Sellers; Repurchases" or "The Pooling and
Servicing Agreement--Assignment of Mortgage Assets" above and all proceeds
of any Mortgage Loan repurchased as described under "The Pooling and
Servicing Agreement--Termination; Optional Termination" below;
(v) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Certificate Account and, to the extent
specified in the related Prospectus Supplement, any payments required to be
made by the Master Servicer in connection with prepayment interest
shortfalls;
(vii) all other amounts required to be deposited in the Certificate
Account pursuant to the Agreement including, if applicable, funds from (A)
any credit enhancement, (B) the Pre-Funding Account, and (C) all payments
on Private Mortgage-Backed Securities; and
(viii) proceeds received during the related Due Period in connection
with a taking of a related Mortgaged Property with respect to a Mortgage
Loan by condemnation or the exercise of eminent domain or in connection
with a release of part of any such Mortgaged Property from the related lien
("Released Mortgaged Property Proceeds").
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Subject to compliance with the Agreement, for as long as CIT Consumer
Finance remains the Master Servicer under the Agreement and CIT Consumer Finance
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 S&P (as defined herein) 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 (as defined herein), the Master Servicer (or any Sub-Servicer
which is an affiliate of CIT) will not be required to make such deposits into
the Certificate Account (the "Delayed Deposits") until the Business Day
immediately preceding the Distribution Date (the "Deposit Date") following the
last day of the Due Period within which such payments were processed by the
Servicer.
In those cases where a Sub-Servicer which is not an affiliate of CIT is
servicing a Mortgage Loan, the Sub-Servicer will establish and maintain an
account ("Sub-servicing Account") that will comply with the standards set forth
above, and which is otherwise acceptable to the Master Servicer. The
Sub-Servicer is required to deposit into the Sub-servicing Account on a daily
basis all amounts enumerated in the preceding paragraph in respect of the
Mortgage Loans received by the Sub-Servicer, less its servicing compensation. On
the date specified in the related Prospectus Supplement, the Sub-Servicer shall
remit to the Master Servicer all funds held in the Sub-servicing Account with
respect to each Mortgage Loan. The Sub-Servicer may, to the extent described in
the related Prospectus Supplement, be required to advance any monthly
installment of principal and interest that was not received less its servicing
fee, by the date specified in the related Prospectus Supplement.
The Master Servicer (or the Sub-Servicer or the Depositor, as applicable)
may from time to time direct the institution that maintains the Certificate
Account to withdraw funds from the Certificate Account for the following
purposes:
(i) to pay to the Master Servicer the servicing fees described in the
related Prospectus Supplement, the Master Servicing Fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the Certificate Account;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Mortgage Loan being limited to amounts
received that represent late recoveries of payments of principal and/or
interest on such Mortgage Loan (or Insurance Proceeds, Liquidation Proceeds
or Released Mortgaged Property Proceeds with respect thereto) with respect
to which such Advance was made, proceeds of any Mortgage Loans repurchased
by the Depositor, a Sub-Servicer or a Seller pursuant to the related
Agreement and any other amount otherwise distributable to the holder or
holders of Certificates representing the residual interest in the related
Trust if a REMIC election has been made with respect thereto;
(iii) to reimburse the Master Servicer for any Advances previously
made which the Master Servicer has determined to be nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid Master Servicing Fees
and unreimbursed out-of-pocket costs and expenses incurred by the Master
Servicer in the performance of its servicing obligations;
(vi) to pay to the Master Servicer, with respect to each Mortgage Loan
or Mortgaged Property acquired in respect thereof that has been purchased
by the Master Servicer pursuant to the Agreement, all amounts received
thereon and not taken into account in determining the principal balance of
such repurchased Mortgage Loan;
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(vii) to reimburse the Master Servicer or the Depositor for
liquidation expenses incurred in connection with Liquidated Mortgages and
reimbursable pursuant to the Agreement;
(viii) to withdraw any amount deposited in the Certificate Account and
not required to be deposited therein; and
(ix) to clear and terminate the Certificate Account upon termination
of the Agreement.
Unless otherwise specified in the related Prospectus Supplement, on or
prior to the Business Day immediately preceding each Distribution Date, the
Master Servicer shall withdraw from the Certificate Account the amount of
Available Funds, to the extent on deposit, for deposit in an account maintained
by the Trustee for the related Series of Certificates.
Except as otherwise provided in the related Prospectus Supplement with
respect to each Buydown Loan, the Master Servicer will deposit the Buydown Funds
in a custodial account (which may be interest-bearing) complying with the
requirements set forth above for the Certificate Account (the "Buydown
Account"). The amount of such deposit, together with investment earnings thereon
at the rate specified in the related Prospectus Supplement, will provide funds
sufficient to support the payments on such Buydown Loan on a level debt service
basis. The Master Servicer will not be obligated to add to the Buydown Account
should investment earnings prove insufficient to maintain the scheduled level of
payments on the Buydown Loans, in which event, distributions to the
Certificateholders may be affected.
With respect to each Graduated Payment Loan, the Master Servicer will, if
and to the extent provided in the related Prospectus Supplement, deposit in a
custodial account (which may be interest-bearing) complying with the
requirements set forth above for the Certificate Account an amount which,
together with investment earnings thereon at the rate set forth in the related
Prospectus Supplement, will provide funds sufficient to support the payments
thereon on a level debt service basis (the "Graduated Payment Account"). The
Master Servicer will not be obligated to supplement the Graduated Payment
Account should investment earnings thereon prove insufficient to maintain the
scheduled level of payments, in which event, distributions to the
Certificateholders may be affected.
Representations by Sellers; Repurchases
Each Seller will have made representations and warranties in the related
Agreement in respect of the Mortgage Loans sold by such Seller and evidenced by
a Series of Certificates. Such representations and warranties, unless otherwise
provided in the related Prospectus Supplement, generally include, among other
things: (i) that any required title insurance (or in the case of Mortgaged
Properties located in areas where such policies are generally not available, an
attorney's certificate of title) and any required hazard insurance policy were
effective at the origination of each Mortgage Loan, and that each policy (or
certificate of title as applicable) remained in effect on the date of purchase
of the Mortgage Loan from the Seller by or on behalf of the Depositor; (ii) that
the Seller had good title to each such Mortgage Loan and such Mortgage Loan was
subject to no offsets, defenses, counterclaims or rights of rescission except to
the extent that any buydown agreement described herein may forgive certain
indebtedness of a Mortgagor; (iii) that each Mortgage Loan constituted a valid
lien on the Mortgaged Properties (subject only to exceptions described in the
related Agreement) and that the Mortgaged Property, to the best knowledge of the
Seller, was free from damage and was in good repair; (iv) that there were no
delinquent tax or assessment liens against the Mortgaged Property; (v) as of the
related Cut-off Date, no Mortgage Loan will be 60 days or more delinquent in
payment; and (vi) that each Mortgage Loan was made in compliance with, and is
enforceable under, all applicable local, state and federal laws and regulations
in all material respects except as limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
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If specified in the related Prospectus Supplement, the representations and
warranties of a Seller in respect of a Mortgage Loan will be made not as of the
Cut-off Date but as of the date on which such Seller sold the Mortgage Loan to
the Depositor or one of its affiliates. Under such circumstances, a substantial
period of time may have elapsed between such date and the date of initial
issuance of the Series of Certificates evidencing an interest in such Mortgage
Loan. Since the representations and warranties of a Seller do not address events
that may occur following the sale of a Mortgage Loan by such Seller, its
repurchase obligation described below will not arise if the relevant event that
would otherwise have given rise to such an obligation with respect to a Mortgage
Loan occurs after the date of sale of such Mortgage Loan by such Seller to the
Depositor or its affiliates. However, the Depositor will not include any
Mortgage Loan in the Trust for any Series of Certificates if anything has come
to the Depositor's attention that would cause it to believe that the
representations and warranties of a Seller will not be accurate and complete in
all material respects in respect of such Mortgage Loan as of the date of initial
issuance of the related Series of Certificates. If the Master Servicer is also a
Seller of Mortgage Loans with respect to a particular Series, such
representations will be in addition to the representations and warranties made
by the Master Servicer in its capacity as the Master Servicer.
If the Depositor elects to cause the Trust relating to a Series of
Certificates to be treated as a REMIC, each Seller will make representations and
warranties in the related Agreement with respect to the related Mortgage Loans
as of the date of initial issuance of such Series of Certificates (the "Closing
Date"), including that (i) each Mortgage Loan is a "qualified mortgage" under
Section 860G(a)(3) of the Code, and (ii) none of the Mortgage Loans had a
loan-to-value ratio greater than 125% at the time of origination and, in the
case of a Mortgage Loan that has been modified, at the time of origination and
at the time such Mortgage Loan has been modified. For purposes of computing such
loan-to-value ratio for a Mortgage Loan which, with respect to the real estate
on which the related Mortgaged Property is located, is not secured by a first
mortgage, the fair market value of the Mortgaged Property and other property
securing the Mortgage Loan must be reduced by the amount of any lien that is
senior to the Mortgage Loan, and must be further reduced by a proportionate
amount of any lien that is on a parity with the Mortgage Loan.
Pursuant to the Agreement, the Master Servicer, the Trustee, any
Sub-Servicer, CIT Consumer Finance, or the Certificate Guaranty Insurer, if any,
will promptly notify the relevant Seller of any material breach of any
representation or warranty made by such Seller in respect of a Mortgage Loan
that materially and adversely affects the interests of the Certificateholders
(or the interests of the Certificate Guaranty Insurer, if any) in such Mortgage
Loan. Unless otherwise specified in the related Prospectus Supplement, if such
Seller does not cure such breach by the earlier of (i) 90 days after such Seller
became aware of such breach, and (ii) 85 days after receipt of notice from the
Master Servicer, the Trustee, CIT Consumer Finance, any Sub-Servicer, or the
Certificate Guaranty Insurer, if any, then such Seller will be obligated (A) to
remove such Mortgage Loan and substitute in lieu of such Mortgage Loan a
substitute Mortgage Loan which qualifies for substitution under the related
Agreement (a "Qualified Substitute Mortgage Loan") and, if the then outstanding
principal balance of such Qualified Substitute Mortgage Loan is less than the
principal balance of such Mortgage Loan as of the date of such substitution,
deposit in the related Certificate Account the amount of such shortfall in
principal balance arising from such substitution (the "Substitution
Adjustment"), or (B) to repurchase such Mortgage Loan from the Trust at a price
(the "Purchase Price") equal to 100% of the outstanding principal balance
thereof as of the date of the repurchase plus accrued interest thereon to the
first day of the month in which the Purchase Price is to be distributed at the
Mortgage Rate (less any unreimbursed Advances or amount payable as related
servicing compensation if such Seller is the Master Servicer with respect to
such Mortgage Loan), which Purchase Price will be deposited in the Certificate
Account and delivered to
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the Trustee on the next succeeding Deposit Date, except for the portion thereof,
if any, relating to unreimbursed Insured Payments, if any, which shall be paid
directly to the Certificate Guaranty Insurer. Notwithstanding the foregoing
provisions, with respect to a Trust for which a REMIC election is to be made,
unless the related Prospectus Supplement otherwise provides, no purchase of or
substitution for a Mortgage Loan will be made without having first received an
opinion of counsel knowledgeable in federal income tax matters that such
purchase or substitution would not result in a prohibited transaction tax or
would cause such Trust to fail to qualify as a REMIC. If a REMIC election is to
be made with respect to a Trust, unless otherwise provided in the related
Prospectus Supplement, the Master Servicer or a holder of the related residual
certificate will be obligated to pay any prohibited transaction tax that may
arise in connection with any such repurchase or substitution. The Master
Servicer, unless otherwise specified in the related Prospectus Supplement, will
be entitled to reimbursement for any such payment from any holder of the related
residual certificate. See "Description of the Certificates--General" herein and
in the related Prospectus Supplement. Except in those cases in which the Master
Servicer is a Seller, the Master Servicer will be required under the applicable
Agreement to enforce this obligation for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. This repurchase
obligation will constitute the sole remedy available to Certificateholders, the
Trustee or the Certificate Guaranty Insurer, if any, for a breach of
representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master Servicer
is a Seller) will be obligated to purchase a Mortgage Loan if a Seller defaults
on its obligation to do so, and no assurance can be given that Sellers will
carry out their respective repurchase obligations with respect to Mortgage
Loans.
Collection Procedures
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer will agree to master service the Mortgage Loans in accordance with the
related Agreement and, where applicable, prudent mortgage servicing standards.
"Prudent mortgage servicing standards" generally will require the Master
Servicer to exercise collection and foreclosure procedures with respect to the
Mortgage Loans with the same degree of care and skill that it would use in
master servicing similar mortgage loans for its own account and for the account
of its affiliates. The Master Servicer will make reasonable efforts to collect
all payments called for under the Mortgage Loans and will, consistent with each
Agreement and any Mortgage Pool Insurance Policy, Primary Mortgage Insurance
Policy and Bankruptcy Bond or alternative arrangements, follow such collection
procedures as are customary with respect to mortgage loans that are comparable
to the Mortgage Loans. Nonetheless, the Master Servicer, in determining the type
of action that is reasonable to pursue may consider, among other things, the
unpaid principal balance of a Mortgage Loan against the estimated cost of
collection or foreclosure action, the unpaid balance of the related prior
mortgage, if any, the condition and estimated market value ("as is" and "if
repaired"), the estimated marketability of the related Mortgage Property and the
borrower's ability to repay.
Waivers And Deferrals
Consistent with the above, the Master Servicer may, in its discretion, (i)
waive any assumption fee, prepayment charge, penalty interest, late payment or
other charge in connection with a Mortgage Loan, and (ii) to the extent not
inconsistent with the coverage of such Mortgage Loan by a Mortgage Pool
Insurance Policy, Primary Mortgage Insurance Policy or Bankruptcy Bond or
alternative arrangements, if applicable, arrange with a Mortgagor a schedule for
the repayment of delinquent amounts subject to any limitations set forth in the
Agreement. To the extent the Master Servicer
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consents to the deferment of the due dates for payments due on a Mortgage Note,
the Master Servicer will nonetheless make payment of any required Advance with
respect to the payments so extended to the same extent as if such installment
had not been deferred.
Escrow Account
If and to the extent specified in the related Prospectus Supplements and
under the related Agreement, the Master Servicer, to the extent permitted by
law, may establish and maintain an escrow account (the "Escrow Account") in
which Mortgagors will be required to deposit amounts sufficient to pay taxes,
assessments, mortgage and hazard insurance premiums, collection expenses, other
comparable items and any other amount permitted to be escrowed by law.
Withdrawals from the Escrow Account maintained for Mortgagors may be made to
effect timely payment of taxes, assessments, mortgage and hazard insurance, to
refund to Mortgagors amounts determined to be overages, to pay interest to
Mortgagors on balances in the Escrow Account to the extent required by law, to
repair or otherwise protect the Mortgaged Property, to clear and terminate such
account and to pay such other amounts as may be permitted by applicable law or
the escrow agreement. The Master Servicer will be responsible for the
administration of the Escrow Account and will be obligated to make payments to
such account when a deficiency exists therein.
Enforcement of Due on Sale Clauses
Unless otherwise specified in the related Prospectus Supplement, in any
case in which Mortgaged Property securing a conventional Mortgage Loan has been,
or is about to be, conveyed by the Mortgagor, the Master Servicer will, to the
extent it has knowledge of such conveyance or proposed conveyance, exercise or
cause to be exercised its rights to accelerate the maturity of such Mortgage
Loan under any "due on sale" clause applicable thereto, but only if, in the
reasonable belief of the Master Servicer, the exercise of such rights is
permitted by applicable law and the applicable Mortgage, will not impair or
threaten to impair any recovery under any related Primary Mortgage Insurance
Policy and will not materially increase the risk of default or delinquency on,
or materially decrease the security for, such Mortgage Loan. If these conditions
are not met or if the Master Servicer reasonably believes it is unable under
applicable law and under the applicable Mortgage to enforce such "due on sale"
clause, the Master Servicer will enter into or cause to be entered into an
assumption and modification agreement with the person to whom such Mortgaged
Property has been or is about to be conveyed, pursuant to which such person
becomes liable for repayment of the Mortgage Loan and, to the extent permitted
by applicable law and the applicable Mortgage, the Mortgagor also remains liable
thereon. Any fee collected by or on behalf of the Master Servicer for entering
into an assumption agreement will be retained by or on behalf of the Master
Servicer as additional servicing compensation. See "Certain Legal Aspects of the
Mortgage Loans--Due on Sale Clauses" herein. The Master Servicer also will be
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note.
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Hazard Insurance
Unless otherwise specified in the related Prospectus Supplement, all
Mortgages will contain provisions requiring the Mortgagor on each Mortgage Loan
to maintain a hazard insurance policy providing for no less than the coverage of
the standard form of fire insurance policy with extended coverage customary for
the type of Mortgaged Property in the state in which such Mortgaged Property is
located. Such coverage will be in an amount that is at least equal to the lesser
of (i) the maximum insurable value of the improvements securing such Mortgage
Loan or (ii) the outstanding principal balance of the Mortgage Loan and the
related senior mortgage (if any) and (iii) the minimum amount required to
compensate for damage or loss on a replacement cost basis. If the Mortgagor
fails to maintain such insurance coverage, however, the Master Servicer will not
be obligated to obtain such insurance and advance premiums for such insurance on
behalf of the Mortgagor (i.e. "force placement" of hazard insurance). All
amounts collected by the Master Servicer under any hazard policy (except for
amounts to be applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) will be deposited in the related Certificate Account. In
the event that the Master Servicer maintains a blanket policy insuring against
hazard losses on all the Mortgage Loans comprising part of a Trust, it will
conclusively be deemed to have satisfied its obligation relating to the
maintenance of hazard insurance. Such blanket policy may contain a deductible
clause, in which case the Master Servicer will be required to deposit from its
own funds into the related Certificate Account the amounts that would have been
deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a Mortgage Loan
by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans may have been
underwritten by different insurers under different state laws in accordance with
different applicable forms and therefore may not contain identical terms and
conditions, the basic terms thereof are dictated by the respective state laws,
and most such policies typically do not cover any physical damage resulting from
the following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and mud
flows), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, in certain cases, vandalism.
The foregoing list is merely indicative of certain kinds of uninsured risks
and is not intended to be all inclusive. If the appraisal (if any) of the
Mortgaged Property securing a Mortgage Loan indicates that the Mortgaged
Property is located in a federally designated special flood area at the time of
origination identified in the Federal Register by the Flood Emergency Management
Agency as having special flood hazards (and such flood insurance has been made
available), the Seller will in some cases require the Mortgagor to obtain flood
insurance subject to the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended.
The Master Servicer will also be required to maintain, to the extent such
insurance is available, on REO Property, fire and hazard insurance in the
applicable amounts described above, liability insurance and, to the extent
required and available under the National Flood Insurance Act of 1968, as
amended, flood insurance in an amount equal to that required above.
The hazard insurance policies covering Mortgaged Properties typically
contain a clause which in effect requires the insured at all times to carry
insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the Mortgaged Property in order to recover the full amount
of any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability in the event of partial loss will not
exceed the larger of (i) the actual cash value (generally defined as replacement
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cost at the time and place of loss, less physical depreciation) of the
improvements damaged or destroyed, or (ii) such proportion of the loss as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of such improvements. Since improved real estate generally has
appreciated in value over time in the past, in the event of partial loss the
hazard insurance proceeds may be insufficient to restore fully the damaged
property. If specified in the related Prospectus Supplement, a special hazard
insurance policy will be obtained to insure against certain of the uninsured
risks described above. See "Credit Enhancement--Special Hazard Insurance
Policies" herein.
Realization Upon Defaulted Mortgage Loans
Unless otherwise specified in the Prospectus Supplement, the Master
Servicer will be required to foreclose upon or otherwise comparably convert the
ownership to the name of the Trustee (or to a nominee of the Trustee or the
Master Servicer) of Mortgaged Properties relating to defaulted Mortgage Loans as
to which no satisfactory arrangements can be made for collection of delinquent
payments to the extent that such action would be consistent with prudent
mortgage servicing standards. However, the Master Servicer will be required to
take into account the existence of any hazardous substances, hazardous wastes or
solid wastes on a Mortgaged Property in determining whether to foreclose upon or
otherwise comparably convert the ownership of such Mortgaged Property.
Primary Mortgage Insurance Policies. The Master Servicer will maintain or
cause to be maintained, as the case may be, in full force and effect, but only
if and to the extent specified in the related Prospectus Supplement, a Primary
Mortgage Insurance Policy with regard to each Mortgage Loan for which such
coverage is required. The Master Servicer will not cancel or refuse to renew any
such Primary Mortgage Insurance Policy in effect at the time of the initial
issuance of a Series of Certificates that is required to be kept in force under
the applicable Agreement unless the replacement Primary Mortgage Insurance
Policy for such canceled or nonrenewed policy is maintained with an insurer
whose claims-paying ability is sufficient to maintain the current rating of the
classes of Certificates of such Series which have been rated.
Although the terms and conditions of primary mortgage insurance vary, the
amount of a claim for benefits under a Primary Mortgage Insurance Policy
covering a Mortgage Loan will consist of the insured percentage of the unpaid
principal amount of the covered Mortgage Loan and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the insured (other than the proceeds of hazard
insurance) that are derived from or in any way related to the Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore the Mortgaged Property and which have not been applied to the payment of
the Mortgage Loan, (iii) amounts expended but not approved by the issuer of the
related Primary Mortgage Insurance Policy (the "Primary Insurer"), (iv) claim
payments previously made by the Primary Insurer, and (v) unpaid premiums.
Primary Mortgage Insurance Policies reimburse certain losses sustained by
reason of defaults in payments by borrowers. Primary Mortgage Insurance Policies
will not insure against, and exclude from coverage, a loss sustained by reason
of a default arising from or involving certain matters, including (i) fraud or
negligence in origination or servicing of the Mortgage Loans, including
misrepresentation by the originator, Seller, Mortgagor or other persons involved
in the origination of the Mortgage Loan; (ii) failure to construct the Mortgaged
Property subject to the Mortgage Loan in accordance with specified plans; (iii)
physical damage to the Mortgaged Property; and (iv) the related Sub-Servicer not
being approved as a servicer by the Primary Insurer.
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Recoveries Under a Primary Mortgage Insurance Policy. As conditions
precedent to the filing of or payment of a claim under a Primary Mortgage
Insurance Policy covering a Mortgage Loan, the insured will be required to (i)
advance or discharge (a) all hazard insurance policy premiums, and (b) as
necessary and approved in advance by the Primary Insurer, (1) real estate
property taxes, (2) all expenses required to maintain the related Mortgaged
Property in at least as good a condition as existed at the effective date of
such Primary Mortgage Insurance Policy, ordinary wear and tear excepted, (3)
Mortgaged Property sales expenses, (4) any outstanding liens (as defined in such
Primary Mortgage Insurance Policy) on the Mortgaged Property, and (5)
foreclosure costs, including court costs and reasonable attorneys' fees; (ii) in
the event of any physical loss or damage to the Mortgaged Property, restore and
repair the Mortgaged Property to at least as good a condition as existed at the
effective date of such Primary Mortgage Insurance Policy, ordinary wear and tear
excepted; and (iii) tender to the Primary Insurer good and marketable title to
and possession of the Mortgaged Property.
The Master Servicer, on behalf of itself, the Trustee and the
Certificateholders, will present claims to the insurer under each Primary
Mortgage Insurance Policy, and will take such reasonable steps as are necessary
to receive payment or to permit recovery thereunder with respect to defaulted
Mortgage Loans. As set forth above, all collections by or on behalf of the
Master Servicer under any Primary Mortgage Insurance Policy and, when the
Mortgaged Property has not been restored, the related hazard insurance policy
are to be deposited in the Certificate Account, subject to withdrawal as
heretofore described.
If the Mortgaged Property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged Mortgaged Property to a condition sufficient to permit
recovery under the related Primary Mortgage Insurance Policy, if any, the Master
Servicer is not required to expend its own funds to restore the damaged
Mortgaged Property unless it determines (i) that such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses; and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If coverage under a Primary Mortgage Insurance Policy is not available or
is insufficient. If recovery on a defaulted Mortgage Loan under any related
Primary Mortgage Insurance Policy is not available for the reasons set forth in
the preceding paragraph, or if the defaulted Mortgage Loan is not covered by a
Primary Mortgage Insurance Policy, the Master Servicer will be obligated to
follow or cause to be followed such normal practices and procedures as it deems
necessary or advisable to realize upon the defaulted Mortgage Loan. If the
proceeds of any liquidation of the Mortgaged Property securing the defaulted
Mortgage Loan are less than the principal balance of such Mortgage Loan plus
interest accrued thereon that is payable to Certificateholders, the Trust will
realize a loss in the amount of such difference plus the aggregate of expenses
incurred by the Master Servicer in connection with such proceedings that are
reimbursable under the Agreement. In the unlikely event that any such
proceedings result in a total recovery which is, after reimbursement to the
Master Servicer of its expenses, in excess of the principal balance of such
Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
compensation with respect to such Mortgage Loan and, unless otherwise specified
in the related Prospectus Supplement, amounts representing the balance of such
excess, exclusive of any amount required by law to be forwarded to the related
Mortgagor, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of a
Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
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compensation with respect to such Mortgage Loan. In the event that the Master
Servicer has expended its own funds to restore the damaged Mortgaged Property
and such funds have not been reimbursed under the related hazard insurance
policy, it will be entitled to withdraw from the Certificate Account out of
related Liquidation Proceeds or Insurance Proceeds an amount equal to such
expenses incurred by it, in which event the Trust may realize a loss up to the
amount so charged. Since Insurance Proceeds cannot exceed deficiency claims and
certain expenses incurred by the Master Servicer, no such payment or recovery
will result in a recovery to the Trust that exceeds the principal balance of the
defaulted Mortgage Loan together with accrued interest thereon. See "Credit
Enhancement" herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement or the
related Agreement, the proceeds from any liquidation of a Mortgage Loan will be
applied in the following order of priority: first, to reimburse the Master
Servicer for any unreimbursed costs of collection and expenses incurred by it in
the liquidation or to restore the related Mortgaged Property and any servicing
compensation payable to the Master Servicer with respect to such Mortgage Loan;
second, to reimburse the Master Servicer for any unreimbursed Advances or
Servicing Advances with respect to such Mortgage Loan; third, to repay accrued
and unpaid interest (to the extent no Advance has been made for such amount) on
such Mortgage Loan; and fourth, to repay principal of such Mortgage Loan.
Servicing and Other Compensation and Payment of Expenses
The principal servicing compensation to be paid to the Master Servicer in
respect of its master servicing activities for each Series of Certificates will
be equal to the percentage per annum described in the related Prospectus
Supplement (which may vary under certain circumstances) of the outstanding
principal balance of each Mortgage Loan, and such compensation will be retained
by it from collections of interest on such Mortgage Loan in the related Trust
(the "Master Servicing Fee"). Unless otherwise specified in the related
Prospectus Supplement, as compensation for its servicing duties, the Master
Servicer will be entitled to a monthly servicing fee as described in the related
Prospectus Supplement. In addition, the Master Servicer will retain any benefit
that may accrue as a result of the investment of funds in the applicable
Certificate Account (unless otherwise specified in the related Prospectus
Supplement), and certain other excess amounts.
The Master Servicer will pay or cause to be paid the reasonable and
customary ongoing expenses associated with each Trust and incurred by it in
connection with its responsibilities under the related Agreement, including,
without limitation, payment of the fees and disbursements of the Trustee, any
custodian appointed by the Trustee, the certificate registrar and any paying
agent, and payment of expenses incurred in enforcing the obligations of
Sub-Servicers and Sellers. The Master Servicer will be entitled to reimbursement
of expenses incurred in enforcing the obligations of Sub-Servicers and Sellers
under certain limited circumstances. In addition, the Master Servicer will pay
the cost of (i) the preservation, restoration and protection of any Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
and (iii) the management and liquidation of Mortgaged Property acquired in
satisfaction of the related Mortgage Loan. Such expenditures may include costs
of collection efforts, reappraisals when a Mortgage Loan is past due, legal fees
in connection with foreclosure actions, advancing payments on the related senior
mortgage, if any, advances of delinquent property taxes, upkeep and maintenance
of the Mortgaged Property if it is acquired through foreclosure and similar
types of expenses. Each such expenditure constitutes a "Servicing Advance." The
Master Servicer will be obligated to make the Servicing Advances incurred in the
performance of its servicing obligations only if it determines (i) that such
actions will increase the proceeds of liquidation of the Mortgage Loan to
Certificateholders after reimbursement to itself for such expenses, and (ii)
that such expenses will be recoverable to it as described below. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
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will be entitled to recover Servicing Advances to the extent permitted by the
Mortgage Loans or, if not theretofore recovered from the Mortgagor on whose
behalf such Servicing Advance was made, from Liquidation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Master Servicer from
the Mortgagor or otherwise relating to the Mortgage Loan. Servicing Advances
will be reimbursable to the Master Servicer from the sources described above out
of the funds on deposit in the Certificate Account, such right of reimbursement
being prior to the rights of Certificateholders to receive any related
Liquidation Proceeds (including Insurance Proceeds). A "Liquidated Mortgage" is
a Mortgage Loan as to which the Master Servicer has determined that all
recoverable Liquidation Proceeds and Insurance Proceeds have been received.
Evidence as to Compliance
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers, the servicing by or on behalf of the Master
Servicer of Mortgage Loans, or Private Mortgage-Backed Securities, under
Agreements substantially similar to each other (including the related Agreement)
was conducted in compliance with the minimum servicing standards set forth in
the Uniform Single Attestation Program for Mortgage Bankers except for any
significant exceptions or errors in records that, in the opinion of the firm,
the Uniform Single Attestation Program for Mortgage Bankers requires it to
report. In rendering its statement such firm may rely, as to matters relating to
the direct servicing of Mortgage Loans or Private Mortgage-Backed Securities by
Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or before
a specified date in each year, of an annual statement signed by an officer of
the Master Servicer to the effect that the Master Servicer has fulfilled its
obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of the Master Servicer may be obtained by Certificateholders of the related
Series without charge upon written request to the Master Servicer at the address
set forth in the related Prospectus Supplement.
List of Certificateholders
Each Agreement will provide that three or more holders of Certificates of
any Series may, by written request to the Trustee and at their expense, obtain
access to the list of all Certificateholders maintained by the Trustee for the
purpose of communicating with other Certificateholders with respect to their
rights under the Agreement and the Certificates.
Certain Matters Regarding the Master Servicer and the Depositor
CIT Consumer Finance will be the Master Servicer under each Agreement, and
is an affiliate of the Depositor. Unless otherwise specified in the related
Prospectus Supplement, CIT Consumer Finance will appoint CITSF as a Sub-Servicer
for all of the Mortgage Loans in each Mortgage Pool.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under such Agreement except upon a determination that
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the performance by it of its duties thereunder is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Each Agreement will further provide that neither the Master Servicer, the
Sub-Servicer (if an affiliate of CIT), the Depositor nor any director, officer,
employee, or agent of the Master Servicer, or the Depositor will be under any
liability to the related Trust or Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the
Agreement, or for errors in judgment; provided, however, that neither the Master
Servicer, the Sub-Servicer (if an affiliate of CIT), the Depositor nor any such
person will be protected against any liability that would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Agreement will provide that
neither the Master Servicer, the Sub-Servicer (if an affiliate of CIT), nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. The Master Servicer, the Sub-Servicer (if an affiliate of CIT), or
the Depositor may, however, in their discretion undertake, appear in or defend
any such action including any cross claims or third party claims which either
may deem necessary or desirable with respect to the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Trust, and the Master Servicer, the Sub-Servicer (if an affiliate of CIT), the
Depositor, as the case may be, will be entitled to be reimbursed therefor out of
funds otherwise distributable to Certificateholders.
Any person into which the Master Servicer or the Sub-Servicer (if an
affiliate of CIT), may be merged or consolidated, or any person resulting from
any merger or consolidation to which the Master Servicer or the Sub-Servicer (if
an affiliate of CIT), is a party, or any person succeeding to the business of
the Master Servicer, or the Sub-Servicer (if an affiliate of CIT), will be the
successor of the Master Servicer or the Sub-Servicer (if an affiliate of CIT),
as applicable, under each Agreement, provided that such person is qualified to
service mortgage loans under the related Agreement, and further provided that
such merger, consolidation or succession does not adversely affect the then
current rating or ratings of the class or classes of Certificates of such Series
that have been rated.
Termination Events
Unless otherwise specified in the related Prospectus Supplement,
Termination Events under each Agreement will consist of (i) any failure by the
Master Servicer to deposit or cause to be deposited any required amount (other
than an Advance or Servicing Advance) into the Certificate Account which
continues unremedied for five Business Days after the giving of written notice
of such failure to the Master Servicer by the Trustee or to the Master Servicer
and the Trustee by the Certificate Guaranty Insurer (if any) or the holders of
Certificates having not less than 51% of the aggregate Percentage Interest
constituting each class of Certificates (other than the Certificates
representing the residual interest in a Trust for which a REMIC election has
been made) (the "Majority Certificateholders"); (ii) any failure by the Master
Servicer to make an Advance or, Servicing Advance, as required under the
Agreement, unless cured as specified therein, to the extent such failure
materially or adversely affects the interests of the Certificate Guaranty
Insurer, if any, or the Certificateholders; (iii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or agreements in the Agreement which continues unremedied for thirty
days after the giving of written notice of such failure to the Master Servicer
by the Trustee, or to the Master Servicer and the Trustee by the Certificate
Guaranty Insurer (if any) or the Majority; and (iv) certain events of
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insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceeding and certain actions by or on behalf of the Master Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Mortgage Assets and the other assets of the Trust
in the event that payments in respect thereto are insufficient to make payments
required in the Agreement. The assets of the Trust will be sold only under the
circumstances and in the manner specified in the related Prospectus Supplement.
Rights Upon Termination Event
Unless otherwise specified in the related Prospectus Supplement, so long as
a Termination Event under an Agreement remains unremedied, the Depositor or the
Trustee may, and at the direction of (i) the Certificate Guaranty Insurer (if
any), or (ii) the Majority Certificateholders and under such other circumstances
as may be specified in such Agreement, the Trustee shall, terminate all of the
rights and obligations of the Master Servicer under the Agreement relating to
such Trust (other than its right to recovery of Advances, Servicing Advances and
other expenses and amounts advanced pursuant to the terms of such Agreement,
which rights the Master Servicer will retain under all circumstances), and with
respect to the Mortgage Assets by written notice to the Master Servicer (with,
if specified in the related Prospectus Supplement, the prior written consent of
the Certificate Guaranty Insurer, if any, which consent may not be unreasonably
withheld), whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the Master Servicer under the Agreement, including, if
specified in the related Prospectus Supplement, the obligation to make Advances,
and will be entitled to similar compensation arrangements not to exceed the
Servicing Fee. "Percentage Interest" means the original principal amount (or
notional principal amount) of a Certificate divided by the original Certificate
Balance of such class of Certificates. In the event that the Trustee is
unwilling or unable so to act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution with
a net worth of at least $15,000,000 to act as successor to the Master Servicer
under the Agreement. Pending such appointment, the Trustee is obligated to act
in such capacity. The Trustee and any such successor may agree without consent
of the Certificateholders upon the servicing compensation to be paid to the
successor servicer, which in no event may be greater than the compensation
payable to the Master Servicer under the Agreement.
No Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under any Agreement to institute any
proceeding with respect to such Agreement, unless such holder previously has
given to the Trustee written notice of default and unless the holders of any
class of Certificates of such Series evidencing not less than 25% of the
aggregate Percentage Interests constituting such class (with, if specified in
the related Prospectus Supplement, the prior written consent of the Certificate
Guaranty Insurer, if any, which consent may not be unreasonably withheld), have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for 60 days has neglected or refused to institute any such
proceeding.
Amendment
Unless otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the Trustee,
without the consent of any of the Certificateholders, (i) to cure any ambiguity;
(ii) to correct or supplement any provision therein which may be defective or
inconsistent with any other provision therein; (iii) to add to the duties of a
Seller, the Trustee or the Master Servicer or a Sub-Servicer; (iv) to add any
other provisions with respect to matters or questions arising under such
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Agreement or related Credit Enhancement; (v) to add or amend any provisions of
such Agreement as required by a Rating Agency in order to maintain or improve
the rating of the Certificates (it being understood that none of any Seller, the
Servicer, the Depositor or the Trustee is obligated to maintain or improve such
rating); (vi) to make any other revisions with respect to matters or questions
arising under the Agreement that are not inconsistent with the provisions
thereof, provided, that such amendment pursuant to clause (vi) will not
materially and adversely affect in any material respect the interests of any
Certificateholder of such Series or, if specified in the related Prospectus
Supplement, the interests of the Certificate Guaranty Insurer; or (vii) to make
any revisions to the Agreement, provided that such amendment will not materially
and adversely affect in any material respect the interests of any
Certificateholder of such Series or, if specified in the related Prospectus
Supplement, the interests of the Certificate Guaranty Insurer, if any. An
amendment will be deemed not to adversely affect in any material respect the
interests of the Certificateholders if the person requesting such amendment
obtains a letter from each Rating Agency stating that such amendment will not
result in the downgrading or withdrawal of the respective ratings then assigned
to such Certificates. In addition, to the extent provided in the related
Agreement, an Agreement may be amended without the consent of any of the
Certificateholders to change the manner in which the Certificate Account is
maintained, provided, that any such change does not adversely affect the then
current rating of the class or classes of Certificates of such Series that have
been rated. In addition, if a REMIC election is made with respect to a Trust,
the related Agreement may be amended to modify, eliminate or add to any of its
provisions to such extent as may be necessary to maintain the qualification of
the related Trust as a REMIC, provided that the Trustee has received an opinion
of counsel to the effect that such action is necessary or helpful to maintain
such qualification. Unless otherwise specified in the related Prospectus
Supplement, each Agreement may also be amended by the Depositor, the Master
Servicer, the applicable Sellers and the Trustee with the consent of holders of
Certificates of such Series evidencing not less than 51% of the aggregate
Percentage Interests of each class affected thereby (and, if specified in the
related Prospectus Supplement, the consent of the Certificate Guaranty Insurer)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or of modifying in any manner
the rights of the holders of the related Certificates; provided, however, that
no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments on any Certificate without the consent of the holder of such
Certificate, or (ii) reduce the aforesaid percentage of Certificates of any
class of holders that is required to consent to any such amendment without the
consent of the holders of all Certificates of such class covered by such
Agreement then outstanding.
If a REMIC election is made with respect to a Trust, the Trustee will not
be entitled to consent to an amendment to the related Agreement without having
first received an opinion of counsel knowledgeable in federal income tax matters
to the effect that such amendment will not cause such Trust to fail to qualify
as a REMIC.
Each Agreement may be amended from time to time by the Master Servicer, the
applicable Sellers, the Depositor and the Trustee by written agreement, upon the
prior written consent of the Certificate Guaranty Insurer, if any, without the
notice to or consent of the Certificateholders in connection with the
substitution of cash, a letter of credit or any other collateral deposited in a
Reserve Fund.
It will not be necessary for the consent of holders of any Certificate to
approve the particular form of any proposed amendment, but it will be sufficient
if such consent shall approve the substance thereof.
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Termination; Purchase of Mortgage Loans
Unless otherwise specified in the related Agreement, the obligations
created by each Agreement for each Series of Certificates will terminate upon
the payment to the related Certificateholders of all amounts held in the
Certificate Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment or other
liquidation of the last of the Mortgage Assets subject thereto or the
disposition of all property acquired upon foreclosure of any such Mortgage
Assets remaining in the Trust; or (ii) the purchase by the Master Servicer or,
if REMIC treatment has been elected and if specified in the related Prospectus
Supplement, by the holder of the residual interest in the REMIC (see "Certain
Federal Income Tax Consequences" below and in the related Prospectus
Supplement), or by such other entity as may be specified in the related
Prospectus Supplement from the related Trust of all of the remaining Mortgage
Assets and all property acquired in respect of such Mortgage Assets.
Unless otherwise specified in the related Prospectus Supplement, any
purchase of Mortgage Assets and property acquired in respect of Mortgage Assets
evidenced by a Series of Certificates will be made at the option of the Master
Servicer, the Depositor or, if applicable, the holder of the REMIC residual
interest, by the Certificate Guaranty Insurer (if any), or by such other entity
as may be specified in the related Prospectus Supplement, at a price, and in
accordance with the procedures, specified in the related Prospectus Supplement.
The exercise of such right will effect early termination of the Certificates of
that Series, but the right of the Master Servicer, the Depositor or, if
applicable, such holder of the REMIC residual interest, Certificate Guaranty
Insurer or other entity, so to purchase is subject to the principal balance of
the related Mortgage Assets being less than 10% (or such other percentage
specified in the related Prospectus Supplement) of the aggregate principal
balance of the Mortgage Assets at the Cut-off Date for the Series (together with
the original balance of any Pre-Funding Account). The foregoing is subject to
the provision that if a REMIC election is made with respect to a Trust, any
repurchase pursuant to clause (ii) above will be made only in connection with a
"qualified liquidation" of the REMIC within the meaning of Section 860F(g)(4) of
the Code and the repurchases of the Mortgage Loans will not constitute
"prohibited transactions" within the meaning of section 860F(a)(2) of the Code.
In no event shall the trust created by an Agreement for a Series of Certificates
continue beyond the expiration of 21 years from the death of the last survivor
of the persons named in the Agreement. Unless otherwise provided in the related
Prospectus Supplement, the repurchase price will equal the principal amount of
such Mortgage Loans or Private Mortgage-Backed Securities (or, with respect to
any property acquired in respect of a Mortgage Loan, the outstanding principal
balance of the Mortgage Loan at the time of foreclosure) plus accrued interest
from the first day of the month of repurchase to the first day of the next
succeeding month at the Mortgage Rates borne by such Mortgage Loans or Private
Mortgage-Backed Securities or at the weighted average of such Mortgage Rates,
less related unreimbursed Advances (to the extent not already reflected in the
computation of the aggregate principal balance of such Mortgage Assets) and
unreimbursed expenses (that are reimbursable pursuant to the terms of the
Pooling and Servicing Agreement).
The Trustee
The trustee (the "Trustee") under each Agreement will be named in the
related Prospectus Supplement. The commercial bank or trust company serving as
Trustee may have banking relationships with the Depositor, the Master Servicer,
the Sub-Servicer, any Seller and any of their respective affiliates.
The Trustee may resign at any time, in which event the Master Servicer will
be obligated to appoint a successor Trustee. The Master Servicer may also remove
the Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. The Trustee may also be removed
at any time by the Majority Certificateholders in the related Trust as specified
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in the Agreement. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Mortgage Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
Mortgaged Properties are located. The summaries are qualified in their entirety
by reference to the appropriate laws of the states in which Mortgage Loans may
be originated.
General
The Mortgage Loans will be secured by deeds of trust, mortgages, security
deeds or deeds to secure debt, depending upon the prevailing practice in the
state in which the property subject to the loan is located. A mortgage creates a
lien upon the real property encumbered by the mortgage, which lien is generally
not prior to the lien for real estate taxes and assessments. Priority between
mortgages depends generally on the order of recording with a state or county
office. Priority also may be affected by the express terms of the mortgage or
the deed of trust and any subordination agreement among the lenders.
Although priority among liens on the same property generally depends in the
first instance on the order of filing, there are a number of ways in which a
lien that is a senior lien when it is filed can become subordinate to a lien
filed at a later date. A deed of trust or mortgage generally is not prior to any
liens for real estate taxes and assessments, certain federal liens (including
certain federal criminal liens, environmental liens and tax liens), certain
mechanics and materialmen's liens, and other liens given priority by applicable
law.
There are two parties to a mortgage - the mortgagor, who is the borrower
and owner of the mortgaged property, and the mortgagee, who is the lender. Under
the mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed of
trust formally has three parties - the borrower-property owner (similar to a
mortgagor) called the trustor, a lender (similar to a mortgagee) called the
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
obligation. A security deed and a deed to secure debt are special types of deeds
which indicate on their face that they are granted to secure an underlying debt.
By executing a security deed or deed to secure debt, the grantor conveys title
to the property to the grantee, as opposed to merely creating a lien upon the
property, until such time as the underlying debt is repaid. The trustee's
authority under a deed of trust, the mortgagee's authority under a mortgage and
the grantee's authority under a security deed or deed to secure debt are
governed by law and, with respect to some deeds of trust, the directions of the
beneficiary.
Foreclosure
Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a nonjudicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any default
by the borrower under the terms of the note or deed of trust. In certain states
such foreclosure also may be accomplished by judicial action in the manner
provided for foreclosure of mortgages. In some states, the trustee must record a
notice of default and send a copy to the borrower-trustor and to any person who
has recorded a request for a copy of any notice of default and notice of sale.
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In addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within any applicable
cure period, a notice of sale must be posted in a public place and, in most
states, published for a specified period of time in one or more newspapers. In
addition, these notice provisions generally require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest of
record in the property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In general,
the borrower, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Certain state laws control the amount of foreclosure expenses and
costs, including attorney's fees, which may be recoverable by a lender.
The trustee's sale generally must be conducted by public auction in the
county or city in which all or some part of the property is located. At the
sale, the trustee generally requires a bidder to deposit with the trustee a set
amount or a percentage of the full amount of the bidder's final bid in cash (or
an equivalent thereto satisfactory to the trustee) prior to and as a condition
to recognizing such bid, and may conditionally accept and hold these amounts for
the duration of the sale. The beneficiary of the deed of trust generally need
not bid cash at the sale, but may instead make a "credit bid" up to the extent
of the total amount due under the deed of trust, including costs and expenses
actually incurred in enforcing the deed of trust, as well as the trustee's fees
and expenses. The trustee will sell the property to the highest proper bidder at
the sale.
A sale conducted in accordance with the terms of the power of sale
contained in the deed of trust generally is presumed to be conducted regularly
and fairly, and, on a conveyance of the property by trustee's deed, confers
absolute legal title to the property to the purchaser, free of all junior deeds
of trust and free of all other liens and claims subordinate to the deed of trust
under which the sale is made. The purchaser's title, however, is subject to all
senior liens and other senior claims. Thus, if the deed of trust being enforced
is a junior deed of trust, the trustee will convey title to the property to the
purchaser subject to the first deed of trust and any other prior liens and
claims. A trustee's sale or judicial foreclosure under a junior deed of trust
generally has no effect on any senior deed of trust, with the possible exception
of the right of a senior beneficiary to accelerate its indebtedness under a
default clause or a "due on sale" clause contained in the senior deed of trust.
Because a potential buyer at the sale may find it difficult to determine
the exact status of title and other facts about the property, and because the
physical condition of the property may have deteriorated, third parties may not
be interested in purchasing the property at a trustee's sale or judicial
foreclosure sale. In a non-judicial foreclosure, it is common for the lender to
purchase the property from the trustee or referee for an amount equal to the
principal amount of the deed of trust, accrued and unpaid interest and expenses
of foreclosure. In judicial foreclosures, it is not uncommon for the lender to
make a bid to purchase the property. The amount of the bid may vary depending on
applicable law, the value of the property, the amount of senior liens and other
considerations. In either case, after a foreclosing lender purchases the
mortgage property, as a business practice it will frequently assume the burdens
of ownership, including the obligations to service any senior deed of trust, to
obtain hazard insurance and to make such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
attempt to sell the property and obtain the services of a real estate broker and
pay the broker a commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Any loss may be
reduced by the receipt of any mortgage insurance proceeds.
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The proceeds received by the trustee from the sale generally are applied
first to the costs, fees and expenses of sale and then to satisfy the
indebtedness secured by the deed of trust under which the sale was conducted.
Any remaining proceeds generally are payable to the holders of junior deeds of
trust and other liens and claims in order of their priority. Any balance
remaining generally is payable to the grantor. Following the sale, if there are
insufficient proceeds to repay the secured debt, the beneficiary under the
foreclosed lien generally may obtain a deficiency judgment against the grantor.
See "- Anti-Deficiency Legislation and Other Limitations on Lenders" herein.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.
Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties defendant. Judicial foreclosure proceedings are often not contested by
any of the parties defendant. However, when the mortgagee's right to foreclosure
is contested, the legal proceedings necessary to resolve the issue can be time
consuming. Since a foreclosure action historically was equitable in nature, the
court may exercise equitable powers to relieve a mortgagor of a default and deny
the mortgagee foreclosure on proof that either the mortgagor's default was
neither willful nor in bad faith or the mortgagee's action established a waiver,
fraud, bad faith, or oppressive or unconscionable conduct such as to warrant a
court of equity to refuse affirmative relief to the mortgagee. Some mortgages
contain a power of sale, and non-judicial foreclosure is permitted. See "--
Foreclosure - Deed of Trust" above for a discussion of non-judicial foreclosure.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring up to
several years to complete. However, a suit against the debtor on the related
mortgage note may take several years and, generally, is an alternative remedy to
foreclosure, since the mortgagee is precluded from pursuing both actions at the
same time. After the completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other court
officer to conduct the sale of the property.
In case of foreclosure under a mortgage, the sale by the referee or other
designated officer or the sale by the trustee is a public sale. However, because
of the difficulty a potential buyer at the sale would have in determining the
exact status of title and other facts about the property, and because the
physical condition of the property may have deteriorated, third parties may not
be interested in purchasing the property at the foreclosure sale. In a
non-judicial foreclosure, it is common for the lender to purchase the property
from the trustee or referee for an amount equal to the principal amount of the
mortgage, accrued and unpaid interest and expenses of foreclosure. In judicial
foreclosures, it is not uncommon for the lender to make a bid to purchase the
property. The amount of the bid may vary depending on applicable law, the value
of the property, the amount of senior liens and other considerations. In either
case, after a foreclosing lender purchases the mortgaged property, as a business
practice it will frequently assume the burdens of ownership, including the
obligations to service any senior mortgage, to obtain hazard insurance and to
make such repairs at its own expense as are necessary to render the property
suitable for sale. The lender will commonly attempt to sell the property and
obtain the services of a real estate broker and pay the broker a commission in
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connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Any loss may be reduced by the receipt of any
mortgage insurance proceeds.
Rights of Redemption
In some states after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. (The
right of redemption should be distinguished from the equity of redemption, which
is a non-statutory right that must be exercised prior to the foreclosure sale.)
In certain other states, this right of redemption applies only to sales
following judicial foreclosure, and not to sales pursuant to a nonjudicial power
of sale. In most states where the right of redemption is available, statutory
redemption may occur upon payment of the foreclosure purchase price, accrued
interest and taxes. In some states, the right to redeem is an equitable right.
The effect of a right of redemption is to diminish the ability of the lender to
sell the foreclosed property. The exercise of a right of redemption would defeat
the title of any purchaser at a foreclosure sale, or of any purchaser from the
lender subsequent to judicial foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has run.
Junior Mortgages; Rights of Senior Mortgages
The mortgage loans comprising or underlying the Mortgage Assets included in
the Trust Fund for a Series will be secured by mortgages or deeds of trust which
may be second or more junior mortgages to other mortgages held by other lenders
or institutional investors. The rights of the Trust (and therefore the Holders),
as mortgagee under a junior mortgage, are subordinate to those of the mortgagee
under the senior mortgage, including the prior rights of the senior mortgagee to
receive hazard insurance and condemnation proceeds and to cause the property
securing the mortgage loan to be sold upon default of the mortgagor, thereby
extinguishing the junior mortgagee's lien unless the junior mortgagee asserts
its subordinate interest in the property in foreclosure litigation and,
possibly, satisfies the defaulted senior mortgage. A junior mortgagee may
satisfy a defaulted senior loan in full and, in some states, may cure such
default and bring the senior loan current, in either event adding the amounts
expended to the balance due on the junior loan. In some states, absent a
provision in the mortgage or deed of trust, no notice of default is required to
be given to a junior mortgagee. In addition, as described above, the rights of
the Trust may be or become subject to liens for real estate taxes and other
obligations. It is CIT Consumer Finance's standard practice to protect its
interest by monitoring any such sale of which it is aware and bidding for
property if it determines that it is in CIT Consumer Finance's best interests to
do so.
The standard form of the mortgage used by most institutional lenders, like
that generally used by CIT Consumer Finance, confers on the mortgagee the right
both to receive all proceeds collected under any hazard insurance policy
required to be maintained by the borrower and all awards made in connection with
condemnation proceedings. The lender generally has the right, subject to the
specific provisions of the deed of trust or mortgage securing its loan, to apply
such proceeds and awards to repair of any damage to the security property or to
payment of any indebtedness secured by the deed of trust or mortgage, in such
order as the beneficiary may determine. Thus, in the event improvements on the
property are damaged or destroyed by fire or other casualty, or in the event the
property is taken by condemnation, the mortgagee or beneficiary under underlying
senior mortgages will have the prior right to collect any insurance proceeds
payable under a hazard insurance policy and any award of damages in connection
with the condemnation and to apply the same to the indebtedness secured by the
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senior mortgages or deeds of trust. If available, proceeds in excess of the
amount of senior mortgage indebtedness, in most cases, will be applied to the
indebtedness of a junior mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay all taxes and
assessments on the property and, when due, all encumbrances, charges and liens
on the property which appear prior to the mortgage or deed of trust, to provide
and maintain fire insurance on the property, to maintain and repair the property
and not to commit or permit any waste thereof. Upon a failure of the grantor or
mortgagor to perform any of these obligations, the mortgagee or beneficiary is
given the right under certain mortgages to perform the obligation itself, at its
election, with the mortgagor agreeing to reimburse the mortgagee or beneficiary
for any sums expended by the mortgagee or beneficiary on behalf of the mortgagor
or grantor. The mortgage or deed of trust typically provides that all sums so
expended by the mortgagee become part of the indebtedness secured by the
mortgage.
Anti-Deficiency Legislation and Other Limitations on Lenders
Anti-Deficiency Legislation. Certain states have imposed statutory
restrictions that limit the remedies of a beneficiary under a deed of trust or a
mortgagee under a mortgage. In some states, statutes limit the right of the
beneficiary or mortgagee to obtain a deficiency judgment against the borrower
following foreclosure or sale under a deed of trust. The purpose of these
statutes is generally to prevent a beneficiary or a mortgagee from obtaining a
large deficiency judgment against the former borrower as a result of low or no
bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, in the event of waste of the
property.
A deficiency judgment is a personal judgment against the borrower equal in
most cases to the difference between the net amount realized upon the public
sale of the real property and the amount due to the lender. However, some states
calculate the deficiency as the difference between the outstanding indebtedness
and the greater of the fair market value of the property and the sales price of
the property. As a result of these restrictions, it is anticipated that in many
instances the Master Servicer will utilize the nonjudicial foreclosure remedy
and forego any possible deficiency, and after a judicial foreclosure will not
seek deficiency judgments against defaulting Mortgagors where anti-deficiency
statutes may apply.
Election of Remedies. Some state statutes may require the beneficiary or
mortgagee to exhaust the security afforded under a deed of trust or mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the borrower. In certain other states, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting such property; however, in some of these states, the lender following
judgment on such personal action, may be deemed to have elected a remedy and may
be precluded from exercising remedies with respect to the property.
Consequently, the practical effect of the election requirement, when applicable,
is that lenders will usually proceed first against the property rather than
bringing a personal action against the borrower.
Other Limitations on Lenders. In addition to anti-deficiency and related
legislation, numerous other federal and state statutory provisions, including
the federal bankruptcy laws, the Relief Act and state laws affording relief to
debtors, may interfere with or affect the ability of the secured mortgage lender
to realize upon its security. For example, in a proceeding under the federal
Bankruptcy Code, the filing of a petition acts as a stay against the enforcement
of remedies for collection of a debt, and a lender may not foreclose on a
mortgaged property without the permission of the bankruptcy court. Moreover, a
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court with federal bankruptcy jurisdiction may permit a debtor through a Chapter
13 Bankruptcy Code rehabilitative plan to cure a monetary default with respect
to a loan on a debtor's residence by paying arrearages within a reasonable time
period and reinstating the original loan payment schedule even though the lender
accelerated the loan and the lender has taken all steps to realize upon his
security (provided no sale of the property has yet occurred) prior to the filing
of the debtor's Chapter 13 petition. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a loan default by permitting
the obligor to pay arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan may be modified if the borrower has filed a petition
under Chapter 13. The rehabilitation plan proposed by the debtor may provide, if
the mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan, for the reduction of the secured indebtedness to
the value of the mortgaged property as of the date of the commencement of the
bankruptcy, rendering the lender a general unsecured creditor for the
difference, and also may reduce the monthly payments due under such mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the federal Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Mortgage Loans underlying a Series of Certificates and
possible reductions in the aggregate amount of such payments.
In a case under the Bankruptcy Code, the lender is precluded from
foreclosing without authorization from the bankruptcy court. In a Chapter 11
case, the lender's lien may be transferred to other collateral and/or be limited
in amount to the value of the lender's interest in the collateral as of the date
of the bankruptcy. The loan term may be extended, the interest rate may be
adjusted to market rates and the priority of the loan may be subordinated to
bankruptcy court-approved financing. The bankruptcy court can, in effect,
invalidate "due on sale" clauses through confirmed Chapter 11 plans of
reorganization.
The Bankruptcy Code and federal tax laws provide priority to certain tax
liens over the lien of a mortgagee or secured party. This may delay or interfere
with the enforcement of rights in respect of a defaulted Mortgage Loan. Numerous
federal and state consumer protection laws impose substantive requirements upon
mortgage lenders and servicers in connection with the origination, servicing and
enforcement of mortgage loans. These laws include the Federal Truth-in-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Housing Act, Fair Credit Reporting Act and related statutes and regulations.
These federal and state laws impose specific statutory liabilities upon lenders
who fail to comply with the provisions of the law. In some cases, this liability
may affect assignees of the loans.
Environmental Risks
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the payment of the
costs of clean-up. In several states, such a lien has priority over the lien of
an existing mortgage against such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended, the United States Environmental Protection Agency
("EPA") may impose a lien on property where the EPA has incurred clean-up costs
with respect to the property. However, a CERCLA lien is subordinate to
pre-existing, perfected security interests. In addition, under federal
environmental legislation and possibly under state law in a number of states, a
secured party which takes a deed in lieu of foreclosure or acquires a property
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at a foreclosure sale may be liable for the costs of cleaning up a contaminated
site. Such cleanup costs may be substantial. In the event that a Trust acquired
title to a property securing a Mortgage Loan and cleanup costs were incurred in
respect of the property, the holders of the Certificates might incur a delay in
the payment if such costs were required to be paid by such Trust. It is possible
that such cleanup costs could reduce the amounts otherwise distributable to the
Certificateholders if the Trust Fund were deemed to be liable for such cleanup
costs and if such cleanup costs were incurred.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, no environmental assessment of the
Mortgage Properties was conducted, although an appraiser might comment upon
environmental factors.
Due on Sale Clauses
The Mortgage Loans generally include a "due on sale" clause which will
provide that if the Mortgagor sells, transfers or conveys the Mortgaged
Property, the Mortgage Loan may in most cases be accelerated by the mortgagee.
In recent years, court decisions and legislative actions have placed substantial
restriction on the right of lenders to enforce such clauses in many states. For
instance, the California Supreme Court in August 1978 held that "due on sale"
clauses were generally unenforceable. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act"), subject to certain
exceptions, preempts state constitutional, statutory and case law prohibiting
the enforcement of "due on sale" clauses. As to loans secured by an
owner-occupied residence, the Garn-St Germain Act sets forth nine specific
instances in which a mortgagee covered by the Garn-St Germain Act may not
exercise its rights under a "due on sale" clause, notwithstanding the fact that
a transfer of the property may have occurred. For example, "due on sale" clauses
are not enforceable in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) originated or assumed during the "window period" under the
Garn-St. Germain Act which ended in all cases not later than October 15, 1982,
and (ii) originated by lenders other than national banks, federal savings
institutions and federal credit unions. FHLMC has taken the position in its
published mortgage servicing standards that, out of a total of eleven "window
period states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah)
have enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of "due on sale" clauses with respect to certain
categories of window period loans. Also, the Garn-St. Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
In addition, under federal bankruptcy law, "due on sale" clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
The inability to enforce a "due on sale" clause may result in transfer of
the related Mortgaged Property to an uncreditworthy person, which could increase
the likelihood of default or may result in a Mortgage Loan bearing an interest
rate below the current market rate being assumed by a new home buyer, which may
affect the average life of the Mortgage Loans and the number of Mortgage Loans
which may extend to maturity.
Prepayment Charges and Late Charges
Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans with respect
to prepayments on loans secured by liens encumbering owner-occupied residential
properties. Since many of the Mortgaged Properties will be owner-occupied, it is
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anticipated that prepayment charges may not be imposed with respect to many of
the Mortgage Loans. The absence of such a restraint on prepayment, particularly
with respect to fixed rate Mortgage Loans having higher Mortgage Rates, may
increase the likelihood of refinancing or other early retirement of such
Mortgage Loans.
Forms of notes, mortgages, and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made. In certain states, there are or may be specific limitations upon
the late charges which a lender may collect from a borrower for delinquent
payments.
Late charges and prepayment fees are property of the Trust and will be made
available to pay the Certificateholders. The Mortgage Loans originated by CIT
Consumer Finance generally do not make provision for late charges, but other
Mortgage Loans in a Mortgage Pool may make provision for late charges. CIT
Consumer Finance's current practice is to waive such fees (by noncollection) in
most cases. CIT Consumer Finance's current operating system cannot process
prepayment penalties for partial prepayments on any Mortgage Loan.
Equitable Limitations on Remedies
In connection with lenders' attempts to realize upon their collateral,
courts have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes of the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the property or the borrower's
execution of secondary financing affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under security agreements receive notices in addition to the
statutorily-prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that, in cases involving the
sale by a trustee under a deed of trust or by a mortgagee under a mortgage
having a power of sale, there is insufficient state action to afford
constitutional protections to the borrower.
Most conventional single-family mortgage loans may be prepaid in full or in
part without penalty. A mortgagee to whom a prepayment in full has been tendered
may be compelled to give either a release of the mortgage or an instrument
assigning the existing mortgage. The absence of a restraint on prepayment,
particularly with respect to mortgage loans having higher mortgage rates, may
increase the likelihood of refinancing or other early retirements of such
mortgage loans.
Alternative Mortgage Transactions Parity Act
The Alternative Mortgage Transactions Parity Act ("AMTPA"), enacted in
1982, preempts state laws which restrict or limit the structure of adjustable
rate provisions, balloon payments, graduated payments and other terms contained
in non-traditional (fixed rate fixed term) mortgage loans. These state statutes
are replaced, at the option of the lender, by federal regulations. The lender
must follow in their entirety either state laws or federal regulations, and
cannot select and combine the most advantageous terms of each. Six states
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(Arizona, Maine, Massachusetts, New York, South Carolina and Wisconsin) have
used their now-expired ability to opt out of all or part of the AMTPA
provisions. CIT Consumer Finance generally elects to have the federal
regulations apply, in the states where applicable, to the types of mortgage
loans originated by it that are covered by AMTPA.
Applicability of Usury Laws
Many states have usury laws which limit the interest and other amounts that
may be charged under certain loans. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("Title
V"), provides that state usury limitations shall not apply to certain types of
residential first mortgage loans originated by certain lenders after March 31,
1980. The statute authorized the states to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision which
expressly rejects an application of the federal law. Fifteen states adopted such
a law prior to the April 1, 1983 deadline. In addition, even where Title V is
not so rejected, any state is authorized by the law to adopt a provision, which
need not expressly reject Title V, limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to limit
discount points or other charges.
Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Relief Act, a borrower who enters
military service after the origination of such borrower's mortgage loan
(including a borrower who is a member of the National Guard or is in reserve
status at the time of the origination of the mortgage loan and is later called
to active duty) (i) may not be charged interest above an annual rate of 6%
during the period of such borrower's active duty status, unless a court orders
otherwise upon application of the lender, (ii) may be entitled to a stay of
proceedings on any kind of foreclosure or repossession action in the case of
defaults on such obligations entered into prior to military service for the
duration of military service, and (iii) may have the maturity of such
obligations incurred prior to military service extended, the payments lowered
and the payment schedule readjusted for a period of time after the completion of
military service. However, the benefits of (i), (ii), or (iii) above are subject
to challenge by creditors and if, in the opinion of the court, the ability of a
person to comply with such obligations is not materially impaired by military
service, the court may apply equitable principles accordingly. If a borrower's
obligation to repay amounts otherwise due on a Mortgage Loan included in a Trust
Fund for a Series is relieved pursuant to the Relief Act, none of the Trustee,
the Master Servicer, the Depositor, the Sellers nor the Trustee will be required
to advance such amounts, and any loss in respect thereof may reduce the amounts
available to be paid to the Certificateholders of such Series. Unless otherwise
specified in the related Prospectus Supplement, any shortfalls in interest
collections on the mortgage loans underlying the Private Mortgage-Backed
Securities included in a Trust Fund for a Series resulting from application of
the Relief Act will be allocated to each class of Certificates of such Series
that is entitled to receive interest in respect of such mortgage loans in
proportion to the interest that each such class of Certificates would have
otherwise been entitled to receive in respect of such mortgage loans had such
interest shortfall not occurred.
It is possible that such interest rate limitation could have an effect, for
an indeterminate period of time, on the ability of the Master Servicer to
collect full amounts of interest on certain of the Mortgage Loans. Unless
otherwise provided in the applicable Prospectus Supplement, any shortfall in
interest collections resulting from the application of the Relief Act could
result in losses to the holders of the Certificates. In the event that such a
Mortgage Loan goes into default, there may be delays and losses occasioned by
the inability to realize upon the Mortgaged Property in a timely fashion.
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Home Ownership Act
The Mortgage Loans may be subject to the Home Ownership and Equity
Protection Act of 1994 (the "Home Ownership Act") which amended the Federal
Truth-in-Lending Act as it applies to mortgages subject to the Home Ownership
Act. The Home Ownership Act requires certain additional disclosures, specifies
the timing of such disclosures and limits or prohibits the inclusion of certain
provisions in mortgages subject to the Home Ownership Act. The Home Ownership
Act also provides that any purchaser or assignee of a mortgage covered by the
Home Ownership Act is subject to all of the claims and defenses which the
borrower could assert against the original lender. The maximum damages that may
be recovered by a borrower from an assignee in an action under the Home
Ownership Act are the remaining amount of indebtedness plus the total amount
paid by the borrower in connection with the mortgage loan. Any Trust for which
the Mortgage Assets include Mortgage Loans subject to the Home Ownership Act
would be subject to all of the claims and defenses which the Mortgagor could
assert against the original lender. Any violation of the Home Ownership Act
which would result in such liability would be a breach of the Seller's
representations and warranties, and the Seller would be obligated to cure,
repurchase or, if permitted by the related Agreement, substitute for, the
Mortgage Loan in question.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each Series of
Certificates is a general discussion of certain of the anticipated federal
income tax consequences of the purchase, ownership and disposition of the
Certificates offered hereby. The discussion and the opinions referred to below,
are based on laws, regulations, rulings and decisions now in effect (or, in the
case of certain regulations, proposed), all of which are subject to change or
possibly differing interpretations. The discussion below does not purport to
deal with federal tax consequences applicable to all categories of investors,
some of which may be subject to special rules. Investors should consult their
own tax advisors in determining the federal, state, local and other tax
consequences to them of the purchase, ownership and disposition of Certificates.
For purposes of this tax discussion (except with respect to information
reporting, or where the context indicates otherwise), the terms
"Certificateholder" and "holder" mean the beneficial owner of a Certificate.
Each Trust will be provided with an opinion of Schulte Roth & Zabel LLP,
counsel for the Depositor, regarding certain of the federal income tax matters
discussed below and in the related Prospectus Supplement. An opinion of counsel,
however, is not binding on the IRS, and no ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the Trust, the Certificates and related terms, parties and
documents will be deemed to refer, unless otherwise specified herein, to each
Trust and the Certificates and related terms, parties and documents applicable
to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust as a REMIC for
federal income tax purposes or if the Trust is classified as a grantor trust or
is given an alternative characterization for federal income tax purposes. The
related Prospectus Supplement for each Series of Certificates will specify
whether an election to treat the Trust as a REMIC for federal income tax
purposes will be made and, if not, how the Trust is intended to be treated.
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Scope of the Tax Opinions
It is expected that Schulte Roth & Zabel LLP will deliver, upon issuance of
a Series of Certificates, its opinion that, with respect to each Series of
Certificates for which a REMIC election is to be made, the related Trust or
certain assets of such Trust will be, under then existing law and assuming (i) a
proper and timely REMIC election, and (ii) ongoing compliance with the
provisions of the related Agreement and applicable provisions of the Code and
applicable Treasury regulations and rulings, and in reliance upon the
representations and warranties in the related Agreement, a REMIC and the
Certificates will be considered to evidence ownership of "regular interests" in
the REMIC within the meaning of Section 860G(a)(1) of the Code or "residual
interests" in the REMIC within the meaning of the Section 860G(a)(2) of the
Code.
It is expected that Schulte Roth & Zabel LLP, will deliver, upon issuance
of a Series of Certificates, its opinion that, with respect to each Series of
Certificates for which a REMIC election is not made, the related Trust will be,
under then existing law and assuming compliance with the related Agreement,
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation or a taxable mortgage pool.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a REMIC, a grantor trust or other classification,
as the case may be, for federal income tax purposes on investors generally and
of related tax matters affecting investors generally, but do not purport to
furnish information in the level of detail or with the attention to the
investor's specific tax circumstances that would be provided by an investor's
own tax adviser. Accordingly, each investor is advised to consult its own tax
advisers with regard to the tax consequences to it of investing in the
Certificates.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Certificates in any state or locality. Certificateholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Certificates.
Alternative Tax Treatment
In the event that, as a result of a change in applicable laws or
regulations or the interpretation thereof, the federal income tax
characteristics of the Certificates are not anticipated to be as described
above, the related Prospectus Supplement will include a discussion of the
anticipated federal income tax treatment of the Certificates.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors should consider the
state and local income, franchise, personal property, or other tax consequences
of the acquisition, ownership, and disposition of the Certificates. State and
local income tax law may differ substantially from the corresponding federal
law, and this discussion does not purport to describe any aspect of the income
tax laws of any state or locality. Therefore, potential investors should consult
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their own tax advisors with respect to the various tax consequences of
investments in the Certificates.
ERISA CONSIDERATIONS
Set forth below and in the related Prospectus Supplement for each Series of
Certificates is a general discussion of certain considerations of the purchase,
ownership and disposition of the Certificates under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code. The discussion
in the related Prospectus Supplement and below, are based on laws, regulations,
rulings and decisions now in effect (or, in the case of certain regulations,
proposed), all of which are subject to change or possibly differing
interpretations. The discussion below does not purport to deal with all issues
applicable to an investor subject to ERISA. Investors should consult their own
advisors in determining the consequences to them under ERISA and the Code of the
purchase, ownership and disposition of Certificates. If Certificates are divided
into subclasses the related Prospectus Supplement will contain information
concerning considerations relating to ERISA and the Code that are applicable to
such Certificates.
ERISA imposes requirements on employee benefit plans (and on certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds, separate accounts and
insurance company general accounts in which such plans, accounts or arrangements
are invested) (collectively "Plans") subject to ERISA and on persons who are
fiduciaries with respect to such Plans. Generally, ERISA applies to investments
made by Plans. Among other things, ERISA requires that the assets of Plans be
held in trust and that the trustee, or other duly authorized fiduciary, have
exclusive authority and discretion to manage and control the assets of such
Plans. ERISA also imposes certain duties on persons who are fiduciaries of
Plans. Under ERISA, any person who exercises any authority or control respecting
the management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant).
Certain employee benefit plans, such as governmental plans (as defined in ERISA
Section 3(32)) and, if no election has been made under Section 410(d) of the
Code, church plans (as defined in ERISA Section 3(33)), are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in Senior
Certificates without regard to the ERISA considerations described above and
below, subject to the provisions of applicable state law. Any such plan which is
qualified and exempt from taxation under Code Sections 401(a) and 501(a),
however, is subject to the prohibited transaction rules set forth in Code
Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest acquired by the investing Plan is
a publicly-offered security. A publicly-offered security, as defined in Labor
Reg. Section 2510.3-101, is a security that is widely held, freely transferable
and registered under the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the
Mortgage Loans may be deemed Plan assets of each Plan that purchases
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Certificates, an investment in the Certificates by a Plan might be a prohibited
transaction under ERISA Sections 406 and 407 and subject to an excise tax under
Code Section 4975 unless a statutory or administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
The DOL also has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Underwriter Exemptions.
The Prospectus Supplement for each Series of Certificates will indicate the
classes of Certificates, if any, offered thereby as to which it is expected that
PTE 83-1, an Underwriter Exemption or any other exemptions will apply.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with its counsel concerning the impact of ERISA and the Code, the
applicability of PTE 83-1, the availability and applicability of any Underwriter
Exemption or any other exemptions from the prohibited transaction provisions of
ERISA and the Code and the potential consequences in their specific
circumstances, prior to making such investment. Moreover, each Plan fiduciary
should determine whether under the general fiduciary standards of investment
procedure and diversification an investment in the Certificates is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Certificates that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, life insurance companies and pension funds)
created pursuant to or existing under the laws of the United States or of any
state (including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulation to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any such entities. Under SMMEA, if a state enacts
legislation prior to October 4, 1991 specifically limiting the legal investment
authority of any such entities with respect to "mortgage related securities,"
the Certificates will constitute legal investments for entities subject to such
legislation only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline. SMMEA provides,
however, that in no event will the enactment of any such legislation affect the
validity of any contractual commitment to purchase, hold or invest in
Certificates, or require the sale or other disposition of Certificates, so long
as such contractual commitment was made or such Certificates acquired prior to
the enactment of such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Certificates
without limitations as to the percentage of their assets represented thereby,
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federal credit unions may invest in mortgage related securities, and national
banks may purchase Certificates for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities, and the NCUA's regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), (whether or not the class of Certificates under consideration
for purchase constitutes a "mortgage related security").
All depository institutions considering an investment in the Certificates
(whether or not the class of certificates under consideration for purchase
constitutes a "mortgage related security" should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities (to the extent adopted by their respective regulators) (the "Policy
Statement"), setting forth, in relevant part, certain securities trading and
sales practices deemed unsuitable for an institution's investment portfolio, and
guidelines for (and restrictions on) investing in mortgage derivative products
including "mortgage related securities" that are "high-risk mortgage securities"
as defined in the Policy Statement. According to the Policy Statement, such
"high-risk mortgage securities" include securities such as Certificates not
entitled to distributions allocated to principal or interest, or Subordinated
Certificates. Under the Policy Statement, it is the responsibility of each
depository institution to determine, prior to purchase (and at stated intervals
thereafter), whether a particular mortgage derivative product is a "high-risk
mortgage security", and whether the purchase (or retention) of such a product
would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
that may restrict or prohibit investment in securities that are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
Certificates are being offered hereby in Series from time to time (each
Series evidencing a separate Trust) through any of the following methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters;
2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and
3. By placement directly by the Depositor with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts or
additional compensation to such underwriters and the proceeds of the offering to
the Depositor, or the method by which the price at which the underwriters will
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sell the Certificates will be determined. Each Prospectus Supplement for an
underwritten offering will also contain information regarding the nature of the
underwriters' obligations, any material relationship between the Depositor and
any underwriter and, where appropriate, information regarding any discounts or
concessions to be allowed or reallowed to dealers or others and any arrangements
to stabilize the market for the Certificates so offered. In firm commitment
underwritten offerings, the underwriters will be obligated to purchase all of
the Certificates of such Series if any such Certificates are purchased.
Certificates may be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
Underwriters and agents may be entitled under agreements entered into with
the Depositor and CIT Consumer Finance to indemnification by the Depositor and
CIT Consumer Finance against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribution with respect to
payments which such underwriters or agents may be required to make in respect
thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Depositor and
purchasers of Certificates of such Series.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor by
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022.
FINANCIAL INFORMATION
A new Trust will be formed with respect to each Series of Certificates and
no Trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Certificates.
Accordingly, no financial statements with respect to any Trust will be included
in this Prospectus or in the related Prospectus Supplement.
CIT Consumer Finance and CITSF each has determined that its financial
statements are not material to the offering made hereby.
RATINGS
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the related Prospectus Supplement that they shall have
been rated in the rating categories specified in the related Prospectus
Supplement by the Rating Agency or Agencies specified in the related Prospectus
Supplement.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the credit enhancer or guarantor, if any. Ratings on
mortgage pass-through certificates do not represent any assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. As a result,
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certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped pass-through certificates in extreme cases might
fail to recoup their underlying investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
EXPERTS
The financial statements listed under the heading "Exhibits, Financial
Statement Schedule and Reports on Form 8-K" in CIT's 1996 Annual Report on Form
10-K have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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Page
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INDEX TO DEFINED TERMS
Accrual Certificates.........................................................57
Adjustable Rate..........................................................10, 34
Adjustable Rate Mortgage Loan............................................10, 34
Adjusted Mortgage Loan Remittance Rate.......................................59
Advance..................................................................18, 59
Agreement.................................................................6, 37
AMTPA.......................................................................100
Asset Service Center.........................................................42
Available Funds..............................................................56
Balloon Loans............................................................10, 34
Balloon Payments.........................................................10, 35
Bankruptcy Bond..........................................................17, 70
beneficial owner.............................................................62
Book-Entry Certificates......................................................61
Business Day..............................................................9, 56
Buydown Account..............................................................80
Buydown Fund.................................................................35
Buydown Loans................................................................35
Call Date................................................................10, 35
Call Loans...............................................................10, 35
CBC Holding..................................................................41
Cede......................................................................5, 21
Cedel.................................................................5, 21, 31
CERCLA.......................................................................98
Certificate Account..........................................................77
Certificate Balance..........................................................57
Certificate Guaranty Insurance Policy....................................16, 67
Certificate Guaranty Insurer.................................................67
Certificate Register.........................................................55
Certificateholders........................................................2, 33
Certificates...........................................................1, 6, 53
CIT.......................................................................1, 22
CIT Consumer Finance...................................................1, 6, 22
CITSF.....................................................................6, 22
Class Certificate Balance....................................................56
Closing Date..............................................................7, 81
Code.........................................................................20
Combined Loan-to-Value Ratio.................................................37
Commission................................................................3, 34
Compensating Interest....................................................19, 60
Confirmatory Mortgage Note...................................................75
Credit Enhancement...........................................................30
Credit Enhancer..............................................................30
Cut-off Date..............................................................9, 53
Definitive Certificate.......................................................62
Delayed Deposits.............................................................79
Deposit Date.................................................................79
Depositor..............................................................1, 6, 22
Depository...................................................................62
Detailed Description.........................................................34
Determination Date........................................................8, 56
Distribution Date.........................................................8, 55
DKB..........................................................................40
DOL.....................................................................20, 104
DTC...................................................................5, 21, 31
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Page
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Due Period................................................................9, 56
EPA..........................................................................98
ERISA...................................................................20, 104
Escrow Account...............................................................83
Euroclear.............................................................5, 21, 31
Exchange Act..................................................................3
Financial Intermediary.......................................................62
Fixed Rate...............................................................10, 34
Fixed Rate Mortgage Loan.................................................10, 34
Funding Period...........................................................14, 33
Garn-St Germain Act..........................................................99
Graduated Payment Account....................................................80
Graduated Payment Loan...................................................11, 35
Home Equity Loan.............................................................43
Home Ownership Act......................................................28, 102
Indirect Participants........................................................62
Insurance Paying Agent.......................................................67
Insurance Proceeds...........................................................78
Insured Expenses.............................................................78
Insured Payment..............................................................67
Junior Lien Loans............................................................24
Limited Guarantee............................................................71
Liquidated Mortgage..........................................................88
Liquidation Expenses.........................................................78
Liquidation Proceeds.........................................................78
Majority Certificateholders..................................................89
Master Servicer...........................................................6, 42
Master Servicing Fee.........................................................87
MHC..........................................................................40
Mortgage Assets........................................................1, 9, 33
Mortgage Documents...........................................................37
Mortgage Loans.........................................................1, 9, 33
Mortgage Note............................................................10, 34
Mortgage Pool.............................................................9, 33
Mortgage Pool Insurance Policy...........................................16, 68
Mortgage Rate............................................................10, 34
Mortgaged Properties.........................................................34
Mortgaged Property........................................................9, 38
Mortgages..............................................................1, 9, 33
Mortgagor....................................................................22
NCUA........................................................................106
Participants.................................................................62
Pass-Through Rate............................................................56
Percentage Interest..........................................................90
Permitted Investments........................................................67
Plan Asset Regulations.......................................................20
Plans.......................................................................104
PMBS Agreement...............................................................39
PMBS Issuer..............................................................13, 39
PMBS Servicer............................................................13, 39
PMBS Trustee.............................................................13, 39
Policy Statement............................................................106
Pool......................................................................9, 33
Pool Insurer.................................................................68
Precomputed Loan.............................................................36
Pre-Funded Amount........................................................14, 33
Pre-Funding Account...................................................1, 14, 33
Primary Insurer..............................................................85
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Primary Mortgage Insurance Policy............................................34
Principal Prepayment.....................................................18, 60
Principal Prepayments........................................................57
Private Mortgage-Backed Securities........................................9, 38
PTE 83-1....................................................................105
Purchase Price...............................................................81
Qualified Substitute Mortgage Loan...........................................81
Rating Agency............................................................18, 77
Record Date..................................................................55
Registration Statement........................................................3
Released Mortgaged Property Proceeds.........................................78
Relief Act...................................................................28
REMIC.................................................................2, 20, 55
REO Property.................................................................54
Reserve Fund.............................................................16, 66
Retained Interest............................................................53
Scheduled Accrual Loans......................................................36
Seller.................................................................1, 6, 33
Senior Certificateholders................................................15, 65
Senior Certificates.......................................................7, 57
Series.................................................................1, 6, 53
Servicing Advance............................................................87
Simple Interest Loans........................................................35
SMMEA...................................................................19, 105
Special Hazard Insurance Policy..........................................17, 69
Special Hazard Insurer.......................................................69
Standard Hazard Insurance Policy.........................................11, 34
Stockholders Agreement.......................................................41
Subordinated Certificateholders..........................................15, 65
Subordinated Certificates.................................................7, 57
Sub-Servicers................................................................37
Sub-servicing Account........................................................79
Substitution Adjustment......................................................81
The Pooling and Servicing Agreement..........................................53
Title V.....................................................................101
Trust..................................................................1, 9, 53
Trust Fund.............................................................1, 9, 53
Trustee...................................................................6, 92
Underwriter Exemptions......................................................105
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================================================================================
No dealer, sales person or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus and, if given or made,
such information or representations must not be relied upon. This Prospectus
Supplement and the accompanying Prospectus do not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby, nor an
offer of Offered Certificates in any state or jurisdiction in which, or to any
person to whom, such offer would be unlawful. The delivery of this Prospectus
Supplement or the accompanying Prospectus at any time does not imply that the
information contained herein or therein is correct as of any time subsequent to
its date.
------------------------
TABLE OF CONTENTS
Page
-----
Prospectus Supplement
Summary of Terms ..................................................... S-3
Risk Factors ......................................................... S-26
The Portfolio of Mortgage Loans ...................................... S-29
The Mortgage Pool .................................................... S-31
Yield and Prepayment Considerations .................................. S-46
The CIT Group Securitization Corporation III, The Depositor .......... S-48
The CIT Group/Consumer Finance, Inc., Seller
and Master Servicer .................................................... S-48
The CIT Group/Sales Financing, Inc., Sub-Servicer ...................... S-49
Servicing of Mortgage Loans ............................................ S-49
Description of the Certificates ........................................ S-50
Credit Enhancement ..................................................... S-55
The Pooling and Servicing Agreement .................................... S-60
Use of Proceeds ........................................................ S-64
Certain Federal Income Tax Consequences ................................ S-64
ERISA Considerations ................................................... S-71
Legal Investment ....................................................... S-72
Underwriting ........................................................... S-73
Legal Matters .......................................................... S-75
Ratings ................................................................ S-75
Annex I - Global Clearance, Settlement and
Tax Documentation Procedures ........................................... S-76
Index to Defined Terms ................................................. S-79
Prospectus
Prospectus Supplement .................................................... 3
Available Information .................................................... 3
Incorporation of Certain Documents by Reference .......................... 4
Reports to Certificateholders ............................................ 5
Summary of Terms ......................................................... 6
Risk Factors ............................................................. 22
The Trusts ............................................................... 33
Use of Proceeds .......................................................... 40
The CIT Group Holdings, Inc. ............................................. 40
The CIT Group Securitization Corporation III, The Depositor .............. 41
The CIT Group/Consumer Finance, Inc., Seller
and Master Servicer ...................................................... 41
The CIT Group/Sales Financing, Inc., Sub-Servicer ........................ 42
The Home Equity Lending Program .......................................... 43
Description of the Certificates .......................................... 53
Credit Enhancement ....................................................... 64
Yield and Prepayment Considerations ...................................... 72
The Pooling and Servicing Agreement ...................................... 75
Certain Legal Aspects of the Mortgage Loans .............................. 93
Certain Federal Income Tax Consequences .................................. 102
State Tax Considerations ................................................. 104
ERISA Considerations ..................................................... 104
Legal Investment ......................................................... 105
Method of Distribution ................................................... 106
Legal Matters ............................................................ 107
Financial Information .................................................... 107
Ratings .................................................................. 108
Experts .................................................................. 108
Index to Defined Terms ................................................... 109
================================================================================
================================================================================
$500,000,000
(Approximate)
THE CIT GROUP SECURITIZATION
CORPORATION III
Depositor
The CIT Group/Consumer
Finance, Inc.
Seller and Master Servicer
Home Equity Loan Asset Backed
Certificates, Series 1997-1
---------------
PROSPECTUS SUPPLEMENT
----------------------------
MORGAN STANLEY DEAN WITTER
FIRST CHICAGO CAPITAL
MARKETS, INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
July __, 1997
================================================================================
